Scottish Government procurement: annual report 2020 to 2021

8. Delivery of policies

The Scottish Government spends significant funds each year buying goods, services and works and it is right that people expect it to be spent in a way that aims to deliver the most benefits possible to society. Our Procurement Strategy sets out our general policies and also how we will monitor those policies.

Through the reporting year, we published a number of Scottish Procurement Policy Notes (SPPNs) and Construction Policy Notes (CPNs).

Details of these can be found at the links below:

• SPPNs
• CPNs

8.1. Our policy on applying community benefit requirements in our contracts

Our Procurement Strategy set out our intention to consider the opportunities to include community benefit requirements in the development phase of all regulated procurements, and to include them, either on a contractual or voluntary basis, wherever there is an opportunity to benefit the community.

Monitoring

We said in our Procurement Strategy that we would:

• Consider the use of community benefits in the development of all our regulated procurements.
• For contracts in excess of £4 million we would set out details of the required community benefits in the appropriate Contract Notice.
• In our Contract Award Notices we would record where we expect contractors to deliver community benefits.
• Collect information about community benefits delivered under our regulated procurements.

Delivery

We considered community benefits in all our regulated procurements during the reporting period. Twenty-one contracts were awarded which specifically included community and social benefits.

As a result, we currently have 62 live contracts valued at nearly £2 billion within which community benefits are now embedded.

As well as supporting thousands of existing jobs, during the reporting period our contracts created 146 brand-new jobs and 27 apprenticeships; delivered 31 work placements for school pupils, college and university students; and we enabled 453 qualifications to be achieved through training.

Examples of community benefits secured from our contracts are shown on the following page.

Case study: Facilities Services Management Contract for the Scottish Government estate

Jobs and training commitments

A number of community benefits will be delivered through the contract, including 40 job creations and 60 work placements. In addition, the contractor will be expected to deliver:

• Careers information, advice and guidance events
• Training weeks
• S/NVQ (National Vocational Qualification) starts for the workforce
• Main contractor and subcontractor industry certification (short term training)
• Training plans and case studies

Sub-contracting opportunities

The contractor will put in place two frameworks for Project Works. The frameworks will be advertised on Public Contracts Scotland (PCS) which will facilitate access for SMEs. The frameworks will be re-tendered every 24 months. It is estimated, using historical data from the previous seven years, that the frameworks will generate in the region of £39m spend during the initial period of the contract.

It is anticipated that the new contract will provide similar opportunities for sub-contracting to the previous contract, including a high proportion of contracts with Scottish SMEs.

Delivery of community benefits will be monitored as part of contract management.

Case Study: General stationery and office paper

Lyreco (UK) Ltd supported Scottish Government in their initial roll-out of our policy on Period Poverty, adding sanitary products to their e-catalogue, providing easy access for schools and colleges initially, followed by all other Scottish public sector establishments, to order these essential products. Lyreco developed this further by creating a supply chain relationship with Hey Girls, a third sector organisation instrumental in supporting this policy, and worked with them to refine the products required and ensure their availability in their catalogue.

8.2. Our policy on consulting and involving those affected by our procurements

Our Procurement Strategy set out our approach to consulting and involving those affected by our procurements. We collaborate closely with others across the public and private sectors to inform, develop and test national policies, processes, toolkits and practices to ensure that they are fit for purpose and underpin the ambition set out in our Procurement Strategy.

Monitoring

We indicated in our strategy that we would record any complaints about a failure to consult and report on our performance, any conclusions reached, and any measures taken in response to complaints.

Delivery

We did not record any complaints arising from our approach to consultations during the reporting period.

Where appropriate we work with people who use our services, potential suppliers and others to help us design procurements. This can vary from market research to supplier engagement days or the design and piloting of services. When developing our contracting strategies and approaches, we involve people who use the services or their representatives through User Intelligence Groups.

Brexit: Operational and Regulatory Readiness

During the reporting year, Scottish Procurement continued to identify and understand the level of Brexit impacts on Scottish Government led contracts and frameworks.

Consideration was again given to how best to address and mitigate these impacts and dialogue was undertaken with key suppliers and stakeholders across the public and private sectors on Brexit implications and preparedness – particularly in the event of a no-deal Brexit.

8.3 Fair Work practices, including paying at least the real Living Wage to people involved in delivering our contracts

Fair Work is work that offers all individuals an effective voice, opportunity, security, fulfilment and respect. It balances the rights and responsibilities of workers and employers. We believe that adopting such practices can make businesses more competitive by improving talent attraction, reducing staff turnover and absenteeism while improving motivation and workforce engagement. 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. The COVID-19 pandemic has affected all of our daily lives, including our workplaces, and the challenges faced by workers, employers and businesses cannot be overstated. We continue to have high expectations of how fair working practices should be adopted as the economy continues to re-open. Scotland is rightly proud of its reputation as a leader on Fair Work and in these exceptional times, adopting a Fair Work approach is more important than ever.

In January 2021 the Scottish Government published Fair Work First: guidance to support implementation. In line with the 2018-19 Programme for Government procurement commitment to extend the range of public contracts that Fair Work criteria will apply to and to implement Fair Work First, we published a Scottish Procurement Policy Note SPPN 3/2021.^[1] Implementation of Fair Work First in Scottish Public Procurement. This advises public bodies how to implement, appropriately, the targeted focus on Fair Work First in their procurements from 1 April 2021.

Monitoring

In our strategy we stated that, if a commitment has been made in a tender to pay the real Living Wage, we would record this in the contract award notice, it would form part of the contract, and we would monitor it through our contract and supplier management processes. We also stated that "information on which of our contractors pay the real Living Wage will be gathered centrally and we will include it in the annual report of our performance against this strategy".

When we refer to "the real Living Wage" we mean the hourly rate set independently and updated annually by the Living Wage Foundation.

Delivery

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.

During this period we have continued to secure a range of Fair Work practices in a number of our significant contracts improving pay and conditions for those working in our supply chain. In implementing Fair Work First, the Scottish Government are leading by example.

Through our Fair Work First approach, which is being promoted in government funding streams, we will ask those bidding for public contracts to commit to working towards five criteria to benefit their workers, these are:

• Appropriate channels for effective voice and employee engagement, such as trade union recognition;
• Investment in workforce development;
• Action to tackle the gender pay gap and create a more diverse and inclusive workplace;
• No inappropriate use of zero-hours contracts; and
• Payment of the real Living Wage.

Impact of Scottish Government policy

We are committed to doing this in partnership with stakeholders by taking a phased approach to implementation which will take account of the economic context, including the impact of EU exit.

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.

The contractor in our Facilities Management Contract has committed to:

• effective voice – six diversity networks are available;
• investment in skills and training;
• ensuring gender balance in the creation of 40 jobs & 60 work placements;
• action to tackle the gender pay gap;
• fair pay for workers – all staff (approx. 199) involved in the delivery of this contract will be paid at or above the real Living Wage;
• opportunity – "Ready2Work" and "Think Differently" programmes;
• security – flexible and agile working, career breaks, pensions and maternity pay fulfilment – career advancement;
• respect – "One Code" programme;

92% of our suppliers with current live contracts have committed to paying at least the real Living Wage.

Adult Social Care Workers

Work through the Fair Work in Social Care Group has now developed a set of recommendations for minimum standards for terms and conditions reflecting Fair Work principles. This extends to the development of local standards that employees should expect, that support effective voice. This work is now being taken forward in collaboration with key stakeholders.

Since 2016, we have provided funding to ensure that Adult Social Care staff, delivering direct care, are paid at least the real Living Wage.

8.4. Our policy on making sure our contractors and subcontractors keep to the Health and Safety at Work Act 1974 and any provision made under that Act

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 Procurement Strategy set out that it is a standard condition of our contracts that the contractor must keep to all laws that apply, as well as the requirements of regulatory organisations and good industry practice.

It also explained that this includes health and safety laws, and that contractors must keep to our own health and safety standards when they are on our premises.

Monitoring

We stated in our Procurement Strategy that we would gather information through our standard contract management arrangements, about health and safety incidents relating to delivery of our contracts and measures taken.

Delivery

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 all the relevant security clearance, permits and qualifications.

8.5. Our policy on procuring fairly and ethically traded goods and services

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.

Our Procurement Strategy set out our policy that, if fairly traded goods and services are available to meet our requirements, we will consider how best to promote them. It also described how our standard terms and conditions allow us to end a contract if the contractor or a subcontractor fails to keep to their legal duties in the areas of environmental, social or employment law when carrying out that contract.

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.

Monitoring

We stated in the strategy that we would:

a) include a statement about the effectiveness of our selection procedures; and

b) keep a record of the value of fairly traded products bought and sold under our catering contract.

Delivery

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 are using the national sustainable procurement tools and supporting guidance to consider human rights, equality, and Fair Work consistently in our procurements and we are encouraging buyers across the public sector in Scotland to do the same.

The tools have been designed to help Scottish public bodies comply with policy and legislation and to help them identify and achieve economic, social and environmental outcomes through their procurement activity, including how to take an ethical approach in their procurement activity.

The value of fair and ethically traded products sold through the Scottish Government's catering contract (which includes tea, coffee, chocolate and sugar) was £1,349 in the reporting period. This is significantly reduced from last year due to the effects of the pandemic and catering facilities in all offices being closed for a prolonged period of time.

Effectiveness of our selection procedures

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.

Impact of Scottish Government policy

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.

In May 2021 we added refreshed Introduction to Sustainable Public Procurement e-learning to the tools platform. This e-learning introduces the user to the strategic role of procurement in addressing policy and legislative priorities, and the key outcomes and benefits that can come from sustainable procurement, and includes a focus on ethics.

8.6 Using contracts involving food to improve the health, wellbeing and education of communities in Scotland and promote the highest standards of animal welfare

Our Procurement Strategy set out our belief that the way in which the public sector buys food and catering services can have positive social, economic and environmental impacts.

Impact of Scottish Government policy

Our national food and drink policy: Good Food Nation continues to promote buying healthy, fresh and environmentally sustainable food and catering.

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 farm animals on farm and at slaughter. Vegan choices, including vegan dishes, sandwiches, and seasonal fruit and vegetables, are provided in our Scottish Government staff restaurants.

8.7. Our policy on paying in 30 days or less to our contractors and subcontractors

Our Procurement Strategy set out that it is a standard term of our contracts that we will pay valid invoices within 30 days, that any subcontract must contain a clause which says that subcontractors will be paid within 30 days, and that this clause must apply through the supply chain. It also explained that this clause must make clear that if a subcontractor believes that invoices are not being paid within 30 days, they can raise the issue directly with us. We also aim to pay as many valid invoices as possible within ten days.

Monitoring

Our Strategy indicated that through contract management arrangements we would monitor complaints from suppliers and subcontractors and take action if appropriate.

Delivery

During the reporting period we paid 96.7% of valid invoices within ten days and 99.7% of invoices within thirty days, getting cash into the economy as quickly as possible.

We are working with contract managers to ensure that payments to suppliers and subcontractors are discussed and addressed through the contract management process.

Impact of Scottish Government policy

The construction sector in particular can suffer from late and extended payment terms from business to business. To help counter this, we require the use of project bank accounts. These are accounts from which a public body can pay firms in the supply chain directly as well as making payments to the main contractor. Project bank accounts improve cash-flow and help businesses stay solvent, particularly smaller firms which can be more vulnerable to the effects of late payments.

Public bodies covered by the Scottish Public Finance Manual must include project bank accounts in their tender documents for building projects over £2 million and civil engineering projects over £5 million. Some public bodies have chosen to implement project bank accounts at lower contract values. We strongly encourage public bodies outside of SPFM scope to implement project bank accounts into their construction procurement policy.

Prompt payment in supply chains is now embedded in our Programme for Government commitment and the Civil Engineering Framework, approx. £600m over four years, will pilot and test new approaches to prompt payment, which can then be rolled out further.

8.8 Achieving policy goals – sustainable procurement and climate change

We have undertaken a range of work to drive understanding of how public procurement can contribute to inclusive, sustainable growth and wellbeing. For example, we have set up the cross-sector Climate and Procurement Forum to mobilise public procurement's contribution to addressing the Climate Emergency. We are working with colleagues across Scottish Government and the wider public sector, primarily through City and Region Deals, to ensure the impetus provided by the Procurement Reform (Scotland) Act 2014 to use public procurement activity to contribute to national and local priorities, in line with the National Performance Framework, takes effect.

We have published research on the value and impact of the sustainable procurement duty since its introduction and are now considering and responding to the recommendations from this work. During 2020/21 we published a suite of Scottish Procurement Policy notes (SPPNs) to expand on and clarify key aspects of sustainable procurement policy. They are:

1. SPPN 9/2020 Supply Chain Resilience and Diversity

2. SPPN 10/2020 Measuring Social Impact in Public Procurement

3. SPPN 1/2021 Taking Account of Climate and Circular Economy Considerations in Public Procurement

4. SPPN6/2021 Fair Work First implementation - Scottish public procurement update

These notes recognise our relative maturity in tackling economic, social and environmental considerations through procurement and reinforce the overarching, comprehensive approach to identifying and pursuing relevant risks and opportunities through use of the sustainable procurement tools to achieve compliance with the sustainable procurement duty.

In June 2020 we relaunched the Sustainable Procurement Tools to create a more accessible online source of help and support in mainstreaming sustainable procurement and compliance with the Procurement Reform (Scotland) Act 2014, in particular the Sustainable Procurement duty. We will continue to develop the tools so they become the central resource for guidance on sustainable procurement. For example, in March 2021 we added the Climate Literacy for Procurers e-learning package to the platform.

Examples of where we have already considered and applied solutions that will have a positive environmental impact include the following.

Case Study: Water efficiency

As part of the Scottish Government Water and Waste Water Framework, the supplier "Business Stream" conduct water audits looking for water leakage and wastage. In the reporting period, the initiative has saved Scotland's public sector over £1.4 million in water costs during the first year of the three-year framework.

This has also helped save 885,000 m3 of water – the equivalent of 354 Olympic-sized swimming pools. In addition to helping the sector generate financial savings, the reduction in water use will help the sector contribute towards the Scottish Government's ambitious net-zero carbon targets. The initiative is continuous and will help Scottish public sector customers save water, money and time in the years ahead. Scottish Procurement acknowledges Business Stream's approach to pro-active water management.

Case Study: Stationery and office paper

Our national provider of general stationery and office paper, Lyreco (UK) Ltd, has worked with us to maximise environmental measures across the Scottish public sector by promoting the use of a recycled paper called Steinbeis Classic White. Since 1 January 2019, 2,435,790 reams of Steinbeis Classic White recycled paper has been bought by framework public bodies. When compared to the production of non-recycled (virgin) paper the use of Steinbeis Classic White has resulted in savings of:

• Wood Pulp 17,980 tonnes
• Water 57,330,484 gal
• Electricity 47,010,747kWh
• CO2 3,897 tonnes

STEINBEIS publish the following savings per ream

• Wood Pulp 7.5kg
• Water 107L
• Electricity 19.3kWh
• CO2 1.6kg

For further information on how the Scottish Government is using public procurement to tackle the Climate Emergency, please see the latest Scottish Government Climate Change Report.