Procurement strategy: April 2021 to March 2023

5. Sustainable procurement and our approach to engaging SMEs, the third sector and supported businesses

The sustainable procurement duty compels us to think about how our regulated procurements will improve Scotland's social, environmental and economic wellbeing, with a particular focus on reducing inequality. It also requires us to facilitate the involvement of SMEs, third sector bodies and supported businesses in our procurements which are designed in a way that encourages them to be involved. We also want to use procurement to encourage innovation.

Our 2019 Small Business Survey Scotland was published in August 2020 and showed that 68% of SMEs with employees were looking to grow their sales over the next three years. Also, the Social Enterprise Census was published in 2019 and showed that 53% of the social enterprises surveyed describe the public sector as customers.

We have taken a number of significant steps to improve our processes to encourage a range of organisations to bid for public contracts including:

• easier access to public contracts;
• reserving contracts for supported businesses;
• improved ways for suppliers to give and receive feedback; and
• removal of the option in our procurement legislation for public contracts to be awarded on the basis of lowest cost or price only.

These opportunities are described in more detail on the next page.

Easier access to public contracts

We have a comprehensive and joined-up set of tools, policy support and guidance which together help simplify our processes and enable buyers and suppliers to access procurement information and opportunities

more easily. These include our PCS portal and the Procurement and Supplier Journeys which are summarised earlier in the document.

To facilitate the involvement of SMEs, the third sector and supported businesses and to make it easier for them to find and bid for contracts, opportunities are advertised through PCS cementing the portal's role as the 'one-stop shop' for procurement opportunities in Scotland.

Public bodies must use PCS to advertise all regulated procurements. It also facilitates Quick Quote, which is a simple competitive process for procurements below the regulated thresholds. PCS can also be used by suppliers of higher value contracts to advertise subcontracting opportunities, making it easier for SMEs, third sector and supported businesses to find such opportunities. We know that 63% of the suppliers awarded contracts through PCS in 2019-20 were SMEs located in Scotland.

We continue to develop our collaborative procurement strategies, engaging extensively, to take account of the potential economic impact on and ease of access for SMEs and third sector organisations. As a result, we split national requirements into specialist or geographical lots and provide supply chain opportunities wherever possible. The use of lots is a conscious decision by purchasers to split large requirements into a number of smaller ones with the intention being that smaller firms that might not be able to bid for the overall large requirement may be able to bid for a small 'lot'. We apply lot-limiting strategies in some cases to ensure a fairer share of business and that a single supplier does not dominate frameworks by being successful on all lots.

Currently, more than 50% of our collaborative suppliers are SMEs. A notable example is the collaborative framework agreement for Print and Associated Services which commenced on 1 April 2019 and can be accessed by the whole of the public sector in Scotland. As a result of the competitive tender exercise we awarded a total of 16 contracts to 14 suppliers. All 14 suppliers appointed to the framework agreement are SMEs and 11 of these suppliers are Scottish SMEs.

Our Scottish Procurement Information Hub identifies that approximately £5.2 billion of public sector spend went to SMEs (where business size is known) and approximately £3.4 billion went to SMEs with a Scottish address in 2018-19 (where business size and postcode is known).

Our legislation requires that suppliers receive feedback on their bids for regulated procurements. We also provide the Single Point of Enquiry service which aims to provide an impartial service to help suppliers who are having issues or concerns about a procurement exercise carried out by any Scottish public sector organisation.

We fund the Supplier Development Programme (SDP) in partnership with local authorities and other public bodies to help organisations compete for public contracts. This delivers a comprehensive range of free training, guidance and supplier focused events to help SMEs, third sector organisations and supported businesses to grow their business.

As well as providing funding to the SDP we also fund support for third sector organisations. This recognises the crucial role they play in driving inclusive economic growth and helping to advance equality and supporting communities most impacted by discrimination and disadvantage. We also deliver support and training for third sector organisations through the Just Enterprise contract.

The 2020-21 Programme for Government committed us to roll out Supply Chain Development Programmes across key sectors of the economy, where we see genuine sustainable economic potential. These will be targeted at existing and prospective suppliers based in Scotland, and enhance their ability to compete for public contracts, help to secure best value for taxpayers and help Scottish suppliers to grow and compete globally. An immediate priority will be the analysis of existing supply chains and identification of opportunities for increased local capability and resilience.

We will make use of our data and procurement networks to help meet this commitment. For example, by supporting a range of public bodies to maximise the contribution their procurement spend makes in their area through the intelligent use of procurement data from the procurement Information Hub. This includes working with Scotland Excel, and other Centres of Expertise, to extend the support, we have already provided to the Ayrshire Regions, to other parts of Scotland. We will then share learning with others across the country.

More widely we continue to play our part to support local economic wellbeing by promoting the use of community benefit requirements and Fair Work First criteria in public contracts to deliver wider benefits for local communities and wider society. This may include local supply chains, new jobