Review of Scottish public sector procurement in construction

7. Capability and capacity

7.1 Overview

7.1.1 In Chapter 4, we set out our recommendations on the need for the political will for change to be supported by appropriate leadership, drive and accountability, whilst in chapter 6 we set out some of the fundamentals of the approach to market. Successful implementation of all of these recommendations, however, relies on improving the capability and capacity of those organisations which are procuring construction work, as well as ensuring that a range of suitable tools and resources are available to support them

7.1.2 Underpinning many examples of poor practice is the fear of challenge, which prevents some bodies from using the full bandwidth of procurement options permitted under law. Related to this, we have received representations that the current EU Directives have been in some ways 'gold-plated' in Scots law - an allegation which the Scottish Government strenuously disputes. As there is a new EU Procurement Directive on the horizon, we have not investigated this area in any detail, but would instead urge all parties to work together to minimise the scope for any such concerns - real or perceived - to arise from the transposition of the new directive.

7.2 People and skills

7.2.1 Not every organisation lacks construction procurement expertise - on this point we want to be very clear - many public sector organisations in Scotland have tremendous experience and expertise.

7.2.2 A problem, however, is that this experience and expertise appears to vary significantly from one organisation to the next. Another problem is that we can only report what 'appears' to be the case from the many stakeholder interviews we have carried out - we cannot populate the spectrum from good to poor practice, because whilst Procurement Capability Assessments ( PCAs) ^[32] are used to evaluate annually how organisations undertake their procurement generally, they are not sufficiently fine-tuned to be able to assess the specifics of construction. Furthermore, not all organisations which spend public money on construction currently participate in the PCA process.

7.2.3 It is generally accepted that any organisation which is spending public money has an obligation to spend that money well and to seek maximum value for money. In our opinion, this means that any organisation using public funds (in part or in entirety) to procure construction work must deploy appropriately skilled people to do so - with no exceptions.

7.2.4 We recognise though that there is no one-size-fits-all prescription to make sure this happens. It is clearly not reasonable to expect an organisation which is an occasional procurer of relatively straightforward construction work to retain the same in-house capability and capacity as one which is a regular procurer of very complex work. It is also important to recognise that, whilst procuring authorities should in general take a forward looking strategic approach to assessing their in-house capability and capacity, they should also, as part of each individual procurement's business planning stage, undertake an assessment of the adequacy of their skills and expertise to manage that specific procurement, which may have specialised characteristics which go beyond the team's capability.

7.2.5 So, if not retained in-house, that capability must be accessed somehow. Collaboration, sharing of services and using other expert public construction procurers as consultants are some potential options for filling this gap. Examples of varying practices in this area range from Aberdeen and Aberdeenshire Councils sharing the services of a Head of Procurement to Fife Housing Association Alliance Lead Developer Partnership, where Kingdom Housing Association provides new build housing procurement services for the four local RSLs.

7.2.6 Our recommendations in this area suggest a number of steps to improve capability. Some of these are practical in nature, others require more fundamental behavioural changes. Collectively they are intended to start addressing the weakest performers by establishing a minimum level of expected competence. Some organisations will already meet this - that is commendable, but should not be taken as a signal that they can relax their standards; we fully expect the strengthened construction procurement policy function within the Scottish Government to promote an agenda of improving standards.

7.2.7 In any change programme, relationships are key, and we could not help but be struck by the internecine battle that appears at times to be raging between procurement professionals and construction professionals in some parts of the public sector.

7.2.8 We heard some remarkably candid comments from construction professionals - on both the client and supplier side - about procurement professionals supposedly "taking over" construction. These can perhaps be summarised by the complaint, which we heard more than once, that having "someone who only knows about buying paperclips" being responsible for complex construction projects was a recipe for "disaster".

7.2.9 Procurement professionals for their part often reported that they had been unable to make the same sorts of inroads into the procurement of construction works in their organisations as they had into the procurement of goods and services, complaining of a lack of ability to influence the procurement strategy. One told us that:

"…the problem in a construction environment is that by the time it gets to the procurement unit, it's a fait accompli…the procurement team are just being handed something to go and buy, and are not able to bring their skills to bear".

7.2.10 Whatever the cause of this mutual distrust, it is manifestly self-defeating and must be brought to an end. Some organisations, such as Renfrewshire Council, have managed successfully to align their procurement functions with their construction functions. Such models of joint-working should be non-negotiable.

7.2.11 Recommendation:

Public sector bodies involved in construction procurement must have access to the right mix of professional procurement and construction expertise to ensure that infrastructure is procured effectively. It may not be appropriate for each organisation to retain this expertise on a permanent basis. It may instead be achieved through collaboration with other bodies - either on a project-by-project, or a longer-term basis.

7.2.12 Guidelines on the necessary blend of required skills should be developed. Procuring authorities should confirm that they have assessed their capability against these guidelines and that they have the capability and capacity to carry out construction procurement or outline the alternative collaborative arrangements through which they plan to achieve this capability.

Procurement Capability Assessments

7.2.13 If an organisation is to improve its performance and ensure that it deploys the right skill set on a project - drawing in support from elsewhere if necessary - it needs firstly to understand the expertise it has at its disposal, and the baseline from which it must improve. It is also important that there is some way of measuring progress in the improvements being made at an organisational level.

7.2.14 There is no need to re-invent the wheel to achieve this. A system of annual Procurement Capability Assessments ( PCAs) has already been in place in Scotland since 2009. These assessments address how well individual organisations are carrying out procurement activity, looking at issues such as the leadership given to procurement within the organisation; how the organisation develops its procurement strategies and specifications; how it manages contracts; and how skilled procurement professionals are deployed.

7.2.15 The PCA has been instrumental in driving and measuring improvements in procurement capability across the Scottish public sector, with an increase in the overall national average PCA score from 35 per cent in 2009 to 62 per cent in 2012.

7.2.16 The structure and approach of the PCA has also won recognition beyond Scotland. Recently the Welsh Government adopted it as the basis for their approach in assessing procurement capability, and we understand that it has been adopted as the standard assessment tool across higher education in England.

7.2.17 The PCAs are designed to cover all procurement activity undertaken by participating organisations. However, whilst the basic principles underpinning PCAs are sound, some additional criteria need to be added to ensure that they adequately cover construction, which we do not believe they can do effectively at the moment.

7.2.18 The use of PCAs also needs to be widened. At present, not all organisations to which the public procurement regulations apply undergo these assessments. We believe that any organisation responsible for construction procurement has an obligation to do so effectively and should therefore participate in this scheme.

7.2.19 Recommendation:

The existing PCA framework should be developed to ensure that it adequately assesses, reports on and helps to improve organisations' ability to procure publicly funded construction. Those carrying out the assessments should be suitably qualified to do so and all organisations procuring construction projects with public funding should undergo procurement capability assessments.

7.2.20 In order to implement this, we believe that the PCA process should be developed to deal appropriately with construction procurement, including separate recording of construction-specific elements. The revised process should be introduced for the 2015 round of assessments. Those carrying out the construction procurement element of the PCA should be suitably qualified to do so.

7.2.21 For those organisations which are not currently subject to PCAs, systems for implementing capability assessment will have to be discussed and agreed with the parties involved - for example the Scottish Government's Housing Supply Division would need to agree this with the RSL sector.

Skills for tomorrow

7.2.22 Procurement and construction are ever-evolving fields and the public sector is expected to deploy new and more commercial skills. In our stakeholder interviews, project, programme and contract management were three key areas in which procurers of publicly-funded construction were often reported to be lacking - either in resource, or access to appropriate skills.

7.2.23 We need to be able to identify both the current skills profile of those working in public sector construction procurement and their future needs. The current Scottish procurement competency framework has been praised by the Chartered Institute for Purchasing and Supply, and is a good basis. It may need some amendments, however, to ensure that it fully addresses construction issues. The strengthening of PCAs should also go some way to helping with this.

7.2.24 We have considered whether some form of formal approach to learning such as a skills academy for construction procurement professionals would be desirable. In England, those involved in the very largest construction projects are provided with management training by the Saïd Business School. Concern at the lack of expertise in construction procurement has been raised with us repeatedly by stakeholders and we recommend that a learning programme for construction procurement be established. This programme would provide an appropriate blend of learning in procurement and construction professional disciplines, including project, programme and contract management.

7.2.25 Additionally, we believe that creating communities of best practice should be a key priority in ensuring longer-term capability and capacity within the public sector. The potential for creating a "mentoring pool" should be explored to allow those more experienced and capable procuring authorities to share their knowledge and learning and, more importantly, support others to improve their procurement decision making and delivery.

7.2.26 Recommendations:

A current and required baseline of skills in construction procurement should be established.

A strategy should be developed to ensure those needs are met through both formal learning and mentoring, building as appropriate on the Scottish procurement competency framework.

Consideration should be given as to whether a structured approach to delivering appropriate learning - such as a Skills Academy approach (virtual or otherwise) - would deliver some or all of the required benefits.

7.2.27 Guidance and expertise should be sought from academia and the relevant professional bodies in implementing these recommendations.

7.3 Tools, systems and guidance

Procurement Journey Guidance

7.3.1 The management of risk and the fear of challenge has been a constant theme in our interviews with stakeholders. Public sector bodies are very aware of the complex body of procurement legislation, regulation and case law, under both European Union and Scots law, but we believe that these rules are too often used as an excuse for public authorities for poor procurement behaviours.

7.3.2 Understandably, public authorities are anxious to ensure that their procurement practices are not challenged by unsuccessful bidders, with all the attendant direct costs and delay which such challenges entail. However, in some cases this has led to procurement processes and costs of procurement for clients and bidders which are wholly disproportionate to the quantum of the planned spend. Over-elaborate processes can actually achieve the opposite of what is intended by creating less transparency and increasing the risk of challenge.

7.3.3 Many public sector stakeholders have reported a perceived lack of central guidance on construction procurement. Throughout our report, we have highlighted a number of specific areas where we think additional guidance should be developed.

7.3.4 A very great deal of guidance does already exist, however, in the form of the Scottish Construction Procurement Manual. This has the potential to be a tremendous source of information. However, it is not in an easily accessible format, and due to resource constraints, has not been comprehensively reviewed and updated for some time.

7.3.5 We see great value in ensuring that clients procuring with public monies have a comprehensive set of tools at their disposal to help them navigate their Construction Procurement Journey. In response to this we have outlined an overarching recommendation related to guidance, with various strands detailed beneath it.

7.3.6 Recommendation:

New standardised guidelines setting out best practice on the end‑to‑end construction procurement process should be developed and maintained. As far as possible, the guidelines should be written in plain English and should be in an accessible digitised form, based on the example of the procurement "Journey" for goods and services. The guidelines should be capable of being used in a proportionate way for projects of different sizes and risk profiles as well as being adaptable for different sectors.

7.3.7 Whilst there may be some merit in then making use of this guidance mandatory, we understand that this is not easy to do. We do believe that adherence to the standards set out in the guidance, as a minimum, should be measured as part of the Procurement Capability Assessment process.

7.3.8 Sub-ordinate to this over-arching recommendation, we have a number of related recommendations which set out matters of good practice, and should be reflected in this guidance.

Our related recommendations are:

a) Good practice guidance on those elements of bids which should and shouldn't be scored and on the focus to be given to quality and whole life costing in the scoring should be developed.

Concerns were raised with us by both clients and suppliers around the need for greater clarity on the scoring and weighting, particularly of quality criteria, within bids. There was a strong sense that, although a lot of time and effort is often spent on quality aspects of bids, these aspects were then rendered almost meaningless through the high weighting given to price. Conversely, it is also important that if the quality scoring has a higher bearing on the outcome of the tender process, then those elements are suitably monitored and delivered as part of any successful bid.

b ) Public bodies should rightly seek to assure themselves of the competence and skills of bidders. This, however, should be done through asking for appropriate experience - as indeed is current Scottish Government policy - rather than necessarily asking for exact experience of similar project delivery within a short number of years (for example "Supply three examples of community halls which you have built in the last five years").

The practice of always asking for exact experience might exclude perfectly competent companies who have not had access to particular projects due to local circumstance or it might result in the appointment of a company which has delivered similar projects at a national or international level, but locally has not. It may also lead to a narrowing of choice, expertise and experience in the construction sector.

All construction projects are different and specific requirements for experience or expertise across the bidder's project team may vary. However, overly-prescriptive requirements have been quoted to us by many suppliers as an unnecessary barrier placed in the way of opportunities to qualify or bid for work.

Clients may feel that they are being as robust as possible in stipulating required experience, but examples of companies which have successfully delivered a £5 million library facility but are then barred - by the same client - from bidding for a £4 million community hall project because they haven't built one or a number in the last few years are blatantly nonsensical. Not only does this sort of behaviour reduce competition, it puts barriers in the way of companies gaining experience and disadvantages SMEs, particularly those in remote and rural areas where SMEs are a vital part of the sustainability of the local economy, and may be in the position to tender the best price.

We recognise that some construction projects are highly specialised in nature - whether through design requirements or construction techniques - and therefore do require precise experience to be demonstrated, but public sector clients should think carefully before specifying their experience requirements to ensure that the field they select from is the strongest it can be.

c) The ability of a company to deliver a contract should not solely be measured by the use of turnover thresholds. Where annual turnover is part of financial criteria it should be limited to no more than two times the annual contract value as outlined in the EU commission's proposal. Further guidance should be developed on other valid and proportionate methods for assessing financial strength and risk.

Again we have received many representations from stakeholders, particularly SMEs, who have been excluded from contracts by requirements to have a level of turnover which seems disproportionately high when the size of the contract is considered.

Whilst turnover clearly has some - very blunt - role to play in evaluating whether a firm is capable of delivering a given project, it is not a measure of financial stability. Indeed, this was recognised in May 2012 by SPCD:

"Turnover may indicate in broad terms that a bidder has the capacity to deal with the volume of work but it is rarely, if ever, a good indicator on its own and public bodies are strongly recommended to take a more rounded, commercial approach". ^[33]

d) To the extent possible within the full scope of the law, including as may be amended by the new EU Procurement Directive and Procurement Reform Bill, contracting authorities should take the prior performance and behaviour of bidders into account when awarding contracts. Guidance which ensures compliance with legislation should be developed.

Much frustration has been expressed to us about a perceived lack of clarity in what consideration can be given to previous good or bad performance when awarding new contracts. Clients are fearful of challenge and contractors feel that the poor performance of their peers is being ignored when selection criteria are being considered. Transparent procedures should be developed which allow clients to feel confident in their use but also ensure that suppliers feel that measures are fair and not overly punitive. This ties in with our recommendations on good performance and contract management.

e) The Scottish Government should reissue its existing guidance to the public sector on how to deal with abnormally low tenders.

Stakeholders, both client and contractor, have raised concerns regarding abnormally low tenders or "suicide bidding". Public sector clients are placed in a difficult position in assessing the deliverability of contracts at low prices, whilst seeking the best value for the public purse. Of course a low tender may be a perfectly legitimate way for a contractor to seek to gain experience of a new area of work, for example. But instances have been quoted to us of low tender prices being submitted, only for the client then to experience a project littered with delays and adversarial contract relations, with resultant claims for extra payment. Further updated guidance on how to deal with low tenders was identified as being a priority.

f) Guidance should be developed which assists contracting authorities to carry out successful pre-market engagement as part of a construction project.

We highlight in section 6.2 the need for more pre-market engagement to take place. We are told that one of the reasons for this not happening as much as it should is that contracting authorities are wary of being seen to favour certain companies, and risking a challenge to their process. More developed guidance on how to carry out successful pre-market engagement within the bounds of the law was signalled to us as something which would be welcomed.

g) Contracting authorities should always make feedback available to both successful and unsuccessful bidders at PQQ and ITT stage. Feedback should be timely, and a model of good practice, building on existing sources, such as the Scottish Suppliers' Charter ^[34] , and legislative requirements, should be developed.

