Procurement: annual report 2022 to 2023

3. Summary of Scottish Government procurement activity

3.1 Overview

Through the reporting period the Scottish Government procurement teams, mindful of a number of challenges such as inflationary pressures, the cost of living crisis and the conflict in Ukraine, tailored their support, taking direct action to work with public, private and third sector organisations, to inform and embed sustainable procurement policies to maximise the impact of procurement, encouraging an increased focus on wellbeing and inclusive economic growth together with value for money.

This also included ongoing work across industry to support the post-pandemic recovery.

Our Procurement Strategy 2022-2024 set out our key policies and how we would monitor them and the following sections explore our approaches and achievements against this in reporting year 2022-2023.

3.2 Good for businesses and their employees

'Maximise the impact of procurement to boost a green and inclusive economic recovery. Promote and enable innovation through Procurement.'

By 'business' we include any organisation or enterprising entity engaged in commercial, industrial, or professional activities including, voluntary, charity, for-profit and non-profit entities.

This section also provides a summary on our work to enable innovation through procurement.

We remain committed to improving access to public contracts for all organisations, and throughout the reporting period continued to review and refine the suite of tools available to both public bodies and suppliers, as well as working actively with the supply base to understand challenges and work collaboratively to provide solutions.

3.2.1 Access to Contracts

Our national Supplier Journey provides free online, easy-to-access guidance for suppliers on all aspects of bidding, from finding opportunities and preparing bids, to lessons learned, and additional support. The Procurement Journey provides free guidance for public sector buyers who procure goods, services and care and support services. Our Single Point of Enquiry offers an impartial and confidential service for businesses with any concerns about a procurement exercise carried out by a Scottish public body.

We continue to fund and support the Supplier Development Programme (SDP), an independent business initiative which delivers free training, online resources and guidance on how to prepare, submit and win public procurement bids. This includes training on tenders and bidding, using the national eCommerce solutions, and understanding frameworks, community benefits and sustainable procurement. 3,656 Scottish SMEs attended SDP training events in 2022-23.

We supported the SDP national and regional 'Meet the Buyer' events that bring suppliers and public sector buyers together. In total, 1,988 Scottish SMEs registered with SDP in 2022-23, bringing total cumulative registrations to 21,583 by 31 March 2023.

Our national eCommerce and Best Practice Shared Service offers a range of services and solutions which enable public sector organisations across Scotland and their suppliers to automate and streamline their business processes, from advertising contracts to paying invoices.

We continue to develop the PCS portal to make it easier for interested parties to access opportunities and the data shows that the number of users continues to increase. In 2022-23:

• 14,895 new public sector business opportunities were advertised.
• 18,079 suppliers were awarded public sector contracts through PCS.

3.2.2 Small and medium-sized enterprises (SMEs)

SMEs are an integral part of the business community in Scotland. We are committed to making it as easy as possible for SMEs, the third sector and supported businesses to bid for and win public procurement contracts and/or participate in local supply chains. The Sustainable Procurement Duty (part of the Procurement Reform (Scotland) Act 2014) requires public sector bodies to consider how they may facilitate the involvement of SMEs, third sector organisations and supported businesses in their procurement activity.

Although not every SME will be interested in contracting with the Scottish Government, many SMEs do continue to engage through our contracting opportunities and our data demonstrates that a significant percentage (51%) of our contracts are won by SMEs.

We openly engage with SMEs, through roundtables and procurement workshops, more detail on this can be found at Section 3.5.3.

Our spend with SMEs

Data from the the Hub shows that the Scottish Government's continued efforts to engage with SMEs are reflected in significant levels of spend with these organisations, as shown in the table below.

Table 1: Direct spend with SMEs supplying goods and services to core Scottish Government – 2019-20 to 2022-23^[3]

Financial Year	2019-20	2020-21	2021-22	2022-23
Spend with SMEs	120,561,842	105,957,790	174,133,835	380,427,467

• Of the £637 million core Scottish Government spend with suppliers, over £380 million (60%) went directly to SMEs, an increase of £206 million on 2021-22.
• Just over £154 million (24%) of the £637 million core Scottish Government spend in 2022-23 was spent with suppliers in Scotland. More than £125 million of that £154 million (81%) went to Scottish SMEs.

SMEs winning Scottish Government contracts and frameworks

We continue to develop our procurement strategies to make our contracts more accessible and provide opportunities for SMEs to bid for public sector contracts. As a direct result of core Scottish Government procurement activity,^[4] we awarded 148 out of a total 288 (51%) regulated contracts and frameworks to SMEs with a value of over £304 million.

In our collaborative national procurements we consider splitting up or 'lotting' larger-value contracts and frameworks into specialist or geographical requirements. We also consider placing multi-supplier frameworks in order to create other supply chain opportunities for SMEs wherever possible.

Case study: Techscalers – good for businesses and their employees

The Scottish Technology Ecosystem Review, commissioned by Cabinet Secretary for Finance & Economy, made recommendations to stimulate Scotland's 'Technology Ecosystem' to drive economic recovery, providing opportunities through jobs, tax revenues and economic innovation. There are ambitious objectives for the programme including creating, for the first time, a truly world-class national infrastructure to co-locate, educate and scale technology companies. There was a requirement for commercial education, mentoring, virtual support and the facilitation of a vibrant peer community.

In response, a procurement was undertaken to deliver this programme, a first in Scotland. The unique nature of the programme required the procurement team to work with stakeholders to translate the concept into a specification, Invitation to Tender and pricing schedule which was attractive to the market and which would generate income. Engagement with stakeholders, the author of the review, property experts, legal team, Scottish Enterprise and the market was undertaken via Requests for Information and supplier days.

An innovative approach to pricing was developed on complex elements including accommodation of students and incubating companies, hosting events, virtual and physical offices and income generation to offset costs. Management fee pricing considered different types e.g. virtual v physical community, types of staffing costs.

A seven-year contract with a value of £60 million was awarded to a Scottish SME, CodeBase. The contract is providing sustainability benefits and supporting new talent to enter into the tech industry in Scotland including, amongst others, through:

• developing existing and creating new educational relationships with schools and universities to deliver in‑person and online events and hosting visits.
• pursuing programmes such as internship programmes, with particular focus on those that support under-represented groups and those wishing to reskill into tech.
• identifying women within the network to act as role models and mentors and visit schools to talk to students about their journey and assist in identifying barriers to women to computer science studies with a view to making changes to further increase interest.
• identifying partners who can assist with improving the number of companies founded by people with protected characteristics, e.g. working with founders who are part of protected characteristics groups to better understand and work to remove these.

