Procurement Reform (Scotland) Act 2014: statutory guidance

4. Community benefit requirements in procurement

4.1. Introduction

Community benefits are one of a range of social and environmental considerations that can be included in public contracts and frameworks. These requirements must be compatible with the procurement principles, equal treatment and non- discrimination and transparency and proportionality.

Community benefit requirements will not be relevant and proportionate to all contracts and frameworks. However, this chapter, in conjunction with guidance on the sustainable procurement duty, aims to help a contracting authority identify relevant opportunities to include them.

Since publication of the Community Benefits in Public Procurement Report and accompanying policy guidance in 2008, community benefits have increasingly been included in contracts and framework agreements by contracting authorities in Scotland. Research^[27] demonstrates that, community benefits have contributed to a range of national and local outcomes relating to employability, skills and tackling inequalities by focusing on under-represented groups. The Procurement Reform (Scotland) Act 2014 aims to achieve the maximum use of these requirements in public contracts and framework agreements.

Community benefit requirements in procurement policy are outlined below:

• there is a presumption that where there is an opportunity to deliver community benefits, appropriate requirements will be included in public contracts and framework agreements
• contract or framework suitability and capacity needs to be addressed on a case-by-case basis – value, duration, local factors and the nature of the supply base will all have an impact
• requirements should be robust, relevant and proportionate so that they can be judged on objective and measurable outcomes
• discrimination should be avoided in the wording of requirements
• monitoring of contract deliverables and outcomes is essential to ensure contract compliance

4.2. Purpose of this chapter

This chapter describes what is required of a contracting authority with respect to community benefit requirements in procurements. It must be read alongside section 24 of the Act. This chapter provides information on:

• when to use community benefit requirements
• identifying community benefit requirements through stakeholder consultation
• incorporating community benefit requirements into the procurement process

4.3. Legal basis of this chapter

A contracting authority must have regard to the guidance in this chapter when it undertakes regulated procurements which meet the community benefit threshold and commence on or after 1 June 2016^[28].

For the purposes of the Act, an initial threshold value of £4 million has been set out in section 25(1) at or above which community benefit requirements must always be considered. Their use does not need to be limited to contracts and framework agreements of this value and this threshold value will be subject to future review^[29]. Where contract or framework agreement requirements and clauses relating to community benefits are not evaluated as part of a procurement process, they may capture social and environmental considerations. Providing clarity to economic operators on what these requirements are, helps bidders understand and better respond to them. This chapter focuses on community benefit requirements as defined by the Act.

Community benefit requirements are defined in the Act as follows:

" Section 24 of the Act:

For the purpose of this Act, a community benefit requirement is a contractual requirement imposed by a contracting authority —

(a) relating to —

(i) training and recruitment, or

(ii) the availability of sub-contracting opportunities, or

(b) which is otherwise intended to improve the economic, social or environmental wellbeing of the authority's area in a way additional to the main purpose of the contract in which the requirement is included.

Section 25 of the Act:

(1) This section applies where a contracting authority proposes to carry out a regulated procurement in relation to which the estimated value of the contract is equal to or greater than £4,000,000.

(2) The contracting authority must, before carrying out the procurement, consider whether to impose community benefit requirements as part of the procurement.

(3) The contracting authority must, in the contract notice relating to the procurement, include —

(a) a summary of the community benefit requirements it intends to include in the contract, or

(b) where it does not intend to include any such requirements, a statement of its reasons for not including any requirements.

(4) Where community benefit requirements are included in a contract, the contracting authority must include in the award notice a statement of the benefits it considers will be derived from those requirements.

(5) The Scottish Ministers may by order modify subsection (1) so as to substitute for the figure specified there for the time being such other figure as they consider appropriate.

While there are clear requirements relating to community benefits in sections 24 & 25 of the Act, use of community benefit requirements may also demonstrate compliance with the sustainable procurement duty which applies to all regulated procurements^[30].

A contracting authority is also required to set out in its procurement strategy a general policy on the use of community benefit requirements and to review compliance with that policy in its annual procurement report. Please refer to Chapter 2 for further information.

4.4. When to use community benefit requirements

A contracting authority is required, by section 25(1) of the Act to consider including community benefit requirements for all regulated procurements where the estimated value of the contract is equal to or greater than £4 million. Community benefit requirements may not always be appropriate and a contracting authority must consider their use by taking into account the nature of the contract, its duration and local factors. In line with the sustainable procurement duty, community benefit requirements should be used in instances where a risk and opportunity assessment identifies that they are the appropriate benefit to seek in a contract or framework.

Research has shown that community benefits principally contribute to four national outcomes. These national outcomes are outlined in Annex A.1. alongside a range of typical community benefit requirements.

While the threshold for considering community benefits is £4 million, this value will be subject to review and research has shown that community benefits can be achieved in procurements under the £4 million threshold^[31]. Reporting on community benefits will help Scottish Ministers gather data to determine whether a change to the threshold figure of £4 million is appropriate (section 25(5) of the Act).

Factors to consider when deciding whether to include community benefit requirements include opportunities such as:

• to generate employment and training opportunities for priority groups
• vocational training
• to up-skill the existing workforce
• equality and diversity initiatives
• to make sub-contracting opportunities available to SMEs, the third sector and supported businesses
• supply-chain development activity
• to build capacity in community organisations
• educational support initiatives
• to work with schools, colleges and universities to offer work experience
• to minimise negative environmental impacts, for example impacts associated with vehicle movements and/or associated emissions and impacts on protected areas, buildings or sites^[32]

This is not an exhaustive list.

Community benefit requirements may be particularly helpful to disadvantaged groups or areas. The Scottish Index of Multiple Deprivation may be a helpful tool for targeting the application of community benefits on particular disadvantaged areas. A contracting authority may also have a particular disadvantaged group as a key customer.

Care should be taken to ensure the requirements do not place a disproportionate burden on economic operators or have wider, unintended consequences. This could be the case, for example, where training and recruitment requirements are included. Here, care needs to be taken to avoid displacement of existing trainees and employees in order to meet community benefit commitments^[33]. It should also be noted that training and employment opportunities require an adequate contract length for these activities to be undertaken. For this reason, while there may be opportunities for activities such as curriculum support on lower value contracts, the majority of community benefits are likely to come from higher value and longer term^[34] contracts.

4.5. Identifying community benefits requirements through stakeholder consultation

The purpose of stakeholder consultation is to inform well-considered and clearly specified community benefit requirements. Some of this will take place during formulation of the procurement strategy which suggests that a contracting authority may consider the National Standards for Community Engagement and Community Empowerment Scotland Act 2015, or when assessing risks and opportunities in compliance with the sustainable procurement duty.

Consultation may be with:

• the market, to identify the capacity of the contract or framework agreement and to ensure clarity of target outcomes for bidders
• customers, for example users of the service
• those with an understanding of related policies, for example non-governmental organisations

The nature of stakeholder consultation must be relevant and proportionate to the community benefit requirements and should ensure that the requirements:

• reflect the needs of the community
• are relevant and proportionate
• will not have a negative impact on achieving value for money

Stakeholder consultation will also help identify what support is available to successful contractors to deliver the requirement – for example from employability teams, skills agencies, graduate or student placement programmes and delivery bodies that may support the policy that is being included – and build understanding of how to evaluate the requirements in the procurement process.

Opportunities to use the requirements to advance equality of opportunity between persons who share a relevant protected characteristic and those who do not, in line with equality duties^[35], may also emerge as a result of this process. Opportunities may also emerge to benefit priority groups that are specifically within the scope of a contracting authority's functions and purposes.

4.6. Incorporating community benefit requirements into the procurement process

When community benefit requirements are being used these are either included in the specification as conditions of contract performance or both.

4.6.1. Identifying the need

The requirements of a specific procurement may reflect wider organisational priorities. For example, a contracting authority with training or education in its remit, may see an opportunity to include curriculum support or training community benefit requirements in contracts. This approach would have the benefit of making these priorities core to the procurement requirements, which is both relevant and proportionate.

4.6.2. Specification

The requirements can then be built into the specification. The appropriate requirements should be developed through stakeholder consultation and engagement and by using the support available as described above. Technical specifications may refer to the specific process, method of production or provision of requested works, supplies or services provided they are linked to the subject matter of the contract or framework and are proportionate. Social and environmental considerations may be included and community benefits can therefore form part of the specification.

4.6.3. Contract notice

The community benefit may be reflected in the contract or framework agreement by name and in Common Procurement Vocabulary (CPV) codes used such as those relating to recruitment (but not including employment contracts). Potential bidders should be alerted to the use of community benefits in the contract notice. Suggested wording is as follows:

'Community benefits are included in this requirement. A summary of the expected community benefits have been provided as follows: [insert text].'

Some typical community benefits are listed in Annex A.1. Further examples are available from existing guidance^[36].

Where community benefits have not been included in requirements valued at or above £4 million, the contracting authority must provide a reason for this in the contract notice. Reasons should reflect that, having considered the scope to include community benefits, they are not considered to be appropriate, relevant and/or proportionate to the procurement with a brief explanation. Urgency is unlikely to be a suitable reason for not including community benefit requirements.

Circumstances where an authority is not required to apply a community benefit include:

• where the requirement is excluded from the provisions of the Act
• where the length or nature of the contract means that it is not a suitable choice for community benefits such as supply contracts of very short duration and where there is little scope to achieve social, environmental or economic outcomes for the relevant area.

In some instances social, economic and environmental considerations will be so integral to the requirement that it may be difficult to separate them out.

4.6.4. Supplier selection^[37]

As community benefits have been in use for a number of years, many economic operators will be able to provide evidence of experience in their use. To encourage businesses to bid for contracts or frameworks using the requirements, care should be taken in what is considered relevant experience. For example, an organisation's approach to recruitment and training of staff may be adequate evidence that it has the capacity to deliver the benefits required, it may not need actual experience of recruitment and training in the course of delivering a community benefit requirement in a contract. A general policy on, for example, recruitment and training, staff or supply-chain development is not enough and would need to be supported by evidence demonstrating how it is applied.

4.6.5. Evaluation and award

One of the key aims of applying award criteria is to achieve value for money by balancing cost, quality and sustainability. Community benefits should be evaluated in a similar manner to other sustainability aspects of the requirement. The weighting for community benefit requirements should be determined on a case-by-case basis, (to ensure they are proportionate), and evaluation of community benefit requirements should include evaluation of the bidder's proposed approach to meet the requirement, ensuring that they demonstrate an understanding of how to achieve the required community benefit. A range of examples of how community benefit requirements are evaluated is available on the Scottish Government website.

See section 4.7.

Community benefits may also be used to improve economic, social or environmental wellbeing in a way that is additional to the main purpose of the contract or framework in which the requirement is being included. See Annex A.1 for examples.

4.6.6. Award notice

Where community benefits are included in a procurement (at or above the £4 million threshold), the award notice should include a statement of the benefits that are expected to be derived from these requirements^[38].

4.6.7. Monitoring and reporting

A contracting authority which is required by the Act to produce and publish an annual procurement report must include a summary of any community benefit requirements imposed as part of a regulated procurement that were fulfilled during the year covered by the report^[39]. This may include:

• apprenticeships completed
• curriculum support activities
• business support activities
• support to communities
• resource efficiencies achieved – materials, waste, water

To understand the scale and nature of the community benefits being achieved, a range of information should be collected. Suggested reporting has been developed which allows flexibility to reflect local needs while encouraging consistent monitoring across contracts. This will give a contracting authority a clear view of how the use of requirements is contributing to national and organisational priorities as well as providing a basis for summarising its achievements in compliance with the reporting duties in the Act. See Annex A.2.

4.7. Other guidance and examples

Further guidance and examples relating to community benefits in procurement are available at: http://www.gov.scot/Topics/Government/Procurement/policy/corporate- responsibility/Sustainability/CommunityBenefits