Chapter 3. Strategically supporting complementary objectives
in Nuevo León

This chapter analyses how Nuevo León strategically pursues complementary policy objectives through public procurement. Complementary policy objectives of public procurement include objectives that reach beyond the traditional goals of public procurement (e.g., advantageous outcomes in terms of efficiency, effectiveness and transparency). They include issues like support for small and medium enterprises, social and green objectives, and support for innovative solutions. This chapter analyses the existing legal and institutional framework in Nuevo León, and the room it provides for secondary policy objectives. In addition, the chapter provides insights into how Nuevo León can link public procurement to its wider strategic development goals. Finally, the chapter explores the benefits of sustainable public procurement, such as better value for money and the achievement of complementary policy goals.

  

This chapter focusses on the extent to which Nuevo León utilises public procurement strategically to support complementary policy objectives, like support for small and medium enterprises (SMEs), social and green objectives, and innovation. The chapter analyses current efforts, and highlights pathways that Nuevo León can take to achieve a maximum impact with regards to strategic public procurement and complementary policy objectives.

This chapter on specific objectives of public procurement complements the general analysis undertaken in Chapter 1 (analysis of the legal and regulatory framework in Nuevo León) and Chapter 2 (fairness and efficiency). Following these two more general perspectives, this chapter examines public procurement in Nuevo León in the context of its specific, overarching challenges. The review asks whether public procurement is utilised in a strategic manner in the state. It also asks whether public procurement serves Nuevo León’s citizens in ways that go beyond the traditional objectives of public procurement.

Complementary policy objectives refer to objectives that reach beyond the scope of a primary policy. Governments around the world are increasingly pursuing complementary policy objectives through public procurement. Aside from objectives like efficiency, effectiveness, transparency and others, public procurement can contribute to achieving more overarching goals. Many leaders know this, and are working to use public procurement to achieve ambitious, complementary objectives. These objectives typically include:

• support for small and medium enterprises

• support for innovation

• “greening”, i.e., improving the impact of goods, services and public works on the environment

• improving conditions for marginalised or economically under-represented groups

• tackling other societal challenges (OECD, 2015_[1]).

Often, public procurement that is conducted in a way that works towards complementary goals is called sustainable public procurement or strategic public procurement. This chapter uses both expressions interchangeably.

Overall, countries can reap the following the benefits from sustainable public procurement (Clement, Watt and Semple, 2016_[2]):

• attainment of policy goals related to sustainability

• better value for money

• reputational benefits

• legal compliance;

• innovation and creative solutions to societal challenges.

This chapter covers three potential areas for action with regards to supporting complementary objectives through strategic public procurement. Officials in the state can begin by:

1. exploring the potential for sustainable public procurement in Nuevo León;

2. finding room for sustainable public procurement in existing frameworks, and utilising it by targeting everyday practices;

3. working towards a policy framework that will support sustainable public procurement.

3.1. Exploring the potential for sustainable public procurement in Nuevo León

Nuevo León could explore the benefits of sustainable public procurement to achieve complementary policy goals. Currently, there is little awareness of the secondary impacts public procurement can have. Furthermore, there is almost no consideration of these topics in the day-to-day procurement practices of the state.

By exploring complementary policy objectives, Nuevo León could expand the positive impacts of public procurement in a targeted way that is meaningful to the region’s context. Several issues, such as support for SMEs, can be supported via public procurement.

The OECD describes the working mechanism of strategic public procurement as held in balance with the other goals of public procurement. In other words, complementary objectives must be properly balanced with the primary goals of public procurement. This relationship is described in the OECD Recommendation of the Council on Public Procurement below, in principle V. Overall, the OECD advocates for a three-step process:

1. Identify benefits of strategic public procurement and its limits (i.e., the specific balance of objectives in the individual country context);

2. Set a strategy to guide increased use of strategic public procurement, and define concrete measures that could be beneficial in the given context;

3. Monitor any activities, and adjust where necessary.

Box ‎3.1. OECD Recommendation of the Council on Public Procurement

The Council:

V. RECOMMENDS that Adherents recognise that any use of the public procurement system to pursue secondary policy objectives should be balanced against the primary procurement objective.

To this end, Adherents should:

i) Evaluate the use of public procurement as one method of pursuing secondary policy objectives in accordance with clear national priorities, balancing the potential benefits against the need to achieve value for money. Both the capacity of the procurement workforce to support secondary policy objectives and the burden associated with monitoring progress in promoting such objectives should be considered.

ii) Develop an appropriate strategy for the integration of secondary policy objectives in public procurement systems. For secondary policy objectives that will be supported by public procurement, appropriate planning, baseline analysis, risk assessment and target outcomes should be established as the basis for the development of action plans or guidelines for implementation.

iii) Employ appropriate impact assessment methodology to measure the effectiveness of procurement in achieving secondary policy objectives. The results of any use of the public procurement system to support secondary policy objectives should be measured according to appropriate milestones to provide policy makers with necessary information regarding the benefits and costs of such use. Effectiveness should be measured both at the level of individual procurements, and against policy objective target outcomes. Additionally, the aggregate effect of pursuing secondary policy objectives on the public procurement system should be periodically assessed to address potential objective overload.

Source: (OECD, 2015_[1])

As stated in the OECD Recommendation of the Council on Public Procurement (and further detailed in the OECD checklist for its implementation), it is vital that states analyse the extent to which it would be beneficial for them to pursue complementary policy objectives through public procurement. The OECD checklist suggests the following measures (OECD, 2016_[3]):

• establish what costs and benefits are concretely associated with the goals to be pursued

• identify which complementary objectives should be pursued by considering national priorities and the primary objectives of public procurement (delivering goods and services to support government policies in a timely, economical and efficient way)

• assess and manage impacts, as well as risks associated with pursuing complementary policy objectives, and hedge especially against the risk of “objective overload” (i.e., attempting to pursue so many complementary objectives that the resulting set of measures becomes unmanageable and inefficient)

• professionalise the public procurement workforce to enable them to handle this strategy

The following sections provide background information on the policy goals that are usually pursued as a part of strategic public procurement, and are relevant to public procurement in Nuevo León. In different policy areas, Nuevo León undertakes individual measures in support of aspects of sustainable development, but it does not appear to have formulated any efforts specifically on public procurement.

3.1.1. Supporting Small and Medium Enterprises

In many countries, SMEs account for a large share of employment and growth. In this context, countries endeavour to support SMEs. Public procurement represents one large source of demand for SME services. However, SMEs frequently face specific obstacles to participating in public procurement. For example, SMEs might lack capacity to bid for and deliver on large government contracts. At times, delayed payments deter SMEs from seeking government contracts due to cash flow constraints. SMEs often have less access to credit, which makes it more difficult to invest, grow or respond to larger orders (Bell and Tayler, 2016_[4]) (European Commission, 2014_[5]) (OECD, 2016_[6]).

Good practices employed by countries to encourage SME participation in public procurement include (OECD, 2016_[3]):

• laws, regulations and policies to encourage participation from SMEs in procurement

• removing barriers to SME access to public procurement through:

  • online dissemination and submission of bids

  • utilisation of lots

  • simplified administrative procedures for SMEs

• training and capacity building for SMEs, including online guidance, programmes and workshops, contact points and centralised advisory services

• preferential fees and financial incentives for SMEs (e.g. waiving or reducing fees, shortened payment deadlines)

• systems to monitor SME participation

• awareness raising among public procurers and SMEs.

Experience from Ireland shows how important it is to actively support SMEs in manoeuvring public administration to participate in public contracts (see Box ‎3.2).

Box ‎3.2. Secondary policy – the Go-2-Tender training programme for SMEs

Inter-Trade Ireland, an agency under the Department of Jobs Enterprise and Innovation in Ireland (DJEI), provides a number of services to business with the goal of enhancing growth opportunities, innovation and competitiveness. Among other tasks, it offers services targeted specifically at SMEs. These services aim to help SMEs compete in procurement markets.

Inter-Trade Ireland’s flagship service in this area is the Go-2-Tender training programme. Go-2-Tender is a two-day practical tender workshop designed for an SME audience that covers key aspects of procurement. During the workshop, SMEs are given knowledge and taught practical skills regarding how to be successful at tendering. Practical skills training includes instruction on how to identify opportunities, how to make bid or no bid decisions and the drafting of successful tenders.

To participate, companies must meet a number of eligibility criteria, such as being classified as an SME, operating in the manufacturing and tradable services sectors, ability to demonstrate export potential, and other attributes. The workshops are conducted by experienced tender specialists, and give insight into the procurement practices of public sector bodies in Ireland. Guest speakers from central government procurement organisations are also invited. In addition to the plenary session, half a day of the workshop is dedicated to mentoring sessions, where participants can choose their topic of interest. Workshops are offered in various locations, and participation fees of EUR 100 apply. In 2016, seven seminars were held across the country. A similar number is foreseen for 2017. Participants can also apply for a follow-up workshop once they have concluded the first Go-2-tender seminar. Since the programme was introduced in 2007, over 900 companies have completed the workshop. These companies won procurement contracts worth EUR 69 million during this same period.

Inter-Trade Ireland also organises Meet the Buyer events, where SMEs have the opportunity to meet public sector buyers face to face. The agency also offers further assistance through FAQs, guides, videos and presentations, as well as dedicated events on emerging trends that impact the procurement environment for SMEs.

Source: Information provided by the Office of Government Procurement (OGP)

According to Nuevo León’s state development plan, 99.4% of all companies in the state are SMEs (micro, pequeñas y medianas empresas, MIPYMES). These companies employ more than 1 million people (Gobierno del Estado de Nuevo León, 2016, p. 86_[7]). In Mexico as a whole, almost 70% of jobs are located in SMEs. (OECD, 2017_[8]) These figures illustrate the important role that SMEs have in Nuevo León and the country as a whole. The fact that Nuevo León’s economy is one of the largest in Mexico further underscores this point. Nuevo León, in addition to Mexico’s federal government, has taken measures in recent years to boost SMEs (Ciudadano,(n.d.)_[9]) (OECD, 2017_[8]).

Despite constituting such a large share of Nuevo León’s economy, Nuevo León’s public procurement system has some systemic obstacles that hinder SMEs from participating in public procurement. As reported by several stakeholders, one major issue relates to payments from the public administration in connection with public procurements. These payments are usually delayed. Suppliers reported that they sometimes wait for up to six months for payment after submitting an invoice. Following up on payments can be a cumbersome and time-intensive process, requiring frequent personal visits with the state authorities, repeated submission of documents, and the like. This can be problematic for smaller companies that cannot devote significant capacity to follow up. Smaller companies also suffer more heavily from untimely payments due to their overall lower cash flow. In Nuevo León, there have been instances of suppliers refusing to provide maintenance services to the government after not being paid. In addition, standard practice in procurement proceedings is to ask for a bond – which usually runs around 10% of the contract value. Stakeholders affirmed that this was a large burden for small companies.

Other obstacles for SMEs relate to the quite complex process for registration to bid and to submit documents for participating in a tender. According to Article 24 of the public procurement law, a new registration is necessary every year. Similarly, new, very comprehensive documents have to be submitted in person (and as a paper copy) with every tender. This is required of companies even if these have supplied the exact same goods or services before. While this practice has positive aspects, such as keeping information current, it creates a substantial burden for SMEs.

SMEs have some advantages in the area of public works in Nuevo León, however. The reason for this is that joint proposals are allowed and usually conducted in larger infrastructure projects in the state. Larger projects are usually delivered by consortiums. This allows SMEs to participate even in larger contracts. For public works, the public authorities usually choose local suppliers, given that they usually offer a lower price.

3.1.2. Green procurement

“Green” public procurement refers to “public purchasing of products and services which are less environmentally damaging when taking into account their whole life cycle” (OECD, 2015_[10]). Countries increasingly recognise that their purchasing should be aligned with more general strategies to protect the environment, reduce carbon consumption, increase energy efficiency and maintain biodiversity.

Good practices employed by countries to encourage green public procurement include (OECD, 2016_[3]):

• laws, regulations and policies in support of green public procurement

• plans for green public procurement with regards to the market (solutions on offer, capacity, etc.) and cost/benefit assessments

• use of environmental standards in technical specifications, such as materials, recycled content; production methods; allowing for submission of alternative solutions; exclusion criteria for non-compliance; etc.

• use of environmental standards in award criteria and contract performance clauses (weighted environmental criteria; eco-labels as a criterion; environmental management systems as criterion)

• systems to monitor green public procurement

• professionalization activities

• awareness raising.

In its State Development Plan, Nuevo León highlights several environment-related aims, including the improvement of air quality and meeting the energy demand in the state. To achieve these goals, Nuevo León will need to invest, for example, in public roads or renewable energy infrastructure ( (Gobierno del Estado de Nuevo León, 2016, p. 176_[7]). These measures can be linked in meaningful ways to public procurement. However, as detailed below, the actual public procurement process in Nuevo León gives limited consideration to environmental concerns.

3.1.3. Procurement for innovation

Countries seek to support innovation because innovation triggers economic growth and creates employment. In their efforts to cultivate innovation, countries increasingly emphasise demand-side policies (i.e., creating a demand for innovative solutions) as opposed to supply-side policies (i.e., creating better conditions for innovation to materialise.) Public procurement is one of the most important tools countries have to create and implement demand-side policies (OECD, 2017_[11]).

Good practices employed by countries to encourage public procurement for innovation include (OECD, 2016_[3]):

• legal provisions or regulations to encourage inclusion of innovative firms in public procurement

• preferential treatment for innovative companies

  • specific support for innovative SMEs (including purchasing assurance schemes and framework contracts for certified products)

• flexibility in organising tendering processes with the aim of encouraging collaboration across borders or institutions in interdisciplinary projects

• flexibility in the required solution by focusing on addressing needs as opposed to purchasing specific products throughout the entire procurement process (beginning with the planning through to tender documents and contracting)

• incentives to conduct procurement for innovation

• systems to monitor the impact of innovation procurement

• professionalization activities to equip procurers with adequate technical knowledge to conduct procurement for innovation

• awareness raising on the part of procurers and potential suppliers.

Nuevo León allocates 1% of its state budget to support for innovation, science and research. According to the state development plan, a long-standing focus on creating a favourable environment for innovation has contributed to Nuevo León’s high living standard, which in fact exceeds the Mexican average (Gobierno del Estado de Nuevo León, 2016, p. 85_[7]).

In this context of innovation-friendly policies, public procurement could further boost innovation. Currently, Nuevo León’s administration does not use public procurement for innovation.

3.2. Fully utilise the existing room in the state’s legal and regulatory framework for sustainable public procurement by targeting every day practices

Nuevo León could expand its practical implementation of strategic public procurement in order to achieve complementary policy objectives. At present, Nuevo León’s legal and regulatory framework leaves room for the possibility of pursuing complementary policy objectives through public procurement. That said, there is little evidence that procurers are taking advantage of this opportunity. For example, no state procurement processes take into account environmental objectives.

By using the full possibilities of the law to incorporate sustainability into procurement processes, Nuevo León could support the attainment of certain policy goals. This would be true, for example, for policy objectives that are delineated in the State Development Plan. Targeted measures could promote more consideration of complementary policy objectives on a case-by-case basis. In so doing, Nuevo León could begin slowly, first using existing potential without overwhelming the government’s limited capacity. At a later stage, officials can begin preparations for an overarching strategy for sustainable public procurement.

3.2.1. Nuevo León’s policy framework for complementary policy objectives

An indispensable prerequisite for strategic public procurement is a legal and regulatory framework that allows for incorporating complementary policy objectives. In providing this legal flexibility, countries pursue different avenues. While some countries establish the legal basis for strategic public procurement by structuring the general public procurement law accordingly, other countries adopt specific laws to address one or several complementary objectives. These laws explicitly allow public procurement procedures to make consideration of complementary policy objectives a part of the process. They also regulate public procurement with regards to these objectives in detail.

There is no specific legal, regulatory or other policy guidance in Nuevo León with regards to achieving complementary policy objectives through public procurement. However, several elements of the policy environment speak to the issue of balance in public procurement.

According to the Law for Acquisitions, Leasing, and Services of the Public Sector (Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público, LAASP), the Ministry of the Economy sets the guidelines for government support of SMEs (Article 8). Article 14 grants the government the right to give suppliers with certain characteristics preference. Examples of these characteristics include companies that employ disabled people, companies that have implemented measures to promote gender equality or SMEs that have a certificate from the Instituto Mexicano de la Propiedad Industrial.

Article 39 of the Law for Acquisitions, Leasing, and Procurement of Services for the State of Nuevo León (Ley de Adquisiciones, Arrendamientos y Contratación de Servicios de Nuevo León, LAASNL) describes the selection criteria to be followed when selecting the winning bidder in a public procurement process. Aside from aspects of timeliness, costs, qualifications and work plans or methodology, the legal specifications allow for flexibility in applying award criteria. This flexibility enables Nuevo León to make choices that could produce limited strategic procurement. The flexibility applies with regards to two aspects of the law among many. First, the law allows the state to consider the costs of the entire life cycle of a product when making procurement decisions. Second, the law allows the state to specify environmental criteria, where applicable.

These rules can provide a basis for expanding strategic use of public procurement in Nuevo León. Currently, procurers in the state make little use of this legal flexibility. This appears to be related to challenges resulting from the need to quantify environmental criteria, as well as the priority given to the lowest price criteria. Considerations of price seem to be paramount in awarding tenders; units are advised to award contracts to bidders that comply with the specifications and offer the lowest price. However, a points and percentage system is available for contracting authorities to use in complex or specialised cases.

Nuevo León’s points and percentage system could provide a basis for expanding the use of complementary policy objectives. In this case, companies fulfilling certain preferred criteria related to complementary policy objectives would receive more points than those that do not. In order to apply a points and percentage system, contracting authorities would require the authorisation of a higher-ranking entity. Authorisation to use points or weighting of award criteria can be granted by one of the following entities in Nuevo León (depending on the governance level at which the public procurement takes place):

• the Secretary of Finance and General Treasury of the State (Secretario de Finanzas y Tesorero General del Estado);

• the Judiciary Council or the Plenum of the Superior Court of Justice (Consejo de la Judicatura / Pleno del Tribunal Superior de Justicia)

• the Committee for Coordination and Internal Directives (Comisión de Coordinación y Régimen Interno)

• the Municipal Council;

• the supreme organ of any institution.

In addition, the LAASNL contains a provision for procurement cases in which two bidders have equally good proposals. In the case of a draw, contracting authorities can give the bid that is associated with the best environmental criteria preference. If, subsequently, there is still a draw, the bid with the best integration of micro, small and medium enterprises wins. The State Treasury provides guidelines granting support to SMEs.

According to interviews with different stakeholders, officials in Nuevo León have never taken advantage of the room left in the state’s legal framework for the purposes of addressing complementary policy objectives. Procurers reported that even if they wanted to include environmental criteria into their procedures, they could not for a few reasons. First, these criteria would drive up prices. Second, cheaper bids still meet the technical specifications set out in the calls for tender. Finally, calls for tenders of larger purchases (which can be restricted via environmental criteria, under the law) have not used environmental criteria due to the budget pressures. Some contracting authorities have considered introducing life cycle costing, but have not yet done so.

While procurers of state-funded projects have not introduced measures to align public procurement with complementary policy objectives, they have done so for federally funded projects. For example, parastatal entities in Nuevo León reported that they had incorporated complementary policy objectives, given that there was a requirement to do so for federal funds. These experiences of applying complementary policy objectives to procurement could be translated to projects conducted using state funds.

It is unclear whether the requirement for approval from a higher-ranking authority represents an obstacle to such measures. That said, the application of a points and percentage system could be facilitated by removing the need for approval, or by simplifying it.

3.2.2. Boosting complementary policy objectives with targeted measures

Countries use different avenues to pursue complementary policy objectives through public procurement. Aside from overarching strategies that can guide implementation of strategic public procurement, it is necessary to consider the complementary policy objectives at hand. Be it green procurement, support for SMEs or innovation procurement, the objective should be considered at all stages of the procurement cycle. This section serves to introduce a selected set of measures that promise good results in Nuevo León’s specific context, without an excessive burden to the public procurement system.

Opportunities for strengthening strategic public procurement as a part of concrete public procurement processes can be showcased by dividing the procurement process into the following stages (Clement, Watt and Semple, 2016_[2]):

1. Pre-procurement;

2. Deciding on the procurement procedure;

3. Defining the subject of the contract (subject matter);

4. Selection and exclusion of bidders;

5. Technical specifications;

6. Award criteria;

7. Contract management;

Nuevo León could add considerations of complementary policy objectives to the deliberations that take place at each of these stages. These considerations could be targeted to the specific priorities of certain complementary objectives. They could also be balanced against any capacity constraints or concerns regarding economic efficiency. Based on the existing legal and regulatory framework, adding considerations of complementary policy objectives at the stages listed below could be particularly impactful. The reasons for this are 1) such efforts would be easily accomplished at these stages; or 2) such efforts would build on existing measures (Clement, Watt and Semple, 2016_[2]) (OECD, 2016_[3]):

3.2.3. Pre-procurement

Currently, procurers in Nuevo León’s Central Purchasing Body (UCC) conduct some market research, but it is very limited. Knowledge of the market among procurers is low. Market research plays an important role particularly in the pre-procurement or planning phase. Skilfully handling this phase is extraordinarily important to ensuring implementation of complementary policy objectives. Therefore, a larger emphasis should be placed on developing this phase. Several concrete measures can be beneficial ( (Clement, Watt and Semple, 2016_[2]) (OECD, 2016_[3]):

• Raise awareness of the impact of the planning stage with the officers conducting procurement, and with officers in the requesting unit.

• Advocate that these officers play a stronger role in the central purchasing unit, and task them with working towards complementary policy objectives. Currently, officials do not seem to be aware of the fact that incorporating complementary objectives into the planning phase is an option.

• Provide training and guidance materials on how to conduct needs analyses and how to include complementary policy objectives, such as environmental concerns, into these analyses. Currently, the requiring unit does not seem to work with a needs definition, but rather with requests of specific products. An alternative could be that the requiring unit describes needs, and leaves the matching with specific products to the bidders.

3.2.4. Technical specifications

In Nuevo León, technical specifications are usually determined by the requesting unit, with little influence from the UCC. However, a smart definition of technical specifications represents one of the most important tools for engaging in procurement that is not only beneficial from a needs and price perspective, but also from a complementary policy objectives perspective. If the UCC defined technical specifications in a way that encouraged environmentally friendly solutions, it could steer its requesting units towards choices that would accomplish complementary policy objectives. Box ‎3.3 provides an example of how environmental standards are considered in public procurement in Hungary.

With regards to technical specifications, Nuevo León could implement the following concrete measures (Clement, Watt and Semple, 2016_[2]) (OECD, 2016_[3]):

• Train and provide guidance for procurers to include technical specifications that make reference to performance requirements and technical standards or certifications that take complementary policy objectives into account. For example, a technical specification could include a requirement that a product meet a certain environmental standard.

• Raise awareness among requesting units regarding the consideration of these performance requirements and standards.

Box ‎3.3. Hungary: Including green standards into technical specifications

Context

Hungary’s Public Procurement Supply Directorate (PPSD) is an autonomous central purchasing body. The PPSD conducts procurement procedures for several government bodies and institutions. Products and services in the PPSD’s portfolio include: communication services and tools, IT systems and services, office technology and services, office furniture, stationary products and paper, vehicles, fuels, travel arrangements, and electronic public procurement services and an electronic auction service.

The PPSD applies green criteria in centralised public procurement procedures, and, where possible, increases the number of environmentally friendly products. The PPSD applies environmental requirements to its procedures and contracts in the following ways: in defining the subject matter, in the technical specifications, in the award criteria and in the contract terms.

Objectives

• increase the use of green criteria in public procurement procedures

• ensure appropriate variety and good prices in cases of environmentally friendly products

• increase the proportion of environmentally friendly products purchased by the PPSD (currently 10% for paper products)

• promote environmental thinking and a change of attitude by means of communication.

Implementation

The green criteria applied by PPSD in the procurement procedures are:

• Paper and stationary products: Environmentally friendly products (envelopes, folders and other paper products for office purposes); and adherence to an environmental management standard (ISO 14001). The technical specifications included environmental labels (FSC, NordicSwan, Blue Angel), ecolabels and recycling.

• IT: EU standards; energy consumption (standby and switched off mode); noise level; waste management (delivery, recycling, extermination); remanufactured products.

• Fuel: EU standards and environmental and sustainability criteria; alternative fuels (biodiesel, bioethanol).

The PPSD publishes information on its website (www.kozbeszerzes.gov.hu) regarding the types of available products it buys and their environmentally friendly features. Contracts and all other documents related to centralised public procurement procedures are also available on this website in PDF format or in databases. The PPSD also conducts presentations and briefings on available green products.

Key lessons:

• The public procurement market is a strategic tool for creating environmentally friendly attitudes, and for promoting environmentally friendly products.

• In order to achieve targets, it is important that environmental requirements work together with economic interests (like cost efficiency and favourable tender prices).

• It is vital that authorities take into consideration products’ effects on each other (for instance, the compatibility of the printer and the paper or the fuel and the motor vehicle).

• It is important to define the procurement methods aiming to promote groups of products.

• Raising awareness regarding available green products is an essential factor of success

Source: (OECD, 2015_[10])

3.2.5. Award criteria

Even when contracts are not awarded directly, the winner of a tendering process is often chosen based on price-only criteria. Better results can be achieved when officials do the following: 1) choose the winning bidder from a group of bidders; 2) evaluate bids using award criteria that reflect complementary policy objectives. In addition, it is beneficial to expand the use of life cycle costs on a case-by-case basis. Box ‎3.4 provides an example of how procurers in the Netherlands quantify environmental performance to inform award decisions.

In order to align its awards criteria with complementary policy objectives, Nuevo León could implement the following measures (Clement, Watt and Semple, 2016_[2]) (OECD, 2016_[3]):

• Raise awareness among procurers and requiring units that direct awards should be a strict exception and tendering the normal case.

• Devise guidance by building on the points and percentages system and on the model of the most economically advantageous tender (MEAT) to select bidders and award points according to complementary policy objectives. For example, a bidder whose product offers a better environmental performance than another could receive more points.

• Raise awareness and provide training on how to implement the points and percentages system to select bidders that comply with secondary policy objectives, such as environmental criteria or lower life cycle costs.

• Provide awards to honour outstanding procurement processes. These awards should honour procurement that used smart award criteria and led to efficient outcomes in terms of both price and complementary objectives.

Different avenues exist in Nuevo León to implement these mechanisms. Some may require legal changes; others can build on existing rules, using additional guidance or training.

Box ‎3.4. Netherlands: Quantifying complementary policy objectives

Rijkswaterstaat (the Department of Public Works of the Ministry of Infrastructure and the Environment, RWS) developed a methodology for infrastructure projects whereby the functional specification of the tender, together with the quality input from the client, ensured an innovative and high-quality solution. Under this system, the tenderer is also asked to respond to specific quality criteria. The RWS uses the most economically advantageous tender methodology (MEAT), and includes specific sustainability criteria.