3.2.3 Third sector

The third sector, including social and community enterprises and enterprising charities, play an important part in the Scottish economy and in society more widely by contributing to economic growth, helping to improve people's wellbeing and supporting local communities. Social enterprises, for example, are businesses with a social or environmental mission, which re-invest their profits into fulfilling their organisational aims – which largely focus on empowering local communities and tackling socio-economic disadvantage.

We are continuing to deliver support to organisations tendering for contracts through the business support contract for the third sector, 'Just Enterprise' – a consortium of third sector organisations. The service provides free one-to-one and one-to-many training and advice on getting 'tender ready' as well as technical tender writing as part of a comprehensive range of business support services specifically tailored to the needs of the sector. Throughout the reporting period, we also continued to fund Partnership for Procurement to provide specialist support to third sector organisations wishing to form consortia to bid for public sector contracts.

Our funding of the Supplier Development Programme has continued to provide third sector organisations with access to the free training provided to tender for and win public sector contracts. Since 2017, more than 829 charities, community interest companies and supported businesses registered with SDP.

504 attendees from the same organisations have attended Meet the Buyer events.

Whilst all national collaborative framework agreements placed by the Scottish Government are open for use by third sector organisations to procure goods and services; work has been continuing with our co-delivery partners to grow engagement in public procurement across the third sector and to raise awareness amongst local and national public bodies of the significant additional benefits of doing business with the enterprising third sector beyond service delivery.

Case study: 'Business Support for the Third Sector in Scotland' contract

The enterprising third sector, which includes community enterprise, charitable trading and social enterprise and anyone trading for the common good, is at the heart of a wellbeing economy in Scotland and makes a key contribution to our ambitions of growing a wellbeing economy in Scotland, as set out in 'Scotland's National Strategy for Economic Transformation'.

The contract builds on the success to date of the Scottish Government's 'business support service' for third sector organisations which has been in place since June 2011. It is a central feature of the ecosystem of support for social enterprise in Scotland, and the redevelopment and redesign of business support is a commitment made in both the 'Social Enterprise Strategy for Scotland 2016-26' and 'Inclusive Growth through Social Enterprise: Scotland's Social Enterprise Action Plan 2021-24' through which the Scottish Government has specifically committed to:

• work with sector partners and national agencies to enhance the national ecosystem of support for new-start social enterprises and a pipeline of support throughout their journey.
• ensure that our mainstream business support services continue to recognise and appropriately support social enterprises, while at the same time enhancing specialist provision.

The service offers one-to-one advice from business advisors, as well as one-to-many workshops on specialist topics including impact measurement and market research. The contract is free at the point of access and is demand-led.

The contract was awarded in early 2023, and runs for four years with a value of £4.7 million and is served by a consortium of 10 providers comprised entirely of third sector organisations, including Community Enterprise in Scotland (CEiS) who are the lead service provider.

In addition to the outlined service provision, the service provider has committed to providing a wide range of community benefits, which include, one graduate apprentice and one modern apprentice who will support delivery of contract. Around 53 placement opportunities for students and work experience placements to gain experience in business support and social enterprise, including priority groups, and two opportunities, though informal apprenticeships, for graduate internships which may evolve over time.

3.2.4 Supported businesses

Supported businesses are defined as organisations whose main aim is to integrate disabled or disadvantaged people, both socially and professionally, and whose workforce comprises at least 30% disabled or disadvantaged people.

Spend by Scottish public sector bodies through our national supported business framework for the reporting period was over £2 million, bringing total spend through the framework since it was awarded to over £11.4 million. The Scottish Government has continued its collaboration with the British Association for Supported Employment (BASE) to increase the number of new supported businesses in Scotland. A regularly updated list of supported businesses (in addition to those on the national framework for supported business) has steadily increased the number of additional supported business available to the public and private sector. Work was underway during this report period on a Dynamic Purchasing System (DPS) for supported business that will be awarded in Q2 of the financial year 2023-24. This DPS will replace the current framework. The increased number of additional supported businesses available to the public and private sector are expected to be listed on this new DPS.

3.2.5 Prompt payment

Prompt payment of our supply chains, ensuring all suppliers and sub-contractors are paid on time, is critical to their sustainability, resilience and to Scotland's economic recovery.

The Scottish Government continues to lead by example, aspiring to a 10-day target for invoice payments, going beyond our contractual commitment to pay within 30 days. During the reporting period, the Scottish Government paid 98% of valid invoices within 10 days and 99% of valid invoices within 30 days.

Through our contract management arrangements, we monitor the percentage of valid invoices paid on time, our average payment performance, any complaints from contractors and subcontractors about late payment and we take action where appropriate.

In April 2022, we published SPPN 2/2022 updating our prompt payment policy. The update integrates prompt payment into the full procurement process and includes steps which can be taken to check payment performance of suppliers during bids for public contracts and guidance on monitoring prompt payment during the life of a contract. The update was welcomed by the Small Business Commissioner:

The UK Small Business Commissioner, Liz Barclay said: 'Small businesses are the backbone of the UK economy and they need certainty about when they'll get paid. Without that they can't invest, innovate, and thrive. I welcome the changes made by the Scottish Government to encourage quicker payments along the supply chain through procurement processes. The SPPN is another step along the way to eradicating the curse of late and unfair payments.'

We expect suppliers at all levels of the supply chain to adopt our prompt payment policy to ensure all suppliers are paid on time and get public spending injected into the economy as quickly as possible.

3.2.6 Health and safety

Our aim is to be a leading employer in the delivery of health and safety and to ensure the wellbeing of our staff and those that deliver our contracts. Our policy makes sure our contractors and subcontractors keep to the Health and Safety at Work Act 1974 and any provision made under that Act.

During this reporting period, there were no incidents that required to be reported to the Health and Safety Executive. For those contractors working on our premises, we meet monthly and review all relevant accident reports and any investigation findings.

Additionally, we encourage our catering and cleaning suppliers to use the in-house Contractor Safety Management System. This allows both suppliers and ourselves to check that subcontractors have the relevant security clearance, permits and qualifications.

3.2.7 Innovation

The new Public Procurement Strategy for Scotland underlines the importance of innovation through procurement to maximise the impact of procurement to boost a green, inclusive and wellbeing economy.

Scotland has a vision of becoming one of the most innovative small nations in the world over the next decade. This is key to our efforts to transform the economy and drive lasting improvement in Scotland's economic performance. The Procurement Reform (Scotland) Act reflects this by placing a duty on public bodies to consider how, through their procurement activities, they can promote and support innovation. Our Scottish Government Procurement Strategy 2022 – 2024 sets out how, through procurement, we aim to support the forthcoming innovation strategy, maximising the impact of procurement to boost a green, inclusive and wellbeing economy. Through this reporting year, work has progressed to further embed innovation in public sector procurement approaches.

Scotland Innovates and Public Contracts Scotland (PCS)

The cross-sectoral Procurement Innovation Leadership Group was established to improve the outcome of innovation in the Scottish public sector. Members of the cross sectoral group worked on the development of the national supplier‑led innovation service (Scotland Innovates) and improvements to processes and reporting for the procurement of innovation, developed in Public Contracts Scotland. Both developments were released during the reporting year.

Scotland Innovates

Scotland Innovates, our National Innovation service was launched in October 2022 at Procurex by the Minister for Trade, Innovation and Public Finance. This service is a joint collaboration between the Scottish Procurement & Property Directorate (SPPD) and NSS National Procurement, with help from other sectors – APUC (Higher and Further Education), Scotland Excel (Local Authorities) and Civtech (Scottish Government Innovation Accelerator). It has allowed businesses and members of the public to submit innovative solutions to the public sector. During the reporting period, Scotland Innovates received 66 submissions from suppliers, 29 targeted at non-health sectors and 37 targeted at Health.

Submissions have been mainly received from SMEs with most 'at or nearly at market'. They cover a wide range of areas from hydrogen production, water purification and the circular economy through to artificial intelligence in various health areas. Some of the submissions have been referred to competitive procurement processes, while others are either being considered for assessment or are being formally assessed for use in the public sector.

Public Contracts Scotland (PCS)

In December 2022, the Scottish Government, in collaboration with Scottish public sector stakeholders, introduced new developments to help promote and encourage innovation through public procurement. This included three new notices in PCS to help public bodies determine and develop innovative solutions; changes to the questions buyers are asked to complete in PCS when creating a contract opportunity notice and / or contract award notice for a regulated procurement to help support reporting; a new Research, Pilot and Innovation Register where information on any research and development (R&D) work or innovative projects can be added and innovation guidance for buyers on the Procurement Journey.

Transport

During 2022-23, the commissioning of the first electric fire appliance from Emergency One, based in Cumnock, Ayrshire came to fruition. This work is the result of collaborative work between Transport Scotland, Scottish Enterprise, Scottish Government and the Scottish Fire and Rescue Service.

Innovation case study: robotic assisted surgery

NHS Scotland is transforming healthcare with the expansion of robotic assisted surgery (RAS) systems across the country. RAS is a cutting-edge surgical procedure that uses advanced robotic technology to perform complex surgeries with more precision, flexibility and control than is possible with conventional techniques.

Scotland is leading the way by developing a global-first National Framework for the development of a RAS programme. Funded by Scottish Government and supported by territorial NHS boards, the RAS approach aims to improve healthcare outcomes, provide equitable access to care, and ensure the best use of services. By increasing the number of machines NHS also provides wider equity of access for patients across Scotland.

Improving outcomes for people

Early evidence suggests that the minimally invasive approach of RAS results in fewer complications and faster recovery time for patients, leading to shorter hospital stays compared to laparoscopic and open-surgery procedures. While existing robots of this kind in Scotland have been used for prostate cancer surgery and thoracic surgery, expansion in robotic systems means that NHS Scotland are now able to offer robotic surgery for colorectal, gynaecological, urological, thoracic and head and neck cancer.

Professor Campbell Roxburgh, consultant colorectal surgeon and Chair, RAS Clinical Reference Group said 'we have seen a halving in the length of time patients are required to stay in hospital in comparison to conventional key hole surgery as it is less invasive. In addition to this, it helps reduce complications, imaging assessments, blood transfusions, readmission rates and infections.'

Procurement of innovation

National oversight, robust governance and diverse cross-functional clinical and oversight groups working collaboratively and innovatively has been instrumental in the success of this 'once for Scotland' approach – delivering more for the people of Scotland. Collectively sharing best practice, learning, experiences, and informed decision making – we've overcome challenges and strengthened our healthand care services for the future.

Kenny Rees (National Services Scotland Category Manager) said "I am delighted that procurement have been able to work as part of a wider team to enable the development of robotic assisted surgery to help patients across Scotland."

The CivTech programme

CivTech sits in the Scottish Government's Digital Directorate with a mission to drive innovation in the public sector by collaboratively solving challenges to make people's lives better – and in doing so create generations of sustainable, high-growth potential businesses. Through a highly innovative but robust and fully assured process, CivTech develops solutions to public sector challenges using methodologies common in the private tech sector but rare in the public sector, including open challenge systems and tech accelerators. These approaches have done much to transform almost every sector in the world, and CivTech has adapted them, so they produce beneficial products and services for public sector and citizen use, and in doing so harnesses the potential of the 'tech revolution' for public good.

In May 2022 Ministers approved CivTech's 2022-26 Full Business Case, with up to £46 million committed to developing innovative products and services. CivTech Round 7 launched in June 2022 with 13 Challenges, followed by CivTech Round 8 in October 2022 with a further 6 Challenges, with a total committed spend on these standing at some £10.6 million. CivTech 8 also saw the launch of Innovate for Nature, an initiative which allows all the major stakeholders in the environment, climate, and biodiversity spaces to work together on common themes, creating projects with ever greater potential impact. Development of other 'Innovate for…' initiatives were started, including Innovate for the Economy and Innovate for Wellbeing.

CivTech's benefits have been independently assessed and indicate extremely high Value for Money (VfM) Return on Investment (ROIs) for both the economy [tax, NI, local economic impact] and to Challenge Sponsors, citizens, and society.

