Bidders for major government contracts must commit to net zero

To win government business, companies will soon be required to have a ‘clear and credible’ plan to reach net zero by 2050. Government bodies will also have to consider climate and waste in their procurement policies.

The announcements came in guidance documents issued last week by the Cabinet Office, as part of ongoing reforms to procurement rules.

All central government departments, their executive agencies and non-departmental public bodies will have to, “verify that the supplier remains committed to achieving net zero prior to entering into any contract awarded under a framework agreement”. This will be through considering carbon reduction plans (CRPs) submitted as part of a bid.

The provision applies to all contracts with an anticipated value above £5m per year, excluding VAT, other than, “where it would not be related and proportionate to the contract”. But this get-out clause is expected to apply in few situations.

“Environmental considerations and carbon reduction will be a factor in most, if not all, contracts,” the guidance states, particularly where they have a direct impact on the environment, require the use of buildings, transportation of goods or people, or require the use of natural resources. “Therefore it is expected that in the majority of cases, the application of this [guidance] will be relevant,” it adds.

The guidance provides a template for CRPs, allowing bidders to demonstrate their commitment to reaching net zero by 2050 in the UK, “and setting out the environmental management measures that they have in place and which will be in effect and utilised during the performance of the contract”. The quality of the CRPs will be weighed up as part of the assessment of technical and professional capabilities to meet contract terms.

The requirement will kick in for all tenders advertised from 30 September.

For many businesses, the information needed to complete a CRP will already be readily available, as it would form a summary of provisions made under an environmental management system, including specific carbon reduction measures undertaken and participation in certification schemes.

The plans must provide information on scope 1 and 2 greenhouse gas emissions, alongside a “defined subset” of scope 3 emissions (such as from the supply chain, business travel and investments). Large businesses are already required to report their scope 1 and 2 emissions – from the direct combustion of fuel and energy consumption – under the Streamlined Energy and Carbon Reporting regime.

Separate guidance has introduced broader, but less well-defined, environmental provisions for public procurement. The entire English public sector, including local government and NHS bodies, should now have regard to meeting the “national priority outcomes” of tackling climate change and reducing waste.  They should also note the objectives of creating new businesses, new jobs and new skills and improving supplier diversity, innovation and resilience, it says.

In brief, contracts should not be awarded to the highest bidder if that would result in worse overall value to the taxpayer than an alternative provider.

“The public sector across the UK, from hospitals and schools to central government, police forces and universities, spends about £290 billion a year through public procurement. The huge power of that expenditure must support us in tackling some of the most important issues we face today, from generating economic growth and helping our communities recover from the Covid-19 pandemic, to supporting the transition to net zero, said Cabinet Office minister Lord Agnew.

When parliamentary time allows, the government intends to legislate to require adherence to the National Procurement Policy Statement. The law would also force public bodies with an annual spend of £200m or more (which would capture the Environment Agency) to publish procurement pipelines and benchmark their procurement capability from April next year. The provision would apply to bodies with a budget of £100m or more from April 2023.

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