Out-Law / Your Daily Need-To-Know

Out-Law Analysis 2 min. read

‘Green’ procurement will shape bids for road and rail contracts

Businesses seeking to win public contracts for major road and rail infrastructure projects can expect governments around the world to use the procurement process to place a greater emphasis on the environmental sustainability of those delivering the projects.

We will start seeing a global shift away from traditional procurement frameworks which focus primarily on value for money, to ones which also place an emphasis on social value and sustainability while achieving value for money. Simply put, ‘green public procurement’ (GPP) is about leveraging the purchasing power of the state to drive environmentally and socially sustainable practices, particularly in respect of large capital projects.

Meeting the challenges of complex procurement processes and assembling a supply chain that meets the demands of zero carbon and social value is one of the current legal and contractual issues affecting road and rail projects in procurement, construction and operation. It is a topic that was discussed at a recent webinar we hosted – the first in a series we have organised over the coming weeks and months to explore global road and rail issues.

Developing procurement and supply chain strategies that meet the necessity of delivering decarbonisation and social value is a challenge. Road and rail projects have a particularly large construction element and so the environmental impacts caused are profoundly detrimental.

The promotion of 'environmental social and governance criteria' has long been on the agenda of multilateral development agencies. What has lagged behind is the transformation of procurement frameworks by governments that set out clear criteria and targets for environmentally and socially responsible purchasing. However, we have seen road and rail authorities in various countries adopt measures in their procurement frameworks to promote green objectives.

Examples include: the inclusion of non-price evaluation criteria focusing on environmental and social value metrics; defining clear environmental key performance indicators for benchmarking of performance; the creation of contractual incentives; the use of a collaborative contracting approach to project delivery; and early contractor involvement – that is, involving contractors in the pre-tender or planning phase of a project.

To prepare for enhanced responsiveness to GPP in road and rail projects, bidders may want to consider:

  • scope and pricing on the basis of a green-friendly life-cycle approach in the supply chain with more regular monitoring;
  • enhanced measures for prevention and minimising negative environmental and social impacts of a project;
  • resource efficiency in building and operations methods, and;
  • promoting a circular economy such as reuse and recycling.

Finally, bidders should understand the contracting model and any performance incentives that may serve to lessen some of the potential higher upfront cost of green interventions.

The next event in our road and rail series takes place on 8 September 2021 and will look at changing contracting models in road and rail projects. Registration for the event is now open.

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