Procurement activity: annual report 2018 to 2019

3. Summary of public procurement in Scotland

3.1 Good for the economy

Public procurement spend is a key driver of the Scottish economy. Scottish public bodies’ total procurement spend in Scotland and elsewhere is estimated at £12.6 billion for the year 2018 to 2019.^[7] This £12.6 billion of spend is estimated to generate approximately £11.2 billion of economic activity in the wider Scottish economy, to support around 111,000 full-time equivalent jobs and to contribute around £6.2 billion to Scottish GDP when taking into account supply chain and re-spending of wage effects. This represents around 4.4% of the Scottish economy.^[8]

3.2 Good for businesses and their employees

Access to contracts

We recognise the important role that Small and Medium Enterprises (SMEs), third sector organisations and supported businesses play in the Scottish economy. In line with the 2014 Act – and, in particular, the Sustainable Procurement Duty – public bodies are required to consider how they might facilitate the involvement of SMEs, the third sector and supported businesses in their procurements.

Since the passage of the 2014 Act, Public Contracts Scotland (PCS) has become a ‘one stop shop’ for procurement opportunities in Scotland, making it easier for businesses of all sizes and sectors to access and win contracts. The Quick Quotes functionality is key in enabling public bodies to advertise lower value contract opportunities which could be attractive to smaller businesses.

Good progress has been made over the last year in improving access to public contracts. The number of public contracts advertised through PCS has continued to rise since the publication of our previous annual report on procurement activity. We also continue to provide a contribution of funding to the Supplier Development Programme, which is giving Scottish SMEs, third sector organisations, social enterprises and supported businesses the training, skills and information they need to access, bid for and win public contracts, including supply chain work. Figure 3 summarises some of our key achievements in facilitating supplier access to public contracts in 2018 to 2019.

Figure 3: Access to public contracts in 2018 to 2019^[9]

16,250 business opportunities advertised on Public Contracts Scotland (+850 vs. 2017-2018)

• 92% of business opportunities on Public Contracts Scotland were low value notices (of which 77% were Quick Quotes)
• 19% of SME employers expressed an interest in or bid for a public contract (vs. 10% across UK as a whole)
• 1,879 new registrations to the Supplier Development Programme (8% increase since 2017 to 2018)
• 2,076 unique businesses attended Supplier Development Programme training events (52% increase since 2017 to 2018)
• 89% of suppliers more likely to bid for public contracts after Supplier Development Programme training
• Over 2,500 suppliers connected to public sector buyers through Meet the Buyer events

In our previous report, we committed to doing more to help small businesses and local supply chains by introducing an easily accessible portal drawing together the support available for businesses which aspire to use public contracts as a means to

facilitate growth. Since then, the introduction of the Find Business Support Portal, developed by Scottish Enterprise, provides businesses with links to the relevant areas of procurement support such as PCS and the Supplier Journey websites.

Summary of regulated procurements

Public bodies have undertaken a great deal of contracting activity over the past year. Among the 110 public bodies submitting annual procurement reports covering the 2018 to 2019 financial year, 4,289 regulated contracts were procured during this period. The total combined value of all regulated contracts, where this information was included in the individual reports, was around £9.7 billion.

Type of contracts

The annual procurement reports show that a wide variety of regulated contracts were awarded in 2018 to 2019. These have ranged from lower value contracts such as maintenance and refurbishment services and payroll systems, through to high value contracts including housing construction and social care service delivery.

Some examples of the types of regulated procurements completed in different sectors include:

• among central government – banking services, transport research, hire of suites for fatal accident enquiry, confidential and shredding services, marketing services, lift modernisation and maintenance, and food and beverages
• in local government – school transport services, day services for adults affected by dementia, supply of street lighting materials, organic waste composting, and salt for winter maintenance
• in the health sector – provision of equipment and machinery such as MRI and CT scanners, ultrasound maintenance, ophthalmic image/data management systems, supply of hospital shop products, and sterile surgical scissors
• for universities and colleges – audio-visual equipment, sports hall flooring, beauty and makeup kits, mobile phones, college insurance, and graduation gown and academic outfit hire services
• among registered social landlords – windows, doors, tenant satisfaction surveys, electricity supply, grounds maintenance, and construction of new build housing

Contracting with SMEs

SMEs in Scotland continue to benefit directly from Scottish public bodies’ procurement spend.^[10] In 2018 to 2019, they accounted for the majority of suppliers to the public sector. According to the Hub, in 2018 to 2019, where we know the postcode of the supplier, we estimate that 26,094 suppliers with a postcode in Scotland directly benefited from public procurement spend.^[11] The data also shows that many of the suppliers winning contracts and benefiting from spend were SMEs and this is an area we are doing particularly well in (Figure 4).^[12],[13]

Figure 4: SMEs winning public sector contracts during 2018 to 2019

• 79% of suppliers winning contracts on Public Contracts Scotland were SMEs (+1% vs. 2017-2018).
• 63%
• 5,249 SME suppliers awarded a place on a regulated contract across 92 public bodies submitting annual procurement reports.
• 93% of businesses in Scotland directly benefiting from procurement spend were SMEs (where business size and postcode is known).

* Suppliers registered on PCS with a Scottish-base business address, where address is known

** Suppliers registered on PCS with less than 250 employees where size and address are known

*** Suppliers registered on PCS with less than 250 employees where size is known

SMEs continue to account for the bulk of procurement spend in Scotland.

Figures from the Hub show that in 2018 to 2019, SMEs accounted for 58.0% (£3.4 billion) of public procurement spend with suppliers

in Scotland (where postcode and business size is known). When we include spend with suppliers outside of Scotland, total Scottish public body procurement spend with SMEs amounted to £5.2 billion (or 46.7% of all spend where business size is known).^[15]

*Where postcode and business size (number of employees) are known for spend figures

Figure 6 provides information about the proportion of Scottish public sector procurement spend in Scotland with suppliers of different sizes (where postcode and business size is known), compared to the proportion of total registered business turnover in Scotland generated by businesses of each size. It shows that SMEs accounted for a significantly greater proportion of procurement spend in Scotland (58.0%) than they did total Scottish business turnover (40.1%). This is positive news given our focus on ensuring that SMEs are involved in – and benefiting from – public contracts.

Public bodies are adopting a range of approaches to facilitate the involvement of SMEs in their regulated procurements. There was great similarity in the examples given in the annual procurement reports between this reporting period and the previous. Examples from the 2018 to 2019 cycle included:

• being members of the Supplier Development Programme
• hosting webinars and making these available to SMEs
• implementing Dynamic Purchasing Systems
• breaking larger requirements into smaller contracts and thus making them more attractive to SMEs
• undertaking consultation to promote the involvement of SMEs in procurement activity

The following example demonstrates how one public body has facilitated the involvement of SMEs in a variety of ways:

“All regulated procurements are advertised on PCS and where possible, for procurements below the regulatory threshold, the college uses Quick Quotes. Glasgow Clyde College is keen to ensure that procurement opportunities are open to as many SMEs as possible”

“The College plans to start a partnership with SENSCOT and Partnership for the procurement team to further explore opportunities to engage with SMEs, Third Sector bodies and supported businesses.”^[17]

Supported businesses

We recognise the importance of enabling supported businesses to take part in the bidding process and to win work with the public sector. So too are public bodies increasingly demonstrating their commitment to contracting with supported businesses, as evident in their annual procurement reports.

Through the annual procurement reports, public bodies are now required to provide data on the number and value of regulated contracts awarded to supported businesses. Using this year’s data as a baseline, we will gain an indication of direction with regard to spend levels with supported businesses in the next cycle of annual reports.

Among the 25 public bodies providing relevant information this year, 50 regulated contracts were awarded to supported businesses. The total value of regulated contracts awarded to supported businesses, among 23 public bodies, was around £8.9 million.

In line with the 2014 Act, public bodies’ annual procurement reports must include a summary of steps taken to facilitate the involvement of supported businesses in their procurement activities, and public bodies are increasingly providing this information. Ninety-five per cent of public bodies provided evidence of this kind of activity in their annual reports, compared to 89% in 2017 to 2018. The examples provided in annual procurement reports included:

• using the Ready for Business Register of supported businesses
• engaging with supported businesses at Meet the Buyer events
• holding supported business engagement days
• hosting industry days to raise awareness of opportunities for supported businesses

Third sector organisations

We also recognise the role that third sector organisations continue to play in delivering public contracts. The evidence suggests that when it comes to facilitating the third sector’s involvement in public procurement, we are moving in the right direction but there is still work to be done.

Public bodies are increasingly recognising the importance of providing information about how they have facilitated the involvement of third sector organisations in their procurement processes, in their annual procurement reports. Forty-seven per cent of public bodies provided this information in their annual procurement reports, compared to 36% in 2017 to 2018. Examples of how they have done so were again similar to the previous reporting cycle and included:

• holding supplier events for third sector organisations
• establishing partnerships with third sector organisations
• providing business support to the third sector
• including third sector organisations as participants for market research

The 2019 Social Enterprise in Scotland Census found that 53% of social enterprises described the public sector as their customers – an improvement on the figure we reported for 2017 (52%). Twenty-one per cent of social enterprises reported bidding for a public contract in the 12 months prior to the Census, which is again a slight increase on the figure obtained for 2017 (20%). Seventeen per cent of social enterprises reported winning a public contract in the last 12 months (again higher than the 15% figure recorded in the 2017 Census).^[18]

Public sector procurement spend in Scotland by sector

Local government bodies account for the largest proportion of Scottish public procurement spend. This is reflected in the procurement spend figures and has much to do with the large size of the sector compared to others and the wide variety of contracts the sector procures – including, for example, contracts for social care services.

Data from the Hub shows that of the £6.9 billion of procurement spend in Scotland (where postcode is known), around two thirds (65.7%) of this spend can be attributed to local government organisations.

The annual procurement reports tell a similar story. Of the 4,289 regulated contracts procured across all 110 public bodies submitting an annual procurement report, the largest share of these (2,012) were procured within the local government sector, followed by central government (763). Local government organisations also comprised the highest total value of regulated contracts (almost £4.9 billion).

Figure 7: Scottish public bodies’ procurement spend in Scotland by public buying entities (2018-2019)*

• 10.2% National Health Service
• 17.4% Central Government
• 6.6% Education
• 65.7% Local Government

* Where postcode is known for spend figures

Public sector procurement spend with suppliers in Scotland by category

The construction sector continues to dominate procurement spend in Scotland. Based on information taken from the Hub, Figure 8 provides information about the amounts of procurement spend in Scotland (where postcode and business sector are known) that can be accounted for by different categories of supplier.^[19] As in the previous year, in 2018 to 2019, construction (£2.1 billion) and social care and services (£1.5 billion) accounted for the largest amounts of Scottish public body procurement spend in Scotland.

For most categories, spend by public bodies with suppliers in Scotland has remained relatively consistent since 2015 to 2016. Spend in some categories has changed more significantly, including social care and services which has increased by 29.9%. Spend on arts, sport and leisure and on waste and environmental services have both increased by 29.3%. Spend on financial services has increased by 63.6% since 2015 to 2016.

In some business sectors, spend has declined notably since 2015 to 2016. For example, spend on utilities and energy has decreased by 26.8% while spend on vehicles has decreased by 17.5%. These variances in spend may be due to a fall in demand through efficiency measure and public estate rationalisation, coupled with achieving better prices through national utilities frameworks.

* Where postcode and business sector are known for spend figures

As mentioned above, the construction industry dominates public bodies’ procurement spend in Scotland. In our last report, we committed to extend our engagement with the construction industry and we will work with Construction Scotland to establish a range of procurement routes to facilitate the delivery of public assets in the built environment, both directly with SMEs and through local supply chains. To this end, we have:

• established a strategic leadership forum between the Scottish Government and Construction Scotland and developed a shared Recovery Action Plan
• published guidance to help public bodies address the quality of the built environment in construction procurement
• undertaken work to progress sustainable pricing
• working with industry and organisations across all Centres of Expertise, we are compiling the required documentation to enable the procurement of a national multi-lot, multi-supplier framework for Civil Engineering, for which a Prior Information Notice (PIN) has been published

Public sector procurement spend in Scotland by supplier location

While public sector procurement spend in Scotland is particularly concentrated in the Central Belt, there is generally a good spread of spend across Scotland. Figure 9 examines procurement spend in each local authority area (where postcode is known) as a proportion of total spend in Scotland in 2018 to 2019. We can see that the largest proportions of procurement spend were in Glasgow City (21.4% of spend, or £1.5 billion), the City of Edinburgh (16.4%, or £1.1 billion) and North Lanarkshire (10.5%, or £728.6 million).

Using the Scottish Index of Multiple Deprivation (SIMD) classification, we have undertaken analysis of procurement spend (where postcode is known and can be matched against the SIMD classification) in 2018 to 2019, in relation to deprivation levels across Scotland. Note that the analysis is based on postcodes obtained from a supplier’s invoice address and that these are not necessarily a reflection of the true impact of public procurement spend in different areas – a contract may be invoiced from one postcode area but the investment and benefits may be accrued primarily in another area. Still, the analysis presents a useful starting point for looking at spend in communities with different levels of advantage.

Scottish public body procurement spend is spread across all SIMD quintiles, although the spend is larger in areas of relative advantage. As shown in Table 1, the largest proportion of spend (£1.9 billion, or 28.5%) was in the fourth quintile, i.e. within the 20-40% least deprived areas in Scotland.^[20] Areas in the first quintile – the 20% most deprived areas in Scotland – had the lowest proportion of procurement spend (£1.1 billion, or 16.2%). However, put together, the three most deprived quintiles account for just over half (£3.6 billion, or 53%) of public sector procurement spend in Scotland.

SIMD classification	Total procurement spend	Proportion of total spend
1 (most deprived)	£1,092,683,735	16.2%
2	£1,127,503,101	16.8%
3	£1,347,740,416	20.0%
4	£1,916,296,613	28.5%
5 (least deprived)	£1,246,505,938	18.5%
Total	£6,730,729,803

* Where postcode is known for spend figures and can be matched against the SIMD classification

These spend figures likely reflect the amount of business activity in each quintile. Spend in the three most deprived quintiles is in line with the proportion of total Scottish turnover generated by registered private sector businesses based in Scotland (52%).^[21]

Of course, not all businesses will be interested in doing business with the public sector – while there are around 179,000 registered businesses in Scotland, there are currently around 60,000 suppliers registered on Public Contracts Scotland.^[22] We will continue to support interested businesses by offering advice and guidance, by making it easier for businesses to identify, access and compete for contract opportunities, and by being clear about what we expect from our suppliers as responsible and fair employers and key partners.