With the launch of Scotland Innovates, Scotland has two important routes to procure innovation. CivTech 'pulls' in innovation by launching Challenges, and Scotland Innovates allows 'push innovation' where private sector companies and organisations can offer potentially beneficial products and services. This two-way procurement system is a world first and offers significant advantages to the Scottish public sector.

3.2.8 Dynamic Purchasing Systems

We continue to adopt an innovative and flexible approach to the procurement of Digital Services through the use of Dynamic Purchasing Systems (DPS) in national collaborative agreements, covering Digital Technology Services, Telephony Services, Network Advice and Internet of Things.

The streamlined application process provides easier access to public sector contract opportunities for suppliers, including SMEs. Almost 70% of our DPS suppliers are SMEs and all are committed to paying the real Living Wage.

3.3 Good for places and communities

'Maximising the impact of procurement with strong community engagement and development to deliver social and economic outcomes as a means to drive wellbeing by creating quality employment and skills.'

We continue to use public procurement as a means to drive wellbeing by creating quality employment and skills and providing opportunities for Scottish SMEs, third sector and supported businesses to bid for public contracts and to participate in public sector supply chains.

3.3.1 Local economic development

Scotland has been pushing the boundaries to use public procurement to achieve wider economic and social outcomes for nearly two decades. This work aligns with the Scottish Government's commitment to Community Wealth Building. Community Wealth Building has five pillars:

1. Plural ownership of the economy

2. Making financial power work for local places

3. Anchor Purchasing

4. Fair employment and just labour markets

5. Socially productive use of land and property

Public procurement, as one of the five pillars, supports delivering this approach in Scotland and to an inclusive recovery; ensuring that we are using procurement to contribute to the National Mission for Jobs through community benefits and that we are maximising local spend and developing our supply chain to enable them to bid for and win public contracts.

We are focusing on what and where we can do things better or indeed do things differently, particularly on local practice, initially using the levers and flexibility afforded by existing policy and legislation. We have a long history of practice in this space and in February 2023 we published an Independent Review of activity over the last 20 years:

Scotland's Journey of Achieving Sustainable Procurement Outcomes (2002 – 2022)

The review compares sustainable procurement outcomes in Scotland with other parts of the UK. A clear research finding is that Scotland's success in achieving socio-economic outcomes is driven by a strong passion and commitment across all sectors.

Both the literature and the interview data appear to indicate that Scotland is regarded as a leader in the field of sustainable procurement, which is due to the ongoing dedication and commitment amongst the Scottish Government and key stakeholders to continue raising standards and maximising outcomes.

The report launch was accompanied by a supporting ministerial video. To share the key messages from the report, we presented its findings at a Heads of Procurement meeting. The new Public Procurement Strategy for Scotland demonstrates a continued commitment to this approach.

In line with our Programme for Government commitment (2021-22) to introduce legislation on Community Wealth Building, the Scottish Government conducted a public consultation to get views on how we might grow local wealth and give communities a greater stake in the economy. The consultation opened on 31st January 2023.

We have also provided sessions to a variety of procurement and non-procurement audiences to describe to them the opportunities and flexibilities afforded by the existing procurement policy and legislative frameworks.

Through our Supply Chain Development Programme we work to identify and progress public sector procurement opportunities for Scottish manufacturers in the supply chains supporting our net zero energy transition.

3.3.2 Community benefit requirements across core, sectoral and national contracts

We considered community benefits in all our regulated procurements during the reporting period and included these where it was relevant and proportionate to do so. We awarded 68 contracts which specifically included community and social benefits.

We currently have 114 live contracts with a combined value of over £1.8 billion within which community benefits are embedded.

As well as supporting thousands of existing jobs, during the reporting period our contracts created 177 brand-new jobs and 69 apprenticeships; delivered 312 work placements for school pupils, college and university students and 9 work placements for Priority Groups; and we enabled 18 qualifications to be achieved.

3.3.3 Provision of food – using contracts involving food to improve the health, wellbeing and education of communities in Scotland and promote the highest standards of animal welfare

Our national food and drink policy: Good Food Nation continues to promote buying healthy, fresh and environmentally sustainable food and catering. Putting our policies into practice, in August 2022, we awarded a new contract for Scottish Government catering services. The contract is for three years with the option for a further three one-year extensions. Under this contract:

• we operate our menu cycle based on fresh, seasonal produce.
• vegan options are provided in Scottish Government catering on a daily basis – sandwiches, seasonal fruit and veg, occasional vegan dishes on the main menu.
• food spoilage is recorded and we have seen a reduction in food waste since the contract commenced.

The welfare of farm animals, reared for products used in food provided in our catering contract and other public contracts, is generally safeguarded under legislation we have introduced to protect animals on farm and at slaughter.

At a national level, the Scottish Government funds the Soil Association to support the Food For Life Scotland programme across a number of local authorities. The programme aims to increase the amount of healthy, locally sourced food served by local authorities in schools and operates in 17 Scottish local authorities. As well as aiming to put more Scottish food on the table, the wider benefits include: educating young people about food and culture; reassuring parents and pupils that their school meals are responsibly sourced, and freshly prepared with trained cooks; promoting fresh, local and seasonal food, ensuring that at least 75% is fresh and unprocessed and; improving healthy options for pupils by putting more fresh fruit and vegetables, fish, and wholegrains on the menu.

We are also funding a pilot programme in the Glasgow area looking at how the Food For Life approach can be applied within the wider public sector, including further and higher education, care homes and leisure centres.

3.4 Good for society

'Ensure that we are efficient, effective and forward-thinking through continuous improvement to help achieve a fairer and more equal society.'

'We aim to boost sustainable and socio-economic outcomes through our investment in construction and infrastructure.'

3.4.1 Fair Work (including payment of the real Living Wage)

Fair Work is work that offers all individuals an effective voice, opportunity, security, fulfilment and respect. We want Scotland to be a world-leading Fair Work Nation by 2025. Scotland's success as an economy is built on a shared endeavour between workers, unions and employers.

We apply Fair Work criteria to contracts for public funding. The strategic ambitions for Fair Work are set out in the Fair Work Convention's Framework and we have set out actions in our Fair Work Action Plan. That Action Plan prioritises Fair Work First (FWF), which is our flagship policy for driving high quality and Fair Work across the labour market in Scotland.

