Public procurement - views and experiences: research

3. Barriers to third sector and new private business engagement with Scottish public procurement

Introduction

In Chapter 2 we described the extent to which survey respondents and interviewees found the process of bidding for Scottish public sector contracts easy. Very few organisations responding to our survey (six respondents, or 18%) indicated that they had found the process easy or very easy. All other research participants described the process as complex and in need of significant improvement.

In this chapter, we outline third sector and new private businesses’ experiences of the barriers they have faced in participating in Scottish public sector procurement. These barriers were identified through feedback provided through the survey, interviews with frontline organisations and businesses, and interviews with stakeholders.

It is important to note that there was little variation in views between third sector organisations and new private businesses, but where these diverged or were unique and specific, we highlight this in the relevant sections.

Later in this report we discuss enablers to participation and solutions to the barriers that we outline here.

Lack of capacity

Many of the third sector organisations and new private businesses participating in the research identified a lack of capacity as one of the key barriers to participation in Scottish public procurement. As discussed in the previous chapter, among the survey respondents from organisations which had bid for a Scottish public sector contract in the last five years, 81% highlighted a lack of capacity and time as a key barrier to bidding.

Third sector organisations and new private businesses echoed this in our interviews with them. Interviewees described their difficulties in having both the staff time and the skills to take part in tendering processes. This was particularly the case for small third sector organisations, but also an issue for small private businesses. Stakeholders also raised this as a key concern. Although we did not specifically ask whether this lack of capacity was a barrier to bidding for both lower- and higher-value contracts, there was no sense that the value of the contract in question made any difference in this respect.

“The process of bidding for contracts often puts off smaller suppliers. There are many barriers regarding paperwork and legislation but also the expertise that suppliers need to successfully bid for contracts is high and specialist, and this means that smaller suppliers don’t get the chance to supply into the public sector.” (Stakeholder)

“What is needed is having someone that can support organisations individually with the bid, i.e. take on the legwork. Advice and training is good but most SMEs do not have the staffing capacity or capability to undertake this.” (Stakeholder)

“Procurement is favoured to larger organisations that have manpower/bid teams to submit bids, often at higher costs than smaller organisations.” (Third sector survey respondent)

Organisations described the significant time investment required to get up to speed with the procurement process at the outset. They also noted that substantive staff time and cost was required each time a tender was issued due to the wide variation in requirements in relation to Invitations to Tender (ITTs), meaning that each time a bid was prepared, new materials had to be produced. Some indicated that this was prohibitive and the reason they had not bid for public contracts in recent years, while for others it was tolerated as a “necessary evil” in order to win contracts, but described as an ineffective and inefficient use of time which was costly to the organisation.

A few interviewees also noted the importance of having reliable IT infrastructure and skills to enable organisations to fully engage with the public tendering process. There are still third sector organisations in particular that do not have adequate access to IT and this is a key barrier to their participation in public procurement.

“We know of an organisation that is sitting with one laptop in a caravan.” (Third sector interviewee)

Consideration for improvement: Consider potential for ongoing improvements to PCS and PCS-Tender; support for training and development in public procurement; and sharing of experiences of tendering processes.

Complexity of procurement processes

The majority of research participants described the procurement processes they had participated in as too complex and disproportionate to the contract. As shown in the previous chapter, 61% of survey respondents highlighted this as a key barrier to bidding for public sector contracts in Scotland, and interviewees from third sector organisations, new private businesses, and stakeholders also raised this as a key concern. This was a barrier highlighted by participating organisations, regardless of size, sector or location. This related to both specifications for contracts and the tendering process itself.

“The level of complexity is a major issue – both the myth and the reality of that!” (Stakeholder)

There was a strong sense that procurement processes required skills and expertise, and staff within organisations with dedicated time to devote to the process of bidding. Most felt that the bidding process is more suited to large organisations than to smaller companies or third sector organisations, however even larger organisations that participated in the research were concerned about the complexity of bidding.

“Requirements of a tender process can be onerous and negate a level playing field.” (Third sector interviewee)

“Simplify the process. With the current constraints in the care sector this is impacting on already stretched resources.” (Large third sector survey respondent)

Many research participants described the extensive amount of time they spent preparing bids and argued that greater consistency is needed within bidding processes. A lack of standardisation within bidding processes was a significant barrier identified by research participants. They emphasised the time spent in presenting the same information in many different ways for different commissioning organisations, but also for different teams or departments within one organisation.

Among those who highlighted this lack of standardisation within bidding processes, all wanted to see templates being used which asked questions in the same way, in the same order, to reduce the amount of time spent tailoring the same information each time they bid. They were also keen that buyers avoided asking for the same information to be provided in different places throughout bidding documents. Some even felt that standardisation of font size would contribute to a more even playing field. These adaptations were considered to be crucial to fundamentally changing the accessibility of procurement.

“There is the function within Public Contracts Scotland to submit some data once per year, but buyers don’t use it. They ask for the data each time organisations bid.” (Stakeholder)

Some research participants referred specifically to challenges they had faced with word counts which had been applied to tendering processes. While respondents did not have an issue in principle with word counts, and indeed some welcomed these as a pragmatic way to ensure an even playing field between bidders, many referred to word counts being applied which were not proportionate to the information being requested.

“Word counts currently bear no relation to the demand.” (New private business survey respondent)

Many research participants felt that there were too many mandatory sections within bidding processes that, in their view, were not relevant to the contract and also required repetition of information. Some noted that changes in policy frequently resulted in new sections and/or conditions being added to tender documentation and contracts (for example, related to climate change or modern slavery) – and that these needed to be relevant and proportionate in future. We return to the issue of terms and conditions of bidding later in this section.

“They need to request fewer documents and make them shorter. Ask for a four-page tender overview. And please include less legalese in the terms and conditions.” (Third sector interviewee)

“There is too much variation between buyers. Suppliers are turned off, especially in a market where there is plenty of private business. Brexit and Covid-19 means suppliers want the easiest route to market.” (Stakeholder)

Some highlighted their impression that there was a ‘right language’ to be used to gain points and that the process began to feel like a tick box exercise rather than a process to ensure the best quality bidder is awarded the contract.

A few research participants felt that individuals within public bodies’ procurement teams were trying to improve things but that legal teams block actions and change due to a highly risk-averse culture and concerns about litigation (if people feel a procurement process has been unfair), leading to over-caution about process and language.

Some research participants raised concerns about the quality control of tender documentation, feeling that this was often lacking and that it led to tender documentation being issued which was confusing and lacking in clarity. Requests for change included more standardisation of terminology within tender documentation, a more logical flow of information that is required, and clarity about whether VAT is included or not (there is no consistency in this regard currently).

Overall, the message from research participants was clear – that the process needs to make it as easy as possible for both the organisation bidding and the people assessing the tender.

We return to a number of these issues in the next sections.

Consideration for improvement: Consider opportunities to simplify tender processes and ensure that tender processes only require information to be provided that is proportionate and relevant to the goods or services being procured.

Public Contracts Scotland and Public Contracts Scotland-Tender

Public Contracts Scotland (PCS) is a national portal enabling suppliers to browse for, register an interest in, and bid for Scottish public sector contracts. In addition, Public Contracts Scotland-Tender (PCS-Tender) also enables suppliers to bid for public contracts.

The majority of research participants were familiar with PCS and/or PCS-Tender. However, as described previously in Figure 10, 10% of our survey respondents reported not knowing where to find bidding opportunities, and 26% reported having had difficulties accessing tender documents. This suggests that there remain gaps in awareness raising about PCS and PCS-Tender and how to identify tender opportunities.

Across the board, participants who were familiar with these systems stressed the difficulties of using them. Both systems were unpopular – being described variously as “cumbersome”, “old-fashioned”, “not user friendly”, “frightening for new organisations” and “confusing”.

More specifically, third sector and new private business interviewees referred to the many different sections within PCS and PCS-Tender making them hard to navigate, the need to submit information across a range of different documents rather than just one, the unclear language used to label different parts of these systems, and search functions that are difficult to use.

“I am familiar with PCS but I find it very hard to search on it.” (Third sector interviewee)

“The key words that you can choose to categorise your business on Public Contracts Scotland are not very good – we had to put in Social Work and Education but that doesn’t really fit with what we do. This needs to be fine-tuned to make it easier to search.” (Third sector interviewee)

“The language used on Public Contracts Scotland involves too much short-hand – it needs to use accessible language.” (Third sector interviewee)

“PCS and PCS-Tender are too fiddly. Why are there two systems?” (New private business interviewee)

“The process is too complex – finding the tenders first, then the bidding process.” (New private business interviewee)

While organisations welcomed PCS as a central point for accessing information about tendering opportunities, almost all queried why there was a need for two systems and were keen to see these consolidated into one system.

All interviewees voiced a need for the systems to be improved to ensure that they become more user-friendly and accessible to all sizes of organisations. Research participants were keen to see these systems simplified to make information quick and easy to find, with more user-friendly functionality and improved guidance.

These systems were also seen as a potential repository of organisational data which could be entered once (potentially annually) and drawn on by any buyers, meaning that the amount of information which had to be produced separately to respond to a tender would only be information specific to that tender. While some research participants recognised that Single Procurement Documents were an attempt to do this, they had also experienced these being used ineffectively – with information requests being duplicated elsewhere in the procurement process.

Insufficient early market engagement with potential bidders

Early market engagement is the process of a buyer meeting with or making information available to potential bidders ahead of a tender being issued.

According to our third sector and new private business interviewees, early market engagement between buyers and potential suppliers has a variety of benefits. For example, many interviewees felt that such engagement was an important way of ensuring that all interested organisations had equal access to tender opportunities. Early engagement was also seen as an opportunity to explore alternative approaches to procurement such as innovation partnerships or collaboration. Moreover, a significant number of research participants also felt that early market engagement was an important way of ensuring that tendering was the most appropriate way of commissioning services, and that the market engagement often needed to take place earlier in the pre-commissioning process.

“There needs to be someone specific to talk to for new businesses with new products. It is impossible to speak to someone, [even at] Meet the Buyer events. There is a need for a panel who meets, say, once a quarter specifically for new products and new businesses.” (New private business survey respondent.)

“There is much less early market engagement than is needed.” (Stakeholder)

While some organisations had attended Meet the Buyer events,^[19] feedback about how valuable these were was mixed and some interviewees felt that Meet the Buyer events often needed to happen more frequently. Some organisations also noted the challenge of feeling able to speak up at Meet the Buyer and other procurement-related events with competitors also present.

“It is hard for suppliers to speak up at Meet the Buyer events – they are a competitive environment.” (Third sector interviewee)

One interviewee from a new private business raised concerns about the barriers they had encountered trying to engage with the public sector about a new product they had designed. They had attended Meet the Buyer events, but had not found these to be an appropriate forum – this participant highlighted a need for tailored events or meetings for organisations wishing to pitch a new product.

Some research participants also raised concerns about lead-in times for tender responses being too short and suggested that greater use of Prior Information Notices would help businesses and organisations to plan ahead in advance of competitions going live. Many had experience of lead-in periods of four weeks or less and noted that this was often insufficient, especially if they wished to form a partnership for delivery.

“A four-week window is tricky, especially if you have three or four bids on the go. It is difficult to plan as you don’t know when an opportunity will come about. A Prior Information Notice would be useful. A six-week deadline would be better.” (New private business survey respondent)

Overall, there was a sense that much more could be done to ease access for new private businesses (particularly SMEs) and third sector organisations and that early market engagement and stronger relationships between buyers and suppliers are needed, while longer lead-in times for bid preparation would be helpful.

Consideration for improvement: Consider opportunities to engage earlier, and more meaningfully, ahead of tendering opportunities.

Lack of transparency in relation to short-listing of suppliers

A number of research participants raised concerns about a lack of transparency within procurement processes, and felt that this was a barrier to them making effective decisions with regards to whether to tender for contracts.

Interviewees raised particular concerns about a lack of transparency in relation to which organisations were selected for Quick Quotes processes, and how to ensure that their own organisation was included in a list of potential suppliers. Some also noted concern about the challenges new businesses and organisations face because they are not yet on the radar of public sector organisations and may not get opportunities to tender through, for example, Quick Quotes.

