Procurement Reform (Scotland) Act 2014: statutory guidance

2. Procurement strategies and annual procurement reports

2.1. Introduction

A procurement strategy allows a contracting authority to set out how it intends to ensure that its procurement activity achieves value for money and contributes to the achievement of the authority's broader aims and objectives, in line with Scotland's National Outcomes. A contracting authority must, in its annual procurement report, record and publicise its performance and achievements in delivering its strategy.

Publication of a procurement strategy and annual procurement report will help promote the positive impacts public procurement can have on Scotland's economy and public services.

2.2. Purpose of this chapter

This chapter describes what is required of a contracting authority with respect to a procurement strategy and an annual procurement report. It must be read alongside sections 15 to 21 of the Act. This chapter provides information on:

• preparing a procurement strategy
• its form and content
• monitoring, reviewing and reporting on a strategy

This chapter must also be read alongside the other chapters of this guidance.

2.3. Legal basis of this chapter

A contracting authority must have regard to this chapter when it expects to have 'significant procurement expenditure' in the next financial year^[2]. We would also encourage a contracting authority to produce a procurement strategy and an annual procurement report even if its spend is lower, to maximise its transparency and allow businesses to understand what policies are important to that authority when delivering procurement contracts.

Section 15 of the Act commenced on 18 April 2016. However, a contracting authority was not required to prepare its first procurement strategy until 31 December 2016.

The first procurement strategy prepared by a contracting authority had to cover the remainder of the financial year of the contracting authority in which 31 December 2016 occurred and the first financial year starting after 31 December 2016^[3].

The following sections of the Act outline when a contracting authority must prepare and publish a procurement strategy and an annual procurement report.

Section 15(1) of the Act:

"A contracting authority which expects to have significant procurement expenditure in the next financial year must, before the start of that year:

(a) prepare a procurement strategy setting out how the authority intends to carry out regulated procurements, or

(b) review its procurement strategy for the current financial year and make such revisions to it as the authority considers appropriate."

Section 18(1) of the Act:

"A contracting authority which is required to prepare or revise a procurement strategy in relation to a financial year must also prepare an annual procurement report on its regulated procurement activities as soon as reasonably practicable after the end of that financial year."

Section 21(1) of the Act:

"As soon as reasonably practicable after the end of each financial year, the Scottish Ministers must prepare a report, based on information contained in annual procurement reports published under section 19(1) during that year, on procurement activity in Scotland."

Section 15(4) of the Act:

"An authority has significant procurement expenditure in a year if the sum of the estimated values of the contracts to which its regulated procurements in that year relate is equal to or greater than £5,000,000."

Section 5(1) of the Act:

"For the purposes of this Act, the estimated value of a contract is the value of the total consideration (not including value added tax) which the contracting authority expects to be payable under or by virtue of the contract."

The Act strikes a balance between increased transparency and consistency of approach, and consideration of wider benefits that can be achieved through procurement – and hence through publication of a procurement strategy and an annual procurement report. The preparation and publication of these documents will aid compliance with the general duty of acting transparently^[4] and provide a better basis for engagement.

Where a contracting authority has an existing procurement strategy, there will be no requirement for it to prepare a completely new procurement strategy each year. A contracting authority must, however, review its procurement strategy annually and make such revisions as it considers appropriate for the purposes of sections 15 to 21 of the Act. Additionally, nothing in the Act precludes a contracting authority from updating its procurement strategy throughout the financial year, or providing more information than that contained in the Act.

While this chapter is designed to support effective implementation, it cannot be overly prescriptive about the requirements since there is no one-size-fits-all approach. A procurement strategy should be proportionate to the size and spend of the relevant contracting authority.

2.4. Preparing a strategy

A clear, comprehensive and effective procurement strategy has an important purpose. It underpins a contracting authority's strategic plan and provides a strategic focus for its procurement activities. It also sets the context in which a contracting authority will work to ensure that procurement achieves value for money and directly contributes to the achievement of its broader aims, objectives and, where relevant, those of the Community Planning Partnership.

A procurement strategy demonstrates how a contracting authority ensures it has considered the wider social, economic and environmental aims of procurement in a consistent manner as required by the sustainable procurement duty under the Act^[5]. Information on the sustainable procurement duty is summarised in Chapter 3. It will also help businesses understand what is important to a contracting authority in the performance and delivery of a contract.

It is important, therefore, for a contracting authority with a significant procurement expenditure to provide clarity about how it intends to carry out its procurement activity. In particular, its procurement strategy should be clear how that activity will contribute to carrying out its functions, how it will achieve value for money and how it will contribute to meeting the general duties in the Act.

2.4.1. When a contracting authority should prepare a strategy

This chapter is aimed at a contracting authority with significant procurement expenditure, which is required by:

• section 15 of the Act to prepare and publish a procurement strategy
• section 18 of the Act to prepare and publish an annual procurement report.

A contracting authority might not expect its procurement spend to exceed £5 million before the start of its financial year. As a result, it might not prepare a procurement strategy. However, it may become apparent that its total expenditure on regulated procurements for the financial year is likely to be greater than £5 million. In this case, the contracting authority must, as soon as practicable, prepare a procurement strategy or review and revise its existing strategy as necessary^[6].

For clarity, the threshold value of £5 million (excluding VAT) represents the total value of regulated procurements. That is, all procurements for goods and services with an estimated value equal to or greater than £50,000, and procurements for works with an estimated value equal to or greater than £2 million^[7], contribute to this total^[8].

Whilst this chapter is primarily aimed at those contracting authorities with significant procurement expenditure, a contracting authority whose spend is below the relevant financial threshold is not precluded from preparing and publishing a procurement strategy proportionate to its size and spend as a matter of good practice. Additionally a contracting authority is not precluded from including information about non- regulated procurements in its procurement strategy

2.4.2. Consultation

A contracting authority should undertake relevant and proportionate consultation and engagement when preparing its procurement strategy. The purpose of this is to ensure that a contracting authority's approach and procurement strategy takes account of stakeholders' views and that stakeholders have the opportunity to engage and contribute to development of the strategy. In doing so, a contracting authority can gain a better understanding of the needs of its area and tailor its strategy to reflect those needs. Indeed one of the areas that the strategy itself must address is an authority's policy on consulting and engaging with those affected by its procurements.

A contracting authority is likely to have a range of different stakeholders. It is therefore important that a contracting authority:

• identifies different stakeholder groups
• communicates effectively with them
• considers those affected by its regulated procurements
• looks for both internal and external views which can strengthen understanding of its proposed procurement strategy, its goals, policy aims and objectives anticipated from its proposed procurements

2.4.3. Approval of a strategy

Following its consultation process, a contracting authority should ensure that its procurement strategy is approved, where appropriate, by the organisational owner at board level or equivalent. Approval of the procurement strategy at an accountable level is important as it demonstrates the whole organisation's commitment to its aims and objectives while satisfying the principles of transparency and proportionality.

2.4.4. Publishing a strategy

Section 19 of the Act requires a contracting authority to publish its procurement strategy, and any revised versions, in a way that it considers appropriate. This must include publication on the internet. A contracting authority must also notify Scottish

Ministers of the publication of its strategy^[9]. In carrying out this duty, a contracting authority is supporting increased transparency and accountability in its procurement activities. Separate advice will be issued to contracting authorities on the means of notifying Scottish Ministers of the publication of a procurement strategy.

A contracting authority should publish its procurement strategy in an inclusive way that takes into account equality and accessibility issues, and allows stakeholders to form a clear view of how the contracting authority intends to meet its procurement obligations.

2.4.5. Joint strategies

Section 16 of the Act states that a group of two or more contracting authorities may have a joint procurement strategy for both or all of the authorities in a group.

The development of a joint procurement strategy is at the discretion of contracting authorities and should cover their collective interests. Contracting authorities developing a joint procurement strategy must have regard to this statutory guidance.

There is nothing in the Act that precludes contracting authorities from developing joint strategies at a lower-level, for example a joint commodity strategy. However, such strategies are not within the scope of the Act.

2.5. Form and content

Section 15(5) of the Act sets out what a contracting authority must include as a minimum in its procurement strategy. Guidance is provided below on each of these requirements. A procurement strategy should be proportionate to the size and spend of the relevant contracting authority, and the Act does not preclude a contracting authority from addressing other relevant matters in its procurement strategy.

