Fair Work Convention Construction Industry Inquiry report: SG response

Procurement

1 – Quality Weightings and Fair Work Criteria

FWC Recommendation 1

All contracting authorities should seek to maximise quality weightings and fair work criteria should be given a robust weighting within the quality dimension. Fair work weightings should not be lower than 10% of the contract and it must be possible for low scores on fair work to impact whether a tender is won or lost.

SG Response

Status: Partially accept: maximising/ robust weightings accepted; minimum value of 10% not accepted.

Response:

We are developing practical guidance to help public bodies to include fair work requirements in their contracts. We will consult with FWC and other stakeholders in development of this guidance. This should help maximise achievement of fair work through procurement.

Public Bodies are required to consider and act on opportunities to improve economic, social and environmental wellbeing in their contracts. We expect how this is done to be tailored to the individual procurement. In some instances, this will constitute a condition of contract; for example, mandating the real living wage is a pass/fail requirement in relevant Scottish Government contracts; in other instances it will require to be weighted. Weighting should be allocated on a case-by-case basis alongside other relevant factors including workmanship, materials and health and safety.

Implementation / Progress:

The draft practical guidance was shared with public, private and FWC stakeholders on 30 October 2023 for their feedback. We plan to have this in place by end March 2024. Once updated we will update the Client Guide to Construction Projects.

2 – FW Training for Construction Contracts

FWC Recommendation 2

Training in fair work should be mandatory for all project commissioners and managers overseeing construction contracts. Training should be provided by those who have demonstrable expertise on fair work and support an understanding of what constitutes positive and stretching fair work commitments by contractors.

SG Response

Status: Accept for SG

Response:

Practical guidance for procurement practitioners will be updated and Fair Work First e-learning will be created and form an accessible part of a blended approach to Fair Work and procurement alongside the other guidance in the sustainable procurement tools. This should increase the confidence contracting authorities have in addressing the seven Fair Work First criteria through procurement.

The Client Guide to Construction Projects will be updated to reflect the requirement to undertake training in fair work and how to access the training material. It will link to guidance and e-learning being developed across all forms of procurement by the Scottish Procurement and Property Directorate.

The e-learning development will follow publication of practical guidance on Fair Work and Procurement.

Implementation / Progress:

The draft practical guidance was shared with public, private and FWC stakeholders on 30 October 2023 for their feedback. We plan to have this in place by end March 2024. Once updated we will make the appropriate updates to the Client Guide to Construction Projects.

3 – Rates in Procurement Contracts

FWC Recommendation 3

Guidance should be reviewed to ensure it supports the use of collectively bargained rates within procurement contracts and short best practice guidance should be developed for construction procurement that highlights positive examples of fair work practice in the construction industry. Current wording around avoiding the use of umbrella companies should be retained.

SG Response

Status: Accepted

Response:

In transposing the last set of Public Procurement Regulations, Scotland took a distinct approach from England, Northern Ireland and Wales in transposing the regulation that allowed enforcement of collective agreements. Regulation 19 of the Public Contracts (Scotland) Regulations 2015 identifies the requirement to comply with collective agreements. Updated statutory guidance was laid before Parliament on 30 May 2022. We have backed this approach up with policy, including model clauses, to facilitate its inclusion in public contracts.

We are in the process of updating practical guidance on Fair Work and procurement. The new guidance will be additional to the SPPN and will reinforce the opportunities to exclude bidders from procurement competitions and to terminate contracts where bidders or suppliers respectively have not complied with environmental, social and employment law, including any relevant collective agreements. It will also reinforce the importance of contract management in-line with Best Practice found in the Procurement Journey.

Construction contracts should be clear in that where collectively bargained rates exist, they should be utilised as a minimum (or “at least”).

Implementation / Progress:

The draft practical guidance was shared with public, private and FWC stakeholders on 30 October 2023 for their feedback. We plan to have this in place by end March 2024. Once updated we will make the appropriate updates to the Client Guide to Construction Projects.

4 – Trade Union Access to Sites

FWC Recommendation 4

Contracting authorities should set an expectation that trade unions have access to workplaces on all public construction contracts in line with the aspiration of the HS2 approach. Access should be facilitated throughout the supply chain.

SG Response

Status: Accepted

Response:

Scottish Government agree that trade unions should have access where requested by the workforce and expect suppliers delivering public contracts to adopt and demonstrate appropriate fair work practices, for all workers engaged in delivering a public contract. There will need to be some consultation with Industry and contracting authorities in relation to Union access to construction sites and as such once we better understand the proposed policy, it can be discussed via the Construction Leadership Forum. This topic will be taken forward as a part of the Construction Leadership Forum working groups. Update to Client Guide will follow on from agreement reached.

Implementation / Progress:

To ensure this recommendation is fully implemented, we propose to consult with employers and trade unions via the Construction Leadership Forum (CLF) and Construction Accord Procurement/ Supply Chain Management Working Group to develop an agreed understanding and expectation.

Once this is in place we will implement it formally through an appropriate update to the Client Guide to Construction Projects.

5 – Guidance on FW Connections

FWC Recommendation 5

Guidance should be updated to make clearer the connections between fair work, sustainable procurement duties, community benefits and discretionary and mandatory exclusions. The guidance should support more use of discretionary exclusions when a contractor or sub-contractor has breached its labour law obligations.

SG Response

Status: Accepted

Response:

In light of the extension of Fair Work First criteria and changes in our approach on payment of the real Living Wage in contracts, we updated our statutory and are updating other, practical guidance. The updated guidance will reinforce the connections between the sustainable procurement duty, fair work, and community benefits and will reinforce the option to exclude bidders and terminate contracts on the basis of breaches of social, environmental and employment law.

