Mandatory selection criteria
PPN 06/21 has introduced new selection criteria for government contracts requiring suppliers to "submit a Carbon Reduction Plan [detailing] their organisational carbon footprint [and confirming] their commitment to achieving Net Zero by 2050."
The selection criteria will apply to central government departments, executive agencies and non departmental public bodies for the procurement of major goods, services or works contracts commenced on or after 30 September 2021. Major contracts in this instance mean contracts with a value of over £5m.
The Carbon Reduction Plan ("CRP") will need to "be approved by a director (or equivalent senior leadership)" within a supplier's organisation and submitted to the relevant contracting authority at the selection stage. A supplier's published CRP should:
- confirm their "commitment to achieving Net Zero by 2050 for their UK operations";
- provide "current emissions for the sources included in Scope 1 and 2 of the GHG Protocol, and a defined subset of Scope 3 emissions";
- provide emissions reporting "for the six greenhouse gases covered by the Kyoto Protocol";
- detail "environmental management measures…including certification schemes or specific carbon reduction measures"; and
- be "updated regularly…and published and clearly signposted on [their] UK website".
Accompanying guidance to PPN 06/21 sets out the circumstances in which a contracting authority may exclude a supplier for failing to achieve compliance with the selection criteria. These circumstances could include failure by a supplier to:
- "make an organisational commitment" to reduce Greenhouse Gas emissions;
- disclose relevant "organisational Greenhouse Gas emissions" to a contracting authority;
- provide a CRP which meets the Technical Standard or providing a CRP which has not been "appropriately signed off"; and
- provide "environmental management measures that will be applied in the performance of the contract" in the CRP.
The decarbonisation context
PPN 06/21 reminds contracting authorities and suppliers that "environmental considerations and carbon reduction will be a factor in most, if not all, contracts" to the extent that, "in the vast majority of cases, the application of [PPN 06/21] will be relevant". Environmental considerations could include contracts which:
- in their delivery, will "have a direct impact on the environment";
- "require the use of buildings by staff" who will deliver the contract; or
- "require the transportation of goods or people" to deliver the contract.
Whilst the measures set out in PPN 06/21 will only apply to major government contracts, it is indicative of the general direction in which the UK government is travelling. The new selection criteria is the latest in the UK government's efforts to decarbonise the public sector to help to achieve Net Zero greenhouse gas emissions across the UK economy by 2050. In the Subsidy Control and public procurement space, these measures have already included:
- targeted public sector funding prioritising decarbonisation projects (such as Phase 2 of the Public Sector Decarbonisation Scheme and the launch of the Ten Point Plan for a Green Industrial Revolution); and
- national policies encouraging contracting authorities to consider and adopt measures to help to achieve Net Zero (such as the National Procurement Policy Statement).
The UK Government's target of reaching Net Zero by 2050 is ambitious and the new measures listed in PPN 06/21 will assist in encouraging suppliers to support the objective, as well as enabling the Government to capture essential data on what its major suppliers are doing. Whilst the new measures are set to apply to procurements for major contracts commenced on or after 30 September 2021, suppliers should use the time leading up to its implementation to review their current internal processes and emissions reporting and address any issues which may fail to achieve compliance at future selection stages. In particular suppliers will need to establish new data sets for the Scope 3 subset of emissions, which may have been outside of current reporting requirements. The good news is that contracting authorities may not need to consider their capability to evaluate bidding suppliers' CRPs. The quality of the CRP is not really being tested – simply answering yes and providing the base data should be sufficient to pass the requirement. What will be interesting is whether we see new standard clauses being introduced to longer term arrangements to capture, and potentially challenge, failures in delivery against those targets.
If you are a public body considering how the latest measures in Procurement Policy Note 06/21 might affect your organisation, please contact a member of our national public sector team to discuss how we might assist you.