2.5.1. Functions and purposes

Contracting authorities operate in a diverse range of areas across the Scottish public sector. It is important that a contracting authority aligns its regulated procurement activity with its functions and purposes to better use its procurement activity as a lever for delivering its objectives, as required by section 15(5)(a)(i) of the Act.

In order to comply with this requirement, a contracting authority, when developing its procurement strategy, may have regard to its organisation's strategy, National Outcomes and – for those authorities listed in Schedule 1 of the Community Empowerment (Scotland) Act 2015 – the collaboratively agreed Local Outcomes Improvement Plan for the area of the Community Planning Partnership. The Local Outcomes Improvement Plan, as described in that Act, contains a contracting authority's strategic plans for improving local outcomes (formerly described as Single Outcome Agreements).

To ensure that its regulated procurements will contribute to the carrying out of its functions and achievement of its purposes, a contracting authority should consider:

• effective and relevant consultation when developing and aligning its procurement strategy with its functions, purposes and the National Outcomes
• effective contract and supplier management to monitor the effectiveness of regulated procurements
• high level commercial targets
• community and stakeholder consultation during procurement exercises
• the use of clear outcomes

2.5.2. Value for money

Good procurement can significantly improve the quality of services the public sector delivers to the people of Scotland. The Scottish Model of Procurement defines value for money in Scottish procurement as not just being about cost and quality. It is also about achieving the best balance between cost, quality and sustainability.

A contracting authority is required by section 15(5)(a)(ii) of the Act to set out how it intends to ensure that its regulated procurements will deliver value for money.

The balance of value for money in each regulated procurement will vary on a case- by-case basis. However, by applying a key set of principles established in its procurement strategy, a contracting authority should maintain consistency and transparency in its procurement process. These principles can also promote and ensure compliance with other duties imposed by the Act, such as the general duties^[10].

A contracting authority should consider the whole-life cost of what it is buying. When applying the principle of value for money, it should ensure that it does so in a clear, transparent and proportionate manner that is in line with the general duties of the Act.

2.5.3. Treating relevant economic operators equally and without discrimination

A contracting authority must apply the principles of equal treatment and non-discrimination in all public procurements within the scope of the Public Contracts (Scotland) Regulations 2015 and the Act. A contracting authority can, by treating relevant economic operators equally and without discrimination, facilitate greater competition, promote innovation, and encourage a wider range of economic operators to become involved in public procurement. As a result, a contracting authority can achieve better value for money.

Where relevant and proportionate, a contracting authority should consider measures such as:

• early market engagement^[11] prior to the publication of a contract notice on Public Contracts Scotland (PCS)
• the use of clear and precise language preventing broad interpretation
• contract size, including the opportunity to break requirements into smaller lots

The process should place the minimum burden possible on economic operators in order to facilitate greater access to procurements. This requirement is contained in section 15(5)(a)(iii) of the Act and is reinforced by the sustainable procurement duty^[12].

2.5.4. Duty to act in a transparent and proportionate manner

Acting in a transparent and proportionate manner is an effective way by which a contracting authority can encourage competition and achieve better value for money in its public procurements. It also promotes accountability and wider participation in the public procurement process.

The principle of transparency requires a contracting authority to approach its public procurements in an open and inclusive manner. Proportionality has a two-part test a contracting authority should consider in all stages of a procurement process.

1. determine if a measure is appropriate and relevant to the objective or outcome being sought

2. determine if this measure goes beyond what is necessary to achieve the particular outcome being pursued.

This will ensure proportionate procurement procedures and decisions, and will safeguard against barriers to participation, in particular for SMEs, third sector bodies and supported businesses.

Section 15(5)(a)(iii) of the Act means that a contracting authority must set out how it intends to ensure that its regulated procurements will be carried out in compliance with its duty to act in a transparent and proportionate manner.

A contracting authority should outline measures it will undertake to comply with this duty in its procurement strategy. This should be done for each stage of the procurement process from the development of its procurement strategy, to the notification of a successful bid and contract award.

Some measures a contracting authority should consider include:

• the use of electronic communication for all procurement activity
• open public and market engagement
• the use of clear and precise language to ensure a common understanding of the requirements

2.5.5. Sustainable procurement duty

Sustainable public procurement aims to make the best use of public money, helping the government achieve its overarching purpose and strategic objectives. The Act implements a national legislative framework for sustainable public procurement in Scotland. A contacting authority must have regard to Chapter 3 on sustainable procurement duty and should read it alongside this section when developing its procurement strategy.

A contracting authority should develop a robust, achievable approach to sustainable procurement that is relevant and proportionate to its scope and area. This should include details on how it will be implemented in its public procurements, as required by section 15(5)(a)(iii) of the Act.

2.5.6. Community benefit requirements

Community benefit requirements in procurement, which are covered by Chapter 4, form part of the Scottish Government's aim of delivering procurement that improves public services for a prosperous, fairer and more sustainable Scotland. Public procurement contracts can help realise a wide range of social and environmental benefits, including more and better employment opportunities. Community benefits have been shown to contribute to local and national outcomes relating to employability, skills and the reduction of inequality^[13].

A contracting authority must have regard to Chapter 4 on community benefit requirements in procurement and should read it alongside this section when developing its procurement strategy.

Section 15(5)(b)(i) of the Act requires a contracting authority to include a policy statement in its procurement strategy on the use of community benefit requirements. In setting out its policy, a contracting authority should ensure that it takes into account any relevant legislation, statutory guidance, and any other relevant guidance or best practice. The statement should outline:

• what the policy is
• when it is applicable
• the aims and objectives of the contracting authority in its use of community benefit requirements
• how the authority will implement and monitor its policy

Information on community benefit requirements in procurement is summarised in Chapter 4 and the associated Annexes.

A strategy may outline the types of community benefits it hopes to achieve in particular contracts. To do so, it is essential for a contracting authority to understand the needs of its area^[14]. This may be achieved by engaging and consulting with relevant stakeholders in its area and referring to the community benefit requirements and sustainable procurement chapters contained in this document.

2.5.7. Consultation and engagement

Consultation and engagement with those affected by its procurements is an effective way for a contracting authority to understand the needs of its area, and to analyse the impact of its public procurement activity. Doing this prior to individual procurements, where relevant and proportionate, also allows the contracting authority to hear, and take into account, the views of those affected.

Section 15(5)(b)(ii) of the Act requires a contracting authority to include in its procurement strategy a statement of its general policy on consulting and engaging with those affected by its procurements. This should include community representatives and public service users or user groups which could be affected by the procurement. For example, in the context of health and social care procurements this inevitably requires consideration of the interests of users of the service, their families and carers.

Whilst the level of consultation and engagement will vary from contract to contract, the policy statement should set out key principles that will underpin relevant and proportionate engagement.

When establishing the principles applicable to consultation and engagement, a contracting authority may wish to consider the National Standards for Community Engagement. Although the National Standards are not applicable to all aspects of consultation, the key principles represent good practice and can help in developing the policy statement on consulting and engaging with those affected by procurements.

By encouraging involvement in an open, equal and inclusive public consultation process with clear principles and purposes, a contracting authority can give all affected parties a voice. This can also help develop strong relationships which can support effective outcomes and promote innovative approaches or solutions.

A contracting authority must include, in its policy statement, details of:

• when and how it will consult and engage with those affected by its procurements
• how the outcomes of the consultation will be used to implement the overarching procurement policy of the contracting authority

2.5.8. Payment of a living wage

The Scottish Government firmly believes that organisations with a diverse workforce which is well rewarded, motivated and led, with appropriate opportunities for training and skills development, is likely to deliver higher quality services. Furthermore, the Scottish Government holds that good relationships between employers and their workforce contribute to productivity and ultimately sustainable economic growth.

Contracting authorities are encouraged to follow the lead of the Scottish Government by promoting the payment of the real Living Wage in public procurement contracts and we encourage others to be a Living Wage Accredited Employer.

The Scottish Government considers payment of the real Living Wage to be a significant indicator of an employer's commitment to fair work practices and that payment of the real Living Wage is one of the clearest ways that an employer can demonstrate that it takes a positive approach to its workforce.

When developing its policy on the payment a living wage, a contracting authority should take into account relevant legislation and should refer to Chapter 5. As part of its policy statement, a contracting authority should also set out how it intends to implement this policy in its procurement activity, as required by section 15(5)(b)(iii) of the Act.

