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Forward Commitment Procurement (FCP) is a procurement model that can be used to deliver cost effective environmental products and services to the public sector and help to create the market conditions in which the environmental goods and services sector can thrive. The model was conceived and developed by the UK Government's Environmental Innovation Advisory Group (EIAG) 2003-2008)〔EIAG was established by Lord Sainsbury in 2003 and jointly managed by the Department of Business, Enterprise and Regulatory Reform (BERR) (previously Department of Trade and Industry) and the Department of Environmental Food and Rural Affairs (DEFRA) and supported by a joint BERR/DEFRA secretariat).〕 to address a key market failure identified by EIAG, namely the lack of market pull for environmental innovations.〔Environmental Innovation: Bridging the gap between environmental necessity and economic opportunity. First report of the Environmental innovations Advisory Group, November 2006. Published by DTI in association with DEFRA. DTI/Pub 8442/2.5K/11/06 NP〕 The first report of EIAG 〔Environmental Innovation: Bridging the gap between environmental necessity and economic opportunity. First report of the Environmental innovations Advisory Group, November 2006. Published by DTI in association with DEFRA. DTI/Pub 8442/2.5K/11/06 NP〕 identified the Government as a key player in the environmental market, with a special responsibility as custodian of the common good to provide intelligent and effective supply chain management that could help to unlock investment in new environmental products and services. As such, the public sector provides a lead market for environmental products and services, and this, coupled with the fact that the Government is a major purchaser of environmental goods and services, led EIAG to focus its activities on "how Government and its agencies can improve on the way they manage the supply chain in this sector" Jack Frost, Chairman of EIAG (2003–2008).〔Chairman’s report: Environmental Innovation: Bridging the gap between environmental necessity and economic opportunity. First report of the Environmental innovations Advisory Group, November 2006. Published by DTI in association with DEFRA. DTI/Pub 8442/2.5K/11/06 NP〕
EIAG developed FCP as a supply chain management tool primarily for use by public sector policy makers and procurers, although the approach it is equally relevant to, and has been picked up by, private sector bodies such as the New Swindon Company in a project concerning innovative combined cooling, heat and power (CCHP) plant and services. FCP in fact mirrors the approach taken by businesses to stimulate suppliers to invest in new products and services to meet their future needs.
"The public sector, as both custodian of the common good and a major purchaser of environmental goods and services, is a natural lead market for environmental products and services. JERA have pioneered FCP as a practical mechanism to enable public sector organisations to fulfill this role, while at the same time delivering the cost effective solutions they need to pressing problems such as climate change and economic and social sustainability". Gaynor Whyles, Director JERA Consulting〔jera consulting website〕 The FCP approach has been well received: • FCP was recommended by the UK Sustainable Procurement Task Force 〔Procuring the Future, UK Sustainable Procurement Task Force〕 and adopted by the UK Government in their Sustainable Procurement Action Plan (). • The Commission on Environmental Markets and Economic Performance called for the UK Government to scale up and replicate the FCP model in the public sector.〔Commission on Environmental Markets and Economic Performance: Report November 2007. Published by DEFRA〕 • The EIAG FCP demonstration project (see below) was highlighted by HM Treasury in the publication ‘Transforming Government Procurement’ as an example of how innovation can be harnessed to improve services and value for money 〔Transforming Government Procurement, HM Treasury, January 2007〕 (). • And highlighted as a best practice case study in 'Finding and Procuring Innovative Solutions, OGC/DIUS Report, 2007', () == Definition == The Forward Commitment Procurement model involves providing the market with advance information of future needs in outcome terms, early engagement with potential suppliers and - most importantly - the incentive of a Forward Commitment: an agreement to purchase a product or service that currently does not exist, at a specified future date, providing it can be delivered to agreed performance levels and costs.〔paraphrased from Box 2.11, page 43 Commission on Environmental Markets and Economic Performance: Report November 2007. Published by DEFRA.〕
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