Instrument Overview

Pooled procurement refers to combining the demand for products or services from two or more parties to enable the group to obtain more affordable prices than each party would get if they acted individually (demand-side aggregation). Municipal pooled procurement involves multiple cities working together to purchase goods or services. For example, this could be an initiative led by a network of cities, state or national governments, or third-party institutions providing technical support to municipalities [1].

Why it matters for cities

Cities are increasingly using pooled procurement to implement their green transition. They can use pooled procurement mechanisms to purchase green technologies, such as solar panels, LED lights, electric vehicles (EVs), and electric vehicle charging infrastructure. They can also be used to purchase services or service contracts, for example, climate risk data and analytics across multiple cities or operating contracts for new green technologies [1].

Key features

This approach facilitates the financing of sustainable projects by making obtaining funds at an affordable price easier. Pooling the demand for green buildings allows entities to utilize their collective purchasing power to negotiate more favourable terms and conditions, ensure quality and net zero compliance, secure lower interest rates, reduce risk, and attract more investors [2].

How It Works

The mechanics for each pooled procurement differ, but they generally follow a similar process:

• Aggregation of demand: Cities or municipalities combine their purchasing needs to create a larger, pooled demand that improves bargaining power and reduces procurement costs.
• Technical support and standardization: Central entities or partners provide guidance to define uniform technical specifications and ensure that all participants understand the requirements of the technologies being procured.
• Centralized procurement or tendering: A coordinating body manages the procurement process on behalf of participating cities, issuing a common tender or providing access to a shared purchasing platform.
• Competitive or prequalified supplier selection: Suppliers are selected through transparent, performance-based evaluations or prequalification processes to ensure best value and reliability.
• Delivery, payment, and operation: The selected suppliers deliver and, in some cases, install or operate the technologies, with payments made according to clear milestones or performance outcomes.

Benefits & Challenges for Cities [1]

Benefits

• Achieves economies of scale leading to lower costs.
• Reduces transaction costs.
• Improves access to technologies or services. 
• Promotes catalytic potential for green market development.
• Facilitates peer learning.
• Improves regional planning and coordination.

Challenges

• May require long-term political commitments, which can wane over time due to election cycles.
• Global and national economic instability and supply chain constraints threaten instruments’ success.
• Extremely large pooled procurements may require suppliers with sufficient room for capital expenditure and manufacturing capacity which can be hard to find.
• Public officials need capacity building to implement complex procurement processes.
• Municipalities’ agreeing on technical standards.

Use Cases

Procurement and stockpiling of medical countermeasures in the EU [3]

The procurement and stockpiling of medical countermeasures (MCMs) is one of the core areas of work within the Health Emergency Preparedness and Response Authority (HERA)'s mandate. By acquiring stocks of critical medical items such as medicines, vaccines, and personal protective equipment through different procurement mechanisms, including by acting as a central purchasing body for Member States, the Commission works to ensure that the EU maintains a high level of preparedness for future cross-border health threats.

The different purchase mechanisms employed by the Commission for procurement include:

• Wholesale procurement: Procurement by the Commission acting as wholesaler by buying, stocking and reselling or donating supplies and services, including rentals, for the benefit of Member States or partner organisations selected by the Commission.
• Joint procurement: Procurement by the Commission on behalf of the participant countries on the basis of a joint procurement agreement signed by all parties. The Commission establishes a Joint Procurement Framework contract under which participating countries order and purchase a given medical countermeasure.
• Grant: The Commission awards grants to EU Member States procuring, hosting and managing the stock.

HERA carries out systematic mapping of the requirements related to the transportation, storage, and distribution of medical countermeasures across the EU to identify key risks and challenges – ensuring that supply chain bottlenecks and other obstacles to a swift response are discovered and addressed well before a crisis hits.

HERA is also working to assess existing stockpiling capacity on both Union and national levels and developing a common strategy to ensure effective geographical coverage and timely deployment of critical medical countermeasures across the EU.

When to Use It [4]

• Strong coordination between public sector entities and departments.
• Robust public procurement processes.

References

[1] Financial-Aggregation-Blueprints-for-Urban-Climate-Infrastructure.pdf

[2] Pooled procurement of green financial products or buildings | Net Zero Buildings

[3] Procurement and stockpiling - Public Health - European Commission

[4] https://citiesclimatefinance.org/financial-instruments/instruments/pooled_procurement

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