Integrating the Functional Economy into public procurement

Recommendations, analysis and methodological guide

June 2021

Agence pour l’Environnement et la Maîtrise de l’Energie (ADEME)

To download : economiefonctionnalitecommandepubliquerapport.pdf (550 KiB)

What is the functionality economy?

The current dominant model of production and consumption is linear (extract, produce, consume, throw away) and is based on a logic of infinite increase of the volumes produced, sold, consumed and destroyed. It leads to the over-consumption of resources and has harmful environmental, economic and social effects. It is opposed to a circular economy, one of the pillars of which, according to ADEME, is the economy of functionality. « The functionality economy establishes a new relationship between supply and demand that is no longer based solely on the simple sale of goods or services. The contractualisation is based on useful effects (benefits) and the offer is adapted to the real needs of people, companies and communities as well as to the challenges of sustainable development. 1 To take the example of mobility, the traditional economic model today consists of the sale of cars, which are renewed regularly. An EF approach centred on uses proposes a mobility solution rather than the purchase of a vehicle. It thus opens the way to a service response to the need to « get around ». It can then take the form of car-sharing, renting, pooling, fleet refurbishment, rather than the simple sale of individual ownership of an asset.

Why integrate the principles of the Functional Economy into public procurement?

Public procurement represents 10% of GDP and is a considerable lever for the development of an innovative economic offer. At the national level, many measures encourage, directly and indirectly, the implementation of the economy of functionality in public procurement:

• The public procurement code The law on the Energy Transition for Green Growth (TEpCV) The Roadmap for the Circular Economy (FREC)

• The Territoire Zéro Déchet Zéro Gaspillage (TZDZG) initiative and the Contrats d’Objectif Déchets et Economie Circulaire (CODEC)

• The National Waste Prevention Programme (PNPD), the Regional Waste Prevention and Management Plans (PRPGD) and the Local Programmes for the Prevention of Household and Assimilated Waste (PLPDMA)

• Schemes for the Promotion of Socially and Ecologically Responsible Purchasing (SPAR or SPASER) in connection with the National Action Plan for Sustainable Public Procurement (PNAAPD)2

Recently, the law n° 2020-105 of 10 February 2020 on the fight against waste and the circular economy (known as the AGEC law) set ambitious targets for local authorities in terms of reuse and recycling in public procurement3. The functionality economy appears to be one of the ways to meet national and European obligations. In addition to regulatory requirements, the functionality economy can feed into local public policies, such as responsible purchasing strategies. Public procurement is then called upon to fulfil functions that are broader than simply responding to a specific need: promoting innovation, serving the economy and employment, contributing to the response to climate and resource saving issues, social issues via integration, developing the offer of companies, etc. The economy of functionality is therefore a model that can be seized by prescribers in a perspective of responsible purchasing. By ordering a performance of use (a result), it aims to establish contracts with a strong positive impact (environmental, social, economic) beyond the simple purchase of a good or a service (means). These objectives go hand in hand with those of efficient use of the local authority’s budgetary resources and effective contract management.

The opportunities offered by the functionality economy model

• The functional economy is a model that encourages the questioning of the right need (or real need), the uses, the expectations of the stakeholders and the formulation of the demand in adequacy.

• The reasoning in price gives way to the reasoning in global cost, inviting the actors to pass from a logic of quantity to a logic of quality.

• In order to develop the terms of the contract and achieve the objectives, it relies on a strengthened and long-term cooperation between the stakeholders.

• A relationship of cooperation and trust is sought with the service provider.

• To counter a volume-based approach in which the reduction in consumption does not benefit the economic operator, the latter is committed to performance objectives such as reducing energy consumption, waste production, extending the life of goods, etc. The economic model involves him in the distribution of the benefits obtained.

This change in approach leads to changes in the work and organisation of local authorities and economic operators, as well as in contractualisation methods. The challenge is therefore to exploit the room for manoeuvre in the public procurement code to experiment with more relevant forms of procurement, more in line with economic, environmental and social issues. In this perspective, buyers need to rely on methods and tools, as well as on the analysis of feedback from territories integrating the economy of functionality in public procurement.

Sources

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