Payment of invoices (& Project Bank Accounts)

Prompt payment of suppliers is an integral component of our efforts to ensure that procurements are carried out in a sustainable manner and the evidence suggests that most public bodies are ensuring that their suppliers are paid on time. Across 90 public bodies submitting annual procurement reports, an average of 90.4% of invoices were paid on time. Twelve of those public bodies have set the standard by paying 100% of their invoices on time and this is the standard that the wider public sector should aspire to.

Project Bank Accounts (PBAs) are key in assuring prompt payment to contractors and subcontractors involved in delivering public contracts, particularly within construction supply chains. In their annual procurement reports, nine public bodies (8%) reported using PBAs.

The following example illustrates how Highlands and Islands Enterprise has used PBAs to help its contractors and subcontractors.

“We are one of the first public bodies to adopt Project Bank Accounts for higher value works contracts. We have awarded two contracts where money will be ring fenced in a trust and paid out simultaneously to the main contractor and their subcontractor. This will help reduce late payment of subcontractors as well as give them greater protection should the main contractor go out of business.”^[23]

In our 2019 report, we said that we would continue to champion faster payments, streamlining purchase-to-pay processes, working with our suppliers to ensure they pay their subcontractors promptly and encouraging the use of PBAs in suitable construction and infrastructure projects. Since our last report was published, we have taken a range of steps, such as:

• extending the use of our national eInvoicing solution to 29 public bodies to date with another six currently in the process of adopting
• working with public bodies to review and re-design purchase-to-pay processes to ensure that they are as efficient and as streamlined as possible
• rolling out a new instance of PECOS in the Scottish Government in order to improve and streamline our purchase-to-pay process
• extending the use of PBAs in Scottish Government contracts, to increase the number of subcontractors able to access them^[24]
• publishing user templates which gather information from public bodies on uptake of PBAs to reinforce best practice, while undertaking outreach work with PBA partners
• issuing guidance on measures public bodies should take to assure frequent and fair supply chain cash flow in existing, current and future construction contracts
• in 2018 to 2019, paying 99% of valid invoices presented to the Scottish Government within 10 days of receipt (and 98.7% in 2019 to 2020)

Subcontracting

Subcontracting is an important means by which Scottish public bodies’ procurement spend can support not only the primary supplier, but also the supplier’s extended supply chain. Public bodies’ annual procurement reports show a great deal of subcontracting activity involving SMEs.

Among 62 public bodies, the total value of contracts subcontracted to SMEs as a result of community benefit requirements was around £104.7 million. These figures are likely to be underestimates of the full extent of subcontracting activity across all 110 public bodies given the large number of public bodies whose annual procurement reports did not provide this information.

In our previous report, we committed to extending the reach of our policy on the advertising of subcontracting opportunities in Public Contracts Scotland (PCS), to provide more opportunities for local supply chains to be established in the delivery of public contracts. To this end, we have:

• issued updated policy guidance to encourage and promote the use of PCS to advertise subcontracting opportunities, including a link on how to use PCS to advertise opportunities and a link on where this has been done previously
• provided ongoing support to local organisations to increase the advertisement of subcontracting opportunities on PCS while encouraging them to track and publish their progress in annual reports

The following case study provides a recent example of a medium-sized firm that won a supplier contract from the Scottish public bodies, and that demonstrates the power of Scottish public sector procurement in stimulating the supply chain.

APS Group (Scotland) Ltd, based in Edinburgh, employs 111 staff,^[25] 25 of whom were additional recruits for the purpose of delivering the Scottish Government’s Baby Box initiative. On behalf of the Scottish Government, this firm delivers the Publishing, Print, Design and Associated Services (PPDAS) Framework which commenced on 1 October 2018 and delivers an account managed customer-focused service. The contract is for a variety of services including (but not limited to) printing services.

In 2018 to 2019, APS Group has continued to support Scotland and Scottish jobs through the Framework by recruiting locally and utilising an extensive supply chain including 112 SMEs, 96 of which are businesses based in Scotland, of which 41 are print suppliers. Table 2 below shows the money spent on these subcontractors, highlighting the firm’s contribution to the Scottish print industry and Scotland’s economic growth as a contribution to GDP.

Table 2: APS Group (Scotland) Ltd supply chain, between 2015 to 2016 and 2018 to 2019 ^[26]

	2015-2016	2016-2017	2017-2018	2018-2019
SME total	Companies: 89	101	114	112
	Spend: £2,143,450	£7,236,188	£7,715,091	£11,021,783
Scottish SME total	Companies: 65	76	105	96
	Spend: £1,940,630	£6,460,390	£5,805,053	£8,436,780
Scottish SME print total	Companies: 33	44	43	41
	Spend: £1,184,465	£1,650,235	£2,400,000	£2,144,909[26]

Fair Work and public procurement

By addressing Fair Work practices through their procurements, public bodies can promote equality of opportunity, increase productivity and deliver maximum value for individuals, communities and society at large. Public bodies are approaching Fair Work considerations in a variety of ways, with around three quarters of all 110 public bodies submitting a procurement report including a general statement in their reports about their approach to Fair Work.^[27] Examples of how public bodies have approached Fair Work included:

• promotion of the real Living Wage and Fair Work practices of suppliers in tender documentation
• including contract conditions related to Fair Work practices
• including a scored Fair Work criterion in invitations to tender^[28]
• actions to help mitigate against the inappropriate use of zero hours contracts in the supply chain
• providing training and development to staff in relation to Fair Work

Public bodies are now asked to provide statistical information on Fair Work practices in their annual procurement reports. The fact that many public bodies have successfully done so is an important step forward in the monitoring and reporting of Fair Work.

