5. Establish requirements and criteria

5.1 Difference between requirement and criteria

When your ambitions and question are clear, the chain has been mapped and the procedure has been chosen, you can start to set your criteria and requirements for circularity.

The criteria for circularity exist alongside award criteria on other relevant topics (of sustainability). As you are looking for the best bidder, it is important to ensure that you create focus in your criteria. If you have too many different criteria, it’ll be harder to distinguish between bidders.    

In a procurement process, you can set both requirements and criteria:

  • A requirement is a lower limit that market parties must meet. The answer is yes or no.
  • A criteria allows parties to differentiate themselves: good, better, best. If you set a criteria, use a clear assessment methodology (yardstick) by which to measure them.

5.2 Formulate requirements and criteria

Include the following four principles if formulating requirements and criteria:

  • Set only those requirements that are really necessary for the contract.
    Avoid overly strict requirements that exclude innovative parties. For example, a requirement for reference projects may exclude new and innovative parties because they simply do not have them. Be critical and ask, are references really essential? If they are, what specific aspects should they reflect? Limit yourself to just those aspects.
  • Are you asking for a vision? Then underpin that vision with tangible performance.
    That way, you reward parties that have actually implemented their vision in their own businesses.
  • Evaluate the circularity of the offer in a way that fits the product group and your definition.
    Find out what commonly used measurement methodologies there are within the product group. As an option, you can also focus on a limited number of products. The winning supplier can then demonstrate the circularity of the remaining products after contract award.
  • Ensure that there is focus in the criteria (both in the selection and award phases).
    Avoid too many different criteria side by side. That way, market parties can differentiate themselves based on what your organisation considers important. With too many different criteria, there is less scope for parties to distinguish themselves. Before the selection phase, think about what makes a party the best provider for you. Before the award phase, consider what the best offer would be. You can draw up requirements and criteria on this basis – perhaps for the selection phase, but always for the award phase.

Tip: ensure the right balance between price and quality in the criteria. Aim for a price/quality ratio of 10% to 30% price versus 70% to 90% quality. This allows market parties to differentiate themselves based on quality, because circular ambitions are, after all, a part of that.

5.3 How to set the budget

In circular procurement processes, you can set a budget in the following two ways (example):

5.3.1 Price floor and price ceiling

The emphasis in procurement processes has traditionally been on price. If you give more weight to quality, you run the risk of the price being higher than you would like it to be. To prevent this from happening, it may help to delineate demand with clear (financial) boundary conditions. However, this requires good market research prior to the tendering phase. You can read more about this in Step 3: Research the market.

With a floor price and a price ceiling, you specify the margin within which the price needs to stay:

  • With a price ceiling, you prevent parties from making offers that are too high.
  • With a price floor, you prevent price divers from winning with a minimum quality score.

There is another added benefit to setting both a price ceiling and price floor. You can then score on price on an absolute scale: a bid at the floor amount gets maximum points, a bid at the ceiling amount gets minimum points. The price formula is then linear between floor and ceiling. That way, you avoid a disproportionate difference in points if all bidders are close to one another on price.

5.3.2 Fixed price

Instead of having a floor and price ceiling, fixed prices are becoming increasingly commonplace. With a fixed price, the client determines a (task) budget. With a fixed price in place, bidders only have to compete on quality. This system increases the focus on circularity and other quality aspects even more than with a price floor and price ceiling.

5.4 Tools and measuring methods

Endeavour to both measure (quantitatively) and assess (qualitatively) circularity. There are a number of measurement methods to choose from. These include a Life Cycle Analysis (LCA) or Environmental Cost Indicator (ECI), which expresses the environmental impact of a product as a number. There is also the percentage of recycled content, which is read from a materials passport.

The choice of tool depends on your definition of the circular economy and your stated ambitions. You can find out more about how to set these in Step 1: Define the circular economy and Step 2: Set ambitions for the internal organisation.

Each method has its own focus areas, which makes it suitable for gaining insight into different objectives. You should also look at the scope of the request – the effort should be proportional to the question being asked.

Some examples of useful tools and measurement methods are provided below:

  • DuboCalc is a tool widely used in civil engineering to determine the environmental impact of infrastructure works. DuboCalc is linked to data from the Dutch National Environmental Database.
  • MPG is a tool used in the built-up environment to calculate the environmental impact of the materials in a building (per square metre of gross floor area). This tool is now compulsory for new-build projects. A building must have an environmental performance of buildings score below a certain (and ever decreasing) value to be awarded an environmental permit.
  • EcoChain is a tool that can help to measure the environmental impact of a bid. The tool creates lifecycle analyses (LCAs) in an automated environment on the basis of data from suppliers and other chain parties.
  • CircularIQ is a tool that can help assess the extent of a bid’s circularity. The tool assesses the extent to which different circular aspects, provided by you, as the client, feature in a bid.
  • The PRP tool from Rendemint is a tool that determines the degree of circularity compared to the absolute (theoretical) circular value. The tool provides a framework in which suppliers can enter their material composition and origin.

Points for action

  • Set criteria for circularity in both the selection and award stages.
  • Avoid setting too many criteria side by side, but ensure focus.
  • Ensure that quality counts (much) more than price.
  • Use a measurement method agreed with market parties in that industry.

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