Another source of great frustration for industry is what is often perceived as a lack of meaningful (if any) feedback on the merits of their tenders - although it should be noted that some examples of very good practice were also highlighted to us. Clients have told us that the fear of feedback being used to challenge the process can sometimes inhibit their genuine desire to give helpful feedback, as can a lack of time. The best examples which we have seen will provide a useful basis for the development of the new model of good practice.

h) If not already established, public sector procuring authorities should work together to develop forums with locally-operating construction firms which would meet on a regular basis and include economic development teams and construction procurement staff to discuss the pipeline of work, issues and opportunities, with a view to building greater understanding, transparency and improved processes and practice.

There are some examples of these forums (such as Fife and Forth Construction Forums working jointly to deliver a core programme of events) currently operating and we see them as a crucial piece of the jigsaw in helping to improve communications between the client and industry side at a sub-national level. Sharing of information and best practice, opportunities for two-way feedback on procurement practices and skills and training are just some areas where we see a real opportunity for value to be added.

i) A formal support mechanism should be developed to help SMEs understand how to compete for public contracts.

Whether through a combination of forums as outlined above, mentoring pools or improved feedback there is a need to help smaller companies understand the expectations placed on them when competing for public contracts. This coupled with other recommendations in the report should help to allow them to compete on contracts which they are able to deliver.

Public Contracts Scotland ( PCS)

7.3.9 The use of the Scottish Government Public Contracts Scotland ( PCS) portal is currently optional but from data gathered we understand that over 1,800 works contracts were advertised through PCS between April 2012 and March 2013. Some clients retain their own procurement portals, and some commercially-operated services provide a contracts-notification service to firms for a fee. PCS is free to use for both advertising and looking for publicly-funded contracts.

7.3.10 To ensure consistent sight of publicly funded construction contracts we see a real value in all projects which are advertised to be advertised on the PCS portal. The provisions of the Procurement Reform Bill proposed by the Scottish Government would mean that all works contracts worth at least £2 million, and supplies and services contracts worth at least £50,000 would have to be advertised on PCS. We very much support this proposal. Where supply chains have not been developed by contractors, we would promote the advertising of these opportunities through PCS also.

7.3.11 We do, however, recognise that there is scope for PCS to continue to be improved and categorisation is one area which could be further developed and evolved. One example would be the system for identifying potential private sector interest in new contract opportunities. Stakeholders have commented on the current categorisation leading to them being notified of opportunities which are not related to their business focus.

7.3.12 Of course, there is a counter-argument that the more specific the categorisations are, the greater the chances of a firm missing out on notification of a contract which it could have delivered. There is clearly a balance to be struck here.

7.3.13 Some concerns have been expressed to us about the speed and user‑friendliness of some aspects of the PCS operating system, and we recommend that further investigations and user feedback should be gathered to ensure that the recommended increased adoption of the use of PCS can be accommodated and high levels of system performance maintained.

7.3.14 Recommendations:

a) Practice should be standardised by making the use of Public Contracts Scotland mandatory when advertising publicly-funded construction contracts

b) Contractors on major projects should be encouraged to advertise sub-contracts on PCS where they have not already fully identified their supply chain

c) Product categorisations used on PCS should be reviewed to ensure that they are as accurate as possible for construction projects.

d) SPCD should assess the current performance of the PCS systems through user feedback to ensure high standards are being achieved and are capable of being maintained following adoption of wider usage.

Pre-Qualification Questionnaires ( PQQs)

7.3.15 Almost all of those we have spoken to, whether client or supplier, have expressed their frustration with the lengthy, resource intensive and costly process of devising, completing and evaluating PQQs. The effort being expended appears to be wholly disproportionate to the value currently being realised from the process.

7.3.16 Consistency in the types of and ways that information is requested in PQQs is sadly lacking across many sectors and sometimes even within the same contracting body. All of this leads to much duplication of effort, with limited added value. We have received consistent comments to the effect that the system rewards expertise at filling in forms rather than underlying competence. Larger companies, with the resources to do so, are said to be engaging or employing resource specialising in writing PQQs. We believe that competence is more important than accreditation and the system must allow public sector clients to be satisfied of competence.

7.3.17 Estimates of the average cost of completing a PQQ process can vary significantly, but the administrative cost to suppliers is undoubtedly substantial. The Scottish Building Federation ( SBF) conducted a Major Contractors Survey in June 2013 which showed on average that major contractors are spending almost £1000 per £1 million of public contract value. Anecdotal evidence gathered by SBF also found that an average of 15 PQQs are submitted per public contract awarded. There are also significant costs to the client in evaluating PQQs. Clearly further evidence would be helpful in this area to quantify properly the cost to the public purse but from the findings of this limited sample size and from anecdotal evidence given to us, it is clear that a large amount of time and money is being expended on the PQQ process both by clients and contractors. This adds further weight to the need for establishing a better way to manage the process and its considerable related costs.

7.3.18 The PQQ is supposed to ensure that only eligible bidders with the requisite financial and technical capacity and capability are invited to proceed to the tendering stage. However, many companies are now avoiding bidding for work in sectors that use PQQ processes as they cannot afford to invest the initial required outlay with little chance of being successful.

7.3.19 PQQ (and ITT) stages can place unnecessary, disproportionate and over‑prescriptive qualifying barriers in the way of SMEs. These barriers not only restrict access to work, but may in turn reduce the available pool of expertise for some public sector construction projects by narrowing companies' portfolios of work.

7.3.20 Stakeholders have commented to us that what helps companies to progress past the PQQ stage is often not delivered when works are finally awarded, and so careful consideration of the requirements of a PQQ and monitoring of their delivery needs to be undertaken to ensure a continued fairness from start to finish in the process.

7.3.21 Work has been ongoing for some time by SPCD, in conjunction with industry and other public sector representatives, to develop a standard PQQ and this has recently been launched and made available through PCS Tender. The standard PQQ allows procuring authorities to select from a defined library of question sets grouped around standard themes such as economic and financial standing and quality management, and reflect the PAS 91:2013 ^[35] standard.

7.3.22 The intention is that the PQQ should be built from this standard base of information in a way which is proportionate and relevant, rather than including all the questions which could possibly be thought of. The small number of mandatory questions required by PAS 91 are highlighted in the standard PQQ and an attempt should be made to keep other questions to the absolute minimum needed. The ongoing application of this principle in practice should be monitored and reviewed.

7.3.23 There is also recognition that requirements differ for contractor and consultancy services. The development of improved functionality for consultancy services is recommended and linkages should be made between SPCD and key representative bodies such as the Royal Incorporation of Architects in Scotland ( RIAS) and the Royal Institution of Chartered Surveyors ( RICS) to improve the applicability of the current library of questions for projects relevant to their professions. This has already proved to be effective for civil engineering contractors with the Civil Engineering Contractors Association ( CECA) Scotland having been at the forefront of working with the Scottish Government to improve and develop the standard PQQ.

7.3.24 Suppliers can choose to provide responses to all potential questions at one time, or simply to provide responses as the various questions are asked in different PQQ exercises in which they are participating. Once a response has been provided, it is stored on the standard PQQ system, and when next responding to a PQQ, suppliers need then only to review their previous responses to ensure their currency, and answer any project-specific questions.

7.3.25 Our recommendation is that the standard PQQ is used by all public sector authorities and RSLs, if including a PQQ stage as part of their procurement process. We do, however, recognise that the standard PQQ requires continual further refinement to be made even more suitable for construction usage once embedded and operating. This could include linking to recognised accreditation schemes and improving the process for gathering and storing references - referee fatigue being an issue which can stop businesses qualifying for opportunities to tender. In implementing any such further development, however, caution would need to be exercised to ensure that firms are not forced into joining expensive accreditation schemes in order to compete.

7.3.26 Recommendations:

a) Additional guidance for the public sector should be developed to ensure that the standard PQQ is used in a way which is proportionate and relevant to the needs of construction procurement, and practices monitored to ensure that this principle is achieved. The standard PQQ should continue to be refined and, where a pre‑qualification stage is being used, its use should be mandated.

b) SPCD, along with bodies such as RIAS and RICS, should work collaboratively to develop consultancy/specialist services suites of standard questions for the standard PQQ. Other requests for specialist suites of questions should also be considered and assessed by SPCD as they arise.

Quick Quote

7.3.27 Below the threshold values from which the EU Directives apply, contracting authorities have greater latitude in how they award contracts, although they must still "follow a procedure leading to the award of the contract which is sufficient to enable open competition and meet the requirements of the principles of equal treatment, non-discrimination and transparency". ^[36]

7.3.28 Of course, the threshold above which the Regulations apply is significantly lower for consultancy services contracts than for works contracts ^[37] (if they are awarded separately from the main works contract).

7.3.29 Quick Quote currently operates as part of PCS to allow the procurer to select a smaller number of suppliers to price the work they require. Each organisation's use of Quick Quote varies, but current guidelines for central government recommend that it is used only for contracts worth less than £50,000. At a little over one per cent of the threshold above which the Public Contracts (Scotland) Regulations 2012 apply, we believe that this is far too low for works contracts.

7.3.30 Increasing the guideline limit for contracts awarded through Quick Quote would allow the number of bidders for construction work to be restricted and negate the need for a full PQQ and/or ITT process for a relatively small works contract. It would still allow the market to be tested albeit on a more limited basis.

7.3.31 The provisions of the Procurement Reform Bill proposed by the Scottish Government apply to works contracts worth at least £2 million, and to supplies and services contracts worth at least £50,000. These provisions include a requirement to advertise such contracts on Public Contracts Scotland. We would encourage public bodies to consider using Quick Quote for contracts which are worth less than these amounts, although each body will clearly still need to undertake an assessment of the potential benefits and risks of such an approach for any given contract.

7.3.32 Indeed, it is important that contracting authorities still satisfy themselves that they are being transparent and fair when operating a Quick Quote process, and that selection of those invited to quote should be subject to a transparent rigorous process which is regularly reviewed. Guidance should be developed to cover this change more fully and outline good practice.

7.3.33 Recommendations:

a) The use of Quick Quote should become the norm for works contracts worth less than £500,000, and public bodies should consider using Quick Quote for awarding construction-related contracts worth less than the proposed thresholds in the Procurement Reform Bill (£2 million for works and £50,000 for supplies and services).

b) When using Quick Quote, public bodies should be able to demonstrate a clear audit trail to contract award, to ensure transparency and accountability.

PCS Tender

7.3.34 Many of the observations on PQQs could similarly be applied to the ITT stage. Disproportionate resources can be expended by both clients and suppliers at tender stage, depending on the procurement choices made by the client.

7.3.35 As with PQQs, the average cost of tender processes is also difficult to quantify, given the level of project specific detail required, and variances stemming from the procurement approach being pursued. CECA estimates, however, that for a contract of approximately £4 million in value, the average cost of tendering is approximately £9,000 if the client has designed the project, or £18,000 if the contract is design and build. And on top of this is the potential PQQ cost already incurred. The Scottish Building Federation estimated recently that once shortlisted for a contract, contractors spend an average of almost £3,700 per £1 million of contract value to complete the procurement process ^[38] , although this is based on a limited sample. We have not attempted to conduct our own survey of this point, but we accept that it is clearly an issue of concern to industry.

7.3.36 Continuing in the vein of ensuring consistency of approach we see great value in using the PCS Tender functionality to ensure that the tendering phase of procurement is also mandated through the use of PCS Tender. This would ensure end to end coverage of the procurement process through one free, central, publicly available portal - PCS. The scope for using standardised question sets for tender procedures along the lines of the standard PQQ should also be promoted.

7.3.37 Recommendation

The use of PCS Tender should be mandatory for creating ITTs, using standard question sets as the basis, and submitting tender returns - whether individual contracts or the establishment of frameworks.

7.3.38 The elements discussed above relating to Public Contracts Scotland can be illustrated as follows: