Sustainable Public Procurement: Towards a lowâcarbon economy

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56 Sustainable Public Procurement: Towards a low carbon economy Calculating a life term cost is not always practised, as it requires both in house technical capacity and other related expenses. Not many companies have the expertise in life term cost assessment. In the absence of adequate capacity and ready to use information, companies are reluctant in carrying out the analysis unless the size and/or value of procurement are large. Instances of energy efficiency in small procurements can be seen in the case of CFL lighting as there is already a rich awareness and ready to use information in the form of labelling that helps the procuring agencies distinguish an energy efficient product from the other. Beside capacity and costs involved, there are several other impediments in a life term cost approach for procurement. A company looks at both immediate costs and long terms costs at the time of evaluating bids. In case of undertaking a feasibility study to ascertain the lifetime costs sometimes companies face difficulties as there is no guarantee with respect to life-time performance of the item purchased given by suppliers. This makes it difficult to justify purchases based on lifetime operating costs. Green purchasing in other countries has followed either the single-issue approach or the life cycle approach (OECD 1999). In the former, a single criteria like energy efficiency or recycled content is used to guide the purchasing decisions of the public authorities. In the latter, a tool is developed for an objective examination of the product’s environment impact along all the stages of its life, which include manufacturing, distribution, use and disposal. Usually low powered contracts are employed in the early phases of the life cycle i.e. contracts where the residual claimant is the government. Also, low powered contracts are employed more for high technology than for standard equipment. Some of the low powered contracts are cost reimbursement type while some of the high-powered contracts are fixed price or price cap type. This means that the contract has to suit the technological characteristic of the good in question. T E R I Report No. 2007GL01
57 Sustainable Public Procurement: Towards a low carbon economy Fig: 3.1: Size of energy budgets and procurement choices perceptions of roles of energy efficiency Procurement Agencies Large energy component + Large energy component + Small/ Medium firm Small energy component + Small/ Medium firm Towards a sustainable path (EE as an economic advantage) Scope for change through external and internal influences Problem area (Energy efficiency not economical) We can divide procurers in Indian Industry into three categories – First, large firms having large energy budgets, second, small firms with big energy budgets and third, small firms with small energy budgets. The first category of companies usually make large procurements and of big energy intensive items and are already in some way or other following the sustainable pathway in making their procurement decisions. Second category is one that has the potential to internalise sustainability in their procurement process but may or may not be adopting energy efficiency measures in their procurement process at the moment. There is a need for a push by way of policies, guidance and incentives to hep them make that shift. The third category is the difficult one for SPP as it is this category that is and will continue to pose problems in making the procurement process sustainable. (See figure 3.1). Any attempts/interests to establish SPP efforts will need to address these industry groups differently. Influences on public procurement: Implications for energy efficiency The perception of stakeholders with respect to energy efficiency in procurement was thus either in terms of environmental responsibility or reducing life term cost. However, these two approaches were not and cannot be looked at in isolation, as there is a whole range of factors that have both a positive as well as negative influence on incorporating energy efficiency measures T E R I Report No. 2007GL01
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