Supplementary Reports Agenda of Ordinary Council Meeting

21 May 2020

6.9 Sustainable Procurement Criteria for Shovel Ready Projects

File Number: A2884013

Author: Caroline Wilson, Manager - District Administration

Authoriser: William J Taylor MBE, General Manager - Corporate Services

Purpose of the Report

Seek approval to use sustainable procurement outcomes for shovel ready projects whilst the Sustainable Procurement Framework is in development.

Executive Summary

· Council has signalled our intent to achieve positive social outcomes as a result of our procurement practices.

· Work has commenced on the design and delivery of Council’s Sustainable Procurement Framework.

· The recent global pandemic has resulted in an economic downturn, prompting central government to seek “shovel ready” project briefs with a view to funding a number of core infrastructure projects across the country.

· This provides Council with a real opportunity to achieve positive social outcomes as a result of shovel ready projects, whilst the work on the overarching framework continues in parallel.

· Five sustainable outcomes are proposed in this report. They do not represent the end state for FNDC sustainable procurement but provide a starting point towards achieving positive social outcomes as a result of these early projects.

Recommendation

That Council adopt five sustainable procurement outcomes for shovel ready projects:

1. Targeted Employment,

2. Wages,

3. Professional Development,

4. Supplier Diversity and

5. Environmental Kaitiaki.

1) Background

Social procurement has been successfully operating in Australia, the United States of America, Canada and the European Union for a number of years. It is embedded into their public authority legislation and underpins the manner in which they procure and manage contracts in their respective markets. The New Zealand Government has recently turned its attention to achieving similar outcomes for our own domestic market and have signalled an expectation that procurement is leveraged to achieve broader outcomes for New Zealand.

This resulted in the recently revised Government Procurement Rules, formerly known as the Government Rules of Sourcing. The revised rules seek to support sustainable and inclusive procurement through the promotion of good practice for procurement planning, approaching the supplier community and contracting. The revised rules came into effect 1 October 2019 and are a requirement for central government agencies. The rules aren’t mandatory for local government, but it is likely only to be a matter of time.

Members have had an early interest in social procurement as a result of The Southern Initiative (TSI - Auckland Council). A workshop was held 18 February 2020 with Elected Members to discuss progressing positive social outcomes for our procurement investment. Staff are now working on delivering on this vision through the development of Councils Sustainable Procurement Framework.

Recent global events have afforded us the opportunity to step early into this space, rather than wait for framework implementation, using central governments “Shovel Ready Projects” initiative. We can achieve positive social outcomes on these projects, which will in turn inform the final framework. There will be an expectation from central government investing in local infrastructure that maximum value for money is achieved. Sustainable procurement outcomes are one way in which value beyond the physical asset can be delivered.

2) Discussion and Options

The purpose of sustainable procurement is to derive social, economic, cultural and environmental value from the supply chain, in addition to pursuing timely, quality and competitive cost based outcomes as a result of all services we procure. The core of sustainable procurement centres on generating positive outcomes and improving quality of life, both now and for future generations.

Experience from The Southern Initiative (Auckland Council) tells us that increasing opportunities to secure quality work, receive a decent wage and have a clear career progression path increases labour market attachment and makes a significant difference to people’s lives, and the lives of their family and the wider community.

Equally important is broadening our supplier market to enable local businesses to engage in Council work and share in the districts’ success. Local firms purchase materials, resources and services locally and provide local employment opportunities.

Northland’s natural environment is unique and diverse, but is increasingly vulnerable to pressures from population growth, urban intensification, and industry activities. Seeking suppliers that value and demonstrate kaitiakitanga (guardianship) of the natural environment and who support methods and innovations to enhance and protect it is an important step in protecting our environment for future generations.

The above is expressed in criteria (requirements) that form a “toolkit”. Not all criteria will be relevant on every project due to the nuanced nature of social procurement, but it is expected that every project will be assessed for suitability to achieve one or more positive social outcomes. The table below illustrates the proposed outcome for each criteria.

