Theme2: Consideration for environmental impacts

The topics to discuss by the moderator is:

1. British Columbia Policy Environment
2. What we mean by environmental considerations
3. How are they considered in the evaluation process?
4. How are they integrated into agreement structures? (a. Efficiency criteria & b. Carbon Neutrality)

[1] Author: Susan Tinker, Moderator

Date:

2008/04/22

Organization:

Assistant Vice-President,
Procurement Services
Partnerships British Columbia

1. British Columbia Policy Environment

The Province of British Columbia is committed to leading the world in sustainable environmental management. As Premier Campbell announced through the 2007 Speech from the Throne, a key element of this commitment is to reduce British Columbia’s greenhouse gas emissions by at least 33 per cent below current levels by 2020. In order to meet this target and other interim milestone targets, the government is implementing several policy changes. A carbon tax will be implemented gradually over the next four years, providing an incentive to make lower carbon emission choices in transportation or other energy intensive activities. The Province is also implementing a greener building code and through its High Performance Building Policy is requiring all new public buildings to be constructed to a minimum LEED Gold standard, or equivalent.
Additional measures include changes in the tax structure and changes in energy policy.

Partnerships British Columbia, on behalf of its clients, is ensuring that specifications relating to the high performance building policy are integrated through all stages of the procurement process. This has happened recently with three major health care projects that have gone to procurement as well as several other that are under analysis. Market response - in financial terms - has been varied, with a premium generally being applied to the base capital cost, up to 15%. Variability may be explained by general inexperience in ‘green‘ building or a pre-existing site condition which makes the achievement of LEED points difficult.

2. What we mean by environmental considerations

Public bodies have a variety of goals and objectives relating to the environment when it comes to the delivery of public infrastructure. Many forms of infrastructure have a direct impact on the environment either in a positive way, such as a water treatment facility, or in a negative way, such as a power generating facility. Other forms of infrastructure - including the foregoing - have a less direct impact on the environment, either in their method of construction, their use of energy, or other operating impacts.

From an infrastructure development perspective, Partnerships BC focuses on the infrastructure delivery environmental impacts as opposed to the purpose specific impacts. At the highest level, the public sector owner might be interested in the overall carbon foot print of its infrastructure, or it may be interested in achieving a certain environmental standard, such as LEED Gold or some equivalent measure.

3. How are they considered in the evaluation process?

Within a competitive selection process, there are typically a couple of opportunities to integrate environmental considerations. Initially, this can happen at the first round of selection (typically a Request for Qualifications in the Canadian context) whereby a larger pool of potential market participants is narrowed down to a smaller, highly qualified group. At this stage, the public sector ‘owner‘ can pre-qualify in the basis of experience working with environmental performance standards. At the next stage of selection, the evaluation process can focus specifically on the degree to which the proposed approach addresses environmental output specifications. Respondents will have to demonstrate how they meet the specific requirements and how they plan to manage related issues (e.g. community impact)

4. How are they integrated into agreement structures?

a. Efficiency criteria

For accommodation infrastructure, one could specify high performance building specifications that would require integration in the project agreement. Often, these specifications require documentation and ultimately certification. The contract could attach a performance measure to the achievement and maintenance of this specified level of certification. In current projects under negotiation within the British Columbia market, the building performance targets are generally set to exceed the minimum amount required for certification to provide a buffer should a point be rejected within the certification process. Penalties are built into the payment mechanism which would be charged in the event that certification is not achieved for a period of time or is not achieved at all.

b. Carbon Neutrality

The contract could also specify carbon emission targets. These will have to be very well-defined, and provide specific measurement protocols. Also any acceptable offset techniques must be well defined and agreed to by both parties.

These have not been explored yet within the British Columbia Public Private Partnerships market. While infrastructure itself has a carbon footprint, many of the mitigation measures, such as carbon offsets, are really programmatic considerations.

