Scottish procurement policy handbook

3 Procurement organisation and governance

3.1 Scope of public procurement

Public procurement can be defined as the acquisition, whether under formal contract or otherwise, of goods, services and works from third parties by contracting authorities.

The scope of public procurement ranges from the purchase of routine supplies or services, to formal tendering and placing contracts for large infrastructure projects by a wide and diverse range of contracting authorities.

This Handbook outlines the principles that should be applied to all procurement. Additional guidance on best practice is provided in the Scottish Public Procurement Toolkit. Further information on the Toolkit can be found in section 16.3. Those who are responsible for procuring, managing or delivering major construction projects should also refer to the Construction Procurement Manual. Further information on the Construction Procurement Manual can be found in section 8.

If contracting authorities employ private sector agents to undertake procurement on their behalf, they should procure these as formal public contracts under EC law, including in the terms an obligation on the provider to:

• require compliance with EC procurement rules;
• ensure clear allocation of responsibilities; and
• where appropriate, obtain the agent's indemnity against any costs incurred as a result of its failure to comply with the legal framework on its behalf.

"Procurement" for the purposes of this Handbook is not intended to cover funding agreements or forms of co-operation between contracting authorities which are non-contractual. However, it should be noted that relationships between contracting authorities may constitute contracts for the provision of goods, services or works in certain circumstances. Further information on the application of EC procurement rules to the provision of services between public bodies and/or between public bodies and delivery vehicles intended to support the provision of shared services to more than one public body can be accessed through the following link:
http://www.scotland.gov.uk/Resource/Doc/1265/0051647.pdf

Even where funding agreements or other forms of co-operation are not contractual and do not constitute procurement, normal commercial disciplines should be applied wherever possible to ensure that public funds and resources are used effectively.

3.2 Procurement landscape

Key roles and responsibilities in relation to the development and implementation of procurement policy are illustrated below:

3.3 Procurement function

Sections 3.3 and 3.4 describe a mature procurement function within a contracting authority. As a result, the text may not be representative of contracting authorities with a less mature procurement function or contracting authorities which share procurement resources. It should be noted that, even where an organisation is not yet mature, it is the Accountable Officer's responsibility to ensure that procurement activity is undertaken or overseen only by those formally authorised to act as procurement officers.

Key roles and responsibilities in relation to the procurement function are illustrated below:

3.4 Role of the procurement function

Each organisation should ensure that its arrangements for procurement are appropriate to the level of procurement undertaken by the organisation and should have, or have access to, a dedicated procurement function. This function should be led by a Head of Procurement with full responsibility for procurement across the organisation ² .

The Head of Procurement should be at Board level or, at a minimum, one level below with a Board member taking clear ownership for procurement and commercial matters.

The specific role of the procurement function may vary depending upon the size and nature of the organisation it serves. At a high level, however, the primary role of the procurement function is to:

• provide professional, qualified procurement expertise, advice and services;
• provide strategic procurement advice;
• ensure that business needs are met through its procurement of goods, services and works;
• contribute to the aims and objectives of the organisation, as detailed in its business plan;
• pro-actively manage and develop the supplier base, including small and medium-sized enterprises ( SMEs) and third sector and voluntary sector organisations, identifying and managing any supply risks or value add opportunities;
• ensure that value for money is achieved, including through implementation of national contracts;
• advise, guide and support the development of and adherence to procurement policy, best practice and law;
• develop, promote and implement appropriate procurement strategies and procedures;
• establish and address training needs, utilising national/sectoral training contracts where appropriate;
• co-ordinate training development and registering of procurement officers across the organisation;
• assess procurement competencies across the organisation, using tools such as the Scottish Procurement Competency Framework ³ ;
• promote and engage in collaboration and information sharing with relevant Centres of Expertise and SPD;
• support sustainable policies through procurement processes ⁴ ;
• comply with and, where appropriate, promote equalities legislation and policy; and
• promote and engage in the implementation of relevant technology solutions, including
  e-procurement, to minimise purchase to pay costs.

A mature procurement function will encompass the following activities:

• act as the interface between the contracting organisation and the external marketplace on commercial matters;
• determine requirements and establish specifications in collaboration with end users;
• challenge the organisation's/end-users' requirements critically for need and cost effectiveness, taking account of whole life costs and corporate social responsibility/sustainability issues;
• conduct market engagement and research;
• engage effectively with Centres of Expertise and SPD in relation to issues of policy, practice, information sharing and collaboration;
• manage supplier relationships, including responding to suppliers' complaints;
• manage commercial relationships;
• manage procurement competitions;
• manage the award of contracts;
• contract management;
• establish a comprehensive contract register;
• establish arrangements relating to authority to procure;
• measure and report procurement performance, including Best Practice Indicators ( BPIs); and
• encourage participation of users/feedback into relevant advisory groups (user intelligence groups).

3.5 Role of procurement officers

The term "procurement officer" is used within this document to describe any member of staff who is formally authorised to procure goods, services and works ( i.e. to place contracts on behalf of the organisation) ⁵ .

The key elements of the procurement officer's role in the procurement process are to provide support and guidance to the end user/customer in:

• market analysis and engaging in initial market dialogue, where appropriate;
• challenging end users' requirements for cost-effectiveness and need, taking account of whole life costs and corporate social responsibility/sustainability issues;
• identifying and engaging other subject matter experts as required ( e.g. end user, legal, finance etc.);
• developing an appropriate output-based specification ⁶ which is fashioned to attract market interest and stimulate competition and innovation;
• developing a procurement strategy which requires consideration of existing and/or collaborative contracts; ⁷
• ensuring that all procurement processes (tender, order from framework etc.) are compliant with relevant legal and policy obligations, advertising through the national portal where appropriate;
• publicising procurement contact points and making available as much information as suppliers reasonably need to respond to the bidding process;
• understanding and complying with relevant legal obligations relating to the goods, services or works to be purchased, e.g. environmental/health and safety legislation;
• ensuring that procurement decisions take account of wider policy requirements;
• ensuring that procurement decisions are aligned against organisational objectives;
• ensuring that the organisation's policies on corporate social responsibility/sustainability are adhered to;
• managing the procurement procedure;
• supporting partnership working arrangements;
• conducting any procurement clarification required prior to contract award;
• finalising the contractual agreement and formal contract documentation;
• establishing a clear audit trail (including recording the contract on the organisation's contract register);
• notifying the outcome of bids promptly and, within the bounds of commercial confidentiality, debriefing winners and losers on the outcome of the bidding process to facilitate better performance on future occasions ⁸ ;
• ensuring that adequate contract and supplier management arrangements are in place, supporting supplier management as appropriate;
• sharing knowledge to develop best practice: and
• handling Freedom of Information requests on procurement matters in accordance with organisational policy.

Detailed guidance on individual aspects of procurement practice is available in the 'Scottish Public Procurement Toolkit' and from SPD/Centres of Expertise websites (see section 16.3 and Annex A).

3.6 Role of the end user

The term "end user" is used within this document to describe the individual with responsibility for formulating the requirement, i.e. the goods, services or works required or the budget from which the requirement will be purchased.

The key elements of the end user's role in the procurement process are to:

• adequately define the user's needs, identifying minimum and desirable elements and ensuring that there is adequate consultation with users and their representative bodies (where necessary);
• ensure that the requirement takes account of the organisation's policy requirements, including its corporate social responsibility/sustainability policies, and is aligned against organisational objectives;
• ensure compliance with relevant legal obligations relating to the goods, services or works to be purchased, e.g. environmental/health and safety legislation;
• where appropriate, prepare a business case;
• ensure that funding is in place;
• contribute to drafting the tender specification ⁹ ;
• contribute to development of the procurement strategy;
• be involved throughout the life cycle of the procurement exercise - implementation, review,
  ongoing intelligence groups;
• provide technical expertise and input to support the bid assessment processes;
• prepare the technical recommendation in any bid assessment report; and
• approve key review stages throughout the procurement process.

End users should not deal directly with bidders or potential bidders during the procurement process without the full involvement of and/or approval by the procurement officer.

3.7 Procurement skills

The Review of Public Procurement in Scotland recommended that skill levels of procurement staff should be continuously improved through programmes of professional training and development. Training for staff involved in the procurement process should be considered by organisations as an investment.

The recruitment and retention of suitably qualified staff is essential. Organisations should implement a process to assess, at regular intervals, their organisation's procurement capability and develop training and development strategies which ensure that their procurement activity is both compliant with legislation and obtaining value for money.

The diversity of the work involved in procurement necessitates that procurement staff are required to be competent in a wide variety of generic procurement skills in addition to the specific technical skills and knowledge required when procuring for different sectors and commodities.

A Scottish Procurement Competency Framework has been developed which complements existing staff development tools in organisations by ensuring that the skills are specific to procurement. The flexibility of the framework ensures that it can be utilised by all sectors. It will support the development of procurement staff using a consistent and measurable approach across the Scottish Public Sector. It should be noted that the skills are applicable to all staff where procurement activity is an integral part of their role, not only staff employed in a specific procurement post. The Competency Framework can be accessed through the following link:
http://www.scotland.gov.uk/Topics/Government/Procurement/npcoe/Capability/CompetencyFramework

Professional training and development programmes, both nationally and sectorally will be established between the public sector, professional bodies e.g. Chartered Institute of Purchasing and Supply, Society of Procurement Officers ( SOPO) and Association of University Procurement Officers ( AUPO) and training providers. These programmes will be accessible by all public sector bodies.

3.8 Governance and audit

Contracting authorities are responsible for establishing arrangements for ensuring the proper conduct of their affairs, including conformance to standards of good governance and accountability with regard to procurement. They will usually involve their audit committees or similar groups in monitoring these arrangements.

Internal audit should provide an independent and continuing appraisal of an organisation's internal control system and continuing assurance that its internal control systems are adequate and effective.

Each organisation's audit committee should set the degree of assurance it requires concerning the management of procurement risk, and internal audit should plan its work accordingly. This should address the Review of Public Procurement in Scotland recommendation that organisations confirm annually that they comply with minimum standards of governance and accountability for procurement ¹⁰ .

External audit provide an opinion on contracting authorities' financial statements and the regularity of transactions. As part of the wider scope of public audit, each year they review and report on contracting authorities' corporate governance arrangements, including arrangements to achieve value for money in the use of resources and may seek assurances on compliance with public procurement law.

External audit may review and report on standards of risk management and governance with regard to procurement in any contracting authority. Additionally, Audit Scotland's programme of performance audits ¹¹ may scrutinise and report on contracting authorities' procurement systems and effectiveness.