30% weighting of environment from New Year - What is best practice?
From the New Year, a major change occurred in public procurement here in Norway. Weighting of environmental and climate considerations will now count for a full 30%. But what is the best practice for winning bids going forward?
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As 2023 fades into history, we welcome 2024. This year marks a turning point for public tenders in Norway with the introduction of new guidelines requiring at least a 30% weighting of climate and environmental considerations.
Or is it actually an absolute requirement that bids must be weighted this way? We will delve deeper into that question in this post. Regardless, both contractors and public developers are now facing a challenge, but within every challenge lies opportunity.
We wanted to learn more about this and gathered representatives from the Norwegian Agency for Public Procurement (DFØ), Norconsult, Troms County Municipality, and Bærum Municipality for a panel discussion to initiate an informal dialogue about the new requirements. We have gathered the threads and created this post, which we hope can assist in discussions going forward.
Current situation:
Currently, there aren't enough electric machines or equipment available to carry out all types of work required on a construction site. Therefore, the next 5-10 years will primarily consist of hybrid projects where developers can set requirements for the degree of electrification, or the proportion of zero emissions, based on the project and the work to be performed. But how can this be documented correctly?
The Guide:
DFØ has developed a guide providing general information on the changes and specific guidance on how to prepare contract requirements. You can find the guide here: [Guide to Rules on Climate and Environmental Considerations in Public Procurement](#).
**Part I:** Not essential for the construction industry, as the contract value usually exceeds the national threshold. However, it's good to know that there are no procedural rules here, so there is no obligation to include award criteria.
**Part II:** Between the national and EEA threshold (up to 56 million NOK in 2024). Here, climate and environmental considerations must be among the top three award criteria. Award criteria can be replaced by requirements if they provide a better climate and environmental effect than weighting. This must be well justified in the bid to be valid.
**Part III:** Above the EEA threshold (56 million NOK in 2024), climate and environmental considerations must be weighted at a minimum of 30%. However, developers can bypass this requirement by setting specific implementation requirements if they can demonstrate that this provides a higher climate and environmental effect than weighting.
### What Does This Mean for Public Developers and Contractors?
**Contractors' Approach:**
**Strategic Adaptation:**
Many larger players like Veidekke, AF Gruppen, and NCC are already well-prepared for this change. However, the industry is highly fragmented, meaning many small players often participate in larger projects. The advantage for larger players is that they have already accumulated a good deal of expertise and personnel who can respond well to the requirements set by developers and can also provide better estimates of cost changes for a project by making it hybrid or fully electric (Zero Emissions). It is therefore important for smaller players to familiarize themselves with the DFØ guide and build their own expertise to be well-positioned in future tenders. They should also be aware of the requirements higher up in the value chain to secure their interests when entering agreements with larger contractors.
**Partnerships and Collaboration:**
Even though larger players have an advantage in understanding the new requirements and their consequences, smaller contractors who depend on participating in larger bids as subcontractors would do well to be aware of new requirements in public projects. Initiating measures to meet new reporting requirements, electric machinery, efficiency, fuel consumption, and the like will be beneficial. Being aware of their own machine fleet and ready for automatic data reporting will be a significant advantage in pitching for such projects.
**Involvement of Experts:**
More and more consulting engineers will specialize in this field, and consulting with experts in their fields can be the difference between winning a bid or not. Where internal knowledge is lacking, this can be hired. Ketil Søyland argued that the earlier consultants are involved in such phases, the easier it will be to submit good concrete bids that consider both the environment and cost estimates.
### Public Developers' Challenges and Opportunities:
**Implementation Challenges:**
**Technological Adaptation:**
The transition to more environmentally friendly construction projects may require investments in new technology and infrastructure. Developers may face challenges with the availability and costs of facilitating construction power, as well as capacity challenges and lack of systems to follow up on requirements and documentation.
Many public developers have previous experience setting and following up on requirements during the construction phase. The biggest difference here will be that if environmental requirements are not set in the tender, the bids must be weighted with 30% environmental and climate considerations.
**Regulatory Barriers:**
Changes in regulations and the implementation of new guidelines can lead to uncertainty or misunderstandings in interpreting the requirements, and clear guidelines and training may be necessary to ensure compliance.
**Knowledge Building and Sharing:**
**Training and Resource Allocation:**
Developers must invest in training and developing internal teams to understand and manage the new environmental requirements. This includes training in assessing environmental impact and implementing environmentally friendly practices.
**Information Sharing and Best Practices:**
Creating platforms or networks for knowledge sharing among developers and contractors can be crucial for spreading best practices, success stories, and strategies for meeting environmental goals.
**Collaboration with Industry:**
**Close Ties with Suppliers:**
Developers can strengthen collaboration with suppliers and contractors to ensure access to environmentally friendly products and services. This can include incentives or requirements that encourage the use of sustainable materials and technologies.
**Long-Term Partnerships:**
Establishing long-term collaboration agreements with contractors engaged in sustainable practices can be a strategy to ensure mutual understanding and targeted initiatives to meet environmental goals. There are good examples of entering into long-term contracts or collaborating with other companies, making it easier for contractors to invest in a new machine fleet because the underlying perspective is broader.
