Creative Public Procurement: Lessons from Italy and the UK

Creative Public Procurement: Lessons from Italy and the UK Dr. Roberta Sonnino School of City and Regional Planning Cardiff University

The Potential of Public Procurement • Public procurement holds significant development potential: • Enormous market in the EU, where it represents ca. 16% of the total GDP (€ 1,500 billion in 2002) • In the UK, the public sector spends some £ 150 billion/year, or around 13% of its GDP • Significant opportunity to promote socially and environmentally friendly products and services – concept of sustainable procurement

Sustainable public procurement Bringing together the business and the policy arms of government is what sustainable procurement is about. It is about how the government’ s immense buying power can be used to make rapid progress towards its own goals on sustainable development. […] Sustainable procurement – in short using procurement to support wider social, economic and environmental objectives in ways that offer real long-term benefits, is how the public sector should be spending taxpayers money (Neville Simms, UK Sustainable Procurement Task Force, 2006)

Sustainable public procurement in the EU: the background • In the 1990s, public procurement in the EU was subordinated to the philosophy of free trade and the single market • 4 directives aimed to provide an effective competitive market for public contracts that delivered best value for public money • No consideration for environmental and social costs of products and services offered

Sustainable public procurement in the EU: the background • Principles of free trade and the single market began to be openly questioned after the Treaty of the European Union (1997) • Article 6 requires the integration of environmental and social objectives into all EU’s policies to promote sustainable development • Helsinki case C-513/1999: the European Court of Justice agreed that contracting authorities can take into consideration the “production methods” of the bidder

Sustainable Public Procurement in the EU • Legislation reformed in 2004 • Two new directives • Article 26 of the Public Sector Directive establishes that: Contracting authorities may lay down special conditions relating to the performance of a contract…The conditions governing the performance of a contract may, in particular, concern social and environmental considerations

Sustainable Public Procurement in the EU • I think that one of the key concerns for us […] is this big argument about the fact that […] most of the plus points, the gains that we got in the European directives are in the recitals, and the UK government has a strict policy of transposing the articles only into the regulations […] Member states in their implementation have an obligation to provide as much information to public authorities who are the targets of the legislation[…] You can’t do that effectively without making reference to the recitals. […] We felt that, in the UK context, knowing that the local authorities exercise caution, these directives, as the Commission itself said, would extend the scope for the environment and social, they said they were there to clarify, and we think that the recitals are crucial to the clarification, and as such the regulations should be informing about the spirit of that clarification. […] We are disappointed at the national level…for us a lot of the spirit of the Directives, that we worked very hard to change, is not there…KATHLEEN WALKER-SHAW, BRITISH GENERAL UNION

Sustainable Public Procurement: the Potential of School Meals • A sustainable school meal system is one that: • reduces diet-related health problems • promotes sustainable patterns of consumption • creates new markets for local producers • provides environmental benefits

Sustainable Public Procurement and its Barriers: the Case of the UK • Progressive deterioration of the school meal service since the 1980s • Abolition of nutritional standards • Compulsory Competitive Tendering (CCT) as a market-driven regulatory regime that spawned a cost-cutting culture (Morgan and Sonnino, 2008) • Lower quality school food • Loss of kitchen infrastructure in schools • Reduction in the numbers and skill levels of catering staff

Sustainable Public Procurement and its Barriers: the Case of the UK • The UK system is obsessed with cost-effectiveness and “value for money” • Gershon Review of the public sector (1999) called for reform to secure better value for money and said we should not accept a “green premium” while greening public procurement • Lots of sensible choices that could be made by procurement managers are ruled out by a spurious perception of efficiency (B. Tuxworth, Forum for the Future, June 2006)

The School Food Revolution: Hungry for Success in Scotland (2002) • New vision for school meals: • Promoting the “whole school approach” • Raising the quality and nutritional standards of the meals • Re-imagining school meals as an educational and health service • Significant financial investment: £ 63.5 million for the years 2003-2006

The School Food Revolution in East Ayrshire • Deprived rural county of 120,000 • Far-sighted council working in the spirit of ‘joined-up thinking’ • Goal of “environmental stewardship, connecting children with food and with where the food comes from” (R. Gourlay, Head of Catering)

Re-localizing the Food Chain in East Ayrshire • Pilot project at Hurlford primary (2004), extended to the other 10 primary in 2005 • Radically new menus • Health benefits of the Mediterranean diet • Fat, sugar and salt were reduced • Added colorings, artificial flavorings and GM-foods were banned • Fresh and unprocessed ingredients were prioritized • Local suppliers actively involved • Establishment of relationships between producers and the Council

Re-localizing the Food Chain in East Ayrshire • Strict “straightness” guidelines for class 1 vegetables made more flexible to attract organic suppliers • Products broken into 9 lots to attract local producers • Four innovative “quality” award criteria • Ability to supply to deadlines • Quality and range of foodstuffs • Food handling arrangements and facilities • Use of resources

Re-localizing the Food Chain: Procurement Mechanisms • 13 Expressions of Interest and 10 bids received • “Lack of understanding of the full process on the part of some producers” (Bowden et al., 2006) • Contracts awarded to 2 local wholesalers and 5 local producers • 50% of the ingredients utilized are organic • 70% are locally sourced • 90% of the food served is unprocessed • Costs of a two-course meal: £ 2.10 (ca. €3) • 10 p difference between buying off national contracts and buying locally