The seven criteria are:

• appropriate channels for effective voice, such as trade union recognition
• investment in workforce development
• no inappropriate use of zero hours contracts
• action to tackle the gender pay gap and create a more diverse and inclusive workplace
• providing fair pay for workers (for example, payment of the real Living Wage)
• offer flexible and family-friendly working practices for all workers from day one of employment
• oppose the use of fire and rehire practices

It is our normal practice to include Fair Work provisions in our invitations to tender, where appropriate, and we consider these along with other relevant criteria as part of the tender evaluation process.

The real Living Wage

The Scottish Government is an accredited Living Wage employer and we pay at least the real Living Wage to all direct employees and to all contracted staff who regularly provide services on our sites. We routinely mandate payment of at least the real Living Wage to workers involved in delivery of our contracts. 95% of our suppliers with current live contracts have committed to paying at least the real Living Wage to staff working on our contracts, up from 94% in the previous reporting period.

In consultation with the wider public sector, business and trade unions, in May 2022 we published updated the Statutory Guidance under the Procurement Reform (Scotland) Act 2014. In particular, the statutory guidance now includes a chapter on Fair Work First requirements in procurement.

3.4.2 Climate change

How procurement policies have contributed to compliance with climate change duties

The Scottish Government is committed to using public procurement to contribute towards the strategic priority of transition to a more resource-efficient, lower-carbon economy. The Scottish Government National Performance Framework 'National Outcomes' reflect the values and aspirations of the people of Scotland and are aligned to the 17 UN Sustainable Development Goals.

Through the work of the Climate and Procurement Forum, we have modernised and further developed a suite of online Sustainable Procurement Tools based on the National Performance Framework which link intended outcomes to sustainable outcome delivery. The Tools support Scottish public sector procurers to adjust to a more resource-efficient and sustainable procurement practice.

The centrally funded, national sustainable procurement tools include:

• climate literacy and circular economy e-learning, which helps to encourage and assist public bodies, including Scottish Government, to take account of climate and circular economy in their procurement activity;
• a range of guidance, including model wording, covering climate change, biodiversity, landscapes, natural heritage, waste and energy efficiency;
• model sustainability tests to help buyers to maximise economic, social and environmental outcomes in procurement of specific commodities; and,
• a suite of procurement case studies from across the public sector demonstrating the impact of addressing sustainability opportunities.

Climate literacy e-learning is mandatory for all Scottish Procurement and Property Directorate (SPPD) staff and is strongly promoted across Scotland with 1,025 people having completed training by 31 March 2023.

To further encourage a consistent approach to addressing climate through procurement across the public sector, in April 2022 we introduced an update to the Single Procurement Document (SPD). We published standardised statements and guidance to help organisations to take a staged approach to address their climate impact. This is complemented by new support to suppliers embarking on this via the Supplier Journey and the Supplier Development Programme. While we tested the guidance and templates in some Scottish Government contracts and frameworks during the year, to provide public bodies time to prepare their markets for this change, we suggested that the wider public sector should adopt it from 2023.

In June 2022 we replaced our original Scottish Procurement Policy Note (SPPN) on climate and procurement with SPPN 3/2022: Public procurement - taking account of climate and circular economy considerations. This new policy note reflects additional sources of help and support which have been developed to enable public bodies to use their procurement activity to address the climate emergency. As well as a continued focus on whether, what and how to buy, the new policy note clarifies that public bodies can use the same data and information on climate and circular economy to provide content for both their Annual Procurement Reports and their Public Bodies Climate Change Reporting Duties.

Between December 2022 and January 2023 we reviewed and simplified the structure of the Climate and Procurement Forum to drive a focus on priority projects.

How procurement activity has contributed to compliance with climate change duties

The Scottish Government applies procurement and climate change policy across a range of contracts and frameworks for goods and services to minimise waste and maximise reuse, as well as drive efficiency and sustainability. We are addressing emissions in relevant contracts, and there are a number of examples where procurement activity has contributed to our efforts to limit negative environmental impact, such as:

Scotland's Baby Box

As a result of including a weighted climate emergency question as part of the tender evaluation process, the successful supplier has committed to delivering a range of sustainable benefits in the delivery of this contract. Specific actions include:

• using material on the baby products which results in a reduced environment impact;
• use of knot fabrics (more sustainable than woven fabrics as it uses less water, is faster drying and does not require ironing);
• siting the warehouse in Scotland, reducing national carrier emissions;
• electrical consumption reduction (e.g. switching to LED lighting);
• consolidating supply chain and offering larger orders equating to larger shipments and reduced transport costs;
• introducing battery-operated vehicles for final transfer of freight;
• use of materials which meet the strict sustainability criteria: non-toxic; abundant; easily reproduced; rapidly renewable; low waste; recycled; recyclable or biodegradable;
• waste plain white cotton fabric from the manufacture of Baby Box clothing is recycled to make more fabric and the waste from the patterned fabrics is repurposed to make cleaning cloths minimising overall waste from the production process;
• the introduction of a recycling programme for cotton goods with a recycling company based in Central Scotland who pick up end-of-life textiles from participating laundries and sell on to the motoring/cleaning trade; and
• reducing packaging as far as practically possible across all product lines.

Catering services

In addition to the community benefits previously noted, as a result of including a weighted climate emergency question within the tender evaluation process, the successful catering supplier has also committed to delivering a range of sustainable benefits and practices as part of the contract. In addition to delivering a carbon-neutral catering contract from its first day, the supplier has also committed to implementing a number of initiatives to help support the circular economy including:

• a food waste management programme;
• using the 'unusable' food products to make edible dishes such as melon skin chutney;
• promotion of reusable takeaway items – removing single use plastics, reducing the use of double walled cups, reducing the content of plastic in water bottles;
• reducing the reliance on animal-based protein;
• waste oil recycling;
• food waste recycling through anaerobic digestion;
• IT recycling and donation to schools and charity; and
• supplier's in-house marketplace for staff to buy, sell, swap, or donate used unwanted equipment, merchandising collateral, uniforms, furniture.

National collaborative frameworks for client devices.

Energy efficiency - One of the main environmental impacts from the use of IT products including laptops, desktops and tablets (client devices) is energy consumption. Client devices supplied under our frameworks are required to meet the Green Electronics Council's EPEAT accreditation standards which are designed to reduce the environmental impact of devices across their lifecycle.

