Reserving contracts for supported businesses: SPPN 04/2017

Reserving contracts for supported businesses

Purpose

1. This note provides advice on reserving contracts for supported businesses. It contains information on:

• determining whether an organisation meets the definition of a supported business for the purposes of public procurement legislation
• identifying supported businesses
• monitoring and reporting

Background

2. The ability for public bodies to restrict participation in a tender exercise to supported businesses has been part of national procurement legislation since 2006. The provision within the legislation which makes this possible is also referred to as "Reserved Contracts".

3. As a result of changes introduced by European Directive 2014/24/EU and given effect in Scotland through the Public Contracts (Scotland) Regulations 2015 ("the Regulations"), the criteria to participate in a Reserved Contract tender exercise has been amended to a new two-part test. The first part of the test is that the main aim of the bidding organisation must be to socially and professionally integrate disabled or disadvantaged people, and the second part is that at least 30% of the employees of the bidding organisation must be disabled or disadvantaged persons. A bidding organisation that meets both parts of the test is known, for the purposes of public procurement legislation, as a Supported Business.

4. The Procurement Reform (Scotland) Act 2014 ("the 2014 Act") similarly includes a provision allowing public bodies to restrict participation in the tendering process to Supported Businesses only. It also places a requirement on a public body to:

• consider, before starting a procurement competition, how, by the way in which it conducts the procurement process, it might facilitate the involvement of Supported Businesses and
• (assuming the public body considers it may facilitate involvement of Supported Businesses) then to act in a way to best bring that about

5. Under the 2014 Act, the definition of a Supported Business and supported employment programme is the same as under the Regulations.

Determining whether an organisation meets the definition of a supported business for the purposes of procurement legislation

6. As stated above, the definition of a Supported Business is twofold. Firstly, a bidding organisation must have the social and professional integration of disabled and disadvantaged persons as its main aim. This may be evidenced in the organisation's Articles of Association (in the case of companies) or such other constitutional documentation that governs the organisation. It is within the discretion of individual public bodies to determine whether a bidding organisation has demonstrated the requirement that it has as its main aim the social and professional integration of disabled and disadvantaged persons.

7. Secondly, the definition requires that at least 30% of the employees of the organisation are disabled or disadvantaged. Regulation 2 of the Public Contracts (Scotland) Regulations 2015 states "disabled", in relation to a person, means a disabled person within the meaning of the Equality Act 2010 and, in relation to a worker, means a disabled person who is a worker (see Annex A for relevant section of the Equality Act 2010).

8. There is no single authoritative definition of 'disadvantaged' in any of the articles in the European procurement directives. The European Commission has made it clear in correspondence with the Scottish Government that there are no immediate plans to provide such a definition. The Scottish Government suggests therefore that public bodies should draw on recital 36 to the EU Public Procurement Directive 2014/24/EU which describes disadvantaged persons as:

'The unemployed, members of disadvantaged minorities, or otherwise socially marginalised groups.'

9. Public bodies may also find it helpful to consider the definition of a 'disadvantaged worker' given in the European Commission Regulation (EU) No 651/2014 of 17 June 2014. The definition is provided at Annex B.

10. To meet the second part of the definition, organisations are only able to count employees or workers when setting out whether they meet the 30% threshold. Volunteers and those doing unpaid work placements or internships therefore do not count towards meeting the definition of a supported business. Organisations can count staff for which remuneration or part of remuneration is funded through a third party (for example, DWP Work Choice programme).

11. The precise proportion of employees qualifying as disabled or disadvantaged may fluctuate over time. Public bodies may therefore want to satisfy themselves the organisation has in place HR and resourcing policies that illustrates its overall commitment to employing staff from the target group. It is important that a disproportionate burden is not placed on organisations or public bodies in reviewing staffing levels.

12. In order to be considered a Supported Business eligible to bid for a Reserved Contract, organisations will need to fulfil both parts of the definition. It is within the buyer's discretion whether self-declaration is sufficient through the European Single Procurement Document or whether to require organisations to submit evidence they meet the two-part definition of a supported business.

Identifying supported businesses

13. Given the change in definition there is an opportunity for Supported Businesses to participate further in procurement, and the coming years may see an increase both in organisations who qualify as supported businesses for public procurement legislation purposes and in services and goods provided by supported businesses. Buyers may therefore want to carry out some market research as part of the procurement strategy to determine whether that particular procurement exercise is suitable to be tendered under reserved contract procedures. There are a number of ways in which a buyer might go about doing so.

14. For example, the advertising portal, Public Contracts Scotland (PCS), alerts buyers to the existence of Supported Businesses that could possibly deliver their contract. When public bodies enter the commodity they wish to purchase, the portal will highlight Supported Businesses which could potentially meet that requirement.

15. Public bodies may also wish to refer to the on-line register of supported businesses which is incorporated into a 'refreshed' Ready for Business 'RfB Third Sector Register' that is embedded within Partnership for Procurement website P4P and maintained by P4P.

16. It is important to note that both PCS and the on-line register of supported businesses rely on suppliers self-declaring whether they meet the definition and therefore does not constitute evidence in its own right that a supplier is a supported business in terms of the legislation. Buyers will need to carry out their own due diligence to satisfy themselves the definition has been met.

17. There is also a framework agreement for Supported Businesses put in place by the Scottish Government. This framework includes four lots, covering: furniture and associated products, document management; textiles/personal protective equipment; and signage. Further information on how to place contracts through the framework can be found in the buyers' guide. The current framework agreement expires on 11 September 2018.

Action

18. Public bodies are encouraged to use the Reserved Contracts process where it is appropriate to do so. They should familiarise themselves with the goods and services provided by Supported Businesses and consider, when planning a procurement exercise, if a contract or framework agreement should be 'reserved'.

19. It is in the interest of public bodies to monitor how they are facilitating supported businesses in their procurement activities as it will help bodies evidence their compliance with the sustainable procurement duty and annual reporting requirements set out in the 2014 Act.

Monitoring and reporting

20. Under the 2014 Act, public bodies with an annual procurement spend equal to or greater than £5 million are required to publish an annual procurement report. One of the mandatory elements to be included in the report is "a summary of any steps taken to facilitate the involvement of supported businesses in regulated procurements during the year covered by the report". Statutory guidance on procurement strategies and annual procurement reports can be accessed from the Scottish Government website.

Dissemination

21. Please bring this SPPN to the attention of all relevant staff, including those in agencies, non-departmental public bodies and other sponsored public bodies within your area of responsibility.

Contact

22. If you have any questions about this SPPN, please contact us at scottishprocurement@gov.scot