The figures obtained for 2018 to 2019 give us a baseline indication of the presence of Fair Work in public bodies’ procurement processes; this helps us to understand where public bodies are doing well and, crucially, where more could be done.

Note that not all 110 public bodies provided the relevant information in their annual procurement reports and so the activity outlined in this section is not likely to reflect the full extent of Fair Work activity. Nevertheless, the increasing amount of information that we have available on Fair Work since our last report suggests that public bodies are increasingly considering Fair Work in their procurement exercises and there is greater awareness of Fair Work practices across the public sector.

Regulated contracts with a scored Fair Work criterion

Public bodies should use scored Fair Work criterion where it is relevant and proportionate to do so. Eighty-five (77%) of the 110 public bodies submitting an annual procurement report for 2018 to 2019 provided relevant information about the number of regulated contracts awarded during the period which included a scored Fair Work criterion. Among these 85 public bodies, 1,119 regulated contracts which included a scored Fair Work criterion were awarded during the reporting period.

Suppliers’ commitment to the real Living Wage and Living Wage accreditation

Sixty-eight (62%) of the 110 public bodies submitting an annual procurement report provided information about the number of suppliers who have committed to paying the real Living Wage in the delivery of a regulated contract awarded during the reporting period. Among these 68 public bodies, a combined total of 1,562 suppliers committed to paying the real Living Wage when delivering a regulated contract awarded in 2018 to 2019.^[29]

Sixty-six (60%) of the 110 public bodies submitting an annual procurement report provided data on the number of suppliers who are accredited Living Wage employers and were awarded a regulated contract during the reporting period. Across these 66 public bodies, a combined total of 482 suppliers were accredited as Living Wage employers. This amounts to 7% of all suppliers awarded a regulated contract by these public bodies during the reporting period.

We have already mentioned that there are around 179,000 registered businesses in Scotland. As of April 2020, there were around 1,700 Living Wage employers in Scotland, which equates to less than 1% of all registered businesses in Scotland.^[30] As such, the figures must be viewed within the wider context of real Living Wage uptake in Scotland and the fact that many businesses

are yet to gain Living Wage accreditation, regardless of whether they work with the public sector or not. The likelihood is that by continuing to promote Fair Work practices through public procurement, more businesses will be in a better position to gain Living Wage accreditation in the future, and this will in turn be reflected in the statistics gathered for future reporting cycles.

Suppliers signing up to the Scottish Business Pledge

Fifty-five (50%) public bodies submitting an annual procurement report provided information about the number of suppliers who were awarded a regulated contract during the reporting period and who have signed up to the Scottish Business Pledge.^[31] Among these 55 public bodies, a combined total of 170 suppliers awarded a regulated contract had made their commitment to the Business Pledge. This amounts to 8% of all suppliers awarded a regulated contract by these public bodies.

This reflects a wider national picture in that many businesses are yet to sign up to the Business Pledge. As of January 2021, 760 businesses are confirmed Business Pledge members. Again, it is likely that as more businesses sign up to the Business Pledge, future annual reports will begin to reflect this increase.

While Fair Work continues to be a priority for us and for the wider public sector, we recognise that further progress is likely to be hampered by the COVID-19 pandemic. We recognise that during this time, many suppliers have faced some degree of uncertainty and are thus likely to have prioritised crisis management and response.

Actions taken to address Fair Work in public procurement

We recognise that there is scope for improvement in relation to Fair Work and we have recently taken a variety of steps to address this. Given the timing of these actions, it is likely that their impact will be felt mainly in future reporting cycles. For example, in July 2018, we published our Best Practice Guidance on Addressing Fair Work Practices (including the real Living Wage) in Procurement and a toolkit for public bodies and suppliers. Both the guidance and accompanying toolkit provided practical support to public bodies and suppliers in developing their approach to Fair Work in the procurement process.

In February 2019, we published our Fair Work Action Plan which included information on our Fair Work First policy. Fair Work First is our flagship policy for driving high quality and fair work across the labour market in Scotland by applying the Fair Work First criteria to grants, other funding and contracts being awarded by and across the public sector, where it is relevant to do so. These criteria focus on addressing particular labour market challenges which, if improved, can deliver sustainable and inclusive growth across Scotland and make a real difference to workers, employers, communities and the wider economy.

