Analysis of the impact and value of community benefit clauses in procurement

3. Outcomes and Impacts of Community Benefit Clauses

Key Findings

• 24 contracts were analysed in depth. However, data in relation to the additionality and sustainability of CB outcomes was limited and this was a significant constraint in assessing the impact of CB clauses. Notwithstanding this caveat, the research was able to draw out a series of key findings.
• Just over 1,000 individuals from priority groups were recruited as a result of the contracts. Each procuring organisation sets its own priority groups but these were commonly unemployed people or young people not in employment, education or training.
  • 38% would not have been recruited without the CB clause.
  • 75% were still in employment at the time of the research.
• Just over 200 apprentices from priority groups were recruited.
  • 73% of the apprentices from priority groups would not have been recruited without the CB clause
  • 100% were still in employment at the time of the research.
• Just over 650 individuals from priority groups accessed a work placement.
  • 72% would not have accessed a work placement without the CB clause.
  • Only 3% of those undertaking a work placement were subsequently recruited by the employer. This reflects the large proportion of work placements offered to school, college and university students.
• Over 6,700 individuals from priority groups received training.
  • 31% would not have been received training without the CB clause.
  • A further 34% of training places would have been offered - but the CB clause led to the training being accredited.
• Some contracts yielded much higher benefits than others. If all contracts had performed to the standard of the best 50% the volume of benefits would have increased significantly.
• Three of the 24 contracts included CB clauses related to developing the supply chain - with a focus on supporting local businesses and social enterprises.
• In terms of contributing to the Scottish Government's National Outcomes, the CB clauses primarily contribute to four National Outcomes:
  • National Outcome 2: We realise our full economic potential with more and better employment opportunities for our people.
  • National Outcome 3: We are better educated, more skilled and more successful, renowned for our research and innovation.
  • National Outcome 4: Our young people are successful learners, confident individuals, effective contributors and responsible citizens.
  • National Outcome 7: We have tackled the significant inequalities in Scottish society.
• It is important to recognise the impact that CBs clauses are having on contractors. For example, many contractors are increasingly viewing CBs as 'business as usual' and adopting CB practices into their business as standard.

Introduction

From the initial survey of public procurement organisations in Scotland, 24 contracts were chosen as the basis for the in-depth analysis. Given the research imperative to present robust data, only contracts for which procurement organisations confirmed that they held (as a minimum) data relating to CB targets and outcomes were in scope for in-depth analysis. Alongside this, consideration was given to ensuring that the contracts were drawn across a range of organisational types, geographies, activities and values. These contracts are summarised in Figure 3.1 and collectively represent a range of contract.

• The majority (18) are construction contracts relating to new builds, demolition or infrastructure projects, but the research also examined three repair and maintenance contracts and three service contracts. The inclusion of service contracts is important given the widely held perception that CB clauses are most applicable to construction contracts.
• By value, the contracts range in scale from £700,000 to £842 million. The Procurement Reform (Scotland) Act 2014 requires that procuring organisations must consider for all contracts valued at £4 million or above whether to impose CB requirements. 17 of the contracts examined were valued at £4 million or above.

For each of the 24 contracts, interviews were undertaken with the procuring organisation, the main contractor and (where appropriate) sub-contractors to collect contract monitoring data in relation to the CB clauses. The focus was on CB clauses that sought to ensure that individuals from priority groups^[9] were recruited, taken on as apprentices, offered work placements and received training. In addition, supply chain opportunities for SMEs and social enterprises were also examined. For each contract, we requested data on:

• The CB target(s) set.
• Performance against the target(s).
• The extent of additionality, where outcomes occurred as a result of the CB clause. For example, in relation to employment, we gathered information on how many individuals from priority groups were recruited as a result of the CB clause being in place.
• The sustainability of the outcomes - for example, identifying how many of the individuals from priority groups were still in employment at the time of the interview. Half (12) of the contracts were ongoing at the time of the interview. This could exert an upward bias on the estimates of sustainability, with individuals still employed to work on the original contract.

A significant research constraint was the lack of monitoring data. Reasons for this included:

• The data had not been collected by the contractor.
• The contractor's project manager had moved jobs and this had led to difficulties in accessing the required data.
• The contract was still in progress and data had not yet been collected.

Figure 3.1: Contracts for In-Depth Research

Name of Contract	Procuring Organisation	Type of Contract	Value	Status at Time of Research
South Glasgow University Hospital, Glasgow	NHS Greater Glasgow and Clyde	Construction	£842.0m	Ongoing
Forth Replacement Crossing, Fife	Transport Scotland	Construction	£790.0m	Ongoing
HMP Low Moss, East Dunbartonshire	Scottish Prison Service	Construction	£98.0m	Complete
Contract A	Local Authority	Construction	£93.0m	Complete
HMP Grampian, Aberdeenshire	Scottish Prison Service	Construction	£57.0m	Complete
Gartcosh Crime Campus, Glasgow	Scottish Government	Construction	£51.0m	Ongoing
HMP Shotts Phase 2, North Lanarkshire	Scottish Prison Service	Construction	£30.0m	Complete
Contract B	Local Authority	Construction	£18.0m	Complete
New build mixed tenure housing, Sighthill, Glasgow	The Wheatley Group	Construction	£13.9m*	Ongoing
New build mixed tenure housing, Barmulloch, Glasgow	The Wheatley Group	Construction	£13.5m*	Ongoing
Johnstone Town Hall, Renfrewshire	Scottish Futures Trust/ hub West Scotland	Construction	£11.0m	Ongoing
Eastgate Offices, Glasgow	Clyde Gateway URC	Construction	£10.0m	Complete
Kilwinning Main Street Public Realm Improvements	Irvine Bay URC	Construction	£3.0m	Complete
Tannahill Crescent, Johnstone, Renfrewshire	Link Housing	Construction	£3.0m	Complete
Red Tree Business Suites, Glasgow	Clyde Gateway URC	Construction	£2.7m	Complete
Irvine Bridgegate Streetscape Improvements, North Ayrshire	Irvine Bay URC	Construction	£2.2m	Complete
Dundee Waterfront Phase 3, Dundee	Dundee City Council	Construction	£10.7m^	Complete
Red Road Demolition, Glasgow	The Wheatley Group	Construction	£5.4m*	Ongoing
Gas Heating Replacement, Falkirk	Falkirk Council	Repair and Maintenance	£7.0m	Ongoing
Timber Preservation and Dampness Removal Work, Falkirk	Falkirk Council	Repair and Maintenance	£1.0m	Ongoing
Link Group Painterworks	Link Housing	Repair and Maintenance	£0.7m	Complete
ICT Services, Highland	The Highland Council	Services	£80.0m	Ongoing
Domestic Furniture and Furnishings Framework	Scotland Excel	Services	£25.0m	Ongoing
Garden Aid, Falkirk	Falkirk Council	Services	£1.8m	Ongoing

Notes:
* Budget for works
^ Waterfront Phase 3 contract was expanded to include additional works, including Riverside lay by, infilling Craig Harbour, repairs to the Tay Road Bridge and other contingencies
Contract A and Contract B have been anonymised at the request of the procuring organisation

Individuals from Priority Groups Recruited

20 contracts set CB clauses for the recruitment of individuals from priority groups, including three contracts using the 'best endeavours'^[10] approach to CB. Collectively, the contracts had a total value of over £2.0 billion and had targets in place to recruit 675 individuals from priority groups. In terms of delivery:

• 1,012 individuals from priority groups were recruited, which is 50% above the target.
• 38% of these individuals were recruited as a result of the CB clause being in place.
• 75% of those recruited from priority groups were still in employment at the time of the research. This is a positive finding and indicates that CB clauses are providing priority groups with access to sustainable employment opportunities. However, a number of the contracts were ongoing at the time of the interview and this could be exerting an upward bias on the estimates of sustainability.

Figure 3.2: Individuals from Priority Groups Recruited

	Number	%
Number of Contracts in Scope	20	-
Value of Contracts in Scope	£2,067.2m	-
Target - Number of Individuals from Priority Groups Recruited	675	-
Outcome - Number of Individuals from Priority Groups Recruited (% of Target)	1,012	150
Additionality - Number of Individuals from Priority Groups Recruited as a Result of CB Clause (% of Priority Group Recruited)	140	38*
Sustainability - Number of Individuals from Priority Groups Still in Employment (% of Priority Group Recruited)	687	75^

Notes: * Out of 373 (priority groups recruited under contracts for which additionality data was available).
^ Out of 916 (priority groups recruited under contracts for which sustainability data was available).