Some interviewees felt strongly that buyers should only include organisations in shortlists that genuinely had a chance of being awarded the contract – some were concerned that some organisations were included just to make up numbers. For example, a few interviewees representing small companies fed back that they had to compete against huge multi-nationals, against which they felt they had no chance.

“Put me in a ring with people who are comparable to me. We were beaten to a job by a very large accountancy and consulting firm even although they are three times as expensive as us”. (Third sector survey respondent)

Consideration for improvement: Consider potential for greater transparency around selection for Quick Quotes, and for support to organisations to improve chances of selection for Quick Quotes.

Ineffective tender assessment processes

Many research participants felt that the tender assessment processes they had experienced to date did not always result in the best provider being selected, or in the best outcomes for individuals (in the case of service contracts). Some interviewees had experience of poor assessment of tenders and had been put off bidding again, for others this dissuaded them from bidding in the first place.

There was a strong feeling that the assessment processes are driven by a fear of breaching procurement rules, resulting in a risk-averse approach to decision–making. Some research participants felt that assessment processes were too punitive – with reports, for example, of tenders being eliminated from the process because a page was missing.

Research participants also raised concerns about lack of consistency in assessment – noting that what scores highly for one client may not be sufficient for another.

“Undue caution around risk of being sued for not tendering properly but surely risk of not getting outcomes for services users is great?” (Third sector survey respondent)

Some interviewees felt that a points-based assessment should often be avoided in favour of engaging with organisations in a more collaborative process. We heard some reports of this beginning to happen in some places. Other interviewees felt that partnership working was not incentivised enough in the assessment criteria, with some feeling that this is a result of it being easier for a local authority to work with one large organisation.

Many research participants raised concerns about the lack of emphasis placed on local knowledge and experience within scoring processes and felt that this was undervalued and should be far more heavily-weighted relative to other criteria. Likewise, some people felt that previous relevant experience is not weighted heavily enough. However, there are challenges in addressing this as procurement rules preclude purchasing decisions being taken on the basis of the location of the supplier. Purchasing decisions are made on the basis of criteria that relate to the nature of what is being purchased as opposed to where it is being purchased from.

A few participants noted the importance of buyers ensuring that assessment processes assess based on the requirements of their tender. One organisation, for example, which provides counselling support to children, reported being marked down because they had not offered to engage with families, but this was not a requirement of the tender.

Some research participants felt that more careful consideration of cost/quality ratios was required, with one observing that “If the price weighting is 40% then the quality is almost irrelevant.” This is because costings are often scored on the basis of the cheapest price being awarded the maximum points possible on price. Some organisations are of the view that if maximum points have already been awarded to one organisation for 40% of the overall score, the chances of then being awarded a high enough score on the quality part of the assessment to beat this bidder were low. Depending on the nature and scale of the contract, this could dissuade organisations from bidding.

We heard from one stakeholder that there has been some progress in improving third sector input into tender assessments – for example, by involving third sector representation on tender assessment panels. There was a desire noted for this to happen more frequently in order to ensure that third sector organisations’ views and perspectives are properly valued and understood within assessment processes.

Consideration for improvement: Consider opportunities to ensure that local supply of goods and services are appropriately valued in assessment processes, without breaching procurement rules.

Insufficient lotting of contracts

Lotting is the sub-division of larger contract requirements into a number of smaller ones – usually by factors such as geography or some other type of sub-category. It can be beneficial in a number of ways including spreading risk for the buyer, improving access to contracts for smaller or more specialist organisations, and creating more competition – providing it is done within procurement rules.

Many research participants reported that lotting was not yet happening enough, although there was recognition that there is now more lotting of contracts than previously. A significant number of research participants noted that the large scale of contracts and the insufficient use of lotting continued to be a barrier to their engagement with public procurement. This was particularly the case for smaller companies or third sector organisations that may be able to fulfil one but not all elements of a contract.

