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Asia-Pacific
Partnership
Buildings
and Appliances Taskforce
International Workshop to Promote the
Integration of Energy Efficiency in Public Procurement
July 13-14, 2007
Hotel Imperial, New Delhi, India
Hosted by the Indian Bureau of Energy Efficiency
With support from
The Asia Pacific Partnership (APP)
US State Department (USDOS)
US Environmental Protection Agency (USEPA)
US Agency for International Development (USAID)
Purpose of Workshop
The
primary purpose of workshop is to assist BEE in
initiating the process for promotion of energy efficient
purchases in all Government Departments. The
presentation and discussion of experiences of the US,
China, India and other APP member countries will also
serve as an important input to the development of a
handbook of good practices for market transformation to
promote diffusion of energy efficient products. A
background note on APP is at Annexure-I
Indian Situation
In India, different procurement rules apply at the
Central level, in the states and territories, to the
central public sector units, and to public sector
enterprises. At the Central level, procurement is
regulated through executive directives. The General
Financial Rules (GFR), issued by the Ministry of
Finance, lay down the principles for financial
management, and—in chapters 6 and 8—broad rules and
procedures for the procurement of goods and services and
for contract management. The Rules were revised in 2005
to provide greater flexibility while ensuring
accountability in government transactions. The basic
principles that these rules and regulation seek to
introduce in the public procurement process are:
(a) Adequate
information and announcement
(b) Transparency
of bidding as well as evaluation process
(c)
Accountability
(d)
Non-restrictive bidding conditions to unlock market
(e)
Non-discriminatory practices to provide equality of
opportunity.
A Manual on
Policies and Procedures for Purchase of Goods has been
published to assist the procurement entities and their
officers in procurement. An important number of
instructions, issued by the Central Vigilance Commission
(CVC), supplement these regulations, particularly since
1998 to bring in greater transparency and
accountability. Specific sectoral procurement
regulations exist in some areas, such as defense
procurement.
At the Central
level, procurement is administered by the individual
government agencies. These agencies may issue more
detailed instructions in conformity with the Rules; the
individual procuring agencies are also responsible for
developing their own handbooks, model forms, and model
contracts. Most of these agencies have already developed
model tender documents. Certain control and oversight
functions are carried out by central authorities such as
the Comptroller and Auditor General and the Central
Vigilance Commission (CVC).
As public
procurement in India is decentralized, all States/Public
Sector Units have their own procurement organizations.
In order to enable smaller public organizations, who do
not have the capacity and capability to undertake such
an elaborate exercise, to comply with the process,
agencies like DGS&D, Kendriya Bhandar, NCCF have been in
existence. These agencies provide demanded goods and
services through a rate contract system of suppliers/
service providers. The Rate Contract Scheme is like the
Framework Agreement used widely in countries like the
UK, USA and Europe. Earlier the DGS&D had a major role
in government procurement, but as part of
liberalization, this has been largely decentralized. No
centralized data on Central Public Procurement Offices
at the Union and State levels is maintained.
Procurement of
Energy Efficient Products
The Indian Government Sector (central, state, and
municipal) presents a substantial opportunity for energy
savings. The total planned annual energy-related
expenditure for 2007-08 is $15.75 billion, which will
include expenditure on capacity addition, energy
distribution, implementation of various programs and
procurement of energy-related products.
The Government
Sector can mandate the purchase of energy-efficient
and/or environmentally friendly products. This is
important to allow government organizations to lead by
example and be a catalyst for market transformation by
using its substantial purchasing power to create a
market for energy-efficient products. In addition to
creating a market, the policy to procure
energy-efficient products reduces energy costs without
compromising quality.
Carefully
orchestrated government purchase programs in which
Governmental organizations create the complete framework
enabling energy-efficient procurement of products can
reap significant cost savings through bulk procurement
contracts with leading vendors and manufacturers of
energy-efficient products. Some state agencies serve as
the procurement arm for other government units within
the states. If energy-efficient products are on the
approved list, the resulting cost and energy savings can
be enormous.
Current Obstacles
and Solutions
Despite the large savings potential for energy-efficient
government purchasing, there are a number of obstacles
to success. Some have to do with the core goals of
public purchasing: to promote transparency (reduce
corruption), lower the costs of routine purchasing, ease
of placing orders, and simplify the process where
possible. These barriers may make purchasing departments
resistant to changes in procurement practices that seem
to work well.
A few barriers to
energy-efficient government procurement are indicated
below:
1.
Lack of
Government Legislation:
The lack of an enabling government legislation
directing (making it mandatory) government agencies to
purchase energy efficient equipment based on technical
criteria/specification to be set by a government
agency (e.g. Bureau of Energy Efficiency in the case
of India): While many states have passed Government
Orders directing government organizations and
Designated Customers (under Indian Energy Conservation
Act of 2001), they are neither accompanied by energy
efficiency specifications nor do they reference a
program (e.g. BEE’s Star Rating System).