Looking at this data in a little more detail, it is worth noting that 2 contracts (South Glasgow University Hospital and Forth Replacement Crossing) dominate - accounting for just over £1.6 billion of contract value and 524 recruits from priority groups.

In terms of variation across contracts:

• The proportion of those recruited from priority groups as a result of the CB clause being in place ranged from 10% to 100%.
  • For 7 of the 15 contracts for which data were available, all of those from the priority group that were recruited had been taken on as a result of the CB clause being in place. Most of these were relatively small contracts. For example, 4 had recruited less than 10 individuals, and some related to procurement opportunities focused on activities specifically identified to offer the potential to provide job opportunities for priority clients with a range of employability supports as part of the package.
  • In contrast, the larger contracts tended to have lower levels of additionality. For example, just 12% of those that had been recruited under the Scotland Excel Domestic Furniture and Furnishings Framework were taken on as a result of the CB clause being in place.
• Sustainability ranged from to 15% to 100%. However, the 15% appears to be an outlier as 13 contracts had sustainability of over 50%.

In terms of the numbers from priorities groups recruited relative to contract values:

• One individual from a priority group was recruited for each £2 million spent.
• Although some of these individuals might have been hired anyway, the research indicates that 38% of them were recruited as a result of the CB clause. This means that an additional individual from a priority group was recruited for each £5.4 million spent.
• However some contracts with CB clauses performed much better than others. If we consider those contracts with the highest numbers from priority groups recruited for each £ of contract value, in the best performing 50% of contracts an individual from a priority group was recruited for every £422,000 spent. Data on additionality is only available for 7 of the 10 best performing contracts. For these contracts, an additional individual from a priority group was recruited for each £2.0 million spent.

Individuals from Priority Groups Recruited as Apprentices

14 contracts set CB clauses for the recruitment of apprentices from priority groups, including three contracts that used 'best endeavours'. Collectively, these contracts are valued at just under £1.2 billion and aimed to recruit 130 apprentices from priority groups.

• Across the 14 contracts, 208 individuals from priority groups were taken on as apprentices. This is 60% above the CB targets.
• Data on additionality and sustainability was limited - but where it was available:
  • 73% of individuals from priority groups were taken on as apprentices as a result of the CB clause being in place.
  • 100% were still employed with the contractor. While a positive finding, it should be noted that most of the contracts included in this calculation are ongoing. There is no data to explore sustainability in terms of apprenticeship completion or subsequent employment amongst apprentices.

Figure 3.3: Individuals from Priority Groups Recruited as Apprentices

	Number	%
Number of Contracts in Scope	14	-
Value of Contracts in Scope (£ million)	£1,186.1m	-
Target - Number of Individuals from Priority Groups Recruited as Apprentices	130	-
Outcome - Number of Individuals from Priority Groups Recruited as Apprentices (% of Target)	208	160
Additionality - Number of Individuals from Priority Groups Recruited as Apprentices as a Result of CB Clause (% of Priority Group Recruited)	32	73*
Sustainability - Number of Individuals from Priority Groups Recruited as Apprentices Still in Employment (% of Priority Group Recruited)	27	100^

Notes: * Out of 44 (apprentices from priority groups recruited under contracts for which additionality data was available).
^ Out of 27 (apprentices from priority groups recruited under contracts for which sustainability data was available).

Individuals from Priority Groups Accessing Work Placements

17 contracts set CB clauses for individuals from priority groups accessing work placements, including three that used 'best endeavours' CB clauses. These contracts had a total value of just over £2.0 billion and set targets for 328 individuals from priority groups accessing work placements. There was significant variation in the priority groups targeted by procuring organisations - with this including both unemployed people (e.g. registered for Jobseekers' Allowance or participating in Get Ready for Work) and those in education (ranging from graduate student placements to work experience for school pupils).

• In total, 663 individuals from priority groups accessed work placements, double the target.
• 72% of individuals from priority groups accessing work placements did so as a result of the CB clause being in place.
• The proportion of those progressing from a work placement to employment with the contractor is very low at just 3%. However, the majority of contracts for which we have data targeted their work placement opportunities at students (and, in particular, at providing work experience for school pupils) and therefore we would not expect large numbers progressing into employment from this group.

