Sustainable Public Procurement: Towards a low‐carbon economy

53 Sustainable Public Procurement: Towards a low carbon economy
Low life term cost
development of methodology is one of the critical aspects which
would need to be addressed for the expansion of energy efficiency
and thus its implication for procurement in India.
Internal policies of the companies, such as environmental
policies and R& R policy influence the procurement process
indirectly. Therefore, they see SPP as a means of implementing
their policy and mission. Companies like IOCL and NTPC, which
are involved in mega projects which cause large scale
displacement and relocation, see this as an opportunity to
mitigate the ill effects and win the confidence of the local people.
This brings back the point mentioned in the previous section that
companies with an environmental policy find it easier to justify
their choice of energy efficient items, even though it may cost
more to the company. Unless there is an internal institutional
commitment towards environment protection at the level of the
company, a sustainable approach in their procurement process is
difficult to find.
It is clear that performance and cost are the two most important
factors determining the procurement made by companies.
Financial cost of a product can be determined on the basis of
either least cost at the time of purchase or a lifetime cost of the
product. Depending on the nature of goods being procured,
requirements, quantity and cost of item to be procured, choice
between immediate and long term cost is made for the purposes
of evaluation of a bid.
Least cost at the time of purchase is the most common and usual
practice but a lifetime low cost is what serves as the basis for
following an energy efficiency criterion while making a
procurement decision. Reduced energy consumption gets
translated into reduced operating costs and hence, a more
economical in the long run despite the initial incurring of
expenses. The basic difference between whole life costing and L1
cost is that the concept of former “allows for the consideration of
environmental, social and economic costs and benefits that occur
throughout the life of the a product or service, rather than simply
restricting these to the financial outlay involved in initial
T E R I Report No. 2007GL01