EPEAT accredited devices are more energy efficient, less toxic, longer-lasting, and easier to recycle than products that do not meet EPEAT eco-label standards, while addressing labour and human rights issues along the entire supply chain.

In 2023 Scottish Procurement was again recognised by the Global Electronics Council at their annual Purchaser Awards for excellence in procurement of sustainable IT Products.

The Global Electronics Council estimate that over their lifetime, Client devices purchased through Scottish Government frameworks in 2022-23 will result in a number of environmental benefits:

• savings of 31,000 MWh of electricity.
• a reduction of greenhouse gas emissions of almost 7,000 metric tons of CO2 equivalents.
• a reduction of 1.5 metric tons of primary materials, hazardous and solid waste.

Our success in the global EPEAT awards programme is recognition of our continued determination to deliver the highest levels of sustainability and environmental benefits to the Scottish public sector.

Packaging, recycling and reuse – Our client device frameworks include minimum standards for the use of recycled and recyclable content. Our framework suppliers are required to manage and reduce waste to deliver the best environmental outcome in accordance with the waste hierarchy. This includes minimising the use, and environmental impact, of packaging.

Biodiversity – During the reporting period, our framework supplier of laptop and desktop client devices funded the planting of 30,000 native Scottish tree species in Aberdeenshire and Skye in partnership with Forest Carbon and the Arbor Day Foundation. This is helping to restore and revitalise Scotland's natural biodiversity and ecosystems and reduce the long-term impact of carbon dioxide on the climate.

The Sustainable Procurement Tools host a growing range of best practice case studies from across the Scottish public sector. During the reporting year we added case studies on Sensor Monitoring Equipment for Social Housing Properties and Reducing Carbon Footprint in Hybrid Cloud Hosting Services for IT Shared Services

3.4.3 Equality and diversity

Equality sits at the heart of public procurement through our Sustainable Procurement Duty, requiring public bodies to consider and act on opportunities to improve the social, environmental and economic wellbeing, with a particular focus on reducing inequality within their procurement activity.

Our commitment in the Scottish Government to delivering equality is laid out in our Scottish Government Procurement Strategy and in the national procurement policies we set for Scotland. We enable compliance through our national sustainable procurement tools, guidance and support. We require organisations to track compliance (against their corporate procurement strategies) in their Annual Reports on Procurement, reporting our overall impact in the Scottish Ministers' Annual Report on Procurement across Scotland.

Scottish Government routinely acts on opportunities to further equality, diversity and inclusion through its procurement activity. For example the £60 million TechScalers contract includes commitments to:

• pursue programmes with particular focus on those that support under-represented groups and those wishing to reskill into tech.
• identifying women within the network to act as role models and mentors and visit schools to talk to students about their journey and assist in identifying barriers to women in computer science studies with a view to making changes to further increase interest.
• identifying partners who can assist with improving the number of companies founded by people with protected characteristics, e.g. working with founders who are part of protected characteristics groups to better understand and work to remove these.

3.4.5 Fairly and ethically traded goods and services

We believe that those we contract with should adopt high standards of business ethics, this includes taking a robust approach to ensuring the goods and services are sourced fairly and ethically.

All Invitations to Tender issued during the reporting period included a provision to ensure that our supply chains are free from human trafficking and exploitation, including modern slavery, permitting us to terminate contracts with suppliers for breaches of social, environmental or labour law.

We continued to use the national sustainability tools to inform our commodity strategies which helped us to identify and mitigate potential risks in all of our regulated procurements. We also use targeted selection and award criteria relating to fairly and ethically traded supply chains where relevant for all regulated procurements.

We continue to engage with a range of organisations on ethical procurement, including learning from best practice used by others across Europe, and working with relevant stakeholders. If fairly traded goods and services are available to meet our requirements, we will consider how best to promote them.

3.4.6 Equal treatment and non-discrimination general duty

Public bodies are required to carry out their regulated procurement activity in line with the general duties of equal treatment and non-discrimination, encouraging a wider range of potential suppliers to engage with public procurement, while also stimulating greater levels of competition and innovative thinking, which ultimately allows us to achieve better value for public money.

The Scottish Government has complied with these duties in a number of ways:

• recognising that one size does not fit all we have developed approaches and solutions that are proportionate, flexible and scalable to help minimise unnecessary bureaucracy for buyers and suppliers, for example, our approach to developing standardised statements and guidance in the SPD;
• listening, adapting and remaining flexible in our approaches, engaging and consulting widely with external stakeholders as appropriate to incorporate feedback;
• focusing on encouragement and enablement versus mandates where we can, and maximising the impact of existing legislation and policy where we can;
• working with counterparts to align approaches (including on reporting) to avoid duplication of effort, for example, agreeing that corporate annual reports on procurement can be used for our climate reporting obligations;

Specifically, we have:

• used PCS to advertise all regulated procurement opportunities.
• used clear, precise and plain language in tender documents, to facilitate understanding of requirements.
• ensured that only staff with appropriate training and experience are authorised to oversee regulated procurements.
• used a toolkit of standard procedures, templates and processes to ensure best practice and consistency.

Case study: 'Provision of Carers And Winter Benefits' contract

• The Scottish Government's vision for social security is an approach which puts respect for the dignity of the individual at the heart of our policies, processes and systems. To support this, our approach to digital and technology solutions is one which is 'benefit neutral', with an expectation that solutions will support multiple benefits irrespective of their type, entitlement, or payment frequency.
• A single, integrated benefit platform is a key guiding principle of the Social Security Digital and Technology Strategy, which is aimed at providing a citizen-centred, evidence-based approach to benefit processing. To support the set-up of Scotland's Social Security system there was a requirement to secure a service provider(s) to support the design, development and delivery of Carer's and Winter Benefits.
• The successful supplier was required to further develop a social program management solution for processing devolved social security benefits, at the heart of which will sit a number of community benefits, with a focus on training and education for those seeking employment and encouraging SME involvement.
• A minimum of six apprenticeship positions were expected to be created at the Modern Apprentice level, with recruitment of apprentices targeted, where possible, in postcodes within the 10% most deprived areas in Scotland. Three more Modern Apprentices have been engaged and the recruitment process for a further three is planned (bringing total to twelve). The contract will also deliver a wide range of target support across a number of channels.
• Through schools/colleges – engaging directly to support pupils preparing for the job market, including providing access to learning pathways, digital credentials and local job opportunities.
• Via the STEM Community – delivering practical 'show don't tell' workshops covering STEM subjects including engineering, scientific activity and technology, including coding.
• With Youth Groups – to support personal development and prepare for work through Life Skills and other workshops.
• Delivery of the contract will also encourage SME involvement in the supplier's services making use of their partnership with the Accord SME Alliance, providing access to a network of 22 SMEs, and a wide range of design, delivery and testing skills.

3.4.7 Respecting human rights

We take a robust approach in procurement processes to tackling criminal activity, including human trafficking and exploitation, modern slavery, corruption and fraud and also to promote positive practices. Respecting human rights is not only a moral and legal obligation, it can have business benefits such as attracting and retaining a diverse skilled workforce (which can in turn increase quality, innovation, and productivity); reducing risks, including court proceedings; and enhancing reputation and brand value, increasing the customer base.

3.4.8 National Care Service for Scotland (NCS)

In June 2022, the National Care Service (NCS) Bill was introduced. Through the NCS Bill we have proposed an amendment to the Public Contracts (Scotland) Regulations 2015, to insert a new regulation that will allow the extension of the reserved process to a wider range of third and voluntary sector organisations. In response to stakeholder feedback we have been considering amendments to the provisions within the NCS Bill related to procurement as introduced, including how we can ensure the reserved process meets the policy intent of being applicable to third sector organisations whilst also responding to recommendations for longer-term contracts.

In partnership with COSLA we convened a working group in November 2022, to consider improvements that can be made to the current commissioning and procurement processes to enable the development of ethical commissioning and ethical procurement principles, tools and practices. This has included discussing approaches to enhancing and embedding fair working practices within the social care sector through procurement, considering routes to implementation, drafting ethical procurement principles and identifying some areas of good practice.

Work is ongoing, and due to be expanded related to good practice identification and review, all of which will support our future plans for wider engagement with the sector including procurement professionals to co-design the principles, tools and guidance to embed ethical procurement within the national care service.

3.4.9 Construction

National collaborative construction frameworks

In 2022-23, we continued to lead the dialogue with public bodies involved in construction and with industry representatives to refine the aims and objectives of future national collaborative construction frameworks - the first being the £5-£100 million Civil Engineering (Scotland) Framework.

Collaborative engagement continued with the Procurement Centres of Expertise, Scottish Futures Trust and Transport Scotland, and with industry – through Construction Scotland. This was primarily via the Civil Engineering (Scotland) Framework Steering Group (and its four bespoke Working Groups), and with stakeholders via the Civil Engineering User Intelligence Group.

In June 2022, the Contract Notice for the Civil Engineering (Scotland) Framework was published on PCS. During December 2022, Stage 1 of a Restricted procedure for the multi-lotted multi-supplier Civil Engineering (Scotland) Framework was concluded. The procurement process remained live at the end of the period covered by the Report (as at 31 March 2023).

In mid-February 2023, the Civil Engineering User Intelligence Group endorsed a Strategy for a Civil Engineering (Scotland) Dynamic Purchasing System (for projects up to £5m); the Strategy was also noted by the Centres of Expertise.

Construction Accord

Through the Construction Leadership Forum, the Scottish Government has collaborated with the public sector and industry in the development of the Construction Accord. The Construction Accord was launched in October 2022 and is a collaborative set of shared strategic aims co-developed by the private and public sector and includes key principles such as fair work, net zero, diversity and inclusion. Following the launch, a Transformation Board was set up, co-chaired by Peter Reekie, CEO of Scottish Futures Trust (SFT) and Morag Angus, SG Chief Surveyor; followed by a number of working groups to deliver on the priority work areas in the Accord. One of these groups will focus specifically on Procurement and the Supply Chain. All groups are populated with both public and private sector members.

Construction Procurement Reform

On average, Scotland's public sector spends more than £4 billion a year on constructing buildings and infrastructure. The Scottish Government recognises that there is a desire for construction procurement reform in the construction industry and is looking at how this might be achieved. In this reporting year, the Construction Procurement Survey was issued (May 2022) to ask industry what construction procurement reform means to them, as well as giving an opportunity for feedback on construction procurement issues, challenges, and opportunities. 112 responses were received from across industry and the public sector, including contractors, councils, consultants, and suppliers. There was a wide ranging and rich level of engagement with the survey.

The key themes identified through the survey responses were Processes, Standards & Systems; Mechanisms, Tools & Templates; Realistic Expectations & Outcomes; Behaviours and Attitudes; Quality, Value and Cost; Innovation & Best Practice; and Skills Development & Training. Common issues around the burden of work in the construction procurement process, issues relating to pricing (which included abnormally low tenders and price/quality assessment ratios) and accessibility to SMEs, local organisations and new entrants were raised.

Following on from this, Scottish Government led a series of five facilitated workshops between March and May 2023. Members of the construction industry came together to discuss a way of changing and improving construction procurement and to explore the key challenge areas and opportunities for innovation.

Open to all, those workshops included representatives from contractors, local authorities, professional bodies, central government and consultants, all of whom brought a shared interest in finding new ways to work better together and identifying opportunities for improvements. Through developing preferable visions of the future of construction procurement, the workshops gave valuable insight into potential areas for change. Work is now ongoing through the work of the Construction Accord to deliver against a set of outcome recommendations.

Sustainability in Construction Procurement

The Scottish Government is committed to ending Scotland's contribution to climate change by 2045. The construction industry offers one of the biggest opportunities to make a real difference with the built environment being one of the biggest contributors to carbon emissions, estimated to account for nearly 25% of total UK greenhouse gas emissions. The UK Green Building Council reports that operational and embodied carbon from construction currently accounts for around 6% of the UK's annual emissions.

Our guidance on 'Sustainability in Construction' was issued in January 2023 and offers a roadmap for public sector clients to run construction projects that limit the impact on the environment. The guidance forms Chapter 18 of the 'Client Guide to Construction Projects'. This covers how to embed sustainability into a construction project within every project stage from inception to deconstruction, thus allowing clients to become experts in Sustainable Construction and guiding them on how to meet all their construction-related sustainability targets.

3.5 Open and connected

Ensure procurement in Scotland is open, transparent and connected at local, national and international levels.

