Define criteria for circularity

Once the specifications are clear, the value chain has been made transparent and the procedure has been selected, you can formulate your criteria for circularity. In case there is a selection stage, these criteria are applied at supplier level. For the award stage these criteria are applied at proposal level. These criteria for circularity apply in addition to award criteria based on other relevant (sustainability) topics. However, you must make sure that your criteria have a clear focus: using too many different criteria makes it harder for parties to make a difference.

Determine what makes a particular party the best possible supplier for you (in case there is a selection stage) and what would be the best possible proposal for you. Use the outcomes to define your requirements and criteria for the selection stage (if there is one) and the award stage. Try to measure (quantitative) as well as evaluate (qualitative) circularity. There are several methodologies you can use to measure circularity.

Make sure you maintain the right price to quality ratio when you define your criteria. You should aim for a ratio of 10-30% price versus 70-90% quality. This allows market players to distinguish themselves in terms of quality, which includes circular ambitions. You could consider setting a ceiling price and maybe a floor price.

Desirable price to quality ratio. Source: PHI Factory (2017) Preliminary study circular procurement criteria
Desirable price to quality ratio. Source: PHI Factory (2017) Preliminary study circular procurement criteria

Difference between requirements and criteria

A procurement process can include both requirements and criteria. A requirement is a lower threshold that parties have to meet (‘yes’ or ‘no’). A criterion allows parties to distinguish themselves (good-better-best). Determine a clear evaluation methodology (benchmark) for each criterion.

The difference between requirements and criteria: requirements set a minimum level, criteria challenge market players to distinguish themselves by improving on that.
The difference between requirements and criteria: requirements set a minimum level, criteria challenge market players to distinguish themselves by improving on that.

Using ceiling and floor prices

In the past, procurement projects often focussed on price. If the weighting shifts towards quality, there is a risk that the price will increase. To prevent this from happening, it may help to delimit the scope for solutions with clear (financial) conditions. However, this would require you to conduct good market research prior to putting out the tender.

A ceiling price will ensure that that offers you receive are not too high. After all, proposals that exceed the ceiling price will be excluded from the award of the contract. A floor price could prevent price cutters from winning the contract: by offering a very low price, they hope to win the contract with a minimum quality score. Using a ceiling price and a floor price would prevent this.

An additional benefit of using ceiling and floor prices is that this allows you measure the price performance on an absolute scale. A tender with the floor price gets a maximum score, while a tender with the ceiling price gets a minimum score, with the other prices on a linear scale between ceiling and floor. In this way, if price differences between tenderers are small, their price scores will not vary widely.  

Main concerns when defining requirements and criteria

It is important to define clear requirements and criteria if you want to select the best supplier and the best proposal. You should take into account the following principles:

  • Only set requirements that are indispensable to the performance of the contract and avoid disproportionate requirements that exclude innovative parties. For example, a requirement to include reference cases can be disproportionate if that would exclude new and innovative parties that do not have reference cases yet. So you need to be critical: is it really necessary to ask for reference cases? And if it is, which specific aspects should be addressed in these cases? Limit yourself to these aspects.
  • If you asked parties to formulate a vision, it should be substantiated with concrete achievements in the business operations of an organisation. This approach will reward parties that have anchored their vision in their own business operations.
  • Determine the circularity of the proposal in a way that is appropriate for the requested product group. Find out what measuring methods are commonly used within that product group. Consider focussing on a limited number of products in the tender and asking the winning supplier to demonstrate the circularity of the remaining products.
  • Make sure to define clearly targeted criteria (in the selection stage as well as the award stage). This will allow market players to distinguish themselves in areas that are important to your organisation. Using too many different criteria makes it harder for parties to make a difference.

The table below gives an overview of the objectives for the selection and award stages and examples of the corresponding requirements and criteria related to circular economy and circularity.

Overview of possible requirements and criteria related to circularity. Source: Copper8 (2018), Circular Procurement Academy
Overview of possible requirements and criteria related to circularity. Source: Copper8 (2018), Circular Procurement Academy

Tools and measuring methods to determine the level of circularity

There are various tools and measuring methods to determine the level of circularity. The decision to use a particular instrument is dependent on your definition of circular economy, your ambitions and the scope of the tender. After all, the effort required to enter the information must be proportional to the request. Each methodology has particular focus areas and is therefore suited to clarify a particular set of objectives.

  • DuboCalc is an instrument that is often used in civil and hydraulic engineering to determine the environmental impact of activities. DuboCalc is linked to the Dutch National Environmental Database.
  • EcoChain is an instrument that can be used to determine the environmental impact of a proposal. It does so by carrying out LCA analyses in an automated environment, based on data from suppliers and other value chain partners.
  • CircularIQ is an instrument that can be used to determine the level of circularity of a proposal. It does so by determining to what extent various circular aspects – as indicated by the client – have been included in the proposal.
  • The Rendemint PRP tool is an instrument that can be used to reveal the origin of materials. It does so by offering a framework that allows suppliers to report their material composition and the origin of their materials.

Tips

  • Give sufficient weight to quality in the price to quality ratio.
  • Use criteria relating to circularity in both the selection stage and the award stage.
  • Make sure to define clearly targeted criteria to ensure market players can distinguish themselves.
  • Use a measuring method that has been agreed with market players in that sector. Validate this with a market consultation.

Inspiring examples

Background information

Tool - MVIcriteria

The MVIcriteria.nl/en website offers standard criteria for sustainable procurement of various product groups, at different levels.

Suggestions and/or additions?