“We experienced one contract that included the provision of IT support, inter-personal skills, health and safety, and change management. We were able to deliver parts of the contract but not all of them and as the contract was not broken down into lots, we were unable to bid. This is lazy procurement – they did it in this way because it would be easier to manage.” (Third sector interviewee)

This interviewee also pointed out the greater risk in appointing one company to deliver on all of these services.

Research participants were positive about the progress that some Centres of Expertise are making in terms of lotting, however they also raised concerns that local authorities in particular are not making the most of lotting opportunities, with some concern that this is related to costs.

Interviewees emphasised the importance of local authorities making the most of opportunities for lotting. They also emphasised the importance of Scottish Government actively encouraging this type of approach – the perception is that at the moment it is up to individuals in local authorities to make it happen.

Consideration for improvement: Explore opportunities to encourage greater use of lotting, where this is appropriate.

Ineffective use of framework agreements

Framework agreements involve multiple suppliers bidding to become part of a framework under which a range of contracts may then be individually let. Typically these are put in place for extended periods of time and can enable a longer-term relationship to be established between suppliers and buyers. Usually, the requirements of bidding for contracts within a framework are less onerous than bidding for individual contracts.

While some research participants noted the potential value of being on a framework agreement, a number of research participants had had poor experiences of these. Despite putting in a significant amount of time and effort to bid to be on a framework agreement in the first place, a few participants that had been successful in joining framework agreements reported that they had not been awarded any contracts through them.

“We have been on a framework for two and half years now and have never been offered any work.” (New private business interviewee)

“We haven’t had anything through the framework we are on. People have come to us directly, outside the framework, to commission work so the framework is not working.” (Third sector interviewee)

One organisation also noted that there can be an administrative burden involved in being on a framework agreement even if they have not been awarded a contract – some buying organisations, for example, require suppliers on their framework agreements to submit progress updates even when they have not been awarded any contracts.

One organisation also raised concerns about a framework agreement they had been part of in which organisations on the framework were ranked, with the highest-ranking organisation then getting first refusal of contracts. This effectively meant that the lower ranking organisations did not have an opportunity to deliver any of the contracts as these were taken on by the highest–ranking organisation.

“Framework agreements can be good but ranking successful organisations within these doesn’t work at all.” (Third sector interviewee)

Lack of feedback from public bodies

Receiving feedback from buyers in the event of an unsuccessful bid can be helpful in supporting organisations to improve the quality of future bids. Some organisations we interviewed reported that feedback was sometimes non-existent, and that when it was available, it often lacked detail.

“Suppliers who are unsuccessful don’t get enough feedback. Especially in the case of smaller contracts.” (Stakeholder)

“We have asked for feedback in the past, and got it, but it was never very detailed or helpful.” (Third sector interviewee)

Some also questioned the veracity of some of the feedback – believing that a contract is often awarded based on price, or that buyers already had a company they wanted to award a contract to regardless of the quality of the other bidders.

Consideration for improvement: Explore potential to improve frequency and quality of feedback to unsuccessful bidders for lower value contracts not currently covered by any legislative requirement to provide feedback.

Short duration of contracts

Some research participants raised concerns about the duration of contracts awarded through public procurement. Among these participants, there was a sense that contracts were often short, usually a maximum of two to three years in duration. Some felt this was not long enough and made the burden of re-tendering too great. This seemed to be a particular issue in relation to health and social care contracts where services were often delivered over a long-term period but contracts were limited to, for example, three years.

Some interviewees also reported that the often short duration of public contracts created challenges in relation to organisations’ financial sustainability. Continually having to bid for short-term contracts makes it very challenging for organisations to project what their future income will be. This has a knock-on effect on decisions relating to size of workforce, office space and a range of other factors. As a result, staff in these organisations are often on short-term contracts that need to be regularly reviewed based on contracts won and can result in a lack of job security for staff and significant turnover within the workforce. This can then have a direct impact on the quality of service provided.

“Constant and repeated re-tendering makes it very hard in relation to contracts for support workers and it creates barriers around financial sustainability.” (Stakeholder)

“Longer-term contracts are important for contractors and the people they support." (Stakeholder)

“We have been trying to train procurement officers in designing contracts that are more flexible, have sustainable hourly rates etc. We have had good attendance.” (Stakeholder)

Low contract values

Low contract values were frequently cited as a barrier to engagement in public procurement – in two respects. Firstly, organisations observed that if contract values were too low, they often spent a disproportionate amount of time in preparing bids which meant it was not financially worthwhile to bid.

Secondly, a number of organisations raised concerns about the hourly rates that buyers were prepared to pay for specialist services. In particular, this applied to contracts within the local government sector, with local authorities often being perceived as unwilling to pay a fair and realistic rate for high quality service provision. This does not necessarily mean that suppliers working with other parts of the public sector do not also face similar issues around low contract values, or that these issues disproportionately affect the local government sector. Rather, these findings likely reflect the fact that, as indicated in Chapter 2, most of our research participants had contracted with this sector.

“Local authorities run competitive tenders to cut the price. It is a race to the bottom.” (Stakeholder)

“Every time we have bid we’ve had very good feedback but undercut by larger private companies who quote below what would be economically viable.” (Third sector interviewee)

This was raised as a particular issue in relation to social care, where local authorities have a single hourly rate that is often too low to be attractive to companies and organisations to bid for. Some interviewees reported that payment rates are leading to market failure in some areas with insufficient numbers of care providers bidding to deliver contracts and services not being offered. This was considered to be a direct consequence of the rates that local authorities will pay.

Suggestions for change included paying a range of hourly rates based on a range of tasks, and paying for some specialist support at a higher rate. Another suggestion provided was that if fixed hourly rates were to be specified, then these needed to be a true, independently measured hourly rate which was consistent with the principles of being a Fair Work employer.

“Our local area has realised [that paying rates that are too low is resulting in too few care providers in our area] – they are going through a transformation process just now, shifting from paying by hours and minutes and moving towards more personalisation and better quality.” (Third sector interviewee)

A few research participants also felt that in order to effect change in relation to budgets, there was a need to re-frame the argument for senior leaders – for example, emphasising to them the long term benefits of healthy eating when considering the price and quality of school lunch contracts.

Onerous terms and conditions

All research participants, across both new private businesses and third sector organisations, and across a range of different sectors, reported that one of the biggest barriers to participation in public procurement were the requirements imposed by buyers during the bidding process. These were varied and included requirements related to insurance, accreditations, minimum IT requirements, community benefits clauses, financial standing, and requirements to address a range of policy issues such as Fair Work and climate change. Many of these were a barrier for smaller organisations and companies in particular but some large organisations also raised concerns about some of these issues. Stakeholders confirmed these concerns.

We describe these further below:

Insurance requirements

Some organisations raised concerns about the costs of putting in place insurances, such as public liability insurance, which were prohibitively high for some organisations and a significant additional financial cost for others. While there was recognition of the importance of these, some organisations reported that the level of insurance required often bore no relation to the value or nature of the contract being awarded.

Quality accreditations

Some interviewees reported that significant time and cost was associated with getting accreditation for quality control systems. This was raised as a particular concern by some newer businesses and third sector organisations.

“Accreditations like ISO 9001 are a real challenge. For new businesses and organisations this constitutes a large upfront financial commitment and can take time to acquire.” (New private business interviewee)

IT requirements

Many organisations we interviewed referred to the ever-increasing requirements placed on them in relation to IT security. In recent years, some public bodies have required bidders to be Cyber Essentials-accredited. Participants felt that this accreditation was effectively mandatory, and again constituted a significant additional cost for small businesses and organisations.

Turnover requirements

For some tenders, research participants reported that minimum turnover levels are often still too high for some organisations and that these high turnover requirements subsequently exclude them from bidding. Again, these were not always considered to be proportionate to the size of contract being tendered.

Output-based payments

Some contracts continue to pay out on the basis of concrete outputs delivered, and do not tend to make upfront payments to cover costs until the first outputs are delivered. A number of third sector research participants highlighted the challenges with cashflow that result from this. However, we acknowledge that addressing this issue may prove challenging, given that the Scottish Public Finance Manual advises public bodies not to pay contractors in advance of delivery unless there are exceptional circumstances.

Policy-related requirements

Organisations reported that in recent years, requirements within tender documents to address policy–related issues have become increasingly frequent. For example, research participants reported having to regularly respond to questions about their organisation’s approach to climate change actions – which while being recognised as important, were frequently described as irrelevant to the contracts being commissioned, and onerous for small businesses and organisations to address.

They also reported having to show how their organisation met the Fair Work First policy and research participants noted that being required to pay the real Living Wage could become a barrier to the third sector’s ability to deliver within the available budgets.

Demanding community benefits clauses

A number of research participants had experienced bidding processes which required them to demonstrate that they were delivering community benefits in some form. Some organisations reported that these can be challenging and costly to accommodate but are sometimes scored and mandatory and therefore impossible to avoid. There was a clear sense that these were not always proportionate or relevant to the contract value or content and were considered to be a significant financial commitment for a small company or organisation.

One third sector interviewee felt that third sector organisations should be exempt from delivering community benefits clauses “since charities already operate in the public interest”. This is interesting given that third sector organisations, by nature, are often designed to provide added social value – in turn, this suggests that there is scope for Scottish Government and the wider public sector to better-promote the use and importance of community benefit requirements to the supplier base, where they are relevant and proportionate.

Financial requirements

A few organisations reported that the financial requirements specified in tender documents can sometimes be excluding – particularly for smaller or new organisations or companies. For example, sometimes buyers require audited accounts to be produced for the last three years which can exclude new businesses and organisations. In addition, some buyers require organisations to be VAT-registered, which not all small companies are at the outset and this can again present a barrier to bidding.

"It is difficult to get through the financial standing checks when you are a new business.” (New private business interviewee)

Track record requirements

Some research participants felt that the demands in relation to demonstrating prior experience were sometimes still too high, although others felt that prior experience needed to be more heavily weighted.

"The requirements of a tender can be onerous and negate a level playing field. Social enterprises will not always have the required track record." (Stakeholder)

GDPR requirements

Some research participants raised concerns about meeting the requirements of GDPR, data security, and staying up to date with the rules.

Consideration for improvement: Consider opportunities to reduce onerous terms and conditions and ensure these remain proportionate to contract type and value.

Lack of a robust appeals process for lower value contracts

Some form of appeals system is an important component of any robust and transparent assessment process. It ensures that bidders can challenge decisions taken, with the expectation that a decision may be overturned if it was found to have been flawed. Some research participants expressed a view that there was currently no effective means of challenging decisions taken within public procurement processes, nor any recourse for bidders if poor or unfair decisions were made.

Currently, organisations do have the right to legally challenge decisions made in relation to higher value contracts at £50,000 or over for goods and services and £2 million for works. For contracts of any size, bidders also have the option of raising issues directly with the public body, or of approaching the Scottish Government’s Single Point of Enquiry (SPoE) service.

The SPoE service offers organisations bidding for public contracts an opportunity to raise concerns and seek advice. However, while the SPoE can provide additional guidance, clarification and advice, it does not have formal powers to investigate concerns or change decisions made by buying organisations. It can only work with organisations on an informal basis to try and resolve any concerns.

Few research participants were aware of either their right to legal recourse (in the case of higher value contracts) or of the SPoE, suggesting a clear need for increased awareness raising of each of these mechanisms.

Those that were aware of the SPoE were concerned that it was not meeting the needs of organisations. The service is considered by those that were familiar with it to be ineffective as it has no power to reverse decisions taken by public bodies in procurement processes.

These research participants were keen to see the SPoE given greater authority to overturn decisions made by public bodies and extend its role to provide a wider range of services. For example, a few stakeholders felt that the SPoE could be an important source of data if it were to publish information related to the type of queries it received, and the action taken. They cited the value of data provided by the Public Procurement Review Service (PPRS) in England, which has legislative backing. However, we understand that while the PPRS can require contracting authorities to give reasonable assistance to its investigations, it cannot force a contracting authority to award a contract, or refrain from awarding a contract, to a particular bidder. Any recommendations it may make to contracting authorities are non-binding. The PPRS regularly publishes data related to action that had been taken to address enquiries, and it provided bidders and stakeholder bodies with valuable information about issues arising within their sector. It was felt that functions such as this would be a valuable addition to the responsibilities given to the SPoE. This would clearly require significant consideration given the additional capacity that this would necessitate.

