Annual report on procurement activity in Scotland: 2019

6. Engaging SMEs, the third sector and supported businesses

Greater transparency and easier access to bid for public contracts mean that more businesses of all sizes and type have the opportunity to benefit from the public purse.

SMEs

We recognise that businesses including SMEs are critical to the economic health of the country. The number of public contracts advertised through Public Contracts Scotland has significantly increased since 2009. In that year, 3,516 contracts were advertised on Public Contracts Scotland increasing to 15,400 in 2017-18. That represents more than a four-fold increase in eight years. The majority of those notices in 2017-18 (11,715 or 76%) were published using the Quick Quotes system which is a simple competitive process for use by public bodies to advertise lower value contract opportunities and which are often attractive to smaller and medium sized businesses (SMEs). The remaining 24% were higher value public contracts.

Our 2017 Small Business Survey Scotland was published in July 2018 and showed that 60% of SMEs were looking to grow their sales over the next three years. In addition, the Supplier Development Programme has seen a 17% increase in business registration from 2016-17, with over 1,300 SMEs, third sector bodies and supported businesses attending training events.

The sustainable procurement duty under the 2014 Act requires public bodies to consider how they might facilitate the involvement of SMEs, the third sector and supported businesses in their procurements and which should be designed in a way that encourages them to be involved. The 2014 Act makes it easier for them to find and win contracts by ensuring that contract opportunities are advertised through Public Contracts Scotland cementing the website's role as the 'one-stop shop' for procurement opportunities in Scotland.

As a direct result of procurement activity by Scottish public bodies:

• Over 20,700 businesses in Scotland, approximately 19,500 (94%) of which were SMEs, directly benefitted from spend in Scotland in 2016-17^[24], with many more businesses indirectly benefiting within supply chains.
• Our Scottish Procurement Information Hub identifies that, where the size and location of the supplier was known, SMEs were direct recipients of 60% of procurement spend in Scotland in 2017-18.
• Information recorded on Public Contracts Scotland identifies a high percentage of those winning contracts are SMEs, including Scottish SMEs. For example, over 78% of suppliers awarded contracts in 2017-18 were SMEs, and 60% were SMEs located in Scotland.

Figure 13: Suppliers awarded contracts

This shows that SMEs continue to have an excellent track record in winning public sector contracts. To help SMEs and third sector bodies to continue to win work and to grow their business the Supplier Development Programme will continue to run supplier focused events and works with partners and external organisations. Also, to help SME and Third Sector bodies who wish to tender for public sector contracts, we updated the Supplier Journey. This includes guidance on bidding for goods, services, health and social care contracts. It also includes information on where suppliers, from all sectors, can seek further support and training.

The Third Sector

We recognise the importance of the third sector and continue to fund 'Partnership for Procurement', a programme that provides a range of support specifically to Third Sector bodies wishing to form consortia to bid for public sector contracts. We also deliver support and training in tender writing for Third Sector bodies linked to the Just Enterprise Third Sector programme.

The Social Enterprise in Scotland Census 2017 showed that 52% of the social enterprises surveyed describe the public sector as customers and 20% had bid for a public sector contract in the preceding 12 months with three-quarters of those bidding being successful.

In their annual procurement reports, many public bodies discuss how they have facilitated the involvement of SMEs, supported businesses and third sector bodies. Examples of this included:

• reserving contracts to supported businesses
• asking bidders to confirm that sub-contract opportunities are accessible to SMEs and third sector bodies
• encouraging SME participation through the lotting of contracts
• using the Scottish Government Supported Business Framework and drawing on the independent register of supported businesses
• targeting opportunities at SMEs through the Quick Quote process
• holding industry days, which highlighted opportunities for supported businesses
• increasing their spend with SMEs during the reporting period

Supported Businesses

We also recognise the importance of providing opportunities for supported businesses to participate in public procurement. Procurement legislation defines supported businesses as businesses for which the core purpose is the social and professional integration of disabled or disadvantaged persons and where at least 30% of the employees of those businesses are disabled or disadvantaged persons.

Public bodies can choose to reserve contracts for supported businesses, without opening the opportunity up to wider market competition. This approach recognises that supported

businesses have a valuable role as a stepping stone into mainstream employment for disabled and disadvantaged persons.

That is why we committed, within the first of three action plans underpinning 'Scotland's Social Enterprise Strategy 2016-2026', to continue to work with supported businesses across Scotland, seeking creative ways to enable them to flourish commercially and sustain employment for disabled and disadvantaged people. That action plan underlines our commitment to make it easier for public bodies to identify and reserve contracts for supported businesses.

We also extended our Supported Business Framework until September 2018^[25]. The framework provided an easier route for public bodies to contract with supported businesses on that framework for the following goods and services:

• Textiles and Personal Protective Equipment
• Furniture and associated products
• Signage
• Document management

As a direct result of procurement activity by public bodies, a range of contracts were awarded to supported businesses with a total combined value in excess of £17 million. This includes the largest ever reserved contract, valued at £8.1 million for delivery of Fair Start Scotland, which aims to help some of those furthest removed from the labour market in their journey towards and into work. Annual procurement reports by public bodies also show over £6 million of spend with supported businesses during the timeframe covered by the reports.