2. L1 based
decisions as against life cycle costing as supplement
to L1
EE products usually have a first cost comparative bias
against them. L1 based decision making process places
them at great disadvantages particularly in the
quagmire of a plethora of rules, regulations,
guidance, post-hoc audits/inspections, etc. While this
leads to products or services with low first-cost, in
the case of energy-using equipment this can also mean
lower efficiency and increased energy and quite often
maintenance cost over the life of the product. The
obvious solution is to base purchase decisions on
total life-cycle costs (LCC) but considering the
challenges in effective a policy change so that call
procurement decisions are based after conducting LCC
analysis, an interim solution will be to include
minimum energy performance or energy efficiency
specifications for products that government
departments have to purchase.
3. Enabling
market for EE products by Public Procurement
The seemingly
inadequate market for EE products needs a government
champion. Overemphasis on first cost does not provide
adequate instrumentality to stimulate this.
4. Lack of
availability of EE products
This barrier is
a direct corollary of the above point- market
distortion in favor of EE products that public
procurement could create, is absent.
5. Lack of a
simple and easy to use EE Procurement manuals and Tip
Sheets
It is often
difficult or costly to evaluate LCC at the time of
purchase. In the case USA’s Federal Energy Management
Program (FEMP) – probably the most successful EE
procurement program in the world, a number of tools,
outreach, and purchasing aids for the government
agencies (reference EE Procurement web sites of FEMP)
have been created to help buyers have an understanding
of the total cost of ownership (initial purchase,
operation, and maintenance costs,). Sometimes training
in use of the tools can help, along with easier access
to data on purchase prices and energy costs – but many
purchasing officials are more receptive to lists of
pre-approved (energy-efficient items), with life-cycle
cost used to justify exceptions, or for very large
contracts.
6. Lack of
awareness in procurement agencies
Business a usual
approach in most government organizations, lack of
awareness about the need to conserve energy and
resources over a medium to long run too is a barrier.
Buyers view energy-efficient purchasing as requiring
technical skills or information they lack; others
assume that it is up to the final user to specify the
desired efficiency level. Users, on the other hand,
may see their own influence as limited, believing that
the purchasing office sets specifications. This role
uncertainty may be more common where local officials
have failed to set a clear policy or to recognize how
energy efficiency can help lower operating costs.
7. Inadequate
human and intellectual resources
Government
purchasers frequently see themselves as facing too
many decisions in too little time. This makes it hard
to introduce new purchasing requirements or to get
them to participate in training.
8. Inherent
Disincentives for innovations in procurement
The plethora of
rules and regulations that provide oversight, though
well intended, has an unintended spin off of purging
the process of any initiative and innovation. Post
procurement audits, inspections and the tedious
process associated with them have a counterproductive
effect on EE procurement.
Objectives of
Workshop
The workshop seeks
to provide an opportunity to share experiences and
lessons learned from government procurement programs
across the six Asia Pacific Partnership (APP) countries,
and provide advice and assistance to the Indian
Government’s efforts to initiate a process for promotion
of energy efficient purchases in government agencies in
India. Participants will discuss key policy and
logistical barriers and how they can be overcome and
share ideas to forward the government procurement
process in India. It will enhance understanding about
the current process for procurement being followed by
various Government departments in India. In addition it
will:
-
Identify major stakeholders and partners;
-
Share
lessons learned from successful energy-efficient
procurement programs implemented in other countries in
the Asia Pacific Partnership and develop consensus in
India on good practices and lesson learned from the
programs;
-
Help
BEE design a statute, ordinance, or policy statement
requiring energy-efficient purchasing by Central and
State owned Government departments;
-
Create
a framework for Government Departments to lead by
example through promoting energy efficient
procurement;
Expected Outcomes
of the Workshop
The workshop seeks
to bring together major stakeholders involved in the
policy framework (MOF, CVC, C&AG), bulk procurement
agencies (DGS&D), major public sector entities like NTPC,
GAIL, NHPC, PGCIL and international experts who have
implemented similar policies (Annexure-II). The expected
outcomes of the workshop are:
-
A
review and synthesis of good practices and lessons
learned form government procurement programs in other
APP countries
-
A
comprehensive understanding of current procurement
processes followed in India and points of intervention
to develop a successful energy-efficient program
-
Identification of major stakeholders and their roles
and responsibilities in the development of the
energy-efficient government purchasing program
-
Identification and prioritization of energy-efficient
products and a phased implementation plan for
promoting energy-efficient government purchasing over
the next three to five years;
Participating
Agencies
-
Ministry of Power, Government of India
-
Bureau
of Energy Efficiency (BEE), India
-
United
States Environment Protection Agency (USEPA), USA
-
United
States Agency for International Development (USAID),
India
-
The
National Development and Reform Commission (NDRC),
China
-
The
China Standards Certification Center (CSC), China
-
KEMCO,
South Korea
-
Alliance to Save Energy, USA
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Lawrence Berkeley National Laboratories, USA
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Director General of Supplies and Distribution (DGS &
D), India
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Central
Public Works Department (CPWD), India
-
ICF
International, USA & India
-
International Resource Group (IRG), USA & India
-
Representatives from Ministries like Railways,
Defense, etc (prospective agencies to initiate the EE
procurement process)
-
Independent Experts (US and Indian)
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