Clyde & Co delivered a webinar alongside Turner & Townsend looking at how governments and organisations can overcome procurement challenges as they progress investment in green projects around the world.
In the UK, there has never been more ambition from government for levelling up the agenda to invest in Green schemes, ranging from home retrofitting to large-scale offshore wind projects. The webinar tackled three themes surrounding this topic: technology, the skills gap, and supply chain maturity, and we’ve shared our five key takeaways from the discussions:
1. In-house confidence can meet the challenges of technology
In terms of technology, the panel of speakers highlighted the issue that a general lack of maturity presents key risks. For newer technologies such as carbon capture usage and storage technologies (“CCUS”), scaling up what has previously only been developed at a smaller size is a significant challenge. Longer-standing technologies such as offshore wind can face challenges in their expansion to new locations, which may not be as technically straight-forward and risk-free as where the technology was first intended for use.
It was discussed that the importance of having in-house confidence and capability to meet these challenges cannot be understated, with the 2017 Supreme Court decision in the Robin Rigg case demonstrating that design standards must be supplemented with technical competency and know-how.
Although it can be difficult to foresee technical risks as many will arise from the novelty of the technology itself, disputes can be minimised by considering from the outset to the extent possible what could go wrong and who can pick up the responsibility. This is key as much of the risk must be allocated when bidding. Standards of care should also be clear and match up at all ends of the supply chain contracts.
2. Good procurement focuses on goals
For mitigating the impact of any local skill gaps, the panel was unanimous in the belief that procurement should focus on goals rather than descriptions. Clarity as to objectives and valuations will allow contracting parties to understand the main aims and risks of a project and, provided the technology is available, to realise those aims.
Often the issue is that the technology is not readily available so combining this approach with early supply chain engagement (in particular, before issuing an invitation for tender) affords suppliers the time to mature the technology, mitigate risks and build capability to meet clients’ aims. Working collaboratively with the supply chain in this way will alert them to how they should invest and adapt their business models in order to bring value to a project, thereby improving UK content long-term.
3. Innovative thinking and flexibility will be key in the road ahead
The speakers agreed that the challenge and excitement of the sector lies in the fact that it is completely novel, with no existing rulebook or procurement strategy, so matching the dynamism of the technology with continual innovation and flexible ways of working is key. Listening to stakeholders to understand the market can help parties to find the appropriate risk allocation and incentives to deliver large-scale projects.
Whilst uncommon, the innovation partnership procurement model is one such example where a different approach can provide solutions to price issues and risk sharing, particularly where existing technology is not readily available on the market. Partner(s) are selected on their skills, abilities, and price at the outset, and develop the new solution in collaboration with the contracting authority. The R&D phase is commonly divided into stages, with progress to the next stage and receipt of the associated funding dependent on whether predetermined criteria for the previous stage are met. This continues until the final solution can be taken to market.
4. Investment in the future can create a lasting legacy
To help the UK become a hub for onshore projects such as CCUS, existing supply chain capabilities should be assessed, and training provided where appropriate. Investment in education can help to address the skills gap and drive the green transition by encouraging young people and women to pursue careers in the industry. Whilst garnering interest in construction, engineering and manufacturing has typically been difficult, the green economy is far more attractive and linking the two will be key.
Behavioural change across the chain of command, especially when it comes to procurement and contracting decisions, will be an important driver in the goal to reach net zero. Realising opportunities to make the sector more diverse will help achieve this, opening the door to different ways of thinking and ultimately helping the UK to create a lasting legacy as a leader in the green economy.
5. Governments and organisations can prove decisive
Lastly, the panel felt that whilst OECD and UN guidelines provide useful tools around sustainable procurement, detailed assessment criteria for sustainability is often lacking, and this is needed to provide greater clarity on supply chain maturity.
On the matter of encouraging green solutions through subsidies, it was reflected that the green option may not always be the most expensive and, if it is, can still be a client’s preferred approach. Certainty in terms of policy is arguably more important for attracting investors than subsidies, and the Government can further drive the green transition when leading by example in its own investments.