Re-localizing the Food Chain: The Impacts of Re-localization • Environmentally: • Food miles reduced by 70% • Less packaging waste • Organic and local sourcing have helped the Council to save almost £ 100,000 in environmental costs • Economically • Multiplier effect of £ 160,000/12 schools on local economy

Re-localizing the Food Chain: The Impacts of Re-localization • Culturally: • Improving children’s eating habits and knowledge • Breaking down misconceptions on the scope for procuring local food • Socially: • Increased users’ satisfaction • 67% of children think that school meals taste better • 77% of parents believe that the scheme is a good use of the Council’s money • Social Return on Investment Index of 6.19

Sustainable Public Procurement and its Potential: Examples from Europe • Even before the reform, some European countries have found room for manoeuvring within the old directives: • Finland: Pori and the “acceptance of variants” method • Sweden: Malmoe and the development of energy-friendly transport technologies • Italy: sustainable food procurement

Sustainable Food Procurement: the Italian Model • Sustainable food procurement has a quite long history in Italy • The “Guidelines for a Healthy Italian Diet” (1986), published by the National Institute for Nutrition, explicitly promoted the Mediterranean food model in public catering • Finance Law 488 (1999): To guarantee the promotion of organic agricultural production of ‘quality’ food products, public institutions that operate school and hospital canteens will provide in the daily diet the use of organic, typical and traditional products as well as those from denominated areas, taking into account the guidelines and other recommendations of the National Institute of Nutrition

Sustainable Food Procurement: the Italian School Meal System • Significant development of green and local food procurement in the Italian schools. In 2003: • 68% of Italian schools made at least some use of organic ingredients • 561 organic school canteens • In contrast with the UK, a multifunctional view of school meals supports sustainable procurement in 3 ways: • Contracting authorities retain complete control over the service • Possibility of discriminating in favour of local operators • Wide interpretation of “best value”

School Meals in Rome: The Numbers • 140,000 meals supplied every day • 92% of the meals cooked in the schools • Service entrusted to 6 catering companies but strictly monitored by the centre: • 3,500 inspections by dieticians/year • 1,100 inspections performed by a specialized firm in 2005 • Involvement of Local Health Authorities • Canteen Commissions

Sustainable School Meals in Rome: The Process • Rome began its “quality revolution” in 2001 • Contracts awarded on the basis of the “economically most advantageous tender” • Incremental procurement approach • identification of a few basic quality criteria • development of innovative award criteria

Sustainable School Meals in Rome: The Process • 2002-2004 tender: 100-point award system • Price of the meal (51 points) • Organizational characteristics of the service (30 points) • Projects, interventions and services offered to improve the eating environment and promote food education (15 points) • Additional organic, PDO and PGI products offered (4 points)

Sustainable School Meals in Rome: The Process • In the 2004-2007 tender, Rome increased the number of both basic quality criteria and award criteria • New requirements to prevent childhood obesity • Renewed emphasis on seasonality, variety, tradition and nutritional health • Increased number of organic products

Sustainable School Meals in Rome: The Costs • Costs of a meal: € 4,11 (£ 2.83) • Ingredients: € 1.9 (£ 1.31) -- 47% of the total • Other direct costs: € 2 (£ 1.38) -- 50% of the total • Profit for caterers: € 0.13 cents/meal – 9 p/meal (3,2% of the total) • Families pay on the basis of their income: • 5 meals/week: € 41.32 (£ 28)/month • 25% discount for low-income families • Service free for poor families • Costs of the school meal service in Rome: almost € 110 million (£ 76 million)/year • The city invested € 166 million (£ 114 million) for the years 2004-2007

Case Study 1: The School Food Revolution in Rome • 2007-2012 tender • School meals and social inclusion • Unutilized foods and leftovers to charity associations and animal shelters • Incentives to source products from social cooperatives • School meals and environmental sustainability • Recycling, low-impact detergents, bio-degradable plates • “Guaranteed freshness”

Case Study 1: The School Food Revolution in Rome • Today: • 67.5% of the food is organic • 44% of the food comes from ‘bio-dedicated’ food chains • 26% of the food is local • 14% of the food is Fair Trade • 2% of the food comes from social cooperatives

Is Rome acting legally? • EU regulations support sustainable procurement • If it is set out in a non-discriminatory way, there’s no doubt whatsoever that you can use as your technical specification that all foodstuff must be organic, full stop. […] It is legitimate to say “we want foodstuff that is not older than”, it’s a legitimate idea…If that means in practice that it will have to be locally-grown, so be it! It remains a legitimate criterion, but it is not a legitimate criterion if you say that it has to be produced within 10 kilometres from the school. Interview at DG INTERNAL MARKET

The School Food Challenge: Some Lessons • Rethinking school meals as a health and well being service • Public meals as part of a wider strategy for sustainability integrating production, consumption, health and education • Investing resources • Involving all actors in the food chain • Disseminating good practice from one area to another • Long-term vision

Creative Public Procurement: Lessons from Italy and the UK