Life Cycle Costing Implementation in Green Public Procurement: A Case Study from the Greek Public Sector

Abstract

Green Public Procurement (GPP) is an essential strategy for achieving goals related to public environmental policy, including sustainable production and consumption, streamlined use of resources and mitigation of climate change. The European Union has adopted policies towards “greening” public procurement for member states in order to promote environmental sustainability. Life Cycle Costing (LCC) is a method that measures the financial impact of an investment over the life cycle of a product. The current EU Procurement Directives (2014) are designed to position LCC centrally to sustainable sourcing. Although the literature identifies the links between the environmental dimension through GPP and the economic dimension through the use of LCC, the interaction between them in the context of public procurement has not been adequately captured. The aim of this paper is to evaluate the results of the LCC tools implementation in the context of GPP in Greece and study the economic impact of green procurement in public organizations. The urgent need of reducing energy consumption in the public sector due to the continuing energy crisis and climate change is an additional incentive to evaluate this impact. LCC tools developed by the EU were used, fed with data from public procurement contracts carried out in the Greek public sector. The results show that the adoption of environmental criteria requires market research, planning and coordination to make it cost-effective, especially under the legislative mandate of GPP in Greece by 2022.

1. Introduction

The European Commission through actions, decisions and interventions in recent years is encouraging public authorities to make their purchasing decisions “greener”. Public procurement is a key aspect of public investment as it stimulates economic growth worldwide [1]. The respective expenditure represents around 14% of EU GDP [2] and GPP is an approach that supports public authorities to achieve environmental benefits through the procurement process. EU defines GPP as “a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life cycle when compared to goods, services and works with the same primary function that would otherwise be procured” [3]. GPP stands out as a fundamental market instrument for achieving EU governance goals regarding environmental change, asset utilization and sustained use and creation—especially given the importance of the current energy crisis and the fiscal constraints imposed by many governments. GPP enlarged implementation will help to maintain EU’s leadership in environmental performance [4].

The European Commission has made several attempts to promote the use of green rules in public procurement. Directives 2004/17/EC and 2004/18/EC, which were replaced by directives 2014/24/EU and 2014/25/EU respectively, are considered important interventions in the application of green criteria in public procurement. Legally binding prerequisites must take into account rules such as reduced capital outflows, unrest, reduced asset utilization, etc. [5]. In 2010, most EU countries effectively transformed EU mandates into a public ordinance and National Action Plans (NAPs) were drawn up based on GPP. Specific product groups were identified in order to be used for the implementation of GPP, such as construction, office IT equipment, cleaning products and services and copying and graphic paper [6]. According to European Green Deal Investment Plan (COM 2020), the European Commission will propose further legislation on GPP, with minimum mandatory green criteria or targets for public procurements. Under this green investment plan, public authorities across Europe will be encouraged to integrate green criteria and use labels in their procurements.

At the same time, European directives encourage the purchasers in public services to use LCC methodologies whenever possible [7]. Directive 2014/24/EU encourages the use of LCC within the public procurement process as there is an entire article on life-cycle costing, highlighting its importance in the context of green procurement. Moreover, a variety of existing LCC tools deals with financial, environmental and social concerns [8].

Considering the previous and despite the fact that there is an increasing interest of researchers in green procurement [9,10,11,12], the understanding and adaptation by public purchasers of both economic and environmental objectives in the procurement of goods and services remains optional [13]. This paper explores the relationship between GPP and LCC and evaluates the economic impact of green procurement through the application of LCC tools developed by the EU in green procurement projects in the Greek public sector. Through this evaluation, it is determined whether green products have by default a higher investment cost than non-green ones. Thus, the aim of this paper is to evaluate the results of the LCC tools implementation in the context of GPP in Greece and study the economic impact of green procurement in public organizations. The urgent need of reducing energy consumption in the public sector due to the continuing energy crisis and climate change is an additional incentive to evaluate this impact.

The remainder of the paper is structured as follows: in Section 2 the current state of GPP in Europe and in Greece is presented, with a brief literature review on the LCC implementation in public procurement. Section 3 presents the LCC implementation in the case of GPP in Greece. In Section 4 the results are analyzed and in Section 5 these results are discussed. The concluding remarks are presented in Section 6.

2. Insights on Green Public Procurement

GPP addresses economic, environmental and social challenges in public procurement activities. It is an important market-based instrument that offers potential in terms of achieving environmental and social objectives of a resource efficient society. Therefore, the goal for public actors is to serve as role models and progressively include these objectives into the public procurement procedures. Until 2013, the majority of studies on environmentally and socially friendly supply chain management have been conducted in the private sector [10,11,12,13,14], while only a few researchers addressed green procurement in a public sector context [15,16], focusing on acquisition measures. From 2013 to 2016 the research focus shifted to GPP understanding and impact; studies that monitored the level of uptake of EU GPP criteria showed that they were not frequently addressed into procurement procedures [17,18]. An extensive overview of the GPP literature is presented by Cheng et al. [14]. They state that GPP’s exploration efforts are focused on improving strategy and specific business areas and outline the lack of studies assessing GPP as an environmental policy instrument. Sonnichen & Clement [19] argue that studies essentially encompass three areas identified by the GPP: organizational aspects, individual behavior and operational tools.

Focusing on the latter, although several operational tools are developed to use environmental criteria in public purchasing processes [20,21], there is still significant space for further applied research [12,19,22]. Given that value for money and financial efficiency are still the most important drivers to evaluate in public procurement, and the externalities are the most important factors in the assessment of environmental sustainability, the LCC approach, when integrated with the externalities, exemplifies adherence to the requirements of public procurement processes [23]. In economics, an externality is an “external effect that occurs when the production or consumption decisions of one agent have an impact on the utility or profit of another agent in an unintended way, and when no compensation or payment is made by the generator of the impact to the affected party”. The assessment of externalities is the first step in order to assess the environmental impacts of purchased products [24]. LCC may include the cost of externalities (e.g., greenhouse gas emissions) under specific conditions laid out in EU directives. The current (2014) directives require that where LCC is used, the calculation method and the data to be provided by tenderers are explicitly stated in the procurement documents. Specific rules also apply regarding methods for assigning costs to environmental externalities, which aim to ensure that these methods are fair and transparent [25].

The lack of published work studying GPP from a combined economic and environmental perspective is evident. Jenssen & Boer [26] indicate that although many EU countries cite the use of LCC in developing GPP criteria, practical cases of LCC in purchasing decisions remain surprisingly sparse. The understanding of the administrative and institutional elements that can support and implement green public procurement practices has not been yet achieved [22].

2.1. Life Cycle Costing in Public Procurement

LCC considers product usage, end-of-life stages and hidden costs in addition to traditional financial accounting. Those costs, occurring throughout an asset’s later life and eventual disposal, are better linked with the costs, benefits and impacts connected with the initial investment. LCC advises against rejecting initiatives that, while having higher initial costs, could be accepted in the long run and result in lower costs and reduced environmental impacts. LCC is an evaluation technique, not a cost accounting technique [27].

A few studies [13,28,29] support the idea that GPP plays a crucial role in procurement processes by bringing the life cycle viewpoint and, therefore, LCC. GPP is not merely an environmental consideration in procurement operations. Thus, instead of being viewed as independent elements of sustainability, the environmental and economic aspects of GPP and LCC, respectively, may be combined within the context of sustainable purchasing, and the adoption of GPP can therefore encourage the inclusion of LCC in the tender evaluation process.

According to Iraldo et al. [18], Estevan & Schaefer [17] and Studies (CEPS) [30], the content of GPP implementation via LCC by public bodies is rather constrained. The institutional and policy structure does not provide adequate incentives to effectively assist public entities in adopting LCC. Building on prior sustainable procurement experience, public sector organizations can investigate the prospect of creating LCC implementation procedures, although it is yet unknown which setting would be most conducive to the creation of such an integrated strategy [13]. In EU public procurement directive (2014/24/EU), LCC becomes the core for implementing green procurement without, however, becoming mandatory yet. It is also still unclear how government agencies leverage LCC tools in their green procurement commitment and until today, the European Commission only occasionally announces good practices in LCC application in various areas of public administration in the Member States, such as buildings, lighting, vehicles, etc.

The LCC structure is depicted in Figure 1 and includes both direct and indirect costs, which are connected to environmental externalities and are provided by the contracting authorities [30].

Direct (or internal) costs are tied to manufacturing a product (or providing a service) and paid during its life cycle. According to EU Directive 2014/24, LCC covers a part or all of the following costs during the life cycle of a product:

• Acquisition cost, linked to purchasing cost. Although there is a distinction between pre-acquisition cost items (raw materials cost, labor cost, energy cost) and post-acquisition cost items (distribution cost, management cost, disposal cost), it is common practice to include only pre-acquisition cost items, which usually include all costs arised in the production of a particular good, in the cost of acquiring.
• Cost of use refers to the operation cost. It includes various cost elements (such as the cost of energy and water consumption, consumables, etc.), it is linked to the consumption of energy and other resources and depends on the conditions of use of the product. The cost of use may also include the cost of cleaning the product [24].
• Maintenance cost includes the costs paid during the lifetime of the product. It relates mainly to expenditure intended to maintain or restore an element necessary for the proper functioning of the product.
• End of life cost consists of costs associated with the product’s end of life including recycling cost, costs of disposal, costs of waste collection, etc.

Art.68 of the Directive EU/2014/24 defines indirect costs as “costs imputed to environmental externalities linked to the product, service or works during its life cycle, provided their monetary value can be determined and verified”. Such costs may include the cost of emissions of greenhouse gases, other pollutant emissions and climate change mitigation costs. Environmental externalities (e.g., electricity consumption) are calculated by identifying their resources’ utilization/emission profile (using publicly available life cycle inventory data), and then converted into environmental impacts by applying a life cycle impact assessment method.

2.2. GPP in Greece

Greece together with Estonia, Hungary, Luxembourg, and Romania were the last EU members without a NAP. However, at the end of 2020, the public consultation on the “National Action Plan for the Promotion of Green Public Procurement” in the Greek public domain was completed in order the competent Interministerial Committee to formulate the final Action Plan. This sets the quantitative targets for the promotion of GPP for the years 2021 to 2023 for the categories of binding and non-binding public contracts, as well as the bodies responsible for their implementation.

It has to be explicitly stated here that the General Directorate of Public Procurement of the Ministry of Development and Investments, as the National Central Purchasing Authority, has already adopted green criteria in the technical specifications of a number of products for which it has concluded Framework Agreements since 2017. These products are: copying paper, PCs and monitors, energy efficient air conditioners, LED indoor lighting lamps, office furniture and car tires. Over the last five years, various actions have been implemented by local authorities in Greece in cooperation with other bodies and within the framework of co-financed programs in the field of sustainable and green development (Interreg MED, Life, Covenant of Mayors, Green Fund, etc.). Additional applications in specific categories, such as street lighting and energy saving products, were implemented through various actions from Greek local authorities [31].

This paper’s contribution is to study the economic impact of the implementation of green procurement compared to non-green procurement in Greek public organizations using the LCC tools developed by the European Union. Following the mapping of green projects in the Greek public sector carried out by Orfanidou et al. [32], comparative results assessing the importance of GPP in relation to the life-cycle costs of green products are provided. The implementation of a NAP in the Greek public sector, combined with the instructions to all public bodies to reduce energy consumption, makes the need for this assessment even more urgent.

3. LCC Implementation in GPP in Greece—Methodology

3.1. Data Collection

Stemming from the European Commission’s encouragement to facilitate the widespread application of LCC among public authorities in the European Union, in order to take more cost-effective decisions, this study used the LCC tools developed by the European Commission to assess in Greece the economic impact of green procurement beyond the criterion of product’s purchasing cost. The inherent assumption was that the purchase price alone does not reflect the financial and non-financial gains that are offered by environmentally and socially preferable assets as they accumulate during their use, and thus an LCC tool can evaluate the costs of an asset throughout its life cycle [23].

Based on this, the life cycle costs of green products vs. non-green products used in Greek GPP projects were compared. The data regarding public procurement projects that applied green criteria carried out in the last 15 years was obtained from Orfanidou et al. [32], who provide an exhaustive record. These projects were thoroughly reviewed in order to collect the purchased products’ necessary technical specifications that would be used in the LCC tool, such as operating costs and externalities costs. Furthermore, financial bids and product specifications were collected through official procurement processes from contracting authorities and suppliers.

Since LCC was not used during the bidding process, in order to be able to make the comparison between green and non-green products, an extensive market research was conducted for the corresponding products used prior to the green policy. These products and their respective costs were identified, along with the data necessary to feed the LCC tool. Then the life cycle analysis of the green and corresponding non-green products was carried out. Therefore, in this case LCC is used after the bidding process (ex-post), yielding life cycle cost estimates for alternative bids—including the awarded one– in order to evaluate the results and use them in future tenders.

As European Commission LCC tools are used, data are applied only for their respective product categories. These are Indoor and Outdoor Lighting and Computers and Monitors. For the first category, the development of energy-efficient lighting technology, the shorter payback time brought on by lower electrical costs and the encouragement of public authorities for its use are the factors contributing to a widespread GPP adoption [33]. On the other hand, due to increased functionality, popularity and availability, computers and monitors are widely used in the public sector. During their life-cycle, the energy consumption seems to be associated with environmental impacts and is highly considered.

3.2. The EU LCC Tool

Several authorities have developed tools with the main purpose of comparing LCC between different products. A comprehensive overview of LCC tools, approaches and good practices is included in the EU-funded SPP Regions report [17], for various categories of products. In this paper the EU developed LCC tool is selected. It is a well-established and widely-acknowledged approach, which aims at supporting real-life decision-making. As it is officially backed by the EU, it has gained acceptability and recognition from the academia, practitioners and policy-makers, referring to key product categories such as Vending Machines, Computers and Monitors, Outdoor Lighting, Indoor Lighting and Imaging Equipment. It may be applied: (a) before tendering, in order to assess the LCC of alternative options and to strengthen the market engagement procedures prior to the tendering process, (b) during tendering, in order to compare offers during the evaluation and award of contracts, as foreseen in Directives 2014/24/EU on public procurement and 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors and (c) after tendering, in order to evaluate the performance of the awarded solution compared to other tenders or the previous situation, but also to contribute to the preparation of future tenders for similar products or services [25].

The life cycle impact assessment method used in EU LCC tools is ReCiPe. According to January 2021 Biodiversity Measurements Approaches and summary descriptions, ReCiPe is one of the most recent and updated impact assessment methods available to LCA practitioners [34]. The environmental impacts are transformed into externalities by applying monetization factors. EU LCC tool initially assessed four environmental impact categories: human health, ecosystem, resource availability and climate change. Regarding the final version of this tool, due to little consensus on human health and ecosystems and the lack of available methods for their evaluation and monetization, the European Commission decided to use monetization only for climate change.

3.3. Limitations and Barriers

With the definition of LCC and the types of costs involved, various limitations arise requiring caution in order to avoid questionable results, before the application of the LCC by public authorities. Data are not easily collected. Those that can be obtained from suppliers and relate to purchase and usage costs (acquisition costs, etc.) are easy to access. However, it is difficult to get data concerning, for example, maintenance costs, since this information is not always available to contracting authorities.

Numerous barriers in applying LCC have been pointed out. De Giacomo et al. [13] summarize these barriers as both internal and external to the organization. Examples are the price, since sustainable procurement is considered “expensive”, the lack of acquaintance with LCC approach, the lack of staff skills, refusal to change, lack of common methods from authorities to pilot adoption process and uncertainty regarding the benefits linked to this approach. Furthermore, the majority of barriers to LCC usage are directly associated to the lack of adequate knowledge of LCC processes and mechanisms [35,36,37].

Equally important is the issue of the complexity of environmental externalities, which makes their monetization a difficult challenge. The uncertainty that characterizes environmental decisions at all stages of decision-making and the unpredictable effects of climate change are a major obstacle. More specifically, LCC aims at unifying environmental problems into a single monetary unit. Environmental externalities associated with a product are mentioned in Art.68 of the Directive EU/2014/24, provided that their monetary value can be established and proved. Environmental externalities are unadjusted environmental consequences of production and consumption that have an impact on consumer utility and business costs outside of the market process [24]. The procurement directives clarify that LCC can include costs of environmental externalities, as well as direct costs. It is therefore necessary to determine the cost of externalities. In the EU LCC tool, purchasers have the option to include or exclude the cost of CO₂-eq emissions and to identify the corresponding costs as externalities. This cost identification should be in line with the requirements defined in article 68.2 of Directive 2014/24/EU on public procurement. A proposal is to use 90 EUR/tonne CO₂-eq. One of the arguments for including external costs is the polluter pays principle, which is a recognized approach in the European Union [35]. Questions arising in the context of LCC are whether there are other types of externalities that can be factored in, leaving aside environmental costs. Among these are social costs, which are harder to assess but yet important [23].

Finally, another important aspect of LCC tool utilization is the avoidance of double counting in order to ensure that the evaluation results do not lose their reliability. The cost of delivery and installation, which may be included in the purchase cost, and the cost of maintenance for the period that the service is covered by the guarantee are typical examples [28]. Double counting can take place during the input phase; therefore, the cost information should be specific when evaluating tenders.

4. Results and Analysis

Figure A1 in the Appendix A is an indicative illustration of the results when applying the LCC tool to the energy lighting products assessed. Figure A2i,ii in the Appendix A show the results of LCC implementation in the procurement of office equipment conducted by the Greek public sector using environmental criteria. In this category a comparison with the products that were replaced was not possible, therefore LCC tool is used at the after tendering stage, as referred to in Directive 2014/24/EU.

Table 1. Aggregated results of LCC tool application in GPP in Greece.

Project Details	Project Location	Product Category	Product Specifications	Total Investment Cost	Total Life Cycle Cost	Cost Difference (%)	LCC Difference (%)
Project 1: Stepping-Interreg-Med (2017–2019)	Municipality of Kalymnos	Indoor lighting	Green Products	7569.78	33,428.19	41%	−11%
			Non-green products	5368.50	37,229.33
Project 2: Stepping-Interreg-Med (2017–2019)	Municipality of Limnos	Indoor lighting	Green Products	51,687.20	130,865.33	181%	61%
			Non-green products	18,409.47	81,170.51
Project 3: Stepping-Interreg-Med (2017–2019)	Municipality of Fournoi	Indoor lighting	Green Products	1780	5300.36	925%	33%
			Non-green products	173.7	3997.63
Project 4: Stepping-Interreg-Med (2017–2019)	Municipality of Psara	Indoor lighting	Green Products	12,325.32	30,505.69	161%	−31%
			Non-green products	4731.03	44,449.21
Project 5: GPP4Growth/Interreg Europe	University of Patras	Indoor lighting	Green Products	4983.40	32,456.69	131%	1%
			Non-green products	2153.98	32,240.70
Project 6: Covenant of Mayors project	Municipality of Vrilissia	Indoor Lighting	Green Products	10,135.78	35,835.27	36%	−30%
			Non-green products	7435.00	46,585.50
Project 7: Covenant of Mayors project	Municipality of Thermi	Outdoor Lighting	Green Products	38,549.00	74,029.35	133%	−7%
			Non-green products	16,539.00	79,039.00
Project 8: Covenant of Mayors project	Municipality of Ilion	Indoor Lighting	Green Products	8753	12,253.00	122%	13%
			Non-green products	3939	10,693.00
Project 9: Covenant of Mayors project	Municipality of Heraklion	Indoor Lighting	Green Products	15,535.25	33,535.75	95%	−13%
			Non-green products	7955.00	37,955.00
Project 10: Covenant of Mayors project	Municipality of Alexandroupolis	Outdoor Lighting	Green Products	48,975.89	94,033.71	90%	5%
			Non-green products	25,743.00	89,573.00
Project 11: Covenant of Mayors project	Municipality of Agios Dimitrios	Indoor Lighting	Green Products	17,785.00	45,298.00	50%	33%
			Non-green products	11,835.00	30,478.85
Project 12: Covenant of Mayors project	Municipality of Nea Smyrni	Indoor Lighting	Green Products	6455.75	17,345.00	158%	35%
			Non-green products	2500.00	11,347.00
Project 13: Covenant of Mayors project	Municipality of Kalamaria	Indoor Lighting	Green Products	4782.50	7855.50	74%	8%
			Non-green products	2755.00	7245.00
Project 14: Covenant of Mayors project	Municipality of Hersonisos	Outdoor Lighting	Green Products	14,322.80	31,625.00	157%	−2%
			Non-green products	5570.00	32,240.70
Project 15: Covenant of Mayors project	Municipality of Amaroussion	Indoor Lighting	Green Products	9877.00	27,635.00	71%	−17%
			Non-green products	5788.00	32,240.70

depicts the aggregated results of LCC application in GPP in Greece and a comparison between the investment costs and the total life cycle costs. It includes data from 15 Indoor/Outdoor Lighting projects, for which the tool has been applied, since the necessary data for the utilization of LCC tool could be collected only for these product categories. The results of Table 1 are graphically illustrated in Figure 2.

As some of the products being compared have different lifespans, EU LCC tool allows their comparison over the same time horizon. In order to compare future costs and benefits to the current ones, they are often discounted to present value. The life cycle cost of a product is the total discounted costs during its lifetime.

At a first glance, the above results illustrate that the cost of investing in green products is significantly higher than using conventional products. Correspondingly, one could argue that the total life cycle cost is in most cases disproportionately increased and only in a few cases is reduced, depending on various factors such as quantities of products offered and product specifications that contribute to the final price. Price comparisons are made between products with the same qualitative/technical characteristics to draw reliable conclusions.

Starting deepening in the analysis, there is a significant differentiation in direct and indirect costs. As illustrated in

Table 2. Aggregated results of LCC tool application based on the analysis of direct and indirect costs.

Project Details	Project Location	Product Category	Product Specifications	Direct Cost	Indirect Cost	Total Life Cycle Cost	Indirect Cost as a Percentage of the Total LCC
Project 1: Stepping-Interreg-Med (2017–2019)	Municipality of Kalymnos	Indoor lighting	Green Products	25,238.28	8189.91	33,428.19	24.50%
			Non-green products	27,549.70	9679.63	37,229.33	26%
Project 2: Stepping-Interreg-Med (2017–2019)	Municipality of Limnos	Indoor lighting	Green Products	120,841.05	10,024.28	130,865.33	7.66%
			Non-green products	64,936.41	16,234.10	81,170.51	20%
Project 3: Stepping-Interreg-Med (2017–2019)	Municipality of Fournoi	Indoor lighting	Green Products	4717.32	583.04	5300.36	11%
			Non-green products	2726.38	1271.25	3997.63	31.80%
Project 4: Stepping-Interreg-Med (2017–2019)	Municipality of Psara	Indoor lighting	Green Products	28,431.30	2074.39	30,505.69	6.8%
			Non-green products	31,758.96	12,690.25	44,449.21	28.55%
Project 5: GPP4Growth/Interreg Europe	University of Patras	Indoor lighting	Green Products	24,277.60	8179.09	32,456.69	25.2%
			Non-green products	22,084.88	10,155.82	32,240.70	31.5%
Project 6: Covenant of Mayors project	Municipality of Vrilissia	Indoor lighting	Green Products	28,668.22	7167.05	35,835.27	20%
			Non-green products	34,939.13	11,646.38	46,585.50	25%
Project 7: Covenant of Mayors project	Municipality of Thermi	Outdoor Lighting	Green Products	67,588.80	6440.55	74,029.35	8.7%
			Non-green products	63,626.40	15,412.61	79,039.00	19.5%
Project 8: Covenant of Mayors project	Municipality of Ilion	Indoor Lighting	Green Products	9557.34	2695.66	12,253.00	22%
			Non-green products	8554.40	2138.60	10,693.00	20%
Project 9: Covenant of Mayors project	Municipality of Heraklion	Indoor lighting	Green Products	31,121.18	2414.57	33,535.75	7.20%
			Non-green products	31,123.10	6831.90	37,955.00	18%
Project 10: Covenant of Mayors project	Municipality of Alexandroupolis	Outdoor Lighting	Green Products	85,570.68	8463.03	94,033.71	9%
			Non-green products	64,492.56	25,080.44	89,573.00	28%
Project 11: Covenant of Mayors project	Municipality of AgiosDimitrios	IndoorLighting	Green Products	36,238.40	9059.60	45,298.00	20%
			Non-green products	22,859.14	7619.71	30,478.85	25%
Project 12: Covenant of Mayors project	Municipality of NeaSmyrni	Indoor Lighting	Green Products	14,049.45	3295.55	17,345.00	19%
			Non-green products	8737.19	2609.81	11,347.00	23%
Project 13: Covenant of Mayors project	Municipality of Kalamaria	Indoor Lighting	Green Products	6402.23	1453.27	7855.50	18.50%
			Non-green products	5651.10	1593.90	7245.00	22%
Project 14: Covenant of Mayors project	Municipality of Hersonisos	Outdoor Lighting	Green Products	24,351.25	7273.75	31,625.00	23%
			Non-green products	23,213.30	9027.40	32,240.70	28%
Project 15: Covenant of Mayors project	Municipality of Amaroussion	Indoor Lighting	Green Products	24,318.80	3316.20	27,635.00	12%
			Non-green products	26,598.58	5642.12	32,240.70	17.5%

, indirect costs, including the costs of environmental externalities, differ as percentages of the total LCC costs in green and non-green products. More specifically, in all but one cases, indirect costs represent higher percentages of the total LCC costs in non-green products. This fact is a first argument to deconstruct the dilemma that green products cost more, and the exclusive choice of the purchase price as a criterion in the evaluation process is not safe. Additionally, it is highly likely that a product sold at a low price will not have the required environmental certifications and will have poor operational performance and vice versa, i.e., a product sold at a higher price will carry the required environmental certifications and have better operational performance. Therefore, products’ specifications regardless of the purchase cost largely determine whether the use of these products will lower costs.

Moreover, in 7 out of 15 projects, although the investment cost of green products is higher than that of conventional products, their LCC is lower, and this is an indication of efficient investment. In the remaining 8 projects both investment cost and LCC are higher; hence the investment appears to be unprofitable. In these cases, the corresponding cost difference is not proportional. An illustrative example is the case of project 5, where the green products cost is 2.3 times higher, but the corresponding difference for LCC is only 1%. In this case, if the award was based on the lowest price, the non-green products would have been selected; by leveraging product life cycle assessment the selection would have been different. This shows that there is potential to make GPP equally profitable investments.

5. Discussion

From the abovementioned results, it is important to refer to the circumstances and specific characteristics of the data in this study, which explain the significant discrepancy in the costs presented. It is a fact that the market research was carried out according to the projects’ requirements in periods when the market was not mature to offer products of environmental interest at affordable prices. Until 2020, products with reduced environmental impacts had a significantly higher price than their non-environmental counterparts. The possibility of achieving a lower price could mainly arise through bulk purchases and public administration negotiations of framework agreements. Unfortunately, in the Greek public sector there was no political planning to organize public procurement in the context of sustainability and the ‘green’ agenda. Thus, GPP was done through individual projects and programs not linked to a central administration. Following the NAP that makes green public procurement gradually mandatory, combined with linking the central electronic public procurement system with the use of “green” criteria in public tenders, will contribute decisively to the mitigation of the above problem. The research conducted had a major limitation due to the lack of centralized data and in many cases, there was no record of the products’ technical specifications used before the application of the green criteria.

It is also important to note that the products examined are energy consuming. When operating costs constitute a significant share of total life cycle costs, then the purchase price should not be the only selection criterion, as the use of green products leads to savings due to lower consumption costs. This confirms similar previous research [38,39].

LCC still has a very limited practical applicability, particularly in environmentally friendly initiatives [40]. The public sector is still stuck on the conventional method of project development, which prioritizes initial costs above greatest long-term value. Justifying the necessity for a deliberate change of attention toward LCC implementation in green projects still requires a lot of work. The reduction of budgetary costs should not be pursued through reduced purchase price but through the environmental and social benefits resulting from the integration of green criteria into technical specifications, taking into account the total life-cycle costs. The incorporation of green criteria into the technical specifications of the products to be procured is by definition a process that has the overriding objective of reducing the environmental impact. This should start by focusing on the clients, who as decision makers play a key role in advocating LCC. Accurate information and knowledge about GPP procedures and techniques seems to be the best motivation to apply them. This is likely to be a tremendous advancement for the GPP, far more significant than the availability of financial resources and flexibility in spending, which were commonly seen as the main concerns of government pioneers in decision-making.

On the other hand, EU mandates are an important incentive for economies like Greece to change. The viability of GPP is sketchy due to a new emergency monetary policy, in which public sector faced severe monetary constraints and government spending slowly declined [18]. Gradually, Greek governments made significant steps towards a green economy and green capital. The NAP for GPP, which will be phased in from 2023, will determine the rationale for changing the green rules from discretionary to mandatory.

6. Conclusions

This paper, motivated by environmental degradation, European and local policies to address it and the recent energy crisis, presents the economic results of the implementation of green procurement in projects carried out in Greek public institutions. As European directives encourage the use of LCC tools, since their use is still far from being systematic, those developed by the European Commission were selected and used. This approach was employed to explore the economic benefits of using green products, which are traditionally considered expensive and therefore not the first choice of operators due to their high acquisition cost. While procurement contracts are still awarded on the basis of the most economically advantageous offer, life-cycle costing takes into account all the costs that will be incurred during the lifetime of the product, project or service.

The findings of this research demonstrate that the use of green products by public operators should be implemented methodically at a strategic level. Although at a first glance green products are not economically viable in some cases, a second reading leads to different conclusions. In many cases they turn to be a streamlined choice, since indirect costs in most cases represent a higher percentage of total costs in non-green products. Furthermore, the fact that purchases of green products were fragmented showcases the need for centralized procurement management in order to exploit economies of scale. Decision-makers have various tools at their disposal, and they can consider the long-term effects of alternative choices. This is definitely a more rational and efficient approach, which is in line with sustainability mandates. Moreover, this sophistication in public procurement can stimulate competition and technological advances, leading to additional benefits that it is not easy to quantify. They can be rather considered as drivers towards improved practices with obvious positive impacts for societies at large.

The limited availability of information on public procurement of green products in Greece was an important limitation in the data analysis. Nevertheless, the results obtained are the first official and measurable indicators of the implementation of the GPP strategy in Greece. Future research should use LCC tools to analyze the implications of alternative procurement policies along with extended data availability.