Sustainability: A Case Study Example

In order to achieve sustainability, it is important to embed the concept into an organisation’s procurement activities. The Forward Commitment Procurement (FCP) approach is one way of doing so. The diagram below outlines the FCP method. Key features are the use of outcome-based specifications, extensive supply market engagement, and innovative solutions.

A sustainability case study, based on the FCP method is described below.[1]

Nottingham University Hospitals NHS Trust (NUH) is one of the largest acute teaching hospitals in England. The Trust has an annual income of over €1000 million and employs more than 14,000 staff. The City Hospital Campus is located in an estate comprising more than 150 buildings dating from the 1800s, through the 1960s, to the present day. One of these has a heritage status and many of them have poor energy performance.

PROJECT OVERVIEW

 The project concerned the need for NUH to replace its main heating and power facilities. For 35 years the primary source of heat to the City Campus had been a coal-fired boiler linked to a steam distribution network. Both the boiler and the distribution network were coming to the end of their useful life, providing an ideal opportunity to fundamentally rethink the Trust’s approach to energy supply and management and bring its heat and power solution up to date.

Underlying the project was an awareness of unprecedented challenges associated with increasing energy costs; the price of carbon; the need for flexibility in building use in the face of changing healthcare provision; and the goal of a substantial reduction in CO2 emissions. Moreover, the Project Board were well aware of the detrimental health impacts of poor air quality and climate change and therefore the importance of healthcare organisations taking a position of leadership in the use of clean energy.

The Project Board agreed three core requirements for the Trust’s new energy solution:

• To be leaner: reducing the amount of energy consumed when delivering healthcare;
• To be cleaner: utilising clean, high efficiency onsite power generation, which has the flexibility to meet current and future energy needs;
• To be greener: exploiting all technically and commercially viable zero-carbon and zero-emission technologies.

Energy consultants were asked to review the different options for the Trust and their proposal was to replace the central boiler with a large scale combined heat and power (CHP) plant. However, the Project Board realised that, although this would meet their immediate needs, it would not deliver their longer term carbon and energy efficiency targets, nor offer the necessary flexibility in energy generation in a changing healthcare environment.

Instead the Trust adopted an innovation procurement approach, consulting widely with the market in advance of the formal tendering process. As a result, it became clear that there were solutions available that had the potential to deliver both the long-term carbon and energy efficiency targets and the required flexibility in energy generation to match the Trust’s changing needs over the coming years. This innovation procurement approach gave the Trust the insights and tools needed to think beyond what was currently available, challenge business as usual solutions and engage the market in pre-tender dialogue to determine what was possible given the right market conditions.

SUPPLY MARKET ENGAGEMENT

The Trust decided to look beyond the solutions commonly in use in the NHS and engage with the market to understand what could be achieved given the right market conditions. The trust posed two questions to the market:

• Can we do better than a large scale traditional CHP solution?
• What technology, goods, and services are available to support delivery of a forward-looking integrated approach?

A market sounding exercise was undertaken, supported by a prospectus and a site visit for interested parties. The market sounding received an enthusiastic response from suppliers, with over 120 people registering their interest and attending a site visit. Over 65 high quality and often detailed responses to a market consultation questionnaire were received. These responses gave a highly informative snap-shot of the state of the market.

The main messages from the suppliers at the site meeting were:

• The supply chain was confident of meeting the Trust’s target of 34% reduction by 2020;
• New technologies were available that supported the project objectives, including fuel cells, combined cooling, heat and power systems, and a range of renewable energy technologies (PV, Biomass, etc.);
• The suppliers were ready for the challenge;
• However, more information was needed and NUH needed to opt for either a centralised, decentralised or hybrid solution prior to tendering.

Feedback from this market engagement exercise was that in order to arrive at a credible tender specification, the Trust needed to look in more detail at the current situation with regards to energy consumption and costs. In addition, potential suppliers would need to have more clarity on the condition of the buildings and estate and better understand the long-term energy needs in the context of the Trust’s clinical and estates strategies.

REFINEMENT OF THE SPECIFICATION AND EMBEDDING IN THE ORGANISATION

NHS Trusts need to submit detailed business cases for large-scale capital projects to central government for approval. The project team was able to use the business case development and alignment with the estates and clinical strategies to stimulate a wider debate and detailed discussions among senior management. This helped to embed the project in the organisation and secure senior management endorsement for the procurement approach and ambitious specification.

A second phase of market engagement followed and a Prior Identification Notice (PIN) was published with a refined outcome-based specification and a second site meeting held.

The supply chain response was again encouraging, with key messages from potential suppliers:

• The Estates Strategy must be in place prior to tendering to minimise risk and manage costs;
• More information on the energy consumption per building was needed;
• A robust procurement framework was essential to guarantee a proper comparison of alternatives;
• Fuel cell technology had considerable benefits, was increasingly affordable and could deliver all the Trusts requirements.

PROCUREMENT

The Carbon and Energy Fund (CEF) framework was used for the procurement of the solution. A mini-competition was initially held based on the outcomes communicated in the PIN, leading to the selection of preferred bidders and the refinement of solutions via technical meetings. This was followed by an Invitation to Tender (ITT) and selection of the final preferred bidder. The competitive dialogue procedure allows discussion between buyers and suppliers to determine how a solution meets the need expressed and how it can be developed to the point of supply.

[1] http://www.ecoquip.eu/delivering_efficiency_quality_and_sustainability_through_innovation_procurement_case_study