Implementation / Progress:

Updated statutory guidance was laid before Parliament on 30 May 2022. The draft practical guidance was shared with public, private and FWC stakeholders on 30 October 2023 for their feedback. We plan to have this in place by end March 2024. Once updated we will make the appropriate updates to the Client Guide to Construction Projects.

6 – Collectively Bargained Rates in Contracts

FWC Recommendation 6

All contracting authorities should include adherence to relevant collectively bargained pay rates as a condition of contract. Introducing this a clause within industry standard form contracts is an efficient, proportionate and transparent way to implement this and to ensure that it is applied throughout the supply chain.

SG Response

Status: Accepted

Response:

The model clauses created to drive compliance with environmental, social and labour law forms part of Scottish Government’s standard Terms and Conditions of contract. We have shared with others to facilitate this practice across the public sector in Scotland.

We have facilitated adherence via a model clause that was developed in 2016 and circulated via an SPPN at the time.

Regulation 19 of the Public Contracts (Scotland) Regulations 2015 identifies the requirement to comply with collective agreements: “A contracting authority must include in each public contract or framework agreement such conditions relating to the performance of the contract or framework as meet the requirements mentioned in paragraph (5) and are reasonably necessary to ensure that the economic operator complies with environmental, social and employment law, including any relevant collective agreements or international law measures.”

Implementation / Progress:

We are in the process of updating the practical guidance on Fair Work and procurement to reflect:

• our new stance on mandating the real Living Wage for those involved in delivering public contracts
• the extension of Fair Work First criteria from 5 to 7

The new guidance will be additional to the SPPN and will reinforce the opportunities to exclude bidders from procurement competitions and to terminate contracts where bidders or suppliers respectively have not complied with environmental, social and employment law, including any relevant collective agreements.

It will also reinforce the importance of contract management in-line with Best Practice found in the Procurement Journey.

Once this is completed we will update the Client Guide to Construction projects accordingly.

7 – Monitoring FW delivery in Contracts

FWC Recommendation 7

In every contract in which fair work questions were asked at the framework stage, tender stage or both, effective contract management by the contracting authority must take place to ensure that the response provided by the contractor is delivered in practice

SG Response

Status: Accepted

Response:

The Procurement Reform (Scotland) Act 2014 requires public bodies to set out in their corporate procurement strategy how they will comply with the sustainable procurement duty and their approach to payment of the living wage in procurement. Public bodies are then required to report on their compliance with their strategies through an annual procurement report. These requirements are expected to provide better information on how the public body is using its procurement activity to achieve its wider aims including Fair Work.

Best practice guidance on contract and supplier management is available in the Procurement Journey (Contract and Supplier Management | Procurement Journey).

For Scottish Government, our current process is broadly as follows:

• contract awarded by Scottish Government Procurement Team
• contract Handover doc completed by Buyer containing key contract information (term, value, KPIs FW, CBs etc). This is given to the customer / contract manager
• Customer / Contract Manager is also provided with the Contract Management Handbook which explains the basic principles of contract management their role
• Customer / Contract Manager is instructed to complete (at least), the mandatory elements of the Scottish Government Contract and Supplier Management training programme

All of the above steps / documents make clear to the CM that they are responsible for delivery of the contract (including FW).

The forthcoming Civil Engineering Framework will be implementing a performance regime to monitor contract and framework performance – this will include Fair Work. This is expected to be up and running in 2024.

Implementation / Progress:

The Civil Engineering Framework is expected to be up and running in 2024.

Guidance in the Client Guide to Construction Projects will be reviewed to ensure that clients include any fair work requirements of the contract in their active management of the contract delivery.

Monitoring can only be applied to the public contract as the Employer has no locus in Business to Business contracts down the supply chain.

8 – Fair Work Charter in Contracts

FWC Recommendation 8

All contracting authorities should be signatories to a Fair Work Charter collectively agreed with employers and trade unions. The Scottish Government should also facilitate the appropriate industry leadership group/forum, in negotiation with trade unions, to develop a single charter that sets out principles for advancing fair work in the industry. The single Fair Work Charter should then be used as a pass/fail condition within all construction procurement exercises in Scotland to ensure appropriate fair work standards are applied throughout the supply chain.

SG Response

Status: Accept in principle

Response:

The Construction Accord, collectively agreed with employers and trade unions and launched in October 2022 commits to the following relevant outcomes:

• we provide high quality and fair work for everybody working in the sector and look after their physical and mental health, safety and wellbeing
• we have a diverse workforce and pipeline of talent with capacity and competency fit for current and future industry needs
• our sector is attractive to a diverse range of new entrants to the workforce

We are now taking this forward via the CLF and relevant Working Groups to develop an agreed understanding and expectation that fair work standards will be a condition of contract – with tender submissions required to acknowledge commitment to such.

It would not be acceptable to make being a signatory to a charter a condition of participation in procurement exercises.

Procurement competitions should be open for anyone to apply. A company remote from Scotland would not necessarily be aware of such a charter, therefore to make being a signatory a condition of participation in the procurement exercise would be unfair. A better option for implementation of this recommendation would be to make it a condition of contract for whoever wins the competition – with tender submissions required to acknowledge commitment to such. Alternatively, a signed copy of the charter could be required as part of a tender submission.

Implementation / Progress:

CLF will be used to facilitate this process and explore industry appetite. Once this is in place, we will implement it formally through an update to the Client Guide to Construction.