Public governance

Strategic Public Procurement: Procuring Sustainable, Innovative and Socially Responsible Solutions

 

Opening Remarks by Angel Gurría

OECD Secretary-General

UICP Espaces Congrès, Paris, 2 June 2017

(As prepared for delivery) 

 

 

Dear Commissioner, Ladies and Gentlemen,


I am delighted to open this joint OECD-European Commission conference on Strategic Public Procurement. We are honoured to welcome leaders and experts from so many different policy communities and nationalities here today.


Let me begin by thanking the European Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, Ms. Elżbieta Bieńkowska, for joining us, as well as all our distinguished speakers and participating countries. We are working together to promote a holistic, inclusive and strategic approach to procurement at all levels of government: national, regional and local.


Strategic public procurement matters

Today’s conference builds on the success of last year’s OECD Forum on Procurement for Innovation to further advance our dialogue on rolling out strategic public procurement.


We know the relevance of this matter. Public procurement can have a significant impact on policy outcomes: in the OECD it represents, on average, 12% of GDP and 29% of total government expenditure.


Until only a few years ago, public procurement was perceived as an administrative, back-office function. Today however, it is seen as a crucial pillar of services delivery for governments and a strategic tool for achieving key policy objectives: from budget accountability, to spending efficiency, to buying green and improving outcomes in health, to tackling global challenges such as climate change, and promoting socially responsible suppliers into the global value chain.


The strategic use of public procurement can also make a difference in the development of SMEs. According to our data, in 2013, SMEs in the OECD (in the non-financial business sector) accounted for 99.7% of all enterprises, 60% of employment and generated about 50 to 60% of value added. Facilitating SMEs’ access to public contracts is therefore a crucial policy objective in many countries.


Strategic public procurement can also significantly support a more circular economy and transform supply-chain business models, given the magnitude of its size in government spending and its predominant role in delivering some of the most resource-intensive public services such as infrastructure.


This calls for an approach that not only enables efficiency, growth and value for money, but also accomplishes strategic goals linked to a broader understanding of sustainability, cutting across both environmental and social objectives.


Almost all OECD countries have developed strategic procurement policies rewarding greening efforts and encouraging innovation, for example, by promoting reduced energy consumption, introducing life-cycle costing analysis or incentivising industrial low-carbon innovations.


Overcoming challenges to strategic public procurement

Despite these benefits, a number of challenges are faced when rolling out strategic public procurement. For instance, a lack of understanding of the benefits of sustainable procurement amongst politicians and budget holders is a challenge. Public procurement is subject to many pressures, from cutting costs to meeting the demands of internal users and the public. If there is little political support or resources available for sustainable procurement, it can easily slip down the agenda.


A lack of clear definitions is also an important challenge as many procurement professionals will struggle to define what an “environmentally” or “socially preferable” product or service is. Although several sources for recommended sustainable criteria exist, such as those set by the European Commission, there is room for improvement implementing these.


Another key challenge identified by many public sector organisations is changing the perceptions regarding the true cost or value of a purchase – particularly where only purchase price is assessed rather than life-cycle costs. Typical public sector instruments such as annual budgets – which do not incentivise long-term savings – tend to compound this issue.


Finally, the risk of corruption in the context of public procurement remains a perennial challenge. We have evidence to show that nearly 60% of foreign bribery cases involved bribes to obtain public procurement contracts, reinforcing the need for greater integrity in public procurement processes.


Addressing these challenges requires building up new skills in the public sector. We need to ensure a common understanding of the strategic role of public procurement to achieve policy objectives and ways to evaluate and manage risks.


The OECD is contributing to strategic public procurement

In recent years, the OECD has been increasingly committed to highlighting the importance of strategic public procurement. Our reports, ‘Going Green: Best Practices for Sustainable Procurement’ and ‘Public Procurement for Innovation: Good Practices and Strategies’, outline many best practices as well as successes of countries and stakeholders using procurement strategically.


For example, the Italian central purchasing body, Consip, was able to reduce energy consumption and CO2 emissions by purchasing heating services for over 6,000 buildings using a framework contract on “Integrated Energy Management Services”, while achieving a 27% cost saving in the process. In Norway, strategic procurement has been used to procure innovative welfare technology for old people’s homes.


The OECD’s new report, ‘Investing in Climate, Investing in Growth’, which we launched last week, identifies public procurement as a major potential driver of low-carbon innovation in technologies and business models. In the Netherlands, its Public Infrastructure Authority uses life-cycle analysis and monetisation of externalities including CO2 to appraise infrastructure tenders. By creating a market for innovative low-carbon products, public procurement can mitigate the risk taken by companies that invest in break-through technologies to lower their climate footprint.


We are also witnessing a shift in the focus of procurement from cost compliance to value creation, leading to even greater value for money. For example, countries like Spain, Denmark and Portugal are promoting green public procurement as a major driver for innovation, providing industry with incentives for developing works, products and services with a much better environmental performance.


Innovative solutions, such as the EU’s telemedicine system THALEA , or sustainable office buildings in Belgium , are also supporting the transition to a low-carbon world and making possible access to knowledge that might not be readily available in-house.


When used strategically, public procurement can help make our economies more productive, our public sectors more efficient, our societies and economies more inclusive, all of which are vital conditions for achieving the 2030 Agenda for Sustainable Development and its Sustainable Development Goals.


Ladies and Gentlemen,


Strategic public procurement has become an indispensable tool for governments and policymakers. It is opening up new possibilities and enables us to tackle today’s growing challenges by creating important economic, social and environmental opportunities. It can be a catalyst for innovation and new technologies. As Mariana Mazzucato remarks in her book “The Entrepreneurial State”, “every major technological change in recent years traces most of its funding back to the state”. Strategic public procurement is essential for human progress!


So let’s continue to work together and to consolidate our efforts in order to design, develop and deliver better procurement policies for better lives.


Thank you.

 

See also

OECD work on public procurement

 

 

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