Figure 3.4: Individuals from Priority Groups Accessing Work Placements

	Number	%
Number of Contracts in Scope	17	-
Value of Contracts in Scope (£ million)	£2,029.3m	-
Target - Number of Individuals from Priority Groups Accessing Work Placements	328	-
Outcome - Number of Individuals from Priority Groups Accessing Work Placements (% of Target)	663	202
Additionality - Number of Individuals from Priority Groups Accessing Work Placements as a Result of CB Clause (% of Priority Group Accessing Work Placements)	221	72*
Sustainability - Number of Individuals from Priority Groups that Accessed a Work Placement and Subsequently Progressed into Employment with Contractor (% of Priority Group Accessing Work Placements)	3	3^

Notes: * Out of 306 (work placements for priority groups under contracts for which additionality data was available).
^ Out of 106 (work placements for priority groups under contracts for which sustainability data was available).

Individuals from Priority Groups Receiving Training

9 contracts included CB clauses for the numbers of individuals from priority groups that would receive training, including one contract using 'best endeavours'. Whilst the number is quite small it does include many of the larger contracts. As a consequence, the value of the contracts involved is over £1.7 billion with a target set of providing training to 1,014 individuals from priority groups. This ranged from delivery of professional qualifications (such as RICS accreditation) to unaccredited training.

• The target has been greatly exceeded with 6,726 individuals from priority groups receiving training (over six times the target).
• For the six contracts where data are available (which does not include the two contracts with the largest training numbers):
  • 31% of individuals from priority groups were trained as a result of the CB clause being in place.
  • 34% would have received training but the CB clause led to the training being accredited where it would otherwise not have been.
  • Consultees were also asked if any of the training received by priority groups was at a higher level (e.g. SVQ Level 3 rather than SVQ Level 2) as a result of the CB clause - but there were no instances of this.

Figure 3.5: Individuals from Priority Groups Receiving Training

	Number	%
Number of Contracts in Scope	9	-
Value of Contracts in Scope (£ million)	£1,752.7m	-
Target - Number of Individuals in Priority Groups Receiving Training	1,014	-
Outcome - Number of Individuals in Priority Groups Receiving Training (% of Target)	6,726	663
Additionality - Number of Individuals from Priority Groups That Received Training as a Result of CB Clause (% of Those Receiving Training)	159	31*
Additionality - Number of Individuals Receiving Training that was Accredited as a Result of CB Clause (% of Those Receiving Training)	174	34*
Additionality - Number of Individuals Receiving Training at a Higher Level as a Result of CB Clause (% of Those Receiving Training)	0	0*

Notes: * Out of 506 (training for priority groups under contracts for which additionality data was available).

SMEs and Social Enterprises

Only three contracts included CB clauses in relation to developing the supply chain, with two of these using 'best endeavours'. In the case of the contract with a specific target, this was that 90% of work packages were to be sub-contracted (but with no specific category of SMEs or social enterprises specified). The total value of the contracts with supply chain CB clauses was £950 million. In terms of what has been delivered:

• For the contract with a CB target of 90% of work packages to be sub-contracted, 94% was achieved. This contract let £348,000 of works to local SMEs (equivalent to 3.5% of the total contract value).
• One contract with a best endeavours clause let £63 million of sub-contracts to suppliers within a 30 mile radius. This is equivalent to 64% of the total contract value. However, it should be noted that this project was in the Glasgow City Region meaning a substantial number of businesses fall within the 30 mile radius.
• The other contract with a best endeavours clause let 63% of their work packages to Scottish businesses. They also let four contracts to social enterprises.

Data on additionality was only available in relation to the four (sub) contracts that had been let to social enterprises. None of these would have been let to social enterprises without the CB clause - meaning all of these outcomes are additional. However, as this is based on a single case, it is important not to read too much into this finding.