3.5.1 Openness and transparency

We are committed to improving accountability and being more transparent about how we spend public money, by publishing information about our procurement activity. In our procurement strategy we set out how we will carry out our regulated procurements, and we report on this in this annual procurement report, which also contains details of upcoming procurement projects.

This is in line with our Open Contracting Strategy. The principle of transparency requires public bodies to approach their public procurements in an open and inclusive way. This is an effective means by which public bodies can encourage competition and, in turn, achieve better value for money. To meet our Open Government and transparency commitments, the Scottish Government continues to deliver the following commitments.

Procurement spend captured through the Scottish Procurement Hub is already published on an annual basis, and available on the Scottish Government website - Scottish public sector spend: 2020 to 2021 - gov.scot (www.gov.scot). We also produce and publish spend by sector, supplier size and geographic region.

Public Contracts Scotland data is published in line with Open Contracting Data Standards, which supports organisations to increase transparency and allow deeper analysis of contracting data. This can be accessed via the Public Contracts Scotland home page - Home - Public Contracts Scotland. The data captures published procurement notice information.

Annual publication of Ministerial Report which is an overview of public procurement activity in Scotland based on information contained in individual annual procurement reports prepared by public bodies and other relevant information - Annual Report on Procurement Activity in Scotland - An overview of procurement activity 2020-21 (www.gov.scot)

We publish monthly reports of expenditure of £500 and over on the Scottish Government's electronic Purchasing Cards - Government spend over £500: monthly reports - gov.scot (www.gov.scot)

We use the Public Contracts Scotland portal to advertise regulated contracts and publish award notices, and as one of Scotland's four procurement Centres of Expertise, we also use PCS to produce a collaborative forward plan of procurement opportunities, which is updated monthly. Our selection and award criteria are explained in detail in all our tender competitions and we welcome input and clarification questions from bidders.

3.5.2 Collaboration

In this reporting period we've been working collaboratively with other public bodies and stakeholders to make improvements to our data and management information (MI). We began a major project to develop our MI Platform that will support procurement's 'Good For' outcomes, our ambitions for a green and inclusive economic recovery, and meet National Performance Framework outcomes.

We identified and made available more information related to SMEs and the third sector, and we began to review accessibility of data, which will culminate in a range of new analysis formats such as graphs and maps which will be published in early 2024.

Our aim is to join up data across systems in Scotland, which will improve reporting and provide access to information previously unavailable; to improve intelligence on the impact of public sector procurement on targeted policy commitments, such as Community Wealth Building; Fair Work First; and a Just Transition; and improve supply chain transparency, engagement, resilience and diversity and demonstrate the impact public sector procurement can have in these areas.

The eCommerce and Best Practice Shared Service is at the early stages of their digital transformation programme which is looking at opportunities to improve the service, user experience and to be flexible to adapt to the changing needs of the procurement landscape. Over the course of the reporting year we have engaged extensively with the digital and eProcurement market to get a detailed understanding of what new and innovative solutions are available, which is helping to define what the future eProcurement Service could look like. We are working with our digital partners to engage with our stakeholders to gather the required evidence to inform wider business needs.

3.5.3 Consulting and engaging with those affected by procurements

Our procurement strategy set out our approach to consulting and involving those affected by our procurements. We have continued to engage with suppliers about their experiences of public procurement, what works well and where there is scope for improvement, and will do more to challenge barriers that SMEs may face in competing for public sector contracts.

We held a programme of SME, social enterprise and third sector roundtable meetings to hear directly from suppliers about their experiences of bidding for and winning public contracts. We actively engage small business and third sector representative bodies both individually and through our Procurement Supply Group, who influence policy and improve public procurement on behalf of their members. This year the Institute of Directors, the Soil Association and ScotlandIS joined the group as it evolves to reflect the more diverse businesses and organisations supplying to the Scottish Public Sector.

In February 2023 a procurement workshop, hosted by the Federation of Small Businesses and Women's Enterprise Scotland, was held as part of the annual Business in Parliament Conference which provides direct engagement between businesses and MSPs.

As a result of the workshop discussions, we progressed a number of actions to help SMEs (particularly micro and minority‑led businesses), third sector and supported businesses, engage more easily with public procurement in Scotland. This included publication of one-stop-shop guidance which we developed in collaboration with the Federation of Small Business, Women in Enterprise, Supplier Development Programme and other members of our Procurement Supplier Group. We also ran targeted regional engagement events to reach a broad and diverse group of potential suppliers across Scotland. This blog provides more information on the event.

3.6 Procurement support to rapidly developing external impacts

Although the gradual recovery from the Covid-19 pandemic was well underway in the reporting period, significant other external impacts came to the fore. The war in Ukraine interrupted the gradual economic recovery from Covid-19, causing an energy supply and inflationary shock that pushed the economy toward recession.

The Scottish Government Procurement Team played a key role working with the Scottish Government's Ukraine Directorate, sourcing a compliant route to market and placing contracts, allowing for short-term accommodation needs to be met through the provision of large-scale hotel accommodation, charter of ships and associated ancillary services. Long-term accommodation was also sourced and acquired and the teams also provided support in review of the policies and approaches, attending various assurance boards, project crisis meetings. SPPD continues to provide ongoing commercial and contractual advice as needed.

SPPD was instrumental in ensuring the Ukraine Directorate understood the market options, scoping, tendering and placing a further contract to allow for world class, accountable, crisis management humanitarian response capability to be employed, enabling Scottish Government to consider options to respond rapidly, and effectively at scale and with strategic direction in the provision of further emergency accommodation with supporting services and infrastructure.

3.7 Professionalisation and capability

We continue to engage both nationally and internationally on the professionalisation of procurement. We worked collaboratively in the reporting period with other public bodies to build both the professional capability and capacity of the procurement community in Scotland. We did this through open training programmes and talent initiatives, such as connecting sectoral graduate schemes through the Procurement People of Tomorrow programme.

We also continue to provide internationally recognised best practice tools and guidance, and we set the national procurement and commercial standards for Scotland with aligned training offerings and support. We engage openly across borders with the UK and the Devolved Administrations, Organisation for Economic Co-operation and Development (OECD), National Association of State Procurement Officials (NASPO) and other foreign governments. We stay connected to professional bodies, including the Chartered Institute for Procurement and Supply.