Background
In 2019, the UK Government amended the Climate Change Act 2008, which introduced a target of at least a 100% reduction in the net UK territorial carbon account by 2050. This is otherwise and more widely known as the ‘Net Zero’ target. This is an ambitious target that will require a transformation of of “the UK’s economy over the next three decades [and…] a journey of unprecedented opportunity and change”. This is expected to include how and what Contracting Authorities procure when going out to market, recognising that one “of the ways in which the [UK] Government achieves its goals is to buy goods and services […that] covers a wide range of things, from the purchase of printer paper to” the delivery of multi-billion pound infrastructure and transport projects. Against this backdrop, public spending on procurement (for which the 2020/21 financial year totalled £306 billion) has the ability to prioritise projects that reduce greenhouse gas (“GHG”) emissions and, in turn, support the Net Zero target. Whilst environmental protection and tackling climate change already feature in the delivery of many public contracts, there is a question as to what Contracting Authorities can do to maximise these national priorities.
Existing guidance on carbon reduction and climate change
On 18 March 2024, the Cabinet Office published PPN 01/24 on the Carbon Reduction Contract Schedule (the “Schedule”) which provides a set of standard terms and conditions to support contract specific decarbonisation objectives to be set and delivered. The PPN also provides a framework to monitor and assess suppliers’ decarbonisation performance. This is the first PPN on carbon reduction and climate change since PPN 06/21, which was published nearly three years ago.
The use of the Schedule is optional and should be included where relevant to the subject matter of the contract and proportionate to do so (for example supplementing the provisions of Appendix 1 to Schedule 4 of the Model Services Contract). PPN 01/24 applies to all Central Government Departments, their Executive Agencies and Non-Departmental Public Bodies, referred to in the PPN as ‘In-Scope Organisations’. Other public bodies such as local authorities may wish to apply an equivalent approach to their own contracts but are not obliged to do so.
Before including the Schedule in a contract, In-Scope Organisations should assess:
- their understanding (i.e. maturity) of carbon reduction initiatives and how to apply and monitor these;
- the supplier’s understanding (i.e. maturity) of carbon reduction initiatives and ability to introduce effective measures;
- the value and estimated GHG emissions linked to the contract; and
- the criticality of the contract.
PPN 01/24 should be considered by Contracting Authorities as part of the procurement lifecycle and contract management phase of the agreement in order to ascertain whether and how the contract can incorporate the Schedule.
PPN 01/24 is a welcome addition to PPN 06/21, taking account of carbon reduction plans in public procurements (which applies to major government contracts, framework agreements and contracts awarded under dynamic purchasing systems) with an anticipated value of £5 million per year or more. PPN 06/21 introduced a new selection criteria for government contracts requiring tenderers to detail their commitment to achieving Net Zero through the publication of a Carbon Reduction Plan (“CRP”).
As discussed in a previous DWF article, accompanying guidance to PPN 06/21 sets out the circumstances in which a Contracting Authority may exclude a tender for failing to achieve compliance with the selection criteria. These circumstances could include failure by a tenderer to:
- "make an organisational commitment" to reduce GHG 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"; or
- provide "environmental management measures that will be applied in the performance of the contract" in the CRP.
PPN 06/21 and whether a Contracting Authority intends to introduce a CRP as part of its selection criteria should be considered by Contracting Authorities before going out to market and during the procurement process. Further information regarding PPN 06/21 can be found here.
Additional guidance can be found in PPN 05/21: National Procurement Policy Statement ("NPPS"). The NPPS sets out the "strategic priorities for public procurement" and encourages all Contracting Authorities to "support priority national and local outcomes for the public benefit" to help maximise "value for money in public procurement". The national priorities relate to "social value; commercial and procurement delivery; and skills and capability for procurement." Whilst the latest version of the NPPS will come into force on 28 October 2024, both the current and future versions state that all Contracting Authorities should have regard to set outcomes in their procurement activities, which includes tackling climate change and reducing waste. Further information regarding PPN 05/21 can be found here.
Comment
In the context of the UK Government’s strategic aims and the Net Zero target, it must be considered whether the existing guidance and the NPPS goes far enough, both in carbon reduction and tackling climate change. It is interesting that the guidance in PPN 06/21 is mandatory for contracts over £5 million, whereas PPN 01/24 is optional for all Contracting Authorities. It could be argued that PPN 01/24 has not gone far enough – particularly given that it is entirely voluntary. Whilst PPN 01/24 is not mandatory, it does not necessarily prevent Contracting Authorities from voluntarily adopting measures that will reduce carbon output and help tackle climate change. That being said, it should be recognised that there is often a tension between delivering value for money and maximising public benefit, whilst also attempting to deliver projects that tackle climate change on time and to budget.
With assistance from Chantal Charnock, who is a trainee in our Commercial & Competition team.