Broader Impacts on Contractors

In addition to the impacts stated above, the interviews with contractors found that many of them were changing their practices in response to the inclusion of CB clauses within public contracts, and indeed in anticipation of their greater use in the future. These changes, which in some cases mean CB practices have become embedded as 'business as usual', include:

• Recruitment of (or intention to recruit) a CB coordinator within the business to lead on the delivery of CB clauses internally and work with partner organisations.
• Building CB Terms & Conditions into sub-contractor clauses as standard practice.
• In construction firms, challenging other parts of the business (e.g. office-based functions) to help deliver CB requirements, rather than placing the requirement on the on-site workforce only.
• Greater focus on collating performance data around the delivery of CB clauses as this can potentially be used for future tenders.
• Carrying out case studies of recruits they have taken on through CB clauses to showcase the impact the opportunities have had on them. These case studies can also potentially be used for future tenders.
• One contractor, in understanding the importance of measuring the long-term impact of their CB activities, is planning to monitor the sustainability of the individuals they recruit and take as work placements to show where they progress to.

In addition to these activities, a number of the larger contractors interviewed were members of the CB Champions Network chaired by Ready for Business as part of the Developing Markets for Third Sector Providers contract. This is a forum where key issues and good practice related to the design and delivery of CB clauses are discussed.

Contribution to National Outcomes

Chapter 2 found that a key reason for using CB clauses was to contribute to Scottish Government National Outcomes. Figure 3.6 shows that CB clauses primarily contribute towards four National Outcomes - although they may make a contribution to some others indirectly (for example, improving long term health outcomes as a result of moving into employment). These are:

• National Outcome 2 - We realise our full economic potential with more and better employment opportunities for our people. The most common type of CB related to the recruitment of priority groups, with CBs clauses helping to ensure the economic potential of these individuals are achieved. CBs clauses also help individuals from priority groups access apprenticeships - good quality employment opportunities that lead to the development of intermediate skills.
• National Outcome 3 - We are better educated, more skilled and more successful, renowned for our research and innovation. Over 650 individuals from priority groups accessed a work placement and over 6,700 received training - helping develop their skills. However, a key concern is that much of the training was unaccredited - which may potentially limit the transferability of these skills.
• National Outcome 4 - Our young people are successful learners, confident individuals, effective contributors and responsible citizens. In addition, it could be argued that new apprenticeship starts, the provision of work experience placements for school pupils, college and university students alongside wider engagement with schools means CB clauses are also making a significant contribution to the development of Scotland's young people.
• National Outcome 7 - We have tackled the significant inequalities in Scottish society. Finally, many CB clauses were targeted at unemployed clients (including long term unemployed and young unemployed) and/or specific deprived communities. In doing so, CB clauses are contributing toward the reduction of inequalities.

Figure 3.6: Contribution of CB Clauses to Scottish Government National Outcomes

NATIONAL OUTCOMES THAT CB CLAUSES CONTRIBUTE TO
2	We realise our full economic potential with more and better employment opportunities for our people	Over 1,000 individuals from priority groups have been recruited. Over 200 individuals from priority groups have been recruited as apprentices. Only three contracts recorded outcomes in relation to development of local supply chain (e.g. contracts won by local SMEs or social enterprises) but where these have come through they will generate further employment outcomes.
3	We are better educated, more skilled and more successful, renowned for our research and innovation	Over 650 individuals from priority groups have accessed a work placement and over 6,700 have received trained. In majority of cases, training offered is determined by the employer so likely to be a good fit to labour market needs.
4	Our young people are successful learners, confident individuals, effective contributors and responsible citizens	All apprenticeship opportunities and some job opportunities targeted at young people. Nine contracts offer work experience placements for young people at school, college and university. Two contracts also offer other CBs that could help support young people to become successful learners, confident individuals, effective contributors and responsible citizens - including school visits, mock interviews and assistance with CVs.
7	We have tackled the significant inequalities in Scottish society	CB clauses are targeted at specific groups (e.g. long term unemployed, residents of deprived areas) - thus contributing to a reduction in inequality.

Source: TERU analysis based on e-survey and in-depth interviews with procuring organisations
Note: CB clauses do not contribute directly to National Outcomes 1; 5-6; and 8-16.

Next Chapter

In view of the constraints around the monitoring of the outcomes and impacts of CB clauses, along with the challenges of using CB clauses effectively identified in Chapter 2, the next chapter draws on the literature and interviews to consider some of the good practice and key issues in relation to maximising the impact of CB clauses.