Urban Reverb: Navigating the World of Procurement

Anthony Colclough: Hello and welcome to Urban Reverb, the official podcast of the Smart Cities Marketplace, a European initiative financed by the European Commission. I'm Anthony Colclough. Sometimes when I do the shopping, I worry about where I buy things – oughtn’t I to spend my money with the local grocer, rather than the big chain store? I should be supporting organic farmers, but these organic vegetables are from the other side of the earth, and the non-organic ones have a lower carbon footprint. Should I buy the cheap shoes that are ruined within months, or splash out for a sturdier pair? Before I slip too far down these rabbit holes, I remind myself that after all, it’s not a lot of money that I’m spending in the grand scheme of things.

But what if I was going out with billions to spend? That’s the situation with public procurement – the term used for when cities and other public bodies make large purchases of goods or services with public money, and so it’s no wonder that cities are thinking hard about how their purchasing relates to local goals like creating environmental sustainability, boosting the local economy, and improving social cohesion. On today's podcast, I'm joined by three experts who literally wrote the book, I should say booklet, on sustainable procurement in cities. Meet Daniela, Grace, and Owen.

Grace Sly: So my name is Grace Sly, and I am an expert on the sustainable and innovation procurement team at ICLEI Europe, and I focus on city-to-business collaboration.

Alis-Daniela Torres: I am Daniela Torres from ICLEI Europe also, and I am leading the green and digital transformation team of the organization, especially focusing on the development of the integrated agenda between the sustainability and digital across Europe. 

Owen McColgan: My name is Owen McColgan. I'm originally from Ireland. I work over in Brussels here for Technopolis Group. I'm an economic policy consultant over here for nearly three years. And I am part of the consortium that works on the Smart Cities Marketplace. 

Anthony Colclough: One thing that must be kept in mind when thinking about this issue, as I’ve already alluded to, is the vast sums and attendant power wrapped up in local public procurement, as well as the extraordinary complexity of the topic.

Grace Sly: In the EU, public sector spending represents about 14 percent of GDP and has a total annual value of approximately 2 trillion euros. And given the size of these purchases, procurement can be a really powerful tool for public authorities who are seeking to achieve specific environmental, societal, or economic policy goals and help them meet these climate neutrality objectives, particularly within the framework of the EU Green Deal. And sustainable public procurement can also really incentivize the market to develop green, socially responsible, and innovative products and services that governments can then mobilize the purchasing power to choose these goods and services with reduced environmental impact and therefore be a key driver of changing the market to meet these objectives as well.

Alis-Daniela Torres: The green and digital agendas are merging, and this is happening also on the city level and in the Smart Cities Marketplace, especially we have seen that more and more cities are adopting digital and smart city services and, they are taking more relevance to consider that these services have to be procured somehow. And going back to the topic of public procurement, we see now also that there's a lack of, how can I say, understanding of what is needed towards these purchasing or procuring green and digital solutions like urban data platforms, intelligent transport systems, for example, if a municipality wants to procure air quality monitor, monitoring equipment, for example, or if they want to do smart lighting services in the, in the public space.

It's important also that these procurement processes of this technological innovation also include the sustainability aspects, the economic, social and environmental issues. Like for example, the energy efficiency of the equipment that is going to be purchased for these solutions or how to handle the end-of-life management of this technological equipment.

But also handling sensitive issues like data protection or using citizens’ data, for example. So, it's very relevant that with the procurement tools, at the same time, the city guarantees that all these aspects are included in the procurement of these solutions. And also, in this moment that we are talking about green transition, also the cities have now these climate neutrality goals.

So, we also need to think that everything that the city is procuring also has to complement the and help the city to achieve these goals. So, this is the first effort that the Smart Cities Marketplace is doing with a booklet. We have done an interesting booklet on sustainable procurement. So, yes, so we hope that also it is going to give insights on how green and digital solutions can support the green transition. 

Anthony Colclough: Clearly, there is a lot for cities to think about when they start purchasing anything, not least the long-term effects of that purchase, and how it will fit in with all the other purchasing they will have to do. It’s enough to make your head spin. But what do we mean when we say, ‘sustainable procurement’ and what myriad of attendant challenges and pitfalls lie in wait for the city setting out on this intrepid journey?

Grace Sly: So sustainable public procurement really seeks to look beyond an organization's short-term needs and consider really the long-term impact of a purchasing decision and ensure that the products and services that a public administration purchases can achieve the optimal value for money on a lifecycle cost basis and generate additional benefits for the environment, society, and economy.

Owen McColgan: So regular public procurement, it's not, you don't really look at the whole life cycle of a project. You don't really take into account any environmental factors or anything like that there. So, what's different for sustainability is that you're looking at the whole life cycle. For me, anyway, you're looking at the whole life cycle of this procurement. So, whether it's just, it could be, for example, just buying like a new fleet of buses in your city.

So, what you're going to do is you're really going to look at like how cost effective it is. And how long are these like, say for the engines as well, how long are these engines going to last? So, and how easy are they to repair? So, it's really cost effective. So, cities can really leverage this by setting, like in their tenders for public procurement, what they can really do is they can set sustainability is criteria that incentivizes businesses to adopt eco-friendly practices throughout their supply chain.

You know, and this can really spur on innovation, really leading to like new green technologies. You really, you look at the long-term savings. It could also boost jobs within the city as well through because it's kind of a new market and really emerging market. So, if you're really putting money into green public procurement, you know, and sustainable public procurement, you're really going to boost that green job creation. And it also, it can also attract investments, I suppose, from SMEs and new and new businesses like that.

Grace Sly: And in this Smart Cities Marketplace Solution booklet on public procurement, we have identified several key characteristics of public authorities that can encourage, enable, and engage with the procurement of these sustainable and smart solutions. These include, for example, the need for clear environmental, social, and governance targets, a well-defined economic and regulatory framework, professionalized and well-trained staff, the inclusion of assessment criteria defined by value for money, not just low price, the active cooperation with market stakeholders and clear communication of the procuring authority's objectives with potential suppliers, and really the consideration and engagement of end users.

So, through this we can implement a lifecycle thinking that considers the financial, environmental, and societal costs throughout the purchasing operation and end of life stages of a procurement process. 

Owen McColgan: It's not always about the very lowest, lowest cost. Because environmental factors, like, I mean, putting them into the contract is still, it isn't cheap. But I mean, you have to look at the social impact as well say if you are building a new road and you're not adhering to these environmental potential factors, you know, you can really affect the local environment, which is a cost. You know, you’ve to look at the whole sphere.

Grace Sly: Some of the challenges that we find a lot of cities are facing is really a lack of sufficient knowledge or resources that are required to specify these ambitious, yet achievable requirements in a tender, and consider the specific capabilities of new technologies: How to measure them, how to award them, etcetera.

So this is why it's important that city procurement officials are professionalized and knowledgeable to an extent of how to integrate sustainability criteria in whatever purchasing order they wish to pursue. 

Owen McColgan: It's also the, sometimes you just can't do it because it’s just not there. There's market limitations. The businesses just aren't actually there for them to be able to carry out this here type of procurement, you know.

Grace Sly: The regulatory framework is very important to keep in mind, particularly when it comes to public procurement. Oftentimes cities might feel constricted by regulation or maybe a lack of understanding of how they can utilize existing EU or national frameworks of procurement to purchase these innovative solutions. We're hoping that this booklet can offer some good tips, some examples, and some ways forward for cities who might feel that they don't have a clear understanding of how to introduce sustainable public procurement in their organization, or who may be facing a risk aversion from their institutions. So, by engaging through both capacity building as well as experiential learnings and peer to peer contact, we're hoping that cities can feel more comfortable with navigating the regulatory jungle. 

Anthony Colclough: Despite all of these challenges, cities have been working locally and through European projects and programmes to improve their public procurement practices. There are lots of great examples of cities all over Europe that have wielded their purchasing power to make a positive difference, beyond just securing the basic goods or services that they were looking for. Let’s hear some of these great examples, and the principles that we can deduce for them that other cities can take on board.

Grace Sly: So, in this booklet, we outline one best practice, which is adopting a city-to-business collaborative approach during the procurement process. We are specifying it during the pre0-procurement stage, which is prior to launching a tender. And the idea of city-to-business is to bring together public buyers and market suppliers to build a shared understanding and address the specific social, environmental, and strategic goals of a city, thereby developing very tailor made-solutions and accelerating this market introduction of these innovative, smart, circular, sustainable products.

Owen McColgan: I mean, the best way to go about it, you see, a way to counteract some of these barriers, is to go into the pre-procurement phase, when you actually set out tender, and you kind of discuss with local businesses. You understand what they can do, what they can't do, which it can be quite tricky with regulation-wise, because it could seem that you're giving some businesses preference, but it's still quite covered in EU regulations, sustainable practices, and green public procurement.

So, it's quite tricky to maneuver. I mean, it's all covered in EU regulation, but I suppose you just need, you do need the expertise in-house to be able to navigate it properly, 

Grace Sly: So, in the booklet, we present really a four-phase strategy for procuring authorities on how to enlist the city-to-business concept in their purchasing. And they include addressing the planning and preparation of a purchase; advising on the preliminary market consultations and how to conduct them in accordance with the 2014 public procurement directives; identification of financing and sustainability funds, and how really the Smart Cities Marketplace can offer a variety of services that assist cities with identifying, preparing, and approaching potential investors. And finally, by addressing the implementation of the procurement activity through these innovative procurement procedures. 

There are also concrete examples, for example, with the smart lighting services in Stockholm or Barcelona, where they have used these pre-procurement market engagements in these city-to-business collaborations to ensure that their purchases are both sustainable, viable and really address the needs of the city head-on.

