Smarter public procurement: going cheap can be expensive

What’s the best way to serve the public when you commission major public infrastructure, like a hospital or a sports center? Do you opt for the cheapest construction quote and keep the short-term drain on the public purse to a minimum? Or do you try to see the bigger picture and consider options that drive sustainability and provide better value across the building’s life cycle?

In the latest episode of the Shaping Sustainable Places podcast, we look at how the approach to public procurement is evolving to produce better results for clients, taxpayers and even construction companies. We speak with Karl Jonasson Collberg from the City of Stockholm's Development Department, and with Magnus Persson, CEO of Skanska Sweden.

A win-win-win solution  

Through his work with City of Stockholm, Karl Jonasson Collberg is trying to change the equation around procurement to one where all parties benefit and society is the biggest winner. He says hundreds of billions of dollars are set aside for public works globally each year, and if this money is spent correctly, it can be a force for positive change.

Karl says in a typical procurement process, builders are brought in when the design is finalized. To win the contract, many will offer unrealistically low prices, and then, once they win the tender, they will look for loopholes in the contract to lower their costs and increase profit. This kind of approach benefits no one.

The City of Stockholm is increasingly undertaking procurement processes in which construction companies are invited in early in the planning. In a process known as ‘competitive dialogue’ ideas are exchanged, with issues such as sustainability, materials, life-cycle maintenance and even the character of the construction firm discussed. This can lead to innovation, as was the case with Stockholm’s Meatpacking District where Skanska committed to maintaining a fossil-free site on its part of the development. Karl says Stockholm’s approach is attracting plenty of attention from other cities around the world.

Making a smarter choice 

Skanska’s Magnus Persson says an increasing number of municipalities and government authorities are taking a more farsighted approach and not simply opting for the cheapest construction quote. Rather they are considering the long-term benefits of more sophisticated solutions. Magnus says with the world facing a range of challenges including climate change, giving construction companies the freedom to innovate can result in remarkable solutions, such as lower-carbon concrete and energy-positive buildings.

What’s more, innovation doesn’t need to cost more than old-school approaches. Magnus points to the case of Västerängsskolan in Nybro where Skanska was involved in the planning right from the beginning; it delivered the project 15 percent under budget and with 60 percent less carbon than a conventional build.

Magnus says when public customers opt for innovative approaches, it drives innovation across the industry prompting small and middle sized companies to adopt improved technologies such as electric vehicles.

To find out more about the impact smart procurement policies can have, read Procurement for Impact: Skanska’s Vision for a Competitive, Sustainable EU