In January 2021, we published our Fair Work First Guidance. This guidance is intended to be used by both Scottish public bodies and businesses and it is designed to encourage and support employers to adopt fair work practices within their organisations. We also plan to update the current suite of Procurement – Fair Work guidance, including the best practice guidance and toolkit, to reflect Fair Work First. This will be available on the Procurement Journey website.

We have also followed up on the Fair Work commitments we outlined in our last annual report. We committed to mainstreaming and extending the range of Scottish Government and public sector contracts that Fair Work criteria apply to, improving pay and conditions for those working in our supply chain. Since then, we have:

• updated Scottish Government procurement processes to encourage bidders to commit to Fair Work – this includes updating processes to include the refreshed Fair Work First criteria in all public contracts where it is relevant and proportionate to do so, with many other public bodies adopting similar steps
• started work with public bodies, prioritising the enterprise and skills agencies, to extend Fair Work First criteria, where appropriate, to more contracts
• produced specific guidance on how procurement can support the commitment to pay the real Living Wage to adult social care workers, including for sleepover hours, and those working to deliver the 1,140 hours of funded early learning and childcare entitlement
• clarified annual reporting expectations to make it easier to track progress in addressing Fair Work practices in regulated procurements

3.3 Good for places and communities

Spend (and savings) on goods, works and services that support delivery of public services

Data from the Hub shows that in 2018 to 2019, total Scottish public sector procurement spend (in Scotland and elsewhere) reached £12.6 billion.^[32] In Scotland alone, total spend (where postcode is known) amounted to £6.9 billion. This spend has helped to support the delivery of high-quality and efficient public services that benefit places and communities across Scotland.

We promote the use of various approaches to support the delivery of financial savings in public procurement, from collaborative contracts to electronic tendering. Across 79 public bodies providing relevant information on cash savings delivered through regulated procurements in their annual procurement reports, a total of around £388.9 million cash savings were delivered. Non-cash savings of around £68 million were achieved between 54 public bodies.^[33],[34]

In their annual procurement reports, public bodies described how they had achieved a range of savings. Examples of how they achieved cost savings included:

• using collaborative frameworks
• implementing call-offs from local and national contracts
• ensuring that only procurement professionals carry out contract management activity
• activity at the pre- and post-procurement stages, such as Bidder and Applicant forms and Meet the Buyer events

Within the universities and colleges sector, many reported maximising their savings by using collaborative frameworks at local, sectoral and national levels. For example:

“The University has been optimising use of national, sectoral, local or regional C1 collaborative contracts and frameworks. As well as bringing leverage based savings, the burdens of risk, contract and supplier management are shared and the number of resource-intensive formal local tenders that need to take place is reduced significantly. 35.2% of the University spend went through collaborative agreements.”

“Each year APUC reports the savings achieved via collaborative contract usage and undertaking tenders. The total saving that [Robert Gordon University] secured through contracts for 2018/19 was £603K (comprising £216K cashable savings versus previous price paid, and £387K non-cash savings versus the estimated market price). The savings achieved via RGU-ran tenders in 2018/19 was £290K – these are based on the cost of the successful bidder as measured against the mean price of all bids (which provides an approximation of current market value).”^[35]

Community benefit requirements in public procurement

Community benefit requirements continue to be embedded within the delivery of Scottish public sector contracts. We expect that public sector money should be spent in a way that aims to deliver the widest range of social, economic and environmental benefits possible to society, and the data suggests that the public sector is increasingly meeting these expectations.

In line with the 2014 Act, it is expected that Scottish public bodies will include community benefit requirements in all regulated procurements with an estimated value of £4 million or more, where they are considered relevant and proportionate to the contract in question. In the contract notice, public bodies must include a summary of the community benefit requirements to be included in the contract or reasons why community benefits have not been included in any contracts at or above this threshold.

We continue to see an increase in the number of contract opportunity notices with community benefit requirements published on Public Contracts Scotland (PCS). In 2018 to 2019, 909 notices of this kind (including notices for contracts under the £4 million threshold) were published on PCS – an 8% increase on the figure for the previous year.

Under the 2014 Act, public bodies submitting annual procurement reports must, in their report, include a summary of any community benefits delivered that year through their procurements. Among the 49 public bodies which met the relevant criteria,^[36] 194 regulated contracts at or above the £4 million threshold which included community benefit requirements were awarded during the reporting year. This means that 78% of all contracts at or above the threshold awarded by these public bodies included community benefit requirements.

Table 3: Number of contract opportunity notices with community benefit requirements published on PCS (including contracts under £4 million threshold) ^[41]

Type of contract	2015-2016	2016-2017	2017-2018	2018-2019
Goods	0	57	99	120
Services	2	294	370	455
Works	79	228	374	334
Total	81	579	843	909

Among the 96 public bodies providing relevant information in their annual procurement reports, some 941 regulated contracts with a value of less than £4 million, but containing community benefit requirements, were awarded during the reporting year. These figures are likely to be an underestimate because of the number of public bodies which did not provide this information, or provided it in a manner that was unclear.

