Background
The Environmentally Sustainable Procurement Policy (the ESP) came into effect on 1 July 2024. This brings the Commonwealth government’s approach to procurement closer to Australia’s commitment to net zero by 2050.
The ESP requires tenderers for certain Commonwealth construction service procurements to submit with their tender a plan to address environmental outcomes and commit to reporting on these outcomes throughout the project.
When will the ESP apply?
The ESP applies to “construction service” procurements worth at least $7.5 million by non-corporate Commonwealth entities, and by prescribed corporate Commonwealth entities listed at section 30 of the Public Governance, Performance and Accountability Rule 2014 (Cth) (relevant entities). However, other Commonwealth entities are encouraged to apply the ESP – meaning it could apply to construction service procurements outside the above if the Commonwealth entity chooses.
“Construction services” contracts are those related to the construction of buildings and procurements of architectural and engineering works. This includes contracts for major refurbishments, demolitions, and infrastructure.
From 1 July 2025, the ESP also applies to furniture, fittings and equipment, ICT goods and textiles.
What does the ESP require from tenderers for construction services?
The ESP aims to reduce the environmental impact of Commonwealth procurements across three focus areas – the climate, the environment, and the circularity of the economy. To do so, tenderers must now submit a Supplier Environmental Sustainability Plan (SESP) with their tender documentation.
The SESP must address how:
- the proposal optimises environmental sustainability (with respect to climate, environment, and circularity);
- opportunities for innovation will be considered throughout the contract; and
- the tenderer addresses environmental impacts associated with their business.
The SESP must also contain reporting metrics for sustainability and innovation. The relevant metrics will depend on whether the procurement specifies a sustainability rating, or whether it uses the base reporting metrics (both metrics available here). The successful project proponent must then report on their performance against these metrics at least twice per financial year, and at the end of the contract.
The SESP will form part of the contract and should be reviewed throughout the project life for risks or opportunities for improvement.
What should tenderers for construction services do?
Entities interesting in tendering for Commonwealth construction service work should familiarise themselves with the ESP, the ESP Guidelines, the SESP template, the reporting templates, and the model clauses (all available on the DCCEEW website).
When responding to procurement, tenderers should be diligent in addressing the relevant environmental principles in their SESPs. These may include:
- Climate: minimising emissions, optimising energy efficiency.
- Environment: using renewable energy, waste minimisation procedures.
- Circularity: use of recycled goods, buildings that can be reused, an end-of-life recycle plan, hiring or leasing goods rather than purchasing
By clearly identifying the relevant environmental principles and explaining how their proposal addresses them, a tenderer should have a greater chance of success at tender.
