8. More sustainable options can and should provide better value for money in the long term. But trade-offs can arise between sustainability and affordability in a large capital programme because of the higher capital cost of a more sustainable building, even though the more sustainable option may offer lower costs and greater benefits in the long term.[9]

9. Treasury guidance suggests that whole-life costing is a key tool to promote sustainability and value for money. This approach involves estimating both costs and benefits over the long term at the beginning of a project and is able to indicate the most sustainable procurement option. Whole-life costing is complex and requires considerable financial and technical expertise. Despite previous NAO recommendations to departments to make decisions about construction projects based on whole-life value, departments have struggled to implement the Treasury guidance.[10]

10. Action was being taken to simplify the process of whole-life costing and to encourage departments to use it. The Treasury issued a clarification of the guidance on whole-life costing in March 2007 which re-emphasised that wider benefits, and not just the immediate economic ones, should form part of that assessment. A more detailed note on the application of whole-life costing was being developed by the Public Sector Construction Clients' Forum, a group of public sector staff involved in commissioning building projects.[11]

11. Other steps are being pursued to raise the profile of sustainability in departments. As part of the OGC's new role and powers since January 2007, it is undertaking procurement capability reviews of departments, including their ability to undertake sustainability assessments. There are also proposals to improve the Gateway Review process to take full account of environmental objectives at the outset, which will help improve the quality of business cases and the application of whole-life costing techniques. But as the Gateway process covers larger projects, there will still be a need to address take-up in smaller projects, where the C&AG's report has identified particular problems.[12]

12. Other initiatives should help make it easier for departments to identify and adopt more sustainable options. Departmental uptake of mandatory "Quick Wins" is limited (see Figure 2 below). But DEFRA expected departments now to be more focused on them, and the list of products is constantly being improved. DEFRA's recent "Act on CO2" campaign aims to provide all departments with information on simple ways to save energy and reduce waste, and the Department is intending to launch an online carbon calculator for all the departments to use. Departmental financing rules have also been changed to allow departments to use loan finance to help fund more sustainable energy efficiency measures, to be paid for from energy savings in the future. Negotiations are underway with four departments but there has not yet been any take-up in central government.[13]

Figure 2: Percentage of projects incorporating Quick Wins

Source: National Audit Office/Arup survey of 2005-06 construction and refurbishment projects

13. In a similar manner, the development of common contracts by the OGC could offer substantial opportunities to departments to obtain environmental benefits as well as value-for-money. For example, the OGC announced recently a new cross-government contract for the supply of green electricity, available at no premium. This contract would enable departments to move towards the target of carbon neutrality on the office estate by 2012 without investing in, for example, renewable energy projects, some of which can have long payback periods.[14]

14. Another way to promote sustainability at key stages in projects is the mandatory use of the BREEAM (or equivalent) method to assess the sustainability of new build and refurbishments. Although DEFRA and the OGC remain fully supportive of retaining BREEAM as a standard, departments are concerned that the standard is not equally applicable in every case. For example, the Air Accidents Investigation Branch (part of the Department for Transport) could not locate its premises close to a train station, and as a result was penalised in its BREEAM assessment. And there is a case for developing an alternative assessment tool for use on smaller projects which cannot easily accommodate the cost of a full BREEAM assessment.[15]

10   Qq 39-40, 44, 102; C&AG's Report, paras 3.13-3.19; C&AG's Report, Improving Public Services through better construction, HC (Session 2004-05) 364-I Back

11   Qq 39 ; C&AG's Report, Improving Public Services through better construction, HC (Session 2004-05) 364-I  Back

12   Qq 18, 19,21-23, 39, 40  Back

13   Qq 34, 49-51, 89-91; Ev 15 Back

14   Qq 61, 91, 92 Back

15   Qq 5, 9-12, 31-33, 92, 103; C&AG's Report, para S5 Back