A wide variety of community benefits were imposed during the reporting year. Of the 110 public bodies which submitted procurement reports for the period under analysis, 89 (81%) reported on community benefits delivered during the reporting period. As Figure 10 shows, among the 89 public bodies providing relevant information in their annual procurement report, employment- and employability-related community benefits were the most common – for example, work placements (reported by 62% of public bodies), apprenticeships (61%), and training and qualifications (55%).

In our previous report, we pledged to continue our work to mainstream the use of community benefit requirements in public contracts to deliver wider benefits for local communities and the wider society. Since then, we have:

• clarified the value of subcontracting as a community benefit^[38]
• engaged with a wide range of public bodies to support their understanding of community benefits and to help them make best use of community benefits and other facets of the Sustainable Procurement Duty

More widely, we have observed an increasing commitment and diverse use of community benefits through our engagement with stakeholders, including the launch of a ‘Community Benefits Wishlist’ by Perth and Kinross Council.^[39]

3.4 Good for society

Equality

In accordance with the General Duties, public bodies are required to treat their suppliers, and potential suppliers, equally and without discrimination. The evidence suggests that public bodies are increasingly taking cognisance of these duties.

The annual procurement reports are an importance source for understanding how public bodies have upheld these duties in practice. As Figure 11 shows, although there is no requirement in itself for public bodies to provide this information, public bodies are increasingly doing so.

Figure 11: Proportion of public bodies providing evidence of conducting their regulated procurements with regard to equal treatment and non-discrimination^[40]

50% demonstrated how they had carried out their regulated procurements with regard to equal treatment (up 20% vs. 2017-2018).

44% evidenced how they had carried out their regulated procurements with regard to non-discrimination (up 17% vs. 2017-2018).

Public bodies have conducted their regulated procurements in line with equal treatment and non-discrimination in many ways, using approaches that were largely similar to those reported in the previous year. Examples from the annual procurement reports include:

• advertising regulated procurements widely, through Public Contracts Scotland and/or the Official Journal of the European Union
• using standardised procurement templates with clear language
• providing equality and diversity training to staff
• building equality and diversity requirements into tenders
• publishing procurement strategies, reports and forward plans on the public body’s website

In our 2019 report, we committed to support public bodies in mainstreaming sustainable procurement decisions to maximise the benefits of our procurement spend for Scotland, including the pursuit of equality outcomes through procurement. Since then, we have updated the equality aspect of the sustainable procurement tools and guidance which encourages the public sector to take a relevant and proportionate approach. The updated tools and guidance were endorsed by the Equality and Human Rights Commission.

Climate change/circular economy

In line with the Sustainable Procurement Duty, public bodies must carry out activity related to climate change and other aspects of environmental wellbeing. There is a good amount of work being undertaken across the public sector to ensure that environmental considerations are reflected in procurement practice. In their annual procurement reports, 69 public bodies (63%) demonstrated that their regulated procurements were carried out with regard to environmental wellbeing and climate change.

Taken from the annual procurement reports, examples of how organisations have carried out their regulated procurements while being mindful of environmental wellbeing and climate change included:

• eliminating single-use plastics and seeking alternatives from suppliers
• introducing a pool car fleet service
• introducing activities such as educational projects in schools and woodland planting
• reducing travel by using Skype for meetings
• awarding a contract for recycled furniture to reduce waste going to landfill

Taken from its annual procurement report, the following extract demonstrates the approach taken by one public body to use public procurement to fulfil its duties around climate change:

“Fife Council is a major procurer of goods and services within Fife. The embodied carbon of our up and downstream supply chain is likely to be a significant contributor to Fife-wide carbon emissions and to emissions further afield.

The Council is keen to try to reduce the environmental impacts of our procurement activities, and to use procurement to assist with compliance with our duties under the Climate Change (Scotland) Act and is seeking to do this via a number of activities. The Procurement service works with other services to develop contract terms and procurement award criteria. Procurement weightings are developed in collaboration with the service area. If any barriers are identified in such discussion, effort is made to overcome these barriers.

We utilise the Scottish Government’s ‘Procurement Journey’ guidance in terms of best practice. This includes considerations such as sustainability and climate change mitigation and tools are provided to be utilised with the goods/services that are intended to be procured in mind. Mainstreaming these best practice principles to our procurement activities will contribute to our compliance with climate change duties.”^[42]

Reflecting our commitment in our previous report to support public bodies to mainstream sustainable procurement decisions to maximise the benefits of procurement spend for Scotland, we have updated the sustainable procurement tools so that their content is consistent with efforts to tackle the Global Climate Emergency.

3.5 Open and connected

Increasing transparency and greater openness

In line with the General Duties, public bodies must also ensure transparency and openness in their regulated procurement processes. Public Contracts Scotland (PCS) – our single advertising portal for public contracts – continues to be key in raising awareness of the opportunities that exist for businesses of all sizes and sectors to work with the Scottish public sector. We have already highlighted public bodies’ increased use of the portal to advertise contracts during the year and this has undoubtedly brought greater transparency and openness to the procurement process.

