Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in Armenia, based on a desk review. The review applies an analytical framework of six Pillars (or "building blocks") of SusPP systems.

The Framework is designed to make clear that countries do not need to follow a linear step-by-step path to build effective GPP systems. Rather it is important to examine local contexts and prioritize the Pillars with the most potential in the country. No matter where a country starts, a balanced approach to implementation calls for progress on all Pillars to some degree.

This Factsheet is organized as follows:

• "Country Overview" section with executive summary, indicative maturity rating, key achievements, potential pathways forward and timeline of key events related to advancing sustainable public procurement.
  
• "State of Play & Forward Looking Analysis" section that summarizes the research findings from the desk review for each Pillar theme.
  
• "Key Stakeholders Driving the Agenda" explores opportunities for ADB teams to open discussions with country counterparts and add value to the work of partners.
  

The Factsheet is intended to be a living document that will be revised and improved as new information is uncovered and advances are made. It is designed to support the ADB training programs on SusPP.

If you have new information, please contact ychu@adb.org.

Summary

In Armenia, public procurement spend constitutes 4.7% of GDP with over 22,000 contracts awarded valued at $622 million in 2021 (World Bank 2021). The concept of "Green Procurement" was formally integated into the Law on Procurement by Decree 377 in August 2022. This aligns with the Government's latest national development plan, the Government Program 2021-2026, which sets out a vision for a green economy and sustainable development pathway.

The shift to a green economy is a key national priority. Armenia is one of the most vulnerable countries in Europe and Central Asia to climate change, ranking 114 out of 181 countries globally on climate vulnerability (UNDP 2022). Annual temperatures have increased higher than the global average coupled with a significant decrease in precipitation. Armenia’s economy is highly emissions-intensive (OECD 2021) largely due to its reliance on imported fossil fuels, mainly from Russia, for nearly 90% of its energy needs. The country has set several policies to advance energy efficiency and renewables across the transportation, housing, school building and other sectors. However, these policies do not yet explicitly recognize public procurement as a key tool.

Progress significantly accelerated in 2022 with the launch of several donor-funded programs to support a greener Armenia. A new EU4Environment project was launched in 2023 to develop roadmaps, tools, training and communications campaigns on SusPP across the country.

>> Snapshot of Sustainable Procurement Maturity Level

Key Links

• Official Government Procurement website
  
• E-procurement system

Key Achievements

• Strong motivation to implement SusPP due to commitments in the Comprehensive and Enhanced Partnership Agreement (CEPA) with the European Union (EU)
  
• National development strategies and programs prioritize the advancement of a green, knowledge-based sustainable economy.
• Public Procurement Law reformed in 2022 to promote consideration of "Green Procurement", with an initial focus on energy-efficient procurements
  
• National companies and SMEs have received training to shift to environmentally-friendly operations and products under the EU4 Environment program
  

Ongoing Activities

• Assessment of policy, legal, regulatory and institutional gaps for SPP is planned
  
• Prioritization exercise will be carried out to identify priority products and availability of ecolabels assessed for these priority products
• SusPP criteria, technical specifications and guidelines will be developed for three priority products, and 3-5 pilot tenders will be launched and monitored
• Training and awareness raising events are planned for various stakeholders (economic operators, businesses, SMEs, contracting authorities, State Procurement agency staff etc.)
  

Potential pathways forward

• Support the Ministry of Finance to further elaborate the PPL's promotion of "Green Procurement" through regulatory reform, interministerial bodies, implementing tools etc.
  
• More awareness raising and capacity building, including a training needs assessment and guidance on SusPP procurement planning and practice
  
• Support for national companies and SMEs to participate in SuSPP tenders
• Support for procuring entities to adopt SusPP approaches and design tenders (e.g. pilots)
• Develop monitoring framework and system to track SusPP implementation
  

>> Timeline of Implementation of Sustainable Procurement Activities

2011

2017

2019

2021

2022

2023

Peer Workshop on Environmentally-Friendly Procurement with US Government

Guidelines for Energy Efficient State Procurement proposed

Accession to the WTO Government Procurement Agreement (GPA)

Comprehensive & Enhanced Partnership Agreement (CEPA) with European Union enters in force

New Law on Procurements allows use of non-price criteria

EU4Environment project launched with various activities to advance SusPP implementation

Decree 977 introduces "Green Procurement" concepts into the Procurement Law

Pillar 1: Government Vision & Awareness of SusPP

Governments that establish a clear policy vision on SusPP can accelerate the shift from procurement as a adminstrative to strategic function, making clear how SusPP can deliver on important national social and environmental goals.

Armenia is in early stages of exploring the potential of sustainable public procurement (SusPP) to contribute to national policy objectives. A key motivation for implementing SusPP is to meet the country's obligations under the Comprehensive and Enhanced Partnership Agreement (CEPA) with the European Union (EU) that entered into force in March 2021. Another motivation is the country's accession to the World Trade Organization’s Agreement on Government Procurement Agreement (GPA) in 2011.

The Government's latest national development vision, the Government Program 2021-2026, sets out a vision for a green economy and sustainable development. While the Government Program does not explicitly recognize SusPP, several policy priorities are defined that SusPP can help achieve:

• Switch to electrification: Armenia has prioritized replacing aging passenger cars with electric vehicles (EV). An exemption of custom duties for a quota of EVs imports was created (8,000 cars in 2022).
  
• Energy efficiency: Energy saving measures will be promoted at a large scale including in the fields of transport, industry, agriculture, multi-apartment buildings, public sector and fuel-energy systems.
  
• Increase renewable energy: To reduce its dependence on natural gas, the country aims to install up to 1,000 MW of solar PV capacity by 2030 and achieve 15% solar in national electricity mix.
  

• Promotion of local products and SMEs: The country aims to increase the proportion of SMEs in the GDP to 55% by 2026. A social innovation innovation support centre is planned to enhance the environment for social entrepreneurship and inclusive workforces.
  
• Yerevan as a "green city": The city of Yerevan joined the EBRD Green Cities in August 2016 and developed a 2017 Green City Action Plan.

These policy commitments have been further elaborated into sectoral policies. The Program on Energy Saving and Renewable Energy for 2022-2030 outlines the Government's goals to save energy in the household, transport, public school and other sectors. The country's revised Nationally Determined Contribution (NDC) submitted in May 2021 commits to a 40% reduction in greenhouse gas (GHG) emissions and accelerates the timeline from 2030 to 2050.

The Armenia Transformation Strategy 2050 sets out the country's long-term development vision, including the establishment of a green, knowledge-based sustainable economy. It outlines 16 paths to a better Armenia, including 8. Clean and green environment, 10. Productive and responsible agriculture, 13 Renewable and accesible energy and 15. Knowledge-based economy.

A GREEN Armenia platform was launched in June 2022 to optimize policies and investment initiatives in support of Armenia's transition fo a green economy, with support from the World Bank, European Union and United Nations Development Program.

The Ministry of Environment launched a video to promote green procurement in 2022, stating that "everything that is purchased during public procurement must comply with the principle of "green sustainable procurement". GPP is the 12th of the 17 points of the sustainable development program of Armenia. In 2023, UNEP is planning to conduct a national assessment of SusPP implementation together with an Armenian non-profit institution, along with the development of SusPP communications materials and events to reach broad stakeholders across Armenia.

Pillar 2: Legal & Regulatory Framework

Procurement law reform can be key to clear obstacles to implementation by establishing "value for money", not "lowest price", as a core procurement objective, and authorizing procurement approaches suited to SusPP.

A major effort to modernize procurement in Armenia was undertaken in 2017 with the adoption of a new "Law on Procurement" (PPL). The legal reform aimed to improve conformity to European Union (EU) and EEU standards. The PPL contains some provisions that support SusPP, including:

• recognizes “value for money” and "proportionality" as procurement objectives (Article 3);
  
• allows for bids to be evaluated on the basis of both price and “non-price” (technical or quality) criteria (Article 34);
  

Decree 977 was issued in August 2022 with significant additional reforms in various areas of procurement, including consideration towards "Green Procurement" (ADB Country Office). According to the Decree, implementation will be led by the Ministry of Finance in close coordination with the Ministry of Environment and the Urban Development Committee.

On social procurement, a March 2021 amendment to the PPL reduced barriers faced by SMEs to bid in public procurement by decreasing the deposit requirement for participating in tenders from 100% to 15% (for tenders under 145,000 USD) and 30% (for tenders above that threshold). The PPL also allows for the splitting of tenders into lots (Article 25), an approach that can be utilized to promote SME participation.

On environmentally-friendly procurements, the PPL allows procuring entities to specify performance-related or functional characteristics (Article 13). This approach can be used to invite suppliers to propose new environmentally-friendly technologies and products. In addition, energy-efficient public procurement has clear support in the country's regulatory framework:

• Decision 1504-N dated 25 December 2014 promotes energy saving and energy efficiency improvement measures in facilities being constructed (reconstructed, renovated) with state funding;
  
• Governmental Resolution No 426-N, dated 12 April 2018, established the technical regulation for energy savings and energy efficiency in newly constructed multi-apartment buildings, as well as objects constructed (reconstructed/renovated) by state funds/

In 2019, Guidelines on the Application of Energy Efficiency Requirements for Goods, Works and Services were developed by Armenian experts to support procuring entities to apply energy efficiency requirements in procurements. These Guidelines were finalized and sent to the Ministry of Finance with the intention that an instruction would be issued to public administration bodies.

Pillar 3: Institutions & Capacity

The Ministry of Finance is the lead executive authority responsible for developing and implementing policies on public procurement. No central procuring authorities exists, however the PPL allows for the organization of centralized procurements by authorized persons or bodies (Article 17). In addition, no government body has been assigned specific responsibilities to oversee SusPP implementation.

Current levels of awareness on SusPP appear to be limited amongst procuring entities but introductory trainings are being organized. A peer-exchange workshop on environmentally sustainable public procurement attended by Armenian and U.S. procurers was held in March 2022 with support from the U.S. Government. The United Nations Economic Commission for Europe (UNECE) hosted a regional workshop on the potential of public procurement to foster demand for innovation in support of sustainable development with Armenian participation.

Training on SusPP is planned as an upcoming activities under the EU4Environment program, aiming to engage various stakeholders including businesses, SMEs, contracting authorities and procurement agency staff.

Pillar 4: Market Practices

Market dialogue throughout the procurement process helps procuring entities to choose realistic sustainability criteria and ensure suppliers succeed in delivering on sustainability commitments over the contract duration.

The Government of Armenia has set the promotion of local businesses, especially small and medium enterprises, as a national priority. The EU4Environment program has carried out programs to support SMEs to shift to greener technologies and practices, and receive recognition.

Manufacturing. UNIDO supports manufacturing enterprises from Armenia to measure the Product Environmental Footprint (PEF) of their products. Through this training, Armenian businesses, especially SMEs, can measure their environmental performance and position themselves with confidence on the market of sustainable products. A PEF pamphlet is available in the Armenian language.

Circular Economy. The EU4Environment program plans to launch a Single Market for Green Products and create RECP Clubs in two selected regions of Armenia. Thirteen (13) demonstration companies in the food and beverage, textile, metal goods and construction materials, chemicals and plastic manufacturing sectors received coaching from resource efficiency and cleaner production (RECP) experts in 2022.

As a result of these support programs, suppliers with environmentally-friendly product offerings can be found in Armenia, such as a manufacturing company for vehicle batteries and a road-building company. Useful tools for Armenian companies seeking to shift to greener practices include the I-GO Assistant (and Network) and Green Economy Practices training.

Green Buildings. The green building market in Armenia is expected to have significant growth potential mainly in retrofits, instead of new construction. UNEP and UNECE hosted an event on “High-Performance Building Standards” in November 2019 to understand the experiences and challenges in housing energy efficiency faced in Armenia.

Several green buildings have been designed and constructed in Armenia.

• Under a “Build Armenia” project, the contruction of a large industrial-residential complex in planned that is environmentally sustainable and energy-efficient.
  
• An Armenian company, Ecotun, is building a multi-apartment eco-building complex in the Arabkir region, builds standardized eco-houses and offers eco-blocks made of natural stones and expanded perlite.
  
• A passive solar greenhouse was built in the Shirak region to provide an alternative source of income for farmers under a UNDP project.
  

Pillar 5: Procurement Operations

Various tools can be employed to help procurers more easily identify environmentally friendly goods and services, while centralized procurement approaches can aggregate sufficient demand to motivate suppliers to offer sustainable alternatives.

No specific tools were identified in Armenia to support procurers to design sustainable public procurements to date. In 2023, under a UNEP project, several implementing tools are planned, including:

• Assessment of the availability of ecolabels for priority product groups (identified through a Prioritization Exercise)
  
• Criteria, technical specifications and guidelines for three priority products
• 3-5 pilot tenders of the priority products will be launched and monitored.

Pillar 6: Monitoring & Impact Measurement

Monitoring systems are essential to gather the information needed to keep SusPP implementation on course and communicate on the benefits achieved for the country.

The Ministry of Finance issues annual monitoring reports on government procurement and makes procurement data publicly available on its Office Government Procurement website. The Ministry also operates an e-procurement platform, for which a complete overhaul is planned to further modernize and improve transparency in procurement.

However, the current monitoring system does not appear to include monitoring related to SusPP.

Projects Supported by ADB

Current ADB operations in Armenia are implemented under the country partnership strategy (CPS) 2019–2023, which targets inclusive, diversified, and transformative growth (ADB 2019). About 80% of the active sovereign lending portfolio in Armenia are for transport projects. Support for Armenia’s private sector has emerged as a recent priority. In 2021, ADB approved a $35 million loan to modernize electricity distribution networks in Armenia that will ensure reliable electricity supply, especially in the provinces.

Activities on SusPP can complement ADB's existing areas of work. Opportunities to integrate sustainability criteria include:

• Road and transport projects, including reduction of construction waste, locally-sourced materials, and local and inclusive job creation.
  
• Retrofitting and reconstruction of 46 schools targeted by the Seismic Safety Improvement Program, including low-chemical paints, green and energy efficient buildings, and reduced construction waste.

Other Initiatives supported by National/International Agencies

• The Eastern Partnership (EaP) GREEN programme supported Armenia to achieve goals related to the green economy and sustainable consumption and production [OECD, 2013-2017].

• The EU4Environment initiative is a follow-up to the EaP Green programme funded by several donors (EU, OECD, UNECE, UNEP, UNIDO, World Bank) with various streams of work:
• Support to SMEs to adopt resource efficient and cleaner production (RECP) practices [2019-2021].
  
• UNEP will support the Government of Armenia to conduct a assessment of SusPP implementation and develop supportive tools and trainings for procurers and suppliers. [2023-2024]
  
• UNECE hosted a regional workshop with Armenian participation on "Innovation-Enhancing Procurement", demonstrating how procurement can deliver on sustainable development goals [2022].
  

• A "Green Armenia" platform was launched in 2022 in support of Armenia's sustainable development, green recovery and growth, backed by the World Bank, EU and UN Development Programme.
  

Resources

Asian Development Bank, 2019. Armenia: Country Partnership Strategy (2019-2023).

Asian Development Bank, 2021. Climate Risk Country Profile.

Freedom of Information Armenia, 2017. Implementation Assessment of the Armenian Public Procurement Legislation.

Government of Armenia, Program on Energy Saving and Renewable Energy for 2022-2030 for Armenia.

International Energy Agency (IEA), 2020. Energy Efficient Buildings in Armenia: A Roadmap.

International Finance Corporation (IFC), 2022. Green Buildings Market Intelligence Armenia Country Profile.

International Monetary Fund (IMF), 2019. Country Report No. 19/33, Republic of Armenia Technical Assistance Report - Public Investment Management Assessment.

Organisation for Economic Co-operation and Development, 2021. Sustainable Infrastructure for Low-Carbon Development in the EU Eastern Partnership - Investment in sustainable infrastructure in Armenia.

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