More generally, research participants also noted that organisations do not want to disadvantage themselves by complaining directly to buying authorities and there was a concern that a buying authority could not be objective, that the appeal was unlikely to result in any action (and certainly not likely to result in a change of decision), and that bidders may tarnish their reputation by complaining which could impact on future procurement decisions.

Consideration for improvement: Work towards ensuring that the SPoE is more visible and facilitate greater transparency of its work. Find means to enable it to make better use of available data to share lessons learned.

Conflicts of interest

A small number of interviewees identified conflicts of interest as a barrier to participation in some areas. This issue was raised specifically in relation to organisations which were acting as both commissioners of contracts and deliverers of other contracts. A few interviewees also raised concerns about conflicts of interest on the part of organisations that provided capacity building and business support to bidders, but who themselves could potentially bid against those organisations for contracts.

Buyer and supplier pre-conceptions

During our interviews with third sector organisations and new private businesses, and drawing on feedback from the survey, it became clear that there remain a number of preconceptions that are hindering access to public procurement. These preconceptions exist on the part of both public bodies and suppliers – in particular, they include suppliers’ fears of participation based on misconceptions about processes; and perceptions on the part of some buyers in the public sector that the third sector does not have the experience or capacity to deliver large contracts.

Third sector and new private businesses’ preconceptions about public procurement

Within the third sector in particular (but not exclusively), research participants reported that fear of the tender process amongst many organisations is a barrier to their participation. This was described as being in part due to personal experiences of attempting to engage with Scottish public procurement and having found it challenging, but for many it was felt to be about their perception of Scottish public procurement based on hearsay. Stakeholders reported that this has resulted in some organisations ruling out engagement with public procurement on the basis that it is too difficult.

“There is a fear of the tender journey.” (Stakeholder)

Some stakeholders reported a need for a cultural shift to take place and for more third sector organisations (particularly social enterprises) to recognise the need for bidding for contracts to become part of their funding model. This was considered to be vital to their longevity, within the context of reducing amounts of grant funding.

Public sector preconceptions about the third sector

Some research participants raised concerns that public sector organisations view the third sector as not having the capacity to take on larger contracts and, in some cases, that third sector organisations are simply not on the radar of public sector organisations at all.

“There is too much suspicion that small charities are not able to do the work properly. The perception of small charities needs to change. We need a positive boost. We are not taken seriously as a sustainable business.” (Third sector interviewee)

“The Third sector is seen as not having the capacity to deliver larger projects. Up against [the] commercial sector we do not get [the] recognition deserved.” (Third sector survey respondent)

“We have a strategic plan to move towards 40% being funded through public contracts. However, our local authority is very poor at engaging with local third sector organisations – it is like we don’t exist as far as the council is concerned – despite taking our Board to meet senior staff.” (Third sector interviewee)

While some organisations and stakeholders we interviewed felt that procurement practice has improved in recent years, many research participants felt that current public procurement processes were still often unsuited to third sector organisations and that different approaches to procurement needed to be considered. In particular, they highlighted challenges around procurement processes which favour the lowest bidder and which as a result can exclude organisations that work with the hardest to reach clients. They also made reference to capacity issues in terms of both experience and levels of staffing required to prepare competitive bids which is explored in further detail elsewhere in this chapter.

These organisations advocated for a more collaborative, partnership approach to procurement, where more extensive collaboration is enabled prior to tender processes taking place. We return to this issue in the next chapter.

“The procurement environment is too competitive and cut–throat for many third sector organisations. The lowest bidder wins, terms and conditions are onerous, smaller organisations are squashed out. There needs to be more equitable partnership working and involvement of our sector in service design and commissioning.” (Third sector interviewee)

“Larger contractors need to be negotiated with companies to include the use of third sector in a main contract. Procurement need to view themselves as a service and enabler rather than as an initiator.” (Third sector interviewee)

Consideration for recommendations: Explore opportunities to enhance understanding of the role of the third sector in the delivery of public contracts.