GPP and business competitiveness Jennifer Cassingena Harper Malta Council for Science and Technology EU green public procurement (GPP) policy: national awareness-raising conference Radisson Blu, Malta

Outline  Dynamic Global Context  Europe 2020 : Sustainable Growth  GPP: insights from other countries  GPP and Public Procurement for R&I  Challenges for innovative GPP in small countries  Case studies from Malta  Critical success factors  Conclusions

Rationales for EU STI Priorities  In an increasingly dynamic global context, EU is falling behind its competitors in terms of STI investments and performance (Lisbon and EU 2020).  Fragmentation of European research into national research programmes driven by national priorities (ERA)  EU is facing a range of challenges (economic, societal, environmental) and ‘business as usual’ policies will lead to Europe’s gradual decline

Dynamic Global Context A complex of diverse processes of internationalisation underway - emergence of the globalising learning ecology Key drivers: Competition, cooperation and coordination  Increasing trends of global competitiveness - EU is facing intensifying competition from developing and emerging economies as BRICs are investing heavily in R&D (S&T and innovation-driven). Openness and interdependence of economies both a threat and an opportunity  Cooperation growing through proliferation of international (transnational, intergovernmental, non- gov) organisations – EU recognises need for strategic approaches  Coordination is a growing trend in Europe – ERA, OMC (open method of coordination) Joint Programming in STI policy Competition Cooperation Coordination

Europe 2020 Priorities This has prompted EU to launch the Europe 2020 which identifies three over-arching mutually reinforcing priorities:  Smart growth: developing an economy based on knowledge and innovation.  Sustainable growth: promoting a more resource efficient, greener and more competitive economy.  Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion. Europe

EU 2020:Towards Sustainable Growth Building a resource efficient, sustainable and competitive economy,  exploiting Europe's leadership in the race to develop new processes and technologies, including green technologies,  accelerating the roll out of smart grids using ICTs, exploiting EU-scale networks, and  reinforcing the competitive advantages of our businesses, particularly in manufacturing and within our SMEs,  assisting consumers to value resource efficiency.  Such an approach will help the EU to prosper in a low-carbon, resource constrained world

Sustainable growth and competitiveness  EU’s prosperity depends on world trade in inputs and finished goods. Intense pressure in export markets and for a growing range of inputs is driving EU to improve competitiveness through higher productivity.  EU was largely a first mover in green solutions, but challenged by key competitors, China and North America. EU needs to maintain market lead in green technologies as a means of ensuring resource efficiency through out the economy.

Towards a resource efficient, low-carbon economy  EU aims to support the shift towards a resource efficient and low- carbon economy that is efficient in the way it uses all resources. The aim is to decouple our economic growth from resource and energy use, reduce CO2 emissions, enhance competitiveness and promote greater energy security.  At EU level, the drive is to address both supply-side (EU financial instruments) and demand-side instruments:  Demand-side: use of market-based instruments e.g. emissions trading, revision of energy taxation, state-aid framework, encouraging wider use of green public procurement

Challenges of GPP: Insights from Canada  The lack of credible information to facilitate “buy green” decisions, and uncertainty about trustworthy sources of credible environmental product information  The views that green products are unavailable, too expensive, or unreliable, and that recycled-content, energy-efficiency, water- efficiency and low-toxicity messages are separate issues unrelated to procurement decisions  Conflicting mandates and claims (i.e., recycled content, buy local, etc.), and concerns that the concepts and rationale for green procurement are too difficult to explain to senior decision-makers and end-users  Confused and inconsistent environmental purchasing messages from multiple sources, including misleading information supplied by vendors and “green solution” competitors  Limitations related to the capacity and expertise of procurement personnel and the need for effective coordination of decentralized purchasing practices.

GPP set to become the norm: insights from the UK  Suppliers to the public and private sector will see their competitiveness diminish over the next few years if they fail to provide customers with information on their carbon footprint and evidence that they are improving their environmental sustainability.  That is the stark warning from a group of procurement experts speaking at a roundtable event hosted yesterday by the Carbon Trust Standard, who predicted that the number of organisations adopting demanding sustainable procurement criteria will only increase.  The trend is particularly apparent within the public sector, where the launch 18 months ago of a Centre of Expertise in Sustainable Procurement within the Office of Government Commerce (OGC) has led to an overhaul of government procurement policies.

GPP and Public procurement for Research and Innovation  Both are critical for enhancing global competitiveness  Both entail consumer and societal benefits  Both entail considerable challenges in implementation linked to:  Market factors  Procurers (risk averse and specialised skills)  Consumer awareness  R&I ecosystem

Challenges for Innovative GPP in small economies  Opportunities:  Smaller administrations, more flexile, faster learning, twinning, joining up  Trust, established supplier relationships  Specialisation advantage, niche lead markets  Challenges  Capacity issues, lack of specialised expertise on demand and supply side  Mismatch of needs and supply/export opportunities  Subcritical mass of tenders  Lock in in local, traditional networks (downside of “trust”)  Source: Prof Jakob Edler Project funded by the European Commission

Case studies from Malta in innovative PP  Public procurement for innovation is not common in Malta  Two case studies of relatively large procurements in Malta  Case Study 1 – Enterprise Storage Project  Case Study 2 – catering Services to inpatients at Mater Dei Hospital  Very important for their sector  Succeeded in addressing the need in a new manner Research carried out by Chris Magri for Masters thesis

Case Study 1 - Enterprise Storage Project - MITTS  Published in Government Gazette in Oct 2005  Negotiated procedure was used  €8.8 million contract with S&T Malta Ltd in November 2006  …for the procurement, implementation and support of the ICT infrastructure necessary to support the Active-Active Data Centre concept, the enterprise server and storage consolidation project

Case Study 1 - Enterprise Storage Project - MITTS  Solution procured and centralised the government IT storage needs  Solution to address costly maintenance and lack of security and:  Better manage the server storage space  Avoid waste and duplication  Operate more efficiently  Ensure proper back ups  Reduce total cost of ownership

Case Study 1 - Enterprise Storage Project - MITTS  Complex issues had to be addressed through discussion and discussion  Risks of the solution were addressed through negotiation and implementation by supplier  Need for fairness and confidentiality - addressed through various measures  Drawbacks in using procedure  It was the first time that it was being used in Malta  Resource-intensive and lengthy process  Tension between internal experts and suppliers

Case Study 2 - Catering Services to Inpatients at Hospital - FMS Published in Government Gazette in July 2005  Competitive dialogue procedure  Awarded to JSBZ Catering for €2.34 million annually  Appeal lodged but decision was upheld  … for the supply of catering service to inpatients at the new Mater Dei hospital

Case Study 2 - Catering Services to Inpatients at Hospital - FMS  Previous hospital own kitchen which provided catering services - quality was low, high waste, limited menu choice  New hospital: need for high quality to complement the standards set  Catering is complex: tailoring menus to different patient needs and tastes, 2000 meals per day. Price is a factor in a competitive environment  All these indicated that normal procedures would not work  Catering system based on B-POD (base station holds the mechanics and the pod delivers trays to patients)  Uses advanced procedure of pre plated cook-chill system that ensures food is tastier, fresher and most importantly more hygienic  Fourth such system in the world – first in Malta  Leadership was provided by Ministry of Finance

Case Study 2 - Catering Services to Inpatients at Hospital - FMS  Benefits of competitive dialogue:  Ability to negotiate in a commercial manner  Address different and complex needs  Allowed competition between bidders since they were not aware of what was being negotiated with the other bidder  One could see and test what was being proposed  Drawbacks of the procedure:  Used for first time in Malta  Non successful bidders inclined to appeal due to the investment they had made in the procedure  Required substantial resources  Lengthy and not easy to adjudicate  Main Risk related to ethics (addressed by recorded sessions)

Case Study 2 - Catering Services to Inpatients at Hospital - FMS  Main risk concerned ethics on the part of the procurement and negotiating team – risk heightened due to the negotiating aspects  Risk mitigated by:  having ethical persons on the adjudicating committee  availability of the required skills and competencies  democratic governance was adopted  sessions recorded

Critical Success factors - Initial Stages  As a customer, the procurer needs to be aware of, understand and define the needs of the project  Appropriate political and management support: the conviction and buy in at the top of the organisation and their understanding of why and how to carry out the procurement is imperative  Market research is important to identify what is available and trends in the market so that these are known to those negotiating on the procurer’s side  Use of the right procurement procedure to enable the achievement of the stated aims and objectives

Critical Success factors – Procurement Team  Procurement /adjudication teams need to include appropriate mix of skills, competences and expertise in R&I procurement, finance, negotiation, and legislation  Decision making processes need to be clear, communicated and understood by all  Well-defined governance process, including a multilayered organisation designed to ensure separation of duties and appropriate reporting procedures  Roles and responsibilities in the negotiating process need to be defined and adhered to. The chairperson at each meeting should be assigned the authority to stop anyone who oversteps assigned boundaries, and ensure that the discussion adheres to the terms of reference

Critical Success factors – Procurement Process  Ensure that the procurement involves not only the solution but the implementation of that same solution. In this way the supplier would be addressing risks which otherwise would have to be carried by the procurer  Ensure that the teams negotiate hard but in a fair manner so that the best package possible is obtained. This will ensure the success of the process and the project  Be open to suppliers’ ideas, but ensure that expertise to challenge what the bidders are proposing is available. Ask questions and clarifications during the negotiating and dialogue stage, and listen to, rather than hear, answers  Think in a commercial manner, as if negotiating on behalf of the private sector, but always keep in mind the objectives of the procurement process

Critical Success factors - Ethics  The professional and ethical integrity of the procurement teams is imperative and must be assured in the nomination of the teams, the norms adopted and the implementation process  Ensure integrity and fairness of the process, particularly by documenting, signing and recording discussions and negotiations  Prepare a code of ethics to which all those on the procurement teams have to sign and adhere strictly. The code may included termination clauses in cases of serious breach  With the cognizance that integrity and trust in the procurement team is imperative, attention to small things that collectively ensure the building of trust must be ensured. These include the provision of information in written form, documenting and communicating the whole process, recording all sessions, provision of all important documentation including the code of ethics to suppliers, and addressing bidders’ fears through professionalism and integrity.

Conclusions  GPP and PP for R&I have been assigned a prominent role in EU 2020  Important synergies and common challenges connect the two and highlight the need for more coordinated approaches at national level  More precise information on sectoral PP and GPP and PP for R&I needed to explore full potential of these instruments at European and national level.

Thank you for your attention Acknowledgements: Chris Magri (Masters thesis on R&I PP in Malta) Professor Luke Georghiou and Professor Jakob Edler, University of Manchester for ERAPRISM Procurement Survey and Analysis My contact details: Jennifer Cassingena Harper Website: Project website: