Can you do it and do you want to?
Environmental issues don’t usually feature in a housing provider’s top considerations when procuring IT. This may be a missed opportunity as well as potentially overlooking compliance with legal requirements.
Policy objectives and the Social Value Act
Housing providers, including registered providers, local authorities and ALMOs, are contracting authorities under the public procurement rules (as set out in the Public Contracts Regulations 2015). The Public Services (Social Value) Act 2012 also applies when they procure services, including IT services, valued above the tendering threshold (currently £189,330 ex VAT).
Before procuring a services contract, a housing provider must consider how those services “might improve… the environmental well-being” of the area they operate in and how to secure that improvement through the procurement.
Not all IT contracts are contracts for services; some (e.g. off-the-shelf software licensing) are supply contracts. It is still good practice, though, and in line with many housing providers’ corporate objectives and procurement strategies, to consider environmental issues. Large companies (which some housing providers or their subsidiaries are) must also report on environmental matters, including greenhouse gas emissions, in their annual reports.
Environmental issues & procurement
Environmental considerations can be factored into a procurement:
- As contractual obligations – to be delivered by the supplier, otherwise they will be in breach of contract;
- As selection criteria – through which each potential tenderer’s environmental track record, policies and processes are evaluated either: to exclude suppliers that do not meet minimum standards; or (except in the open procedure) to score suppliers on their environmental track record and credentials and use this to help select which suppliers to invite to tender;
- As award criteria – through which each tenderer’s proposals for delivering specific environmental objectives are evaluated and scored.
This is where housing providers can usually make the most environmental impact in their procurements.
Specifying an “energy hungry” IT solution will increase the environmental and corresponding financial costs of a contract. Cloud-based solutions may be environmentally beneficial by combining the energy requirements for processing for many clients, but some cloud providers may have a smaller environmental footprint than others. Some solutions may allow a housing provider to reuse the heat generated by servers to heat their buildings. Housing providers can recycle obsolete IT equipment to charities in the UK or abroad.
Any contractual requirements must be “objectively verifiable”. Environmental requirements should be specified only where a housing provider has the resources, commitment and technical knowledge to monitor whether they are delivered. This means considering contractual remedies. A housing provider will be reluctant to terminate an otherwise well-performing IT contract for breaches of environmental requirements. Damages are generally payable only for financial losses, although they can be linked to other contractual requirements if they are commercially reasonable or drafted as incentive payments (e.g. for achieving environmental KPI targets).
The Chancery Lane Project has developed template environmental clauses, available online. Housing providers using these should tailor them to the requirements, language and style of their contracts into which they are inserted.
These “looking back” items involve the housing provider evaluating the supplier’s track record and environmental processes. The procurement regulations specifically permit consideration of a supplier’s “environmental management measures”. Suppliers that have broken environmental laws can be excluded (but only after giving them a chance to demonstrate that they have subsequently improved their environmental performance).
This does not apply to contracts called off from frameworks. Here the framework provider ran this stage when setting up the framework, so the housing provide cannot repeat it.
Under the open procurement procedure, these are limited to “pass/fail” questions. Other procedures allow a potential supplier’s environmental policies and processes to be considered when deciding which suppliers to invite to tender.
Award criteria evaluate a tenderer’s proposals for providing the IT services or supplies required. Permitted award criteria specifically include:
- Price or cost, with “cost” here including “client side” costs, and “lifecycle costs” (e.g. increased power usage) provided these can be quantified and evaluated;
- Quality, including “environmental characteristics”.
In Concordia Buses, Finland (Case C-513/99), the court upheld award criteria giving bidders extra marks for proposing to use buses meeting specific noise and pollution levels. These were objectively quantifiable environmental benefits of those tenders. Similarly, a housing provider procuring cloud computing may want to evaluate the environmental footprint from the cloud provider’s server warehouse(s).
Having these as award criteria contrasts with specifying mandatory environmental requirements which, if not met, will lead to the rejection of a tender as non-compliant.
The award criteria must be “linked to the subject matter of the contract”. This can be to the “supplies or services to be provided at any stage of their lifecycle”. However, housing providers may not always have the knowledge (nor desire) to undertake the detailed due diligence into an IT supplier’s supply chain that evaluating this requires.
Environmental award criteria must also be measurable and verifiable. In EVN (Case C-448/01), a criterion measuring the proportion of renewable energy supplied to all customers was successfully challenged because it was neither measurable nor linked to the subject matter of the contract.
There is a role here for the buying clubs, such as the Crown Commercial Service, to incorporate environmental factors more fully into both the competition for places on their frameworks and call-off arrangements from them.
In summary, there are both opportunities and tools for housing providers to consider environmental factors in their IT procurements. The question is whether housing providers will regard it as sufficiently important to spend the extra time and effort needed to do so.
Richard More and Emma Watt are associates and Andrew Millross is a partner at Anthony Collins Solicitors LLP.