The annual procurement reports also show that public bodies are working in an open and transparent manner in their procurement exercises. Seventy-five per cent of public bodies provided evidence of transparency within their procurement reports – an increase since 2017 to 2018 (63%). As in the previous year, common methods of ensuring transparency in procurement included:

• using PCS to publish a contracts register and/or procurement opportunities
• providing expenditure data on the Scottish Procurement Information Hub
• stating contract requirements clearly in all tenders
• updating public bodies’ corporate websites to ensure ease of access to relevant information about procurement

In our previous report, we said that we would commit to publishing a spend dashboard on an annual basis as part of our ongoing work on improving transparency of public procurement in Scotland. In line with this commitment, we:

• are developing a dashboard to cover procurement spend across all sectors
• continue to publish all spend over £25,000 as well as spend over £500 recorded on the electronic Purchasing Card
• published information on our spend with the top 50 suppliers by value, for the 2019 to 2020 financial year

Working across boundaries/collaboration

Within procurement, working across organisational boundaries and in collaboration with others can help public bodies to achieve value for money, while also bringing about greater efficiency in the procurement process and enabling businesses of all sizes to continue to have the opportunity to bid for public contracts.

The four procurement Centres of Expertise in Scotland provide advice and support to the Scottish public sector and they play a key role in encouraging collaborative working across the public sector and the supplier base.^[43] The Scottish Government, for example, awards collaborative agreements for the central government sector and also for the whole of the public sector. These agreements can be used by public bodies and third sector organisations to procure a wide variety of goods and services.

Table 4: Collaborative spend across the public sector (£million)

Year	Health	Local government	Sector Universities and colleges[44]	Central government	Total
2016-2017	1,388	839.4	267	255.3	2,749.7
2017-2018	1,400	899.4	326	199.7	2,825.1
2018-2019	1,338	944.7	344	239	2,865.7

Using figures provided by each of the four Centres of Expertise, Table 4 provides information about aggregated collaborative spend across the public sector. It shows that the value of collaborative spend across the public sector continues to grow, increasing by £40.6 million in the last year alone.

The annual reports further indicate that public bodies have worked collaboratively with others to achieve a wide variety of outcomes in 2018 to 2019. Eighty-seven (79%) public bodies provided evidence of activity related to maximising efficiency and collaboration in their procurement report.

Many public bodies have formed effective working partnerships with other public bodies, used collaborative contracts and engaged in collaborative frameworks and agreements. Other examples of collaborative working from the annual procurement reports included:

• conducting spend analysis to identify collaborative opportunities
• attending training events and cluster group meetings involving other public bodies, to share best practice in procurement
• participating in national and regional strategic working groups
• increasing buying power by collaborating with other internal departments through the shared procurement service
• working with partner local authorities to share best practice, identify and consolidate spend opportunities, and identify new models for service delivery

In our previous report, we pledged to continue to share best practice and evolve our systems, tools and processes. With this in mind, since then, we have:

• relaunched the Procurement Journey and Supplier Journey to provide an improved user experience and additional guidance and support for buyers and suppliers
• developed the eCommerce & Procurement Best Practice Shared Service Operational Plan for 2020-2023 which highlights key areas of development and improvement
• committed to reviewing the Operational Plan each year and working with public bodies and service providers to ensure continuous improvement of the eCommerce solutions and best practice tools

We also said that we would build on the publication of annual procurement reports by improving management information and data, and securing greater consistency of that information, where appropriate, to better support public procurement in Scotland and ensure that procurement spend is being used to best effect. To this end:

• following consultation with suppliers, we are currently in discussions with public sector colleagues about an improved management information platform, which we intend to go to market for in spring/summer 2021
• we have developed a positioning paper and graphical representation of the current situation and future solution with which to support market engagement
• we are carrying out continuous improvement by reviewing and improving the data in eCommerce systems so as to make management information more robust and accurate

Promoting Scotland’s public procurement globally

Despite the important role that public procurement plays in stimulating the economy and in delivering a wide range of benefits to society in Scotland, it is important to also acknowledge the good work that continues to be undertaken to cement Scotland’s reputation as a world leader in public procurement policy and practice, and our ongoing efforts to promote Scottish procurement globally. Such work allows us to share best practice and lessons learned from Scottish public procurement with policymakers and professionals from across the world and, at the same time, learn from the innovative work undertaken elsewhere.

Some examples of the work we undertook in 2018 to 2019 included:

• improving the Public Contracts Scotland portal to ensure that more of the information published on the website conforms to the internationally-recognised Open Contracting Data Standard
• demonstrating our Procurement Journey tool to representatives of other governments, and sharing learning from the tool’s development with governments across the world
• being invited to support the EU Commission in its development of a European Competency Framework for Public Buyers
• participating in international programmes, conferences and events – for example, the World Bank’s Global Conference on eProcurement and the European Commission’s Multi-Stakeholders Expert Group on eProcurement^[45]