In setting out its general policy, a contracting authority should state measures to promote the payment of a real living wage in its procurements. In doing so, a contracting authority should consider:

• becoming a real Living Wage Accredited Employer and promoting this through relevant public contracts
• how it can contribute towards improving the social wellbeing element, in particular reducing inequality in the area, of its sustainable procurement duty under section 9 of the Act by promoting the real Living Wage and fair work practices
• in what types of goods, works and services contracts it may be relevant to address real Living Wage and fair work practices
• how its real Living Wage policy will be approached in regulated procurements in a way which takes account of other relevant factors, while ensuring an appropriate balance between quality and cost
• how it will ensure a proportionate approach, based on the nature, scope, size and place of the performance of the contract

2.5.9. Health and safety

Nothing purchased by a contracting authority should be at the expense of the health and safety of those who are involved in manufacturing, construction or provision of goods, works and services. It is therefore important for a contracting authority to set out in its strategy its general policy on promoting compliance by contractors and sub- contractors with the Health and Safety at Work Act 1974 and any provision made under that Act.

In setting out its statement, a contracting authority should consider how it will assess the potential health and safety risks arising from a particular contract and how it will monitor contracts to ensure compliance with health and safety requirements, including how an economic operator demonstrates compliance. This is required by section 15(5)(b)(iv) of the Act.

Any measure a contracting authority takes to ensure the promotion and compliance of health and safety in its public procurements must be relevant, proportionate and not overly burdensome, meeting current legislation as a minimum. The degree to which health and safety requirements are specified within procurement documents will vary according to the goods, works or services involved and should be considered on a case-by-case basis. For example, specific legislation relating to risk reduction in construction is contained in The Construction (Design and Management) Regulations 2015.

If there are specific health and safety concerns relating to a particular procurement, it is reasonable to require an economic operator to detail, as part of the procurement process, the measures it would implement to respond to the identified risks. A contracting authority can ask an economic operator to provide evidence to demonstrate that its organisation complies with current health and safety legislation.

A contracting authority can also request details of how an economic operator actively promotes and manages good health and safety practice, such as through training and the communication of relevant information to staff. A contracting authority should also consider how it will monitor contracts to ensure compliance with health and safety requirements.

2.5.10. Ethically traded goods and services

The Scottish Government is committed to promoting sustainable procurement and tackling inequalities in Scotland. As part of this, a contracting authority is required to consider the relevant and proportionate application of fair and ethical trading principles in its regulated procurement activity. While a contracting authority has discretion to decide how best to meet its needs, it must have due regard to the principles of procurement when taking account of any fair and ethical trading objectives.

A contracting authority is required by section 15(5)(b)(v) of the Act to include a statement of its general policy on the procurement of fairly and ethically traded goods and services in its procurement strategy. As part of its policy statement, a contracting authority should also set out how it intends to implement this policy in its regulated procurement activity.

When developing its policy, a contracting authority should consider the wider implications of its procurement activity. This includes how it can promote fairness, dignity and the rights of workers and producers in local and international trading. In setting out its general policy, a contracting authority should consider:

• lifecycle costing
• including in each public contract or framework agreement, conditions relating to the performance of the contract to ensure that the economic operator complies with environmental, social and employment law, including any relevant collective agreements or international law measures^[15]
• how it can receive assurances of fair and ethical practices in supply chains

Further, a contracting authority can require that goods, works or services it is procuring have been given a label certifying that these meet specific environmental, social or other characteristics where these are directly relevant^[16].

So as not to discriminate against any economic operator, to maintain transparency, and to promote competition and innovation: a contracting authority must accept all labels of equivalent standards as well as a bid from an economic operator that can demonstrate it meets the specified criteria without certification.

2.5.11. Food

In 2014, the Scottish Government made a commitment to making Scotland a Good Food Nation: a Land of Food and Drink, not only in what we as a nation produce but in what we buy, serve and eat . Public expenditure on food has the potential to unlock benefits for community health, well-being and social justice by providing:

• access to good nutrition, including access to fresh and seasonal produce
• market, employment and training opportunities in a sector where there are a high number of SMEs

Scotland produces some of the highest quality food and drink available. However, the people of Scotland have one of the poorest diet-related health records globally^[17]. A contracting authority has an opportunity to implement a food policy that is integrated into its overall strategy affording a wide range of benefits to the people of Scotland by promoting a healthier, more resilient and sustainable food system which is accessible and affordable to all, and uses the power of public spend to deliver genuine public value in purchasing.

Sustainable food means food that, through its production, processing, distribution and consumption, provides a range of benefits. Food can promote sustainable development in a number of ways, including by:

• delivering the benefits of good nutritional quality
• promoting good health and education
• protecting the environment
• avoiding unnecessary use of natural resources
• contributing towards economic development

This should also help a contracting authority demonstrate its compliance with the sustainable procurement duty.

In setting out and implementing its general policy as required by section 15(5)(c) of the Act, there is broad scope for a contracting authority to approach this requirement in a manner relevant to its needs and purposes. For a contracting authority which does not procure food or catering, it is necessary to include a statement in its procurement strategy to that effect.

Public procurement can play a key role in the promotion of the highest standards of animal welfare^[18]. This can encompass a range of aspects such as health standards for farm livestock, how animals are protected during transportation, no animal cruelty and how animals are treated at slaughter. Adherence to these standards can better protect public health but also make a major contribution to the sustainability of the fishing, aquaculture and livestock sectors to the wider agriculture and food industry and more broadly to the countryside, rural communities and the rural economy.

In setting out its general policy statement, a contracting authority is required to consider how to promote the highest standards of animal welfare. In doing so, it should consider:

• requiring appropriate food standards certification or equivalent – many now include animal welfare requirements and/or welfare inspections
• careful sourcing of Halal and Kosher meat – religious slaughter must be carried out in a licensed abattoir or a licensed poultry slaughterhouse with official veterinary supervision
• careful sourcing of eggs and consideration of the different types of system (enriched cage, barn, free range or equivalent)
• organic certification
• Royal Society for the Protection of Birds freedom foods

2.5.12. Payments to contractors and subcontractors

Late payment legislation places a statutory duty on all public bodies to pay commercial debt within 30 days. This allows businesses to claim interest and recovery costs if goods and services are not paid for on time^[19].

High quality public procurement is dependent on good practice not only by a contracting authority and its purchasers but also by economic operators. Economic operators need to play their part by delivering high quality, cost-effective goods and services while maintaining the highest possible business standards and ethics, including prompt payment to subcontractors.

The Scottish Government is committed to ensuring that businesses are paid on time because we understand how important it is to pay businesses promptly once a service has been performed or goods delivered. Late payment is particularly detrimental to SMEs, third sector bodies and supported businesses.

A contracting authority is required by section 15(5)(d) of the Act to set out in its procurement strategy how it intends to ensure that, so far as reasonably practicable, payments to contractors and sub-contractors are made within 30 days of a valid invoice, or similar claim, being received.

The Scottish Government's policy and approach to ensuring prompt payment in its procurements asks a contracting authority to adopt the standard contract clause or an equivalent provision in its procurement contracts. Prompt payment for goods, works and services can be enforced by inserting clauses into the terms and conditions of the contract.

Effective contract management and monitoring should be undertaken to ensure that prompt payment continues to be applied throughout the duration of the contract. This can be done by requesting information on prompt payment at all levels of the contract. Where relevant, a contracting authority and economic operators should then take any necessary steps to rectify any prompt payment issues experienced.

A contracting authority should also consider monitoring the prompt payment of sub- contractors, for example by carrying out spot checks and/or using project bank accounts or trusts, where relevant and proportionate.

2.6. Monitoring, reviewing and reporting on a procurement strategy

2.6.1. Context

A contracting authority is responsible for ensuring its procurement activity complies with the relevant legislation and that the decisions it takes in the context of its procurement activity are in accordance with the legislation and its own strategic objectives.

The Act requires a contracting authority to review its procurement strategy annually. This can help a contracting authority maintain alignment of its procurement activity with its broader priorities and allow it to revise its strategy where necessary.

2.6.2. Annual procurement report

The Act requires a contracting authority, which is obliged to prepare or revise a procurement strategy in relation to a financial year, to prepare and publish an annual procurement report on its regulated procurement activities as soon as reasonably practicable after the end of its financial year^[20].

It is important to note that a contracting authority is not precluded from preparing and publishing an annual procurement report if it does not meet the financial threshold obligating it to publish a procurement strategy. Additionally, a contracting authority is not precluded from including information about non-regulated procurements in its annual procurement report.

A contracting authority's annual procurement report should be relevant and proportionate to its size and spend. It can:

• aid visibility of purchasing activities
• be a mechanism for conveying how a contracting authority is meeting legislative requirements
• outline how a contracting authority's procurement activity is contributing to the delivery of its broader aims and objectives

Section 18(2) of the Act states that the annual procurement report must include:

(a) A summary of the regulated procurements that have been completed during the year covered by the report

• For the purposes of this section, a regulated procurement is completed when the award notice is published or otherwise comes to an end^[21].

(b) A review of whether those procurements complied with the contracting authority's procurement strategy.

• A contracting authority is required by section 17 of the Act to ensure that its regulated procurements are carried out in accordance with its strategy.
• A contracting authority should include, for example, details of how its procurement activity achieved the policies set out in its procurement strategy, how these contributed to its wider organisational aims and objectives, and highlight any other positive impacts resulting from its procurement activity.
• A contracting authority should include details of policies which were not met and how these can be better achieved in future procurements.
• Within its annual procurement report, a contracting authority should also include a brief statement detailing the methodology used to review its regulated procurements in relation to the requirements in section 15(5)(a)-(d) of the Act.

(c) To the extent that any regulated procurements did not comply, a statement of how the contracting authority intends to ensure that future regulated procurements do comply.

• A contracting authority should consider including information on how improvement activities will address identified shortfalls and how these will be monitored and reported.

(d) A summary of any community benefit requirements imposed as part of a regulated procurement that were fulfilled during the financial year covered by the report

• Please refer to section 4.6.7. on monitoring and reporting on community benefit requirements.

(e) A summary of any steps taken to facilitate the involvement of supported businesses in regulated procurements during the year covered by the report.

• Section 9(1) of the Act sets out the specific requirements of the sustainable procurement duty on a contracting authority. This duty includes considering how, by the way in which it conducts the procurement process, it might facilitate the involvement of supported businesses before starting a procurement competition.

(f) A summary of the regulated procurements the authority expects to commence in the next two financial years

• It is acknowledged that at the time a contracting authority prepares its annual procurement report, it is unlikely to know what its precise requirements will be over the course of the next two financial years. However, it should be in a position to provide a brief forward plan of anticipated procurements relevant and proportionate to the contracting authority's size and spend. A summary should include the subject matter, whether it is a new or re-let procurement, the expected contract notice date, expected award date and expected start date. This information gives economic operators advance notice of future opportunities that may be offered by an authority to assist with planning.

Whilst there are a number of things listed within the Act that a contracting authority must include in its annual procurement report, the content is by no means limited to those items listed under section 18(2) of the Act. Other information to be included within a contracting authority's annual procurement report will be informed by a number of considerations such as the size and spend of the authority and the scope of its procurement activity. An annual procurement report must address all of the matters contained in a contracting authority's procurement strategy.

A contracting authority should consider:

• information on what it has learned from its consultation and engagement with stakeholders and those affected by its procurements, and what it is doing to respond to these views
• information on what it is doing to improve its performance and impact, drawing on relevant information – for example spend analysis – and what improvements have been achieved since its last report
• how it is working with other bodies – for example procurement centres of expertise – to maximise effectiveness and efficiency

The annual procurement report is also a mechanism for a contracting authority to demonstrate its compliance with other legislation that places specific requirements on a contracting authority with respect to its procurement activities, for example, the Equality Act 2010 and the Equality Act 2010 (Specific Duties) (Scotland) Regulations 2012^[22].

Section 19 of the Act requires a contracting authority to publish its annual procurement report in a manner it considers appropriate, and this must include publication on the internet.

A contracting authority should publish its annual procurement report in an inclusive way that takes into account equality and accessibility issues and allows stakeholders to form a clear view of the contracting authority's performance. Separate advice will be issued to contracting authorities on the means of notifying Scottish Ministers of the publication of an annual procurement report.

2.6.3 Annual report on procurement activity in Scotland

Scottish Ministers are required to prepare an annual report on procurement activity in Scotland as soon as reasonably practicable after the end of each financial year^[23].

The report will be based on information contained within annual procurement reports published by contracting authorities during that year.

The annual report on procurement activity in Scotland will contain, as a minimum, information about regulated procurements that have been completed, including community benefit requirements that contracting authorities consider were fulfilled, and steps taken to facilitate the involvement of supported businesses in regulated procurements. It will provide an overview of public procurement activity in Scotland for that year.