The RWS has decided to focus on two criteria when assessing the sustainability attributes of offers, work processes and associated products: CO2 emissions and environmental impact. Two instruments have been developed to measure these attributes: the CO2 performance ladder and “DuboCalc”. The CO2 performance ladder is a certification system which allows the tenderer to show the measures it will take to limit CO2 emissions within its company and in its projects, as well as elsewhere in the supply chain. DuboCalc is a life-cycle analysis (LCA) based tool that calculates the sustainability value of a specific design based on the materials to be used. Bidders use DuboCalc to compare different design options for their submissions. The DuboCalc score of the preferred design is submitted with the tender price.

CO2 performance ladder

A tenderer can submit a CO2 performance ladder certificate with its tender submission. The certificate obliges the tenderer to comply with a certain CO2 reduction target according to its method of execution and working processes. Holders of the certificate have their submission price reduced by a value proportional to the effort made to reduce CO2 emissions. The CO2 performance ladder certificate can be provided as evidence at the tender submission stage, but this is not compulsory as long as the certificate is provided within one year of signing the contract.

DuboCalc

Based on an analysis of the entire life cycle, DuboCalc calculates all embedded environmental impacts of material use, from raw material extraction and production up to and including demolition and recycling (the entire life cycle). The ECI value is used in the tendering procedure as follows: the contracting authority provides the tenderer with all the functional requirements and the latest version of the DuboCalc programme. The tenderer designs the infrastructure and calculates the price and ECI value of its product. The ECI value is transformed into a monetary value according to a formula that is prescribed by the tenderer (the ECI value and monetary value are inversely related, and there is a minimum and a maximum for both values). These two prices are offered to the contracting authority. The contracting authority selects the tenderer that has the lowest combined price and ECI value.

Source: (OECD, 2014_[12])

3.3. Work towards a supportive framework for sustainable public procurement

Nuevo León’s government can translate its strategic priorities for sustainable development to the area of public procurement. Currently, day-to-day procurement practices do not seem to connect to the strategic goals set out in Nuevo León’s State Development Plan or its Strategic Plan (Plan Estrategico). As there are no regulations or procedures requiring the consideration of complementary policy objectives, procurers do not consider them – even though they could, legally.

While setting a strategy for strategic procurement requires a considerable amount of resources and knowledge, Nuevo León could begin by working towards providing a better framework and overarching direction for its public procurement function. The state could set priorities for certain procurement areas or sectors. Furthermore, it could provide guidance on how public procurement can contribute to the attainment of the goals delineated by the state’s strategic development plan and strategic plan.

3.3.1. Exploring the benefits of a strategy for strategic public procurement

By formulating a strategy, Nuevo León can support the implementation of sustainable public procurement that takes into account complementary policy objectives. Such a strategy can help the state realise a long-term vision for sustainable public procurement with concrete targets. These targets could include responsibilities that are clearly attributed and mechanisms to ensure that the system continuously improves and learns from its own failures and successes (Clement, Watt and Semple, 2016_[2]).

Elements of a strategy and of an enabling environment include the following (OECD, 2016_[3]):

• legal and regulatory framework that supports the use of complementary policy objectives and ensures that these rules are in line with general provisions for public procurement

• a systematic review of related policies, priorities and goals in the state

• political commitment

• consultation with relevant stakeholders to inform the strategy

• planning based on targets, milestones, expected outcomes and risk assessments

• clear attribution of responsibilities

• dissemination activities

• training

• financial resources

• a monitoring framework.

To bolster this strategy, Nuevo León should develop support documents, such as guidelines or manuals, knowledge management systems and guidance for evaluation. In addition, concrete activities for each complementary goal are paramount to ensuring a successful implementation of a strategy (OECD, 2016_[3]). When an overarching strategy becomes too ambitious, opting for sectoral plans or priority setting in defined policy areas can be an alternative. For example, many countries focus on the following key sectors, and set specific targets:

1. construction;

2. ICT;

3. cleaning;

4. food and catering;

5. vehicles,

6. electricity.

Several countries have pioneered strategies for sustainable public procurement in different ways. In addition to other examples in this chapter, Box ‎3.6 provides an illustration of how a strategy can provide benefits – even if it is targeting only a specific part of a public procurement system (in this case the procurement of one state-owned enterprise in Austria.) On the question of how to successfully involve civil society in creating a strategy for sustainable public procurement, Ireland provides a good model (see Box ‎3.5).

Box ‎3.5. Secondary objectives – involvement of civil society in policy development

The Irish government has recognised that the public procurement market can offer small to medium sized enterprises significant business opportunities. In many respects, SMEs are better suited to government contracts as they (by their nature) have flexibility and logistical capability that larger companies do not. Often, SMEs are geographically closest to the place where there service is needed.

The following are examples of the collaborative approach Ireland has taken to assist SMEs:

• The Office of Government Procurement (OGP) established and facilitates quarterly meetings of the SME Advisory Group, chaired by the Minister of State at the Department of Finance or the Minister of Public Expenditure and Reform, so that the voice of Irish SMEs can be heard at the highest level. The OGP engages representatives of the industry, (civil society bodies like the Irish SME Association, Irish business association Ibec, SFA Small Firms Association, Construction Industry Federation, and Chambers Ireland) through the SME Advisory Group. There, all groups can exchange views and identify policy initiatives. Other business-focused public bodies that often attend these meeting include: the Competition and Consumer Protection Agency, Enterprise Ireland, InterTradeIreland and the Department of Jobs, Enterprise and Innovation.

