Scottish Government Procurement Strategy 2017-2019

5. Policies

The £11 billion that the public sector in Scotland spends buying goods, services and works each year is a significant sum. It is right that people expect this money to be spent in a way which delivers the maximum possible benefit to society as a whole.

Our aim is to make sure that this happens, while also carrying out procurement that is legal, transparent and fair, and that we design our procurement policies with that aim in mind.

These policies shape and support the procurement activity of public organisations across Scotland in a number of different ways:

• they can be reflected in our approach to legislation. For example, Scottish Ministers are responsible for giving effect to EU procurement directives in Scots law. When the 2014 EU procurement directives were published, and after consulting the general public and stakeholders (people with an interest in our work) on the options available to us, we took the opportunity to reflect a number of our policies in law.
• they can also be reflected in guidance we produce for public purchasers - a recent major example of this would be our approach to drafting statutory guidance on fair work issues when procuring goods, services and works.

In this section, we set out our general policies on a number of key areas, together with a statement on how we will monitor these over the period of this strategy.

5.1 Our policy on applying community benefit requirements in our contracts

Background

A community benefit requirement is defined in the Procurement Reform (Scotland) Act 2014 as:

a contractual requirement imposed by a contracting authority -

(a) relating to -

(i) training and recruitment, or

(ii) the availability of sub-contracting opportunities, or

(b) which is otherwise intended to improve the economic, social or environmental wellbeing of the authority's area in a way additional to the main purpose of the contract in which the requirement is included.

The delivery of community benefits through procurement is in line with Scotland's economic strategy:

'Greater participation (in the labour market) increases an economy's potential output and is essential to supporting sustainable economic growth. Bringing more people into the labour market is key to tackling poverty, inequality and social deprivation and improving health and wellbeing.'

And ' A plan for Scotland: The Scottish Government's Programme for Scotland 2016/2017':

'The Scotland we want to see has a resilient and growing economy, an education system that enables true equality of opportunity for all, public services that are efficient, fair, flexible and valued, and a vibrant, open and inclusive cultural life.'

It also contributes to our overall purpose.

Our aim, to deliver the maximum social and economic benefit from our spending decisions, is consistent with our general and sustainable procurement duties and the Scottish Model of Procurement. Through community benefits we have achieved a range of recruitment and training and opportunities for SMEs, the third sector and supported businesses. We will continue to use them wherever possible to achieve this, with a particular emphasis on targeting training and employment opportunities so that the policy contributes to inclusive growth.

Our policy

For many years our policy with respect to community benefits has been best summed up by the statement:

'The first question that we should ask when developing any contract specification should be: "Can we include a Community Benefit clause?"'

John Swinney, March 2010

If there is an opportunity to benefit the community, we will include appropriate requirements in public contracts and framework agreements. We will consider these opportunities at the development phase of all regulated procurements (currently £50,000 and above for goods and services, £2 million and above for works).

If appropriate, we will look at community benefits in one of two ways.

1. Mandatory or contractual - We will ask all bidders to deliver specific requirements (for example, targeted training and recruitment and opportunities in the supply chain) which form part of the contract specification. As the requirement is the same for all bidders, proposals will form part of the tender evaluation and may be scored.

We will use this approach if:

• the contract is high value;
• is of medium to long-term; and
• where it is clear that specifying an outcome that would benefit the community and which could be delivered under the contract, could add to the contract's social or economic effect.

2. Voluntary - We will ask bidders to consider what community benefits they can offer as part of their proposals, but we will not score this part of the bid and it will not form any part of the tender evaluation. However, if a bid has been accepted, any associated offer of community benefits will be included in the contract to be signed by the bidder.

We will use this method if it might gain extra value from the contract but where it is not appropriate to make providing specific community benefits a mandatory requirement for all bidders. We will make sure that where we ask that voluntary community benefits are offered, they do not place an undue burden on bidders.

Monitoring

If a regulated contract includes a commitment relating to community benefits, the contract award notice will record what the contractor has to deliver. Overseeing delivery will be made part of the formal contract management arrangements and we will keep a record of the benefits delivered.

For contracts of £4 million or above, in line with our duties under the Procurement Reform (Scotland) Act 2014, and for all contracts where the community benefit is made mandatory, we will set out details of the required community benefit in the contract notice. If we do not think it is appropriate to include a community benefit clause, the contract notice will include our reasons why.

We will collect information about delivered benefits and we will report on this in our formal report of our performance against this strategy.

Further information

More information on community benefits is available on our website.

5.2 Our policy on consulting and involving those affected by our procurements

Background

We consult with and involve stakeholders (people with an interest in our work) in a range of ways. Suppliers, non-governmental organisations and the public sector are central to our procurement governance structure.

Representatives from the private, third sector and trade unions are represented on the Procurement Supply Group and the public sector is represented on the Public Procurement Group. We will be holding workshops each year, bringing together a range of representatives from all our stakeholder groups.

We have developed our existing policy and legal frameworks through extensive involvement with stakeholders, including the public sector, the private and third sectors, trade unions, non-governmental organisations and individuals.

Our policy

Where appropriate, we work with users, potential suppliers and others to help us design procurements and the route each procurement will take. This may vary from 'light touch' market research to 'engagement days' for suppliers, or the design and piloting of services. Individual procurements are in response to an identified need and we identify and involve the relevant stakeholders as appropriate. For example, for national contracts, we involve service users through 'user intelligence groups', which are made up of public sector representatives. For other contracts, we will tailor our involvement with service users to the particular circumstances.

Monitoring

We will record any complaints about failure to consult, and our report on our performance will look at these. The report will include information about any conclusions we reach and any measures taken in response to complaints.

5.3 Our policy on paying the Living Wage to people involved in delivering our contracts

Background

We strongly believe that fair work practices and paying the Living Wage can have a positive effect on people's lives and can help to create a fairer and more equal society.

We are committed to promoting the Living Wage and have taken every opportunity to do so when buying goods, services and works. In early February 2015, we published a Scottish Procurement Policy Note on how and when employment practices and workforce matters, including paying the Living Wage, could and should be considered during a public procurement exercise. This was followed in October 2015 by the publication of statutory guidance which looked at fair work practices, including the Living Wage, in procurement procedures. We were the first government in the UK to take this step.

We, the Scottish Government, became an accredited Living Wage employer on 1 June 2015. This is a clear commitment to pay at least the Living Wage for all staff we directly employ and for those who work on our contracts by actively encouraging employers to pay the Living Wage as part of a package of fair work practice in all relevant contracts.

Case Study - Promoting fair employment and tackling inequalities

The Warmer Homes Scotland contract provides energy-efficiency measures for homes in vulnerable communities. The contract provides that there are fair working conditions, including the Living Wage, for those delivering the contract, and those involved in the supply chain. It makes sure that our suppliers are providing jobs, training and work placements.

We have taken particular care to make sure all households, including those in more remote parts of the country, get the same level of service as those in urban areas.

Our policy

Our policy on paying the Living Wage to those who deliver our public contracts is influenced by our belief that those organisations which adopt fair work practices, including the Living Wage (for example those which have a diverse workforce and whose staff are well rewarded, well motivated, well led and who have appropriate opportunities for training and skills development), are likely to deliver a higher quality of service. A positive approach to fair work practices can have a positive effect on the quality of the services, goods and work delivered on our contracts. We also believe that if an employer pays the Living Wage they are more likely to be committed to fair work practices.

When putting in place this policy we have to consider statutory guidance on how and when fair work practices, including the Living Wage, can be part of a procurement process and how they can support improved productivity and economic growth as a key driver of service quality and contract delivery.

In practice, we consider this policy as early as possible in all our public procurement processes. This makes sure that, where it is relevant to how the contract is carried out, assessing a business's approach to fair employment, including the Living Wage, can be an important part of the procurement exercise.

So far we have targeted this policy through award criteria which are in proportion to and relevant to the contract, taking into account a range of factors. We have found that there are two main things to consider:

• to what extent the quality of the delivery of the contract can be affected by those working on it; and
• if there is a risk that suppliers use unfair employment practices. This has mostly been in sectors where low pay is widespread and the Living Wage is not paid or where, for example, the inappropriate use of zero hours contracts might be used in delivering the contract.

An example of this was our approach to our catering tender and contract. All five bidders made commitments to paying staff the Scottish Living Wage as part of a broader package of proposals which showed a positive approach to fair work practices. In several cases, including the successful tender, this directly improved conditions for workers. In the new contract for water and waste-water billing services, the new provider not only committed to paying at least the Living Wage, but also signed the Scottish Business Pledge, committing themselves to creating lasting economic success, building sustainable growth that also achieves fairness, equality, opportunity and innovation.

Monitoring

If a commitment has been made in a tender to pay the Living Wage, we record this in the contract award notice, it will form part of the contract, and we will monitor it through our contract and supplier management processes.

Information on which of our contractors pay the Living Wage will be gathered centrally and we will include it in the annual report of our performance against this strategy.

5.4 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

Background

It is important that those bidding for our contracts are able to demonstrate that they are responsible contractors who keep to their legal duties, including duties relating to health and safety.

Current EU procurement legislation does not clearly include health and safety as part of the selection criteria which purchasers can use when deciding which suppliers to invite to bid. In recognition of the importance of health and safety, when drafting guidance to accompany the European Single Procurement Document we made sure that we gave public purchasers clear advice on how to take account of, and score, a supplier's health and safety record.

Our policy

It is a standard condition of our contracts that the contractor must keep to all laws that apply, all requirements of regulatory organisations, and good industry practice. This includes any relevant health and safety law. Also, whenever contractors' staff are on our premises, under the terms of our standard contracts they must keep to our own health and safety requirements.

Monitoring

We will revise our standard contract management arrangements to make sure that we include information about health and safety incidents relating to delivering our contracts and any measures we take to put things right. This information will be gathered centrally and we will include it in the annual report of our performance against this strategy.

5.5 Our policy on procuring fairly and ethically traded goods and services

Background

Scotland achieved Fair Trade Nation status in 2013 and was one of the first countries in the world to sign up to the UN Sustainable Development Goals. There is a commitment in our Programme for Government 2016/2017 to update the National Performance Framework to reflect this. In their current form, the sustainable procurement tools can be used to identify opportunities to consider ethical issues.

Our standard procurement procedures for regulated contracts involve assessing a bidder's suitability to be awarded the contract. This process includes considering whether the bidder has been convicted of certain offences or committed any acts of professional misconduct while running their business. You can find more detailed information about this in Scotland's European Single Procurement Document, in the procurement journey.

Our policy

If fairly traded goods and services are available to meet our requirements, we will consider how best to promote them. For example, under our catering contract, a range of fair trade choices are available in all staff canteens, and our hospitality tea, coffee and sugar is accredited as fairly traded.

Our standard terms and conditions allow us to end a contract if the contractor or subcontractor fails to keep to their legal duties in the areas of environmental, social or employment law when carrying out that contract.

Monitoring

We will keep a central record of the value of fairly traded products bought or sold under our catering contract. Our annual report on this strategy will include a statement about the effectiveness of our selection procedures.

5.6 Our policy on using contracts involving food to improve the health, wellbeing and education of communities in Scotland and promote the highest standards of animal welfare

Background

While we do not procure food directly, we use our catering framework to achieve a range of benefits. For example, under our current contract requirement, our catering contractor already provides the following:

• All beef, lamb, pork (not including bacon), milk, cream, yoghurts, rolls, pastries, baked goods and speciality cheeses are Scottish;
• All fish is accredited by the Marine Stewardship Council ( MSC);
• All eggs are free-range;.
• All milk is organic and Scottish;
• Chickens are from the UK, to keep to the Red Tractor assurance scheme and our Soil Association award;
• All hospitality tea, coffee and sugar is fair trade accredited;
• Coffee grounds are recycled as compost for customers to use; and
• Our catering service is accredited with the Soil Association's Food for Life catering mark.
• Our catering contractor also works with local communities to provide work placements and is committed to paying its staff at least the Living Wage.

Our policy

We recognise food and drink as a key industry sector where major sustainability wins can be achieved. The procurement of food and catering services is a high ranking area because there are major social, economic and environmental impacts.

Our approach to our catering contract is to make sure that it keeps to all relevant Government policies on healthy eating and nutrition, promoting fresh and seasonal and local produce, and on fairly traded produce. Contracts must also meet the UK Government's buying standards for food.

These standards take account of a range of factors, including production, traceability, authenticity, origin, ethical trading, animal welfare, environmental standards, and health and waste. They are consistent with our 'Catering for Change; Buying food sustainably in the public sector' guidance issued in January 2011.

We also consider catering to be a service where fair employment practice is relevant to the quality of service provided. When bidders are competing for catering contracts, we will take into account whether they are committed to fair employment.

Monitoring

Keeping to our policy requirements is a major part of the contract management arrangements for our catering contract.

5.7 Our policy on paying invoices in 30 days or less to our contractors and sub-contractors

Background

We encourage prompt payment of invoices, both to and by our contractors and their subcontractors. Our most recent published accounts show that, in 2015 to 2016, 98.4% of valid invoices were paid in 10 days or less.

Our policy

It is a standard term of our contracts that we will pay valid invoices within 30 days. Also, any subcontract must contain a clause which says that subcontractors are paid within 30 days, and that this clause should apply through the supply chain. This condition must also make clear that if a subcontractor believes that invoices are not being paid within 30 days, they may raise the issue directly with us and do not have to raise it first with the supply chain.

While our standard terms and conditions say invoices should be paid within 30 days, we try to pay as many as possible within 10 days.

Monitoring

Through our contract management arrangements we will monitor complaints and take action if appropriate.