[2] Author: Richard Foster

Date:

2008/04/30

Organization:

Executive Manager,
Partnerships Victoria
Commercial Division
Department of Treasury and Finance

Susan Tinker has examined some interesting and challenging issues in relation to environmental impacts.

In Australia, we have a voluntary environmental rating scheme known as ‘Green Star’ that evaluates the environmental design and achievements of buildings. Current Victorian State government policy specifies a ‘5 Star’ rating for new government office accommodation. However PPP projects are often more specialised buildings, and there is not always a Green Star rating that directly applies to the type of building in question. Hence in some projects we can specify a minimum Green Star requirement, but in some others this may not be possible.

A Green Star rating is not the only environmental consideration relevant to a project and, regardless of whether we can specify a particular rating or not, specific consideration can also be given to energy efficiency and water usage outcomes. (Water usage is particularly topical in Australia, due to widespread drought conditions over recent years leading to ongoing restrictions on water usage in many areas.) Again, the particular approach to energy efficiency and water usage outcomes depends upon the nature of the project. In some cases the risk associated with usage can be transferred to the contractor and an incentive placed on the contractor to reduce usage to the extent this provides a value for money benefit. In other cases, government may have significant capacity to influence actual usage and the risk may therefore be shared. In either case, careful consideration must be given to how these aspects of the project are assessed during bid evaluation, and the contractual performance requirements may include ongoing efficiency tests.

It has been evident in recent years that community expectations are rapidly evolving, and what may be an acceptable environmental outcome at the time government is preparing tender documentation may not be considered acceptable at the time construction is completed. This presents a significant challenge. (Of course it does not apply to PPPs alone.) How can government better anticipate future community expectations?

Another challenge arises because of rapidly evolving environmental terminology. The term ‘carbon neutral’ can have a range of meanings - does it refer to all energy being derived from ‘green’ sources, or is it acceptable to utilise fossil fuels but purchase carbon offsets? Should the energy used in producing construction materials be included in the ‘carbon accounting’? In the case of water efficiency, should the focus be on minimising potable water use (i.e. minimising the use of drinking water supplies)? Or should it be on minimising total water use from all sources?

These questions may require careful consideration in drafting performance requirements and evaluation criteria, as well as in the communication of the project benefits to the community.
I would be very interested to see others’ views and experiences on these issues.

Kind regards,

[3] Author: Hirohiko Machida

Date:

2008/07/03

Organization:

Director,
PFI promotion office
Cabinet office of Japan

Since the first commitment period of the Kyoto Protocol has started, we are also expected to take measures for sustainable development in Japanese PFI projects. Now we would like to introduce our actions to prevent the global warming.

The issue on Japanese PFI projects to date is that evaluation mechanisms of proposals do not always incorporate proper criteria regarding consideration for environments. We focused on energy-saving on life cycle basis as a global warming countermeasure, and we examined how to promote energy-saving in PFI projects. To be concrete, we have suggested that , especially in the cases of larger projects, energy cost (utility cost) during operation period should be included in PFI projects and predetermined energy cost (subject to some adjustments due to events beyond contractors’ control) should be paid as a part of project costs, so as to motivate the contractor to save energy. Under such scheme, the contractor will be incentivised to adopt energy-saving facilities (which are usually more expensive than conventional facilities) in order to save utility costs, and in the result the emissions of CO2 will be reduced. In addition, we have also presented basic principles with regard to the risk allocation for utility cost, and the method to adjust service fee when energy consumption or energy price has changed.

If similar measures are taken in your countries, please make comments on them.

As for general standards, we have a evaluation method for construction of a new building, equivalent to LEED and BREEAM, named ‘CASBEE’ (Comprehensive Assessment System for Building Environmental Efficiency) and it is used in some PFI projects. The evaluating system broadly includes criteria for evaluation of environmental-conscious functions of buildings such as : 1) environmental load reduction by energy-saving, resource-saving and recycle systems, and 2) improvement of environment and quality management for indoor and landscape comforts.