The most outstanding innovative procurement activities were showcased last week at the Procura+ Awards in Sweden. We have been highlighting the shortlisted entries for the past couple of weeks, here and here. These awards are part of the ICLEI (local governments for sustainability) network’s drive for positive change in sustainable cities worldwide.
The winners included The City of Copenhagen (Denmark) in the category of “Sustainable procurement of the year” for its procurement of healthy, sustainable, biodiverse and appetising food. Rijkswaterstaat (RWS), the body within the Dutch Ministry of Infrastructure and the Environment, in the category of “Tender procedure of the year,” for an innovative contract to procure the works and services necessary to widen the A6 motorway.
But we were fortunate to catch up with the winner of the “Innovation procurement of the year” award — Transport for London. The public transport operator took an innovative approach to procurement, looking at the whole life-cycle cost associated with lighting the expansive London Underground network.*
We asked Dr Leon Smith, Capital Programmes Directorate, London Underground, what made this procurement especially innovative.
“We took a look at how we spend public money on products and services, and applied a brand new approach to how we procure them, focusing on whole life-cycle costs. By brigading our future spend on lighting – creating economies of scale to offer to the market – we were able to inspire potential suppliers to invest in the effort and research required to develop technologies that are more economically advantageous for us, and more sustainable than any of the products currently installed on the TfL network.
Basically, TfL is targeted with saving of £2.5 billion, and increasing, over the next five years. Faced with this savings pressure, we went through a process to look at where our major costs lie, and how we could develop technical requirements and a procurement approach that would result in purchasing of products that will reduce our costs as well as have a positive impact on the environment.
Once we had decided what we really needed to achieve from this purchase, we carried out extensive early market engagement with over 80 manufacturers. In response to our proactive approach, the market responded with a number of products that not only meet TfL’s stringent technical specifications, but were designed to reduce our life-cycle costs (including unit costs, installation, maintenance, energy use, carbon cost, cleaning costs and so on).
For this procurement, we really took a long-term view. Rather than the usual project-by-project procurement undertaken, spending for example £10k or £15k at a time, we looked out to the next 8 years and approached the market with a potential spend of £8 millon. As a result, we are now installing products across the network that are genuinely better for the environment as well as the public purse [win-win].
What was completely innovative, was how we involved different stakeholders in the procurement process to choose the products and build confidence across TfL on the purchase. As part of the procurement approach, a group of stakeholders from across the organisation assessed the products ‘hands-on’, scoring each one so they could be ranked [best to worse]. In total, our asset engineers and maintenance teams assessed over £25K worth of products. It was through this exercise we were really able to determine whether the products submitted by manufacturers truly met our technical specification. The process also validated our life-cycle cost estimates, including our estimates on how much we are expecting to save on future operational costs (e.g. cleaning, maintenance, etc.). Here we discovered that although some products looked great on paper, it wasn’t until they were assessed ‘hands-on’ that the claims of the manufacturers could be validated. Through this process all stakeholders gained a great deal of confidence in the process and the products that were selected.
This was the first time we had undertaken such a rigorous procurement process with these parameters, and it worked. Based on the positive reaction to our approach from the lighting industry as well as our internal stakeholders, we decided to enter the Procura+ awards. All procurement steps combined, we felt our innovative approach was worth sharing with other public bodies. Afterall, we all want the same thing, which is better value for money, products that work, and more widespread use of environmentally friendly and sustainable products.”
Two main results came out of this procurement that are equally valuable: the ability to quantify each of the costs (unit, installation, maintenance, energy, etc.) associated with the purchase and use of the products, and the ability to plan how future savings can be used to off-set capital costs. Considering whole-life costs means that spending saved each year on maintenance for example, can be reinvested into more products, which in turn go on to save more on maintenance. Procuring a greater quantity also brings costs down further. Indicative results suggest that for an average station in London, the lighting products procured will result in a minimum saving of 25 percent (whole life-cycle costs), including significant reductions in energy consumption.
“Innovating to encourage more environmentally friendly products, affects a market wider than just TfL. Because we are working with industry to design products that are greener and more cost-effective in an operational environment, that knowledge is distributed to others world-wide. We’d like to see the methodology we developed applied by public bodies to achieve savings. The way we have looked at the market is more inclusive – SMEs and large major players alike – this means we work with all manufacturers that are innovative – regardless of size. We are rolling this approach out across the TfL network for other products to continually drive innovation in markets, and achieve improved value for money for the good of our customers. Industry also appreciates our efforts, so much so that last month TfL won the Lux ‘Client of the Year’ award.”
Thanks to Leon for sharing this insight with us. And congratulations to Transport for London, and the other winners and runners up.
Who said you can’t follow the rules and drive innovation!
* The procurement was carried out with support from the EU-funded Procurement of Lighting Innovation and Technology in Europe (PRO-LITE) project.