Criteria (Requirement)	Proposed Outcomes
Targeted employment	This requirement is increasing the number of new entrants (or those recently unemployed as a result of Covid-19) that will be employed as a result of the work. This is one way FNDC can use its position as a buyer to support the pipeline of people entering the industry. It will contribute to growing the workforce and towards lowering the poor employment statistics for the Far North.
Wages	This requirement is about improving incomes for people. Improving incomes has a direct impact on people’s quality of life and living standards, including the life chances of children in low income families.
Professional Development	· This requirement is about improving skills and productivity (and is linked to improving incomes and to environmental kaitiaki). ·
Supplier Diversity for sub-contracts	· This requirement is about the value of sub-contracts with, and number of, local, Māori, and Northland businesses engaged in the Contractor’s supply chain as a result of the project. This is one way FNDC can use its position as a buyer to support the growth of local and Māori businesses in the district to improve the distribution of wealth and employment outcomes for those most likely to be disadvantaged. We would be looking for our local suppliers to be able to grow their pipeline of work beyond the life of the particular project, and therefore may also be in a position to bring on new entrants. ·
Environmental Kaitiaki	· This requirement is about sustainable practices that protect and enhance the Far North’s natural environment and enable the reduction of carbon emissions and waste (and is linked into supplier diversity and professional development). ·

We have an opportunity now, by adopting the above criteria to effect early positive social outcomes for our people and our district. We can learn with our supplier base and refine over time. These criteria will form part of the end state for sustainable procurement, with work being conducted in parallel with key stakeholders on other potential criteria specific to our district’s needs.

Reason for the recommendation

There is an opportunity now to step early into achieving positive social outcomes as a result of external funding for infrastructure projects. Central government will have an expectation that maximum benefit is derived from their contribution to the local government infrastructure sector, and this is one way in which this Council can demonstrate value beyond the asset.

3) Financial Implications and Budgetary Provision

The Southern Initiative’s experience is that 1-2 criteria on a project where it is relevant to include sustainable outcomes does not translate into “premium loading” of the tender pricing. For shovel ready projects there is no anticipated budget required to incorporate and monitor sustainable outcomes.

Attachments

Nil

Compliance schedule:

Full consideration has been given to the provisions of the Local Government Act 2002 S77 in relation to decision making, in particular:

1. A Local authority must, in the course of the decision-making process,

a) Seek to identify all reasonably practicable options for the achievement of the objective of a decision; and

b) Assess the options in terms of their advantages and disadvantages; and

c) If any of the options identified under paragraph (a) involves a significant decision in relation to land or a body of water, take into account the relationship of Māori and their culture and traditions with their ancestral land, water sites, wāhi tapu, valued flora and fauna and other taonga.

2. This section is subject to Section 79 - Compliance with procedures in relation to decisions.

Compliance requirement	Staff assessment
State the level of significance (high or low) of the issue or proposal as determined by the Council’s Significance and Engagement Policy	This report has low significance.
State the relevant Council policies (external or internal), legislation, and/or community outcomes (as stated in the LTP) that relate to this decision.	Council’s Procurement policy and the four community wellbeing’s of the Local Government Act are relevant to this report. Government Procurement Rules, whilst not currently mandatory for local government activities, are likely to be required in the future. FNDC is taking early steps to incorporate Broader Outcomes as a result of our spend.
State whether this issue or proposal has a District wide relevance and, if not, the ways in which the appropriate Community Board’s views have been sought.	This report has district wide relevance. Infrastructure spend occurs across the entire district.
State the possible implications for Māori and how Māori have been provided with an opportunity to contribute to decision making if this decision is significant and relates to land and/or any body of water.	We will be looking for suppliers who engage local, Northland based and/or Māori owned businesses within their supply chain. Part of developing the overall framework will involve engagement with key iwi and agency partners.
Identify persons likely to be affected by or have an interest in the matter, and how you have given consideration to their views or preferences (for example – youth, the aged and those with disabilities.	Part of developing the overall framework will look to enable opportunities for our priority social groups: Māori, young people (rangatahi), female, ethnically diverse, refugee background, long-term unemployed, those with disabilities, those with mental health history, ex-offenders, not in employment, education or training (NEET) or those unemployed due to COVID-19.
State the financial implications and where budgetary provisions have been made to support this decision.	There are no anticipated financial costs associated with incorporating and monitoring social outcomes on projects.
Chief Financial Officer review.	The Chief Financial Officer has reviewed this report.