Creative Public Procurement: Lessons from Italy and the UK

Dr. Roberta Sonnino

School of City and Regional Planning

Cardiff University

The Potential of Public Procurement

Public procurement holds significant development potential: Enormous market in the EU, where it

represents ca. 16% of the total GDP (€ 1,500 billion in 2002)

In the UK, the public sector spends some £ 150 billion/year, or around 13% of its GDP

Significant opportunity to promote socially and environmentally friendly products and services – concept of sustainable procurement

Sustainable public procurement

Bringing together the business and the policy arms of government is what sustainable procurement is about. It is about how the government’ s immense buying power can be used to make rapid progress towards its own goals on sustainable development. […] Sustainable procurement – in short using procurement to support wider social, economic and environmental objectives in ways that offer real long-term benefits, is how the public sector should be spending taxpayers money (Neville Simms, UK Sustainable Procurement Task Force, 2006)

Sustainable public procurement in the EU: the background

In the 1990s, public procurement in the EU was subordinated to the philosophy of free trade and the single market 4 directives aimed to provide an effective competitive

market for public contracts that delivered best value for public money

No consideration for environmental and social costs of products and services offered

Sustainable public procurement in the EU: the background

Principles of free trade and the single market began to be openly questioned after the Treaty of the European Union (1997) Article 6 requires the integration of environmental and

social objectives into all EU’s policies to promote sustainable development

Helsinki case C-513/1999: the European Court of Justice agreed that contracting authorities can take into consideration the “production methods” of the bidder

Sustainable Public Procurement in the EU

Legislation reformed in 2004

Two new directives

Article 26 of the Public Sector Directive establishes that:

Contracting authorities may lay down special conditions relating to the performance of a contract…The conditions governing the performance of a contract may, in particular, concern social and environmental considerations

Sustainable Public Procurement in the EU

I think that one of the key concerns for us […] is this big argument about the fact that […] most of the plus points, the gains that we got in the European directives are in the recitals, and the UK government has a strict policy of transposing the articles only into the regulations […] Member states in their implementation have an obligation to provide as much information to public authorities who are the targets of the legislation[…] You can’t do that effectively without making reference to the recitals. […] We felt that, in the UK context, knowing that the local authorities exercise caution, these directives, as the Commission itself said, would extend the scope for the environment and social, they said they were there to clarify, and we think that the recitals are crucial to the clarification, and as such the regulations should be informing about the spirit of that clarification. […] We are disappointed at the national level…for us a lot of the spirit of the Directives, that we worked very hard to change, is not there…KATHLEEN WALKER-SHAW, BRITISH GENERAL UNION

Sustainable Public Procurement: the Potential of School Meals

A sustainable school meal system is one that:

reduces diet-related health problems promotes sustainable patterns of consumption creates new markets for local producers provides environmental benefits

Sustainable Public Procurement and its Barriers: the Case of the UK

Progressive deterioration of the school meal service since the 1980s

Abolition of nutritional standards Compulsory Competitive Tendering (CCT) as a

market-driven regulatory regime that spawned a cost-cutting culture (Morgan and Sonnino, 2008)

Lower quality school food Loss of kitchen infrastructure in schools Reduction in the numbers and skill levels of

catering staff

Sustainable Public Procurement and its Barriers: the Case of the UK

The UK system is obsessed with cost-effectiveness and “value for money”

Gershon Review of the public sector (1999) called for reform to secure better value for money and said we should not accept a “green premium” while greening public procurement

Lots of sensible choices that could be made by procurement managers are ruled out by a spurious perception of efficiency (B. Tuxworth, Forum for the Future, June 2006)

The School Food Revolution: Hungry for Success in Scotland (2002) New vision for school meals:

Promoting the “whole school approach” Raising the quality and nutritional standards of the meals Re-imagining school meals as an educational and health

service Significant financial investment: £ 63.5 million for the years

2003-2006

The School Food Revolution in East Ayrshire Deprived rural county of

120,000

Far-sighted council working in the spirit of ‘joined-up thinking’

Goal of “environmental stewardship, connecting children with food and with where the food comes from” (R. Gourlay, Head of Catering)

Re-localizing the Food Chain in East Ayrshire

Pilot project at Hurlford primary (2004), extended to the other 10 primary in 2005 Radically new menus

Health benefits of the Mediterranean diet Fat, sugar and salt were reduced Added colorings, artificial flavorings and GM-foods were

banned Fresh and unprocessed ingredients were prioritized

Local suppliers actively involved Establishment of relationships between producers and

the Council

Re-localizing the Food Chain in East Ayrshire

Strict “straightness” guidelines for class 1 vegetables made more flexible to attract organic suppliers

Products broken into 9 lots to attract local producers

Four innovative “quality” award criteria

Ability to supply to deadlines Quality and range of foodstuffs Food handling arrangements

and facilities Use of resources

Re-localizing the Food Chain: Procurement Mechanisms

13 Expressions of Interest and 10 bids received “Lack of understanding of the full process on the part of

some producers” (Bowden et al., 2006) Contracts awarded to 2 local wholesalers and 5 local

producers 50% of the ingredients utilized are organic 70% are locally sourced 90% of the food served is unprocessed

Costs of a two-course meal: £ 2.10 (ca. €3) 10 p difference between buying off national contracts and

buying locally

Re-localizing the Food Chain: The Impacts of Re-localization

Environmentally: Food miles reduced by

70% Less packaging waste Organic and local

sourcing have helped the Council to save almost £ 100,000 in environmental costs

Economically Multiplier effect of £

160,000/12 schools on local economy

Food Miles

0

50

100

150

200

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350

Before Af ter

Re-localizing the Food Chain: The Impacts of Re-localization

Culturally: Improving children’s eating habits and knowledge Breaking down misconceptions on the scope for

procuring local food Socially:

Increased users’ satisfaction 67% of children think that school meals taste better 77% of parents believe that the scheme is a good use

of the Council’s money Social Return on Investment Index of 6.19

Sustainable Public Procurement and its Potential: Examples from Europe

Even before the reform, some European countries have found room for manoeuvring within the old directives: Finland: Pori and the “acceptance of variants” method Sweden: Malmoe and the development of energy-

friendly transport technologies Italy: sustainable food procurement

Sustainable Food Procurement: the Italian Model

Sustainable food procurement has a quite long history in Italy

The “Guidelines for a Healthy Italian Diet” (1986), published by the National Institute for Nutrition, explicitly promoted the Mediterranean food model in public catering

Finance Law 488 (1999):To guarantee the promotion of organic agricultural production of ‘quality’ food products, public institutions that operate school and hospital canteens will provide in the daily diet the use of organic, typical and traditional products as well as those from denominated areas, taking into account the guidelines and other recommendations of the National Institute of Nutrition

Significant development of green and local food procurement in the Italian schools. In 2003:

68% of Italian schools made at least some use of organic ingredients

561 organic school canteens

In contrast with the UK, a multifunctional view of school meals supports sustainable procurement in 3 ways:

1. Contracting authorities retain complete control over the service

2. Possibility of discriminating in favour of local operators

3. Wide interpretation of “best value”

Sustainable Food Procurement: the Italian School Meal System

School Meals in Rome: The Numbers

140,000 meals supplied every day

92% of the meals cooked in the schools

Service entrusted to 6 catering companies but strictly monitored by the centre: 3,500 inspections by

dieticians/year 1,100 inspections performed by

a specialized firm in 2005 Involvement of Local Health

Authorities Canteen Commissions

Sustainable School Meals in Rome: The Process

Rome began its “quality revolution” in 2001

Contracts awarded on the basis of the “economically most advantageous tender”

Incremental procurement approach identification of a few basic quality criteria development of innovative award criteria

Sustainable School Meals in Rome: The Process

2002-2004 tender: 100-point award system Price of the meal (51 points) Organizational characteristics of the service

(30 points) Projects, interventions and services offered to

improve the eating environment and promote food education (15 points)

Additional organic, PDO and PGI products offered (4 points)

Sustainable School Meals in Rome: The Process

In the 2004-2007 tender, Rome increased the number of both basic quality criteria and award criteria

New requirements to prevent childhood obesity Renewed emphasis on seasonality, variety, tradition

and nutritional health Increased number of organic products

2004-2007 AWARD CRITERIA Points

A Price 51

B Improving and restoring canteens, kitchens and furniture

17

C PDO and PGI products (meat and cured meats) offered in addition to those required by the tender

9

D Organization of training courses and informational campaigns

8

E Organizational features of the service 4

F Use exclusively of products from "bio-dedicated“ food chains

4

G Organic products offered in addition to those required by the tender

4

H Fair Trade products 2

Sustainable School Meals in Rome: The Costs

Costs of a meal: € 4,11 (£ 2.83) Ingredients: € 1.9 (£ 1.31) -- 47% of the total Other direct costs: € 2 (£ 1.38) -- 50% of the total Profit for caterers: € 0.13 cents/meal – 9 p/meal (3,2% of

the total)

Families pay on the basis of their income: 5 meals/week: € 41.32 (£ 28)/month 25% discount for low-income families Service free for poor families

Costs of the school meal service in Rome: almost € 110 million (£ 76 million)/year The city invested € 166 million (£ 114 million) for the years

2004-2007

Case Study 1: The School Food Revolution in Rome

2007-2012 tender School meals and social inclusion

Unutilized foods and leftovers to charity associations and animal shelters

Incentives to source products from social cooperatives School meals and environmental sustainability

Recycling, low-impact detergents, bio-degradable plates “Guaranteed freshness”

Case Study 1: The School Food Revolution in Rome

Today: 67.5% of the food is

organic 44% of the food comes

from ‘bio-dedicated’ food chains

26% of the food is local 14% of the food is Fair

Trade 2% of the food comes

from social cooperatives

Is Rome acting legally?

EU regulations support sustainable procurement

If it is set out in a non-discriminatory way, there’s no doubt whatsoever that you can use as your technical specification that all foodstuff must be organic, full stop. […] It is legitimate to say “we want foodstuff that is not older than”, it’s a legitimate idea…If that means in practice that it will have to be locally-grown, so be it! It remains a legitimate criterion, but it is not a legitimate criterion if you say that it has to be produced within 10 kilometres from the school. Interview at DG INTERNAL MARKET

The School Food Challenge: Some Lessons

Rethinking school meals as a health and well being service Public meals as part of a wider strategy for sustainability

integrating production, consumption, health and education

Investing resources Involving all actors in the food chain Disseminating good practice from one area to

another Long-term vision