• Recently, the SME Advisory Group created a communications strategy subgroup with the aim of developing a more consolidated and consistent approach to informing SMEs of public procurement opportunities and developments. The aims of this group are to: encourage potential suppliers to build their awareness, understanding and ultimately skills in public tendering; to understand the role respective bodies play in the communications strategy; and to work in partnership with industry representative bodies to considerably improve understanding and awareness of public procurement in the target supplier community. The strategy that was agreed upon by this group includes producing a series of informative YouTube videos explaining specific public procurement topics, the introduction of industry targeted and regional informative breakfast briefing events, and more proactive engagement from industry in promoting and planning events.

• All good organisations must examine the relevance of the services they are providing. In this regard, the OGP has commissioned an external review of the Tender Advisory Service (TAS) model in 2017. The TAS service acts as an impartial broker between suppliers and contracting authorities during a tender process. In so doing, it improves communications and engender a consistent approach to how procurement processes are carried out across the public service. Finally, the SME Advisory Group will review any recommendations arising from the forthcoming external review of TAS before they are implemented.

Analyses show that this approach is working. 95% of procurement expenditure in Ireland goes to firms based in Ireland. The majority of spending is with the SME sector. 68% of OGP framework members are SMEs and 63% of these frameworks have multiple lots.

Source: Information provided by Office of Government Procurement (OGP)

Box ‎3.6. Austria: Example of an organisational strategy for sustainable procurement (ÖBB Infrastruktur AG)

Context

In 2008, the management board of ÖBB Infrastruktur AG (ÖBB Infra), the Austrian state-owned railways infrastructure company, decided to implement an environmental management system. The system was certified according to ISO 14001, and was established as a major pillar for the sustainable development of the company. A co-ordinator was nominated in July 2009 to deal with sustainability on a corporate scale. Notably, the co-ordinator was tasked with developing guidance on sustainable procurement, as procurement was identified as one of the key areas related to the sustainability performance of the company. ÖBB Infra’s annual investment expenditure amounts up to EUR 2 billion (approximately 1% of Austrian gross domestic product). Management decided that procurement should be an important driver of the development of sustainable economic operations throughout the company, so as to reduce the consumption of energy and resources.

Objectives

ÖBB Infra’s sustainable procurement strategy aims at raising procurement officers’ awareness of the integration of socio-economic criteria into the procurement process. The strategy takes a step by step approach in order to contribute to the following tasks:

• reducing the consumption of resources, utilities and energy

• avoiding waste and pollutant emissions

• increasing quality

• protecting biodiversity

• reducing internal and external environmental costs (e.g. costs for disposal or transport)

• increasing the transparency and plausibility of costs

• fostering innovation

• fair working conditions and income

• creating “green jobs”

• winning suppliers as strategic partners.

The strategy builds on the availability of information about sustainability criteria. It also takes into account internal guidance on specific opportunities, as well as marketing the idea to stakeholders.

Implementation process

A guidance note on sustainable procurement was published in 2011. It contains a short description of the general background of sustainable procurement concepts and the reasons for them, sums up initiatives and strategies in the field, points at the legal requirements, and, most importantly, lists existing national and international eco-labels and their specific relevance for ÖBB Infra (and other infrastructure businesses) and includes an evaluation scheme.

Sustainable procurement is now an integral part of internal training programmes at the company. For example, ÖBB Infra has organised a workshop with external experts for procurement officers, and even offers “rail ecology” seminars. The company promotes practical exercises as a way to gain practical experience, especially in the areas of construction materials and tension weights.

Challenges and risks

A common phenomenon in public procurement is the lack of resources in terms of staff to thoroughly monitor and evaluate the measures taken. In the field of construction materials, the establishment of technical standards is particularly complex and requires the adaptation of contract specifications. This increases the workload for procurement officers. It is therefore necessary to make positive effects visible through continuous dialogue and conversations about best practices. It is also important to develop standardised methods to calculate the total costs of ownership, as they are often neglected in practice.

Key lessons

The success of a project requires the involvement and constant collaboration of all essential persons at all stages. For this particular project, co-operation with recognised organisations (the Austrian Institute for Building Biology and Procurement Service) and suppliers was especially fruitful. This project illuminated several key findings. One was that, as long as external costs and the costs-by-cause principle are not integrated into economic assessments on an obligatory basis, procurement by the lowest costs principle will dominate in practice. In this regard, precise legal requirements could be effective in other cases to promote “green” objectives and ensure that sustainable procurement becomes a standard, rather than an exceptional procurement method. Practice also shows that it is easier and more effective to integrate socio-economic criteria early in the procurement procedure, in the description of the subject of the contract and technical specifications.

Source: For further information see: www.oebb.at/infrastruktur/de/5_0_fuer_Generationen/5_2_Verantwortung_Umwelt/index.jsp (OECD, 2015_[10])

3.3.2. Building on Nuevo León’s State Development Plan

Aside from the general aspects in Nuevo León’s public procurement law, Nuevo León’s State Development Plan and Strategic Plan contain references to complementary policy objectives. However, these plans do not address the role public procurement can play in achieving complementary policy goals.

The Development Plan contains three chapters that relate to the following complementary policy objectives:

1. an inclusive economy;

2. human and social development;

3. sustainable development.