So, it's really important to engage with the market in order to formulate targeted, ambitious and yet achievable criteria that the market will want to meet and is able to, within the timeframe that's been given. 

Owen McColgan: Coventry and Croatia, I hope I pronounced that right, they're very good at city-to-business collaborations, you know they, to reconstruct a building and to extend the lifespan, reducing energy. So, they really study the local buildings. Because to understand, to understand the energy points coming from buildings, you have to set out a huge survey to understand where its weakness is, where it's, where it's losing heat and all this here.

So, they set it out in all of their local Governmental build buildings, and then they're able to reduce energy consumption and ultimately lowered cost. They were able to collaborate directly with local suppliers. Like, they set up these workshops with local businesses, like, they kind of built the technology with local businesses to see where they're kind of lacking and where, where other people could help. So, they built the tender the whole way up and then they're able to greatly reduce their energy consumption on their local buildings. 

Alis-Daniela Torres: I work in a project, also with the European Commission in the smart cities family of projects, which is called the Grow Smarter Project.

We work in Stockholm and Barcelona to work on these smart lampposts, that we have done and tested several years ago. And part of work was to really work together with the technology provider to generate the guidelines in order to re-purchase or procure the solution later. And that's the reason why, okay, because they wanted to join the 5G solution with a smart lamp and also include sensors there.

So, it really was several years of discussions on how to design this solution in such a way that meets the city climate goals, but also follows the rules for a transfer and procurement process afterwards, no? Everything that has to do with who owns the data, who is going to run the platform, is the data generated in the platform going to be connected to the city platform of a smart city…

So it was, it was a process. And I think that in Europe, we have an amazing knowledge from the cities that are part of the smart cities projects of the [European] Commission. That we have a lot of examples in other topics like positive energy districts, for example, or smart urban transport services.

So, this is something that is emerging and advancing in all of the, of the cities in Europe. 

Grace Sly: We also have noticed that by engaging in peer exchanges, local governments can share additional knowledge and gain inspiration for future smart and sustainable purchases. For example, at ICLEI, we coordinate this Procure Plus network which brings together European public procurement authorities who can really connect, exchange, and act on these sustainable, innovative procurement actions.

We also think that it's important that cities link the procurement of their smart solutions to broader policy objectives. So, to climate neutrality, to supporting SMEs [Small and Medium Enterprises], creating jobs, and this can really enhance the organizational support or internal support to pursue a sustainable public procurement or to try to purchase an innovative and new solution.

Finally, I just want to mention that engaging citizens and end users with the proposed solution is really important, by including, you know, local businesses, citizen actors, research institutions in the implementation of strategic procurement, it can really generate public buy in and promote community empowerment to feel ownership over the, the new technologies that are being introduced.

Alis-Daniela Torres: It's like we have the two worlds, you know, the people working on public procurement for, for long years, like Grace Sly and the expert teams, and then you have the, the green and digital and the smart city people working for years in the transition, okay? So now I think that it’s the moment that we join those two words to really help the cities achieve the climate neutrality goals they have. Because with the current tools, and the current knowledge, and the current practices, it's good, but we need to accelerate this action.

So, if the cities want to be carbon neutral in 2030, that is what they have committed to and the European Commission is pushing it, we need to do it fast. So, we really have to also advance in all the levels of the services, the signing and adoption and procurement, is key to advance this faster.

I think that it's very important in all levels on a city level region level community level. And of course, in the different European Commission initiatives like The Smart Cities Marketplace where we are representing today.

Anthony Colclough: The immense potential of public procurement is clear as a strategic tool to foster environmental, social, and economic sustainability. Harnessing the purchasing power of public authorities does have the potential to significantly influence the market towards more sustainable and innovative solutions, aligning with the objectives of the EU Green Deal.

Alis-Daniela Torres: Believe it or not, Anthony Colclough, we, Grace Sly and I, when we were preparing the interview, this is the example of two worlds, because I am more the technical side and then Grace Sly is on the procurement side. And, of course, when we were working on the booklet, we realized that still there's a need for a lot of dialogue and understanding.

And this is happening also on the city level. So, the environmental person or the climate a person probably is not sitting fully with the procurement guys of the municipality. So, this is important, also that with this booklet, hopefully we are starting to create this awareness. 

 Anthony Colclough: For me, the key takeaways of this discussion are ones that resonate with all areas of city work – the need for long-term thinking and deeper collaboration. Now, let’s see if I can also apply those to my weekly shop.

Thanks for joining me for this episode of Urban Reverb, the official podcast of the Smart Cities Marketplace. To find a full transcript of this episode, learn more, or join the action, check out smart-cities-martketplace.ec.europa.eu. The Smart Cities Marketplace and this podcast are an initiative of the European Commission, made possible through European funding. Thanks for listening.