New PPN 01/24 publishing the Carbon Reduction Contract Schedule

In its first PPN of 2024, the Cabinet Office has published terms and conditions (in the form of the Carbon Reduction Contract Schedule) to support contract specific carbon reduction objectives in certain Government contracts.  Following in the footsteps of PPN 06/21 (Taking Account of Carbon Reduction Plans in the Procurement of Major Government Contracts), this PPN appears to represent a step-change in the Government’s approach to holding Suppliers to account for achievement of their carbon reduction promises.

The Schedule provides for:

  • the introduction of contract level specific carbon footprint reduction targets for Suppliers (although expressed to be subject to agreement, a 10% year on year reduction in the carbon footprint of the contract is provided as an indicator);
  • monitoring and reporting of the Supplier’s performance against achievement of those targets;
  • the Authority to ‘work with the Supplier to agree a remediation plan’ under the Rectification Plan Process (which it is assumed is a reference to the default-based process contemplated under certain of the Standard Contracts (as summarised in PPN 08/23(Using Standard Contracts))) where it appears that the Supplier might fail to achieve the stated targets;
  • optional gainshare arrangements to incentivise the Supplier to over-perform against the stated carbon footprint reduction targets; and
  • a general obligation on the Supplier to avoid ‘fuel emissions wherever possible’ (for example, by using e-conferencing facilities instead of meetings, providing online and webinar-based training (to avoid travel) and encouraging electric/hybrid vehicles/rail travel rather than petrol or diesel powered vehicles or short haul flights).

The Schedule is intended to sit alongside a Supplier’s existing obligations in respect of organisational level Carbon Reduction Plans (CRPs), which may otherwise apply to a procurement by virtue of PPN 06/21.  However, it seeks to incorporate certain obligations in respect of the CRP into the contract, including the introduction of arrangements for the Authority to ‘work with the Supplier to determine and implement a suitable rectification plan’ (again, through the Rectification Plan Process) where the Authority determines (acting reasonably) that the Supplier is making insufficient progress towards achieving its wider Net Zero commitments.

When does it apply and who is in scope?

The PPN applies with immediate effect to Central Government Departments, their Executive Agencies and Non-Departmental Public Bodies.  While use of the Schedule is expressed to be optional (and intended for incorporation where relevant to the subject matter and proportionate to the delivery of the contract), the accompanying guidance specifically identifies the following (non-exhaustive) areas where it is anticipated that contracts may generate higher Greenhouse Gas Emissions (“GHG Emissions”) or where there may be a greater opportunity for reducing GHG Emissions.  In these cases, it is anticipated (subject to wider considerations around contract value and supply chain size, complexity and readiness to adopt such initiatives) that the adoption of the Schedule will be relevant and proportionate:

•              Fleet

•              Industrial Goods and Services

•              Pharmaceuticals

•              Facilities Management

•              ICT

•              Professional Services.

The guidance encourages In-Scope Organisations to start testing the acceptability of these provisions with the market as soon as possible through pre-market discussions/considerations, to ensure that Suppliers are aware of these additional requirements at the earliest opportunity.  It also confirms that it is expected that the Carbon Reduction Schedule will be incorporated into future iterations of the Standard Contracts.

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