A recent review by the comptroller of Nuevo León (Informe de Recomendaciones del “Programa de coordinación permanente en materia de transparencia, eficiencia y calidad en el servicio público de las Adquisiciones, Arrendamientos y Contratación de Servicios del estado”) encouraged contracting authorities to consider environmental and social concerns in their definitions of needs. Furthermore, the review recommended that contracting authorities focus on finding more energy efficient solutions, and that they give preference to solutions that produce less waste, water consumption and CO2 emissions (Contraloría y Transparencia Gubernamental, Gobierno del Estado, 2016, p. 22_[13]) In addition, the comptroller emphasised the potential negative effects of guarantees on SMEs. The comptroller’s report encourages contracting authorities to consider that they might discourage SMEs from participating in public procurement when they cannot comply with requirements for guarantees.

Nuevo León’s State Development Plan did not seem to have exerted a perceptible influence on the day-to-day activities of procurers in the state. It would be crucial that officials follow up on individual recommendations, while also reviewing how the overarching goals are linked to public procurement. As a second step, officials should implement measures to support complementary policy objectives that ensure that public procurement processes are aligned accordingly. In addition, it could be worthwhile to explore to what extend the different approaches could be coordinated at a central level, for example by the Central Purchasing Body.

The following aspects could be part of a structured approach or strategy, be it overarching or sectorial (OECD, 2016_[3]):

• attribute responsibility to one entity, instead of dispersed institutions that undertake individual activities

• define the objectives, justification and milestones in using public procurement to achieve complementary policy objectives in a centrally accessible strategy document

• develop practical guidance for public procurers in decentralised contracting authorities to facilitate implementation

• raise awareness of this issue among relevant stakeholders, particularly public procurement officials, to achieve a more strategic approach to public procurement

• devote sufficient resources

• develop and implement a methodology to monitor efforts and measure impact of activities related to public procurement and complementary policy objectives.

3.4. Proposals for action

Nuevo León has several overarching plans that speak to complementary policy objectives. The government aims to increase sustainability, spur inclusive growth and contribute to human and social development. In addition, Nuevo León’s public procurement rules provide some flexibility with regards to using procurement methods that favour complementary objectives. However, limited coordinated activities have been undertaken with regards to public procurement.

3.4.1. Aligning public procurement with individual activities

Nuevo León could implement the following measures to promote strategic public procurement:

• Develop public procurement strategies that support policy goals such as environmental and sustainability objectives, as well as efforts to supports SMEs.

• Explore how existing public procurement laws, rules and guidance can be aligned with these existing policy goals, and vice versa, such as the specifications in Article 39 of LAASNL, and consider changes to this article to facilitate the utilisation of procurement methods that allow for strategic procurement.

• Introduce a strategic, overarching policy framework for public procurement.

• Explore to what extend the different approaches are coordinated at a central level, for example by the Central Purchasing Body.

• In the long run, adapt rules and strategies that support a comprehensive policy framework specifically for public procurement. In addition, officials in Nuevo León should explore to what extent a public procurement strategy could translate the policy goals of overarching plans (like the State Development Plan) into concrete actions in the area of public procurement.

Nuevo León could galvanize political leadership in support of employing public procurement to achieve overarching policy objectives. Such efforts could, in turn:

• Win political leadership for strategic public procurement.

• Communicate the importance of public procurement to achieving the goals set out by the State Development Plan.

References

Bell, S. and Y. Tayler (2016), Government procurement – a path to SME growth?, http://blogs.worldbank.org/psd/government-procurement-path-sme-growth (accessed on 19 June 2017).

Ciudadano, N.((n.d.)), Apoyo para fortalecer comercialmente los productos de las Micro,Pequeñas y Medianas Empresas, http://www.nl.gob.mx/servicios/programa-de-apoyo-al-fortalecimiento-de-las-mipymes (accessed on 19 June 2017).

Clement, S., J. Watt and A. Semple (2016), A Guide to Implementing Sustainable Procurement The Procura+ Manual, ICLEI – Local Governments for Sustainability, European Secretariat, http://www.procuraplus.org/fileadmin/user_upload/Manual/Procuraplus_Manual_Third_Edition.pdf.

Contraloría y Transparencia Gubernamental, Gobierno del Estado, N. (2016), Informe de recomendaciones del Programa de coordinación permanente en materia público de las adquisiciones, arrendamientos y contratación de servicios del estado.

European Commission (2014), Public Procurement as a Driver of Innovation in SMEs and Public Services, http://www.ecpar.org/files/public-procurement-driver-of-innovation.pdf.

Gobierno del Estado de Nuevo León (2016), Plan Estatal de Desarrollo 2016-2021, Gobierno del Estado de Nuevo León, Monterrey, http://www.nl.gob.mx/sites/default/files/30jun_pednl2016-2021.pdf.

OECD (2014), “Smart procurement: Best practices for green procurement”, OECD, Paris, http://www.oecd.org/gov/ethics/best-practices-for-green-procurement.htm.

OECD (2015), OECD Recommendation of the Council on Public Procurement, http://www.oecd.org/gov/ethics/OECD-Recommendation-on-Public-Procurement.pdf.

OECD (2015), Going Green. Best Practices for Sustainable Procurement.

OECD (2016), Checklist for Supporting the Implementation of OECD Recommendation of the Council on Public Procurement, www.oecd.org/governance/procurement/toolbox/search/Checklist%2004%20Balance.pdf.

OECD (2016), Financing SMEs and Entrepreneurs 2016: An OECD Scoreboard, OECD Publishing, Paris, https://doi.org/10.1787/fin_sme_ent-2016-en.

OECD (2017), OECD Economic Surveys: Mexico 2017, OECD Publishing, Paris, https://doi.org/10.1787/eco_surveys-mex-2017-en.

OECD (2017), Public Procurement for Innovation: Good Practices and Strategies, OECD Publishing, Paris, https://doi.org/10.1787/9789264265820-en.