Changes to the Public Procurement Rules in Scotland Consultation - Analysis of the Responses

Taking social, environmental and employment issues into account

Statutory guidance - Organisational Procurement Strategy

The consultation document explains that the Scottish Government will use the Public Procurement Reform Programme to learn from existing approaches to strategies and reporting. It will also ensure that statutory guidance meets the distinct requirements of the Procurement Reform (Scotland) Act 2014 (The Act) and will aim to produce guidance on form and content that contributes to the transparency aims of the legislation.

Q1 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

Ninety-nine respondents, from across all organisation groupings as well as individuals, provided comments at this question. Three dominant themes emerged from across the range of respondent groups. The first key theme related to the need for some form of template to be provided with the Statutory Guidance, or at least a clear indication of expected format, length and typical standard wording that might be included in a procurement strategy. Several respondents noted that this would aid consistency.

The second significant theme was that the Statutory Guidance should not be overly prescriptive or mandatory and should allow for flexibility and tailoring to accommodate different organisational needs and take account of procurement strategies that may already be embedded and appropriate. An NHS respondent commented: "It is recommended that the Guidance is a 'high level' document in order that constant costly amendments are not required. It is recommended that more procedural guidance can flow from this overarching document. Essentially the Guidance should contain a statement of good practice and principles for each public body to consider when setting their strategy and completing the annual report".

The third key theme, linking closely to the second, related to the need for proportionality according to the size, resources and sometimes the sector of the organisation affected. As one executive agency / NDPB commented: "Templates to promote consistency and help buying organisations. The proposed format and content of the Procurement Strategy should reflect the diversity of contracting authorities, i.e. it should not require the same level of detail from an authority spending £5m per annum compared to an authority spending several hundred millions pounds per annum".

A number of respondents from different groupings also suggested a need for further clarification as to the specifics of what would constitute compulsory or optional requirements of Procurement Strategies. In particular, several local authorities amongst other respondents commented that the Statutory Guidance should clearly specify the "minimum" standards, in order to avoid imposing a disproportionate burden on public bodies.

At a lower level of mention, a recurring theme from across respondent groupings related to a need for guidance regarding general policy on 'consultation and engaging with those affected by [its] procurements'. There was some comment that 'those affected' is too vague a term and needs clarification within the guidance, or that clarity is required as to how to undertake consultation per se. One or two respondents suggested specific stakeholders or categories of procurement for which consultation might be more appropriate. However, a local authority felt uncertain as to how guidance on consultation would add value to the process and felt this should be left to each public body to decide.

There were also recurring references to guidance regarding policy on 'the payment of a living wage to persons involved in producing, providing or constructing the subject matter of regulated procurements'. These came in particular, although not exclusively, from unions and mostly related to clarity or lack of clarity regarding the legality of the living wage being stipulated as a condition of contract. Some respondents suggested that any guidance regarding the living wage should leave room for public bodies, that believe it can be included as a condition of contract, to disagree with the Scottish Government's position based on their own legal advice. Other respondents commented more generally on the need for sensitivity to different economies across the EU, which might make stipulation of paying the living wage discriminatory. One or two respondents simply expressed support or otherwise for payment of the living wage.

The wider issue of EU regulated procurements was cited by representative bodies for the professional and third sectors as well as a third sector organisation. Concerns were expressed that compliance with national legislation and guidance would not eliminate the risk of non-compliance with EU law. Particular reference was also made to the fact that Housing Associations / Registered Social Landlords (RSLs) are subject to EU procurement law and the Procurement Reform (Scotland) Act 2014.

Several housing / care respondents suggested that specific guidance may be needed for RSLs and there were also suggestions that additional support would be welcomed in assisting RSLs to address new procurement challenges and responsibilities. A representative body commented they: "would urge Scottish Ministers to use the power to amend which organisations are included as 'contracting authorities'. The diversity of the sector in size and scale means that adhering to the requirement to publish and report on a Procurement Strategy will be unduly onerous for smaller RSLs who may fall foul of the £5m threshold due to one-off housing improvement contracts for example. For RSL's in this category, could an exemption be offered from this requirement as long as the housing association agrees to procure such contracts through Public Contracts Scotland?"

Several respondents from different groupings commented on the very specific references to procurement of food within the consultation document. Whilst some respondents welcomed this specificity and emphasis and suggested that particular guidance would be helpful in this area, a slightly more common theme related to suggestions that excessive burden should be avoided where expenditure on food may be of a low value. Three NHS respondents commented: "The Guidance should specify which of these areas are to be explicitly included in the annual report and whether there will be any sanction for not doing so. For example there may be many organisations with an annual procured spend in excess of £5m of which total, there may only be a small percentage which is spent on food." An executive agency / NDPB suggested that since many bodies will have little or limited activity in relation to food, the guidance might be clarified by adding "…where spend on food is significant, e.g. over an annual value of £[to be defined]".

A small number of other themes were evident within specific sectors or respondent groupings.

Some private sector organisations and representative bodies commented specifically on issues relating to the construction sector. Three representative bodies suggested that the guidance should reference how affected public bodies are implementing the recommendations of the Review of Public Sector Construction and the progress that has been made on those recommendations. Some respondents also referenced the issue of prompt payment along supply chains in the construction industry and a representative body for professionals suggested: "The guidance should advise authorities that the use of project bank accounts will facilitate compliance with the requirement in section 15 of the Act to ensure 30 day payments in the supply chain." One private sector organisation suggested that the guidance might include a specific section relating to the construction sector in order to address some of the complex areas pertaining to the sector in more detail.

There was also a suggestion from a small number of respondents that special attention is needed with regard to guidance affecting care and support services specifically. For example: "We would suggest that the Statutory Guidance on procurement strategies and reporting makes explicit reference to the (separate) Statutory Guidance on procurement of care and support services, and requires contracting authorities to set out in their strategies their approach to implementing that guidance, particularly with reference to the Act's provisions relating to 'engagement with those affected' by procurement activity".

Universities and Colleges were also singled out by a small number of respondents, particularly statutory organisations, as facing particular challenges that might need to be reflected in any guidance and subject to certain caveats. One respondent commented: "Guidance should reflect the fact that while public bodies have an "area" of operation at either the regional or Scotland level this is not the case for Universities which compete in a global environment, teaching students from around the world and collaborating in international research". There were several references that colleges and universities might find new public procurement rules particularly burdensome due to limited procurement expertise and resource.

Statutory Guidance - Sustainable Procurement Duty

The Scottish Government is testing and refining a set of tools aimed at enabling a consistent approach to complying with the sustainable procurement duty and this is expected to form the basis of statutory guidance.

Q2 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

One hundred and one respondents, from across all respondent groupings, made comments at this question. A number of those who commented expressed their support for the emphasis given to sustainable procurement; some reiterated comments they had made at the previous question.

The main recurring themes related to a need for consistency of approach and a requirement for flexibility and proportionality, as well as suggestions that templates should be made available or minimum standards should be made clear. A very few respondents repeated that bespoke guidance for specific sectors would be welcomed.

There were positive comments regarding the idea of a Flexible Framework tool as long as it is genuinely flexible and proportionate. Several respondents with past experience of the Flexible Framework commented that it would definitely require improvement or upgrading to meet future needs. There were similar comments regarding a prioritisation methodology. Several respondents offered assistance with development and implementation of tools.

There were several comments that referenced links between sustainable procurement duty, climate change duties and also the EU directive and suggestions that the guidance should offer clarity on any relationships between these.

Statutory Guidance - Community Benefits in Procurement

The consultation document outlines the Scottish Government's proposal to produce statutory guidance on community benefits which will address:

• Defining the appropriate community benefit through stakeholder engagement.
• What to say in the contract notice and contract award notice.
• Circumstances where community benefits would not be relevant or proportionate.
• Reporting of expected and achieved benefits.

Q3 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

Ninety-nine respondents made comments at this question and recurring themes from earlier questions were once again in evidence. For example, many respondents suggested that inclusion of example or standard clauses in the guidance would be helpful, whilst there was also reference to the need for flexibility. There were comments regarding the need for consistency and also comments that non-statutory best practice guidance would be preferable.

The need for proportionality was again highlighted. Linked to this, there was relatively frequent reference to the threshold value and opinions on the most appropriate contract value for community benefit clauses were mixed; some respondents emphasised that they would not wish to see the threshold reduced below £4 million, whilst others would welcome a lower threshold or applicability to all contracts. In particular, local authorities amongst other respondent groupings suggested that a lower threshold would be appropriate. There were also some suggestions that greater clarity regarding exceptions in contracts over £4million would be usefully included in guidance.

There were wide-ranging suggestions as to the definition of community benefits and specific conditions that might be deemed appropriate in assessing and valuing community benefits. There were also some requests for guidance on calculating a financial value for different forms of community benefits.

Once again, a small number of respondents commented that guidance may impact on EU regulated procurements and highlighted the need for care in avoiding discrimination against non-UK contractors.

Principles of procurement

The Public Procurement Directive and the Utilities Directive require all countries in the European Union to take appropriate measures to comply with environment, employment and social laws when they are working on a public contract. The Scottish Government believes that a statutory obligation on public bodies to include relevant clauses in their contracts is the best way to ensure that contractors comply with all relevant laws and collective agreements.

Q4 We believe that a statutory obligation on public bodies to include relevant clauses in their contracts is the best way to ensure that contractors comply with all relevant laws and collective agreements. This should also ensure that public bodies are able to end contracts where a contractor does not meet these requirements. Do you agree or disagree with this position? Please explain your answer.

Ninety-five respondents from across all groupings agreed that a statutory obligation on public bodies to include relevant clauses in their contracts is the best way to ensure that contractors comply with all relevant laws and collective agreements; six respondents, comprising local authorities and respondents from the private sector, disagreed. Ninety-one respondents, the six who disagreed, 84 who agreed and one other, went on to add comments.

The major themes in responses to this question related to the benefits of ensuring consistency, enabling enforcement and allowing public bodies to terminate contracts if a contractor does not meet requirements. Several respondents, particularly unions, welcomed the specification of collective agreements within the suggested requirements. There were also suggestions from unions that Article 18.2 should be implemented in Scottish procurement regulations

Whilst a capacity to terminate contracts where a contractor fails to meet requirements was widely welcomed, several respondents suggested a need for alternative options in circumstances where it would not be practical or appropriate to terminate a contract due to wider negative impacts of doing so.

A key secondary theme raised by respondents related to the need for guidance to be provided regarding the monitoring of contractual requirements. A small number of respondents specifically suggested that there should not be an onus on public bodies to actively monitor compliance or that self-certification by contractors would be appropriate, whilst others expressed the opposite view.

One other recurring theme emerged in responses and this related to the sharing of information between public bodies if a contractor failed to meet requirements, for example when other bodies have agreements with the same contractor. It was suggested that guidance would be helpful in this regard.

Reserved contracts for supported businesses

Current procurement rules allow public bodies to 'reserve' contracts to businesses where more than half of the workers are disabled people. These are known as supported businesses. The consultation explains that the Scottish Government plans to continue to allow public bodies to reserve contracts in this way.

Q5 Is there still a case for reserving contracts for supported businesses in Scotland?

Ninety-one respondents from across all groupings answered 'yes', that there is still a case for reserving contracts for supported businesses in Scotland and seven respondents, including three private sector organisations, answered 'no'. Seventy-four respondents went on to add further comment.

The most consistent recurring theme, coming from a majority of those that commented, was affirmation of support for reserved contracts for supported businesses in Scotland. Several respondents noted that they already successfully use such provisions.

The next most common theme related to the change to the type of business which this applies to and the threshold of workers who must meet the disabled or disadvantaged description. Mixed views were expressed regarding both the inclusion of disadvantaged workers and the shift from 50 per cent to 30 per cent of workers who must meet the description.

The main theme in comments from the small number of respondents who do not believe there is still a case for reserving contracts for supported businesses in Scotland was that they preferred an open and flexible approach or that there were alternative ways of better achieving the same objectives.

Other recurring themes, each from only a very small numbers of respondents, included the need to make reserved contracts clear from the outset and the need for guidance on actions required in situations where, for example, only one supported business might be available to bid.

Disadvantaged workers

While there is no clear definition of a 'disadvantaged worker' in any of the Directives, the Public Procurement Directive does give examples and the Scottish Government wishes to know whether these examples could form a definition.

Q6 Do you think that the definition of a "disadvantaged person" in this context should be "the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups"? If not, what do you think the definition should be and why?

As the following table shows, 51 respondents answered 'yes', 33 respondents answered 'no' and seven respondents made comments without giving a direct 'yes' or 'no' answer. All unions and a large majority of representative bodies for third sector / equality organisations answered 'yes', whilst views were very mixed amongst all other respondent groupings.

Question 6: Do you think that the definition of a "disadvantaged person" in this context should be "the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups"?

	Yes	No	Other	No reply
Local authority (27)	10	13	3	1
Executive Agencies and NDPBs (13)	3	4	2	4
NHS (6)	4	1	1	-
Other statutory organisation (11)	5	3	-	3
Third sector / equality organisation (20)	4	1	-	15
Private sector organisation (18)	6	5	-	7
Representative body for third sector / equality organisations (12)	6	2	-	4
Representative body for private sector organisations (9)	2	-	-	7
Representative body for professionals (6)	3	1	-	2
Union (5)	4	-	-	1
Housing / Care (4)	1	1	-	2
Other (2)	1	1	-	-
Individuals (7)	2	1	1	3
TOTAL (140)	51	33	7	49

Seventy-one respondents, 30 who answered 'yes', 33 who answered 'no' and eight others, went on to make comments. One very dominant theme emerged from all comments, regardless of whether a 'yes' or 'no' answer had been given, namely that the definition is very broad or even vague. Some respondents who had answered 'yes' welcomed this broadness as offering flexibility of interpretation. A much larger number of those who commented felt it was too broad or even vague. Several respondents, notably but not exclusively local authorities, felt there was a risk that the broadness of definition would create potential for legal challenge.

It is perhaps because of the perceived broadness of the definition that almost one in three of the respondents who commented made suggestions for specific additions or alternative definitions per se. The suggestions were varied and wide ranging and the most common, albeit from a minority of respondents, was that the protected characteristics defined by the Equality Act might somehow be incorporated. There were also a small number of suggestions that a definition of social businesses might provide a better alternative.

A small number of respondents commented that a register of supported businesses would be a helpful resource going forward.

Reserved contracts for health, social and cultural services

Some specific types of organisation can bid for a contract which a public body has 'reserved'. The consultation document explains that, while there is a provision to extend this option for mutual and other non-public sector bodies, the Scottish Government is not aware of any reason for doing so in Scotland.

Q7 Our view is that we are not aware of any arguments that currently support reserving contracts for mutual and other non-public sector bodies in Scotland, and we believe this is less of an issue in Scotland. Do you think there are any advantages or disadvantages to applying this provision to the procurement activities of public bodies in Scotland? Please explain your answer.

Twenty-eight respondents answered that they saw 'advantages' and 12 respondents answered that they saw 'disadvantages' to applying this provision; a further 30 respondents made comments without stating that they saw advantages or disadvantages specifically. A total of 66 respondents included comments at this question.

The largest number of respondents that commented had indicated neither advantages specifically nor disadvantages specifically to applying this provision in Scotland; in the main their comments suggested that they had insufficient knowledge or detail to come to a clear view or that they could see potential advantages and disadvantages in applying the provision. A small number simply indicated support for the view expressed in the consultation that there were no obvious arguments that support reserving contracts in this way and / or that this is less of an issue in Scotland.

Comments from those respondents who had indicated that they saw advantages in such a provision were relatively fragmented and a small number simply indicated that they could see no reason not to apply the provision and that it offered flexibility if contracting authorities wished to take up the opportunity. A very few respondents highlighted the opportunities that this creates for some institutions in the higher and further education sectors; one or two others saw benefits of allowing initial reservation of an initial 3 years for public "trusts" which have taken on direct delivery of public services from their parent public bodies. In contrast, one or two respondents who cited disadvantages commented that this should not be used as an alternative to employment through direct services.

A more consistent theme, in comments from respondents who cited disadvantages, as well as some of those who indicated neither advantages nor disadvantages, was that procurement should be transparent, fair and open in the interests of best value.

Labels

The consultation notes that, under the EU Directives, public bodies can ask for the works, goods or services which they are buying to have been given a label which certifies that these meet specific environmental, social or other characteristics and the Scottish Government feels this should be applied to lower value contracts.

Q8 Should the rules about labels which apply to contracts that are EU regulated procurements also apply to lower value regulated procurement contracts covered by the Act? Please explain your answer.

Seventy-three respondents from across all groupings answered 'yes' that the rules about labels which apply to contracts that are EU regulated procurements should also apply to lower value regulated procurement contracts covered by the Act, and ten respondents, from across six respondent groupings, answered 'no'. Four other respondents made comments without answering 'yes' or 'no'. A total of eighty-six respondents commented on this question.

A clear dominant theme emerged in comments at this question, predominantly from those respondents that answered 'yes', that applying rules about labels to lower value regulated procurement contracts covered by the Act would provide consistency, and that consistency and transparency is welcomed. Smaller sub-themes that emerged suggested this should be optional or allowed rather than prescriptive, and that it should be proportionate.

Around a fifth of respondents, including those who answered 'yes' as well as those who answered 'no', commented that this could be onerous and burdensome on SMEs. A small number of respondents suggested that it simply added complexity.

Several respondents indicated their approval for the encouragement this provides to consider environmental and social factors and a number of comments referred to fairly and ethically traded goods specifically.

A small number suggested potential difficulties in terms of compliance with EU Treaty principles and / or that if a need to pay for accreditation creates a financial burden this could be discriminatory.

Technical specifications

Legislation allows for new rules about the technical specifications for lower value regulated contracts and the Scottish Government feels it would be simpler and easier for everyone if the same rules are applied to all contracts, regardless of value.

Q9 Do you think we should align the rules on technical specifications for all regulated procurements, including those lower value procurements regulated by the Act? Please explain your answer.

Seventy-nine respondents from across all groupings answered 'yes' that the rules on technical specifications for all regulated procurements, including those lower value procurements regulated by the Act, should be aligned, and 11 respondents answered 'no'. Three respondents made comments without answering 'yes' or 'no'. A total of eighty-six respondents made comments.

Once again the predominant theme from a large majority of those that commented, and particularly the large number that answered 'yes', was that this would create consistency and simplicity. A small number once again highlighted the need for proportionality.

Six respondents who answered 'no' and a small number of those that answered 'yes' expressed concerns regarding the burden and complexity for SMEs and a few of these respondents expressed a preference for simplicity.

A very small number of respondents indicated that they believed that life cycle costs should not only take account of financial costs but also social and environmental life cycle impacts.

Contract award criteria

At present, public bodies can award contracts either on the basis of the lowest price, or to the 'most economically advantageous tender' (MEAT). The Scottish Government believes it is important to balance cost, quality and sustainability to get the best value for money and plan to make rules to ensure contracts are not awarded on the basis of lowest price or lowest cost alone.

Q10 We believe that contracts should not be awarded on the basis of price or cost alone? Do you agree or disagree? Please explain why.

Eighty-six respondents from across all groupings agreed that contracts should not be awarded on the basis of price or cost alone and 26 respondents disagreed. Ten local authorities disagreed compared with 16 who agreed and executive agencies / NDPBs were divided equally in their views. Three respondents made comments without either agreeing or disagreeing.

A total of one hundred and ten respondents made comments and two major themes emerged. The first related to the view that procurement based solely on lowest price is inappropriate and / or ineffective and that a wide range of other factors - predominantly quality and value for money - should be taken into account. A few respondents also felt this would help to improve perceptions of public sector procurement.

The second major theme related to a need for some flexibility, and a requirement to recognise that there are exceptions to the premise that contracts should not be awarded on the basis of price or cost alone.

A variety of related sub-themes were evident. Many respondents expressed the view that there are cases where it is sufficient for suppliers to meet minimum requirements or pass / fail conditions, whereby price becomes the only consideration thereafter. Some suggested that guidelines should clarify that competition with mandatory pass / fail criteria and a scoring aspect based solely on price or cost does not constitute a "cost only" award.

Whilst some respondents commented that MEAT affords flexibility to weight price above other factors, effectively creating a price-based decision, a number of respondents felt this inappropriate and unnecessary. There were several comments that a simpler process is sometimes required and that alternative options should be kept open.

A few respondents also requested clarity regarding framework agreements and the capacity for call-off purchases on the basis of cost alone, since quality would already have been evaluated when appointing suppliers to a framework.

Summary : Taking social, environmental and employment issues into account

A majority of respondents that answered each question supported:

• A statutory obligation on public bodies to include relevant clauses in their contracts to ensure that contractors comply with all relevant laws and collective agreements.
• Continuing to reserve contracts for supported businesses in Scotland.
• Applying rules about labels which apply to contracts that are EU regulated procurements to lower value regulated procurement contracts covered by the Act.
• Aligning rules on technical specifications for all regulated procurement, including those lower value procurements regulated by the Act.
• Ensuring contracts should not be awarded on the basis of price or cost alone.

There were strong consistent themes evident in responses regarding what should be included in Statutory Guidance. Many respondents suggested templates, standard clauses or standard wording should be provided in the guidance. There were also consistent references to the need for flexibility, consistency and proportionality throughout.

The definition of a "disadvantaged person" prompted mixed reactions and was widely considered to be very broad. Its broadness was felt to have both benefits and drawbacks.

There were mixed views on applying a provision for reserved contracts for health, social and cultural services for mutual and other non-public sector bodies in Scotland. No clear trends were evident and a range of advantages and disadvantages was each mentioned by relatively small numbers. Some respondents felt they had insufficient information to come to a clear view.