Introduction

This Factsheet outlines the current progress in advancing Sustainable Public Procurement (SusPP) in Papua New Guinea based on a desk review. It 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 SusPP 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.

The Government of Papua New Guinea undertook a significant procurement law reform in 2018. The National Procurement Act sets clear preferences for domestic suppliers, including SMEs, and encourages foreign bidders to partner with local firms. Procurement is guided by the principle of value for money, which may open the door for inclusion of sustainability criteria.

The country needs to diversify its economy to create more sustainable and inclusive growth and step up job creation. Economic growth has been largely driven by mining and energy sectors, with the country transitioning from a net carbon sink in 2000 to a net carbon source in 2015. The Government's Vision 2050 sets a goal for the renewable resource sector including manufacturing to contribute 70% of GDP (30% agriculture, 20% tourism , 20% forestry and fisheries). The aim is to empower citizens to maximise the wealth from the vast renewable natural resources and distribute wealth fairly and equally to all Papua New Guineans.

ADB's Country Partnership Strategy 2021-2025 for Papua New Guinea aims to support diversified, sustained and inclusive growth. SusPP can be integrated into ADB planned support to enhance transport and energy infrastructure, as well as to bolster the private sector especially micro, small and medium-sized enterprises (MSMEs). It aligns with ADB's commitment to improve public financial management across all institutions ADB engages with in PNG.

>> Snapshot of Sustainable Procurement Maturity Level

Maturity Level:

Early-Intermediate

Key Achievements

• Procurement laws allows preferences for domestic firms
  
• SusPP recognized as a key tool in National Strategy for Responsible Sustainable Development
• Commitment to achieve net zero by 2050 with actions and targets that SusPP can contribute towards
• Strong civil society and private sector (especially linked to international actors in environmental conservation) that have helped to pilot green standards in building (e.g. aligning the PNG Timber Legality Standard with the FSC certication system etc)

Potential pathways forward

• Leveraging the private sector/ civil society for pilots on SPP criteria (like green buildings, certifications, etc) and awareness building
  
• Encouraging government agencies to be more proactive in early market engagement (ie business forecast) with SMEs, including strategic planning (e.g. annual procurement plans) or targeting support services to match supply (SME capacity/potential) and demand
• Integrating SPP guidance and criteria into procurement manuals
• Support development of e-procurement or other tools/systems that can support monitoring of the effectiveness of local preferences

>> Timeline of Implementation of SusPP Policies and Activities

2020

2021

2016

2018

2010

2014

2017

Vision 2050 & Development Strategic Plan 2010-2030 prioritizes environmental sustainability & climate change

National Climate Compatible Development Management Policy sets commitment to be carbon neutral by 2050

National Strategy for Responsible Sustainable Development 2014 promotes SusPP

SME Policy 2016 priorities support to national SMEs

National Energy Policy 2017-2027 promotes energy efficiency and renewables

National Procurement Act (NPA) 2018 adopted with local preferences

Pacific Green Entrepreneurs network launched

Enhanced Nationally Determined Contribution submitted

Amendment to National Procurement Act (NPA) 2018 adopted

Pillar 1: Government Vision & Awareness of SusPP

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

The country's national development vision is set out in Vision 2050 and the Development Strategic Plan 2030. Vision 2050 sets out "Environmental Sustainability and Climate Change" as one of seven Strategic Focus Areas.

The National Strategy for Responsible Sustainable Development 2014 (StaRS) for PNG sets out the country's green growth vision. It promotes Sustainable Public Procurement as one of eight green growth policy instruments, along with inclsuive green social enterprises and green innovation. The Strategy aims to shift government expenditure away from activities that waste, overuse or degrade environmental assets and help businesses align their models to Inclusive Green Growth principles. To promote SusPP, the Strategy prioritizes a practical, market-led approach to implementation that:

• identifies high impact goods and services
  
• pilots of initiatives to build capacity and support
• ensures multi-stakeholder collaboration between the public and private sector from the outset.

Implementing SusPP can contribute to the country's climate change goals. The Government has committed to 50% GHG reductions by 2030 and carbon neutrality by 2050. It also aims to achieve carbon neutrality in energy industries by 2030 by fully shifting to renewable energy sources.

PNG's Enhanced Nationally Determined Contribution 2020 outlines plans to launch electrified bus rapid transit systems and ensure national roads, bridges and culverts are built to climate resilient codes and standards. It sets a target to increase the share of installed capacity of renewable energy from 30% in 2015 to 78% by 2030. Energy efficiency is a national priority outlined in the National Energy Policy 2017-2027.

PNG’s Sustainable Development Goal 13 Roadmap “30 Actions by 2030” sets out the latest vision for sustainable development with 30 goals to reach by 2030. These Goals offer a succinct view of the key national priorities that SusPP can be designed to contribute to achieving (see figure below).

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.

Public procurement in PNG is regulated by the National Procurement Act (NPA) 2018 (gazetted on 1 April 2019) and the Public Finance and Management Act (PFMA) as amended 2018 (gazetted on 1 March 2019). The procurement law applies to all public and statutory bodies of PNG with exceptions for state-owned enterprises (SOE). For procurements arranged under international agreements such as under ADB financed projects, the terms of the international agreement will prevail in the case of conflict.

Domestic preferences

Under the 2018 NPA, PNG citizens and SOEs hold exclusive rights to bid for government contracts valued at PGK10 million. Contracts valued from PGK10 million to PGK30 million must have at least 50% local content in the bidding consortium. A 2021 amendment raised the threshold to PGK50 million.

The Law also allows procuring entities to extend price preferences for national companies or citizens, amounting to 15% for goods contracts and 7% for works or services contracts. Joint ventures between national and foreign companies with a majority holding by the local company or citizen can be granted a 4% margin of preference. This allows national companies to compete successfully against lower priced bids from foreign firms.

Notably, these domestic preferences cannot be applied to ADB loans, as the country's Gross National Income (GNI) is above the threshold for such thresholds to be applied in ADB funded projects for civil works.

Green procurement

The 2018 procurement law does not specifically promote green or environmentally-friendly procurement. However, it does stipulate that procurements shall be conducted in a manner to maximise competition and a socio-economic return on investment that achieves value for money (Article 41). In addition, Technical and Financial Evaluation Committees must be created for all regulated procurements. These provisions may open the door to allow sustainability criteria and expertise to be considered in tender evaluations. However, procurement law reform will be needed to set out a clear legal basis for green public procurement in the country.

Pillar 3: Institutions & Capacity

Institutional Arrangement

The 2018 NPA created a new National Procurement Commission (NPC) replacing the previous Central Supply and Tenders Board (CSTB). It centralizes procurement by mandating the NPC to coordinate all procurements with a value over PGK 500,000. A 2021 amendment to the NPA raised this threshold to PGK 1 million. This centralized approach is intended to leverage economies of scale, improve efficiency and reduce corruption in public procurement.

The NPA creates Provincial and District Committees of the NPC with authority to undertake procurements valued up to PGK 5 million and 2.5 million, respectively. The 2021 amendment to the NPA raised these thresholds to PGK 10 million and 5 million, respectively.

The 2018 PFMA created a Authority to Pre-commit Expenditure Committee (APC Committee) formed by the Heads of Departments of Finance, Treasury ( Chair) and National Planning and Monitoring to oversee procurements. The APC Committee can certify government departments that want to want to procure independently of the NPC. To be certified, requesting public and statutory bodies must show they have the capacity to carry out good public finance management practices (Article 27).

The NPC must appoint a Technical and Financial Evaluation Committee (TFEC) for each procurement that it undertakes. The TFEC shall make a recommendation to the NPC to approve and award a contract. However, the NPC is not bound by the recommendation of the TFEC.

Currently the NPC has not been assigned any specific responsibilities to advance SusPP. The NPC is responsible for procurement training, competency levels and certification requirements. However, these do not consider capacities to implement SusPP to date.

Training materials for local government officials on the green economy, energy efficiency, renewable energy and green business have been developed and translated into local languages under a Global Green Growth Institute project. Workshops were held in November 2022.

Pillar 4: Market Practices & Sustainable Supply Chain

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.

SME Participation in Procurement

The 2018 Procurement Law allows for preferences for domestic suppliers. However, no data was found on the participation of SMEs, women and vulnerable groups in public procurement contracts in PNG. Progress in this area is considered a key national priority.

The PNG Government has positioned SMEs as a vehicle for inclusive growth, job creation and poverty reduction and reducing the economy's reliance on mining and energy. Most small businesses in PNG operate in the informal economy. However, by 2021, more than 50,000 SMEs were legally registered. The Government aims to grow that number to 500,000 registered SMEs by 2030 under its 2016 SME Policy. It also aims to increase citizen control over the formal economy from 10% in 2016 to 70% in 2030.

Growth of SMEs is planned in the agricultural, tourism, fisheries, forestry and manufacturing sectors, aiming for more value-added activities - with a focus on integrating women and people with disabilities. Public works contracts raise particular challenges, as much of the required construction materials and equipment are not available in the country. However, there is evidence that local construction firms have successfully delivered on public works funded by the World Bank, ADB, Australia and the PNG Government.

Rhodes PNG Limited is the first construction and engineering company in the world to be recertified with EDGE, the leading global assessment system for gender equality, underscoring the company's commitment to providing greater access to higher paying jobs and leadership roles for women in the construction industry in Papua New Guinea.

Green enterprises and industry

A Pacific Green Entrepreneurs network was launched in 2020 to support entrepreneurs (particularly women and youth) develop green businesses with business models that contribute to national climate and sustainable development goals (SDGs). The network offers mentorship, training, incubator and accelerator programs. Over 30 PNG startups have graduated from the program, offering a potential pool of businesses that can respond to green criteria in public procurements.

A new Blue Economy ClimAccelerator was launched in 2023 to support entrepreneurs with solution related to maritime activities including maritime transport & infrastructure, ports, and waste disposal management.

The Business Council of Papua New Guinea plans to create a strategic Advisory Group on the SDGs to lead and champion the private sector’s engagement on SDGs. It partnered with UNDP to launch a Business4SDGs dashboard that tracks and monitors business initiatives and maps them against progress towards achieving the Sustainable Development Goals (50 participating companies).

Pillar 5: Procurement Operations

Various tools and procurement approaches can be employed to help procurers more easily identify environmentally friendly goods and services and attract a competitive market response.

This review did not uncover data on existing sustainable procurement practices or information on tools available to support procuring entities to practice SusPP.

Several actions are planned to develop tools that can support SusPP including (outlined in the Enhanced NDC 2020 and other policy documents):

• develop and endorse Minimum Energy Performance Standards and Labelling Regulation (MEPSL)
  
• adopt and apply climate resilient codes and standards for roads, bridges and culverts
• establish low carbon fuel and emission standards for vehicles
• internationally recognized timber legality standard.

A Climate Building Standards Regulation and Climate Resilient Infrastructure Standards Regulation are planned that will prescribe minimum environmental standards and performance levels to apply to buildings and infrastructure projects (Article 68, Climate Change (Management) (Amendment) Act 2021).

The National Climate Compatible Development Management Policy 2014 recognizes that the Government can play a leading role in showcasing green practices. It calls for the construction and renovation of public facilities to serve as demonstrations of energy efficiency improvements and green building practices including renewable energy installations. It outlines priority actions that can guide the design of sustainable procurements:

• incorporate green building and energy efficiency standards in all public facilities;
  
• require the use of water saving fixtures;
  
• set landscaping standards that promote environmental benefits with a preference for indigenous plants;
• support locally produced foods;
• support local jobs in sustainable green businesses
• build green and energy efficient public infrastructure (e.g. street lighting, fleet management programs)

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 National Procurement Commission is responsible for monitoring and reporting on the performance of the procurement system and contract management. However, it has not been assigned specific duties to track green or social procurements. No information was found on a procurement monitoring system or indicators in PNG.

A monitoring and evaluation framework for green growth is prescribed in Vision 2050, DSP 2030 and the StaRS 2014 based on the OECD Inclusive Green Growth Indicators. However, this framework does not contain any specific indicators on sustainable or green public procurement.

Projects Supported by ADB

ADB's Country Partnership Strategy 2021-2025 for Papua New Guinea aims to support diversified, sustained and inclusive growth.

More than 75% of new lending in the CPS period is expected to focus on essential infrastructure, specifically transport and energy. Sustainability criteria can be integrated into the procurements for these ADB projects.

SusPP activities can also be integrated into planned ADB support to support procurement capacity. ADB also plans to renew its ongoing TA for Supporting Public Financial Management (Phase 3), which includes a component on procurement. ADB plans to provide targeted capacity building in procurement, opening the door for sessions on SusPP.

Other Initiatives supported by National/International Agencies

No specific support projects on SusPP were found in PNG.

The Global Green Growth Institute (2021-2025) supports projects to build capacity on green economy concepts in PNG and support entrepreneurs in the green and blue economy.

UNDP coordinates programs to advance energy efficiency and renewable energy capacity in the country.

The Government of Japan is supporting the construction of three solar farms for the people of the Autonomous Region of Bougainville. PNG has signed a Climate Change Action Plan with Australia to jointly work on effective actions on climate change.

Resources

ADB 2018. Financing Sustainable Growth in Papua New Guinea.

Global Green Growth Institute, 2019. Green Growth Potential Assessment Papua New Guinea Country Report.

Global Green Growth Institute, 2019. Papua New Guinea Country Planning Framework.

PWC briefing on "Overview and commentary on the PNG Government’s SME Policy" (April 2016).

Transparency International, 2018. Papua New Guinea: Public Procurement Legislation Assessment.

UNDP, 2022. Making nature's value visible: Valuing the contribution of nature to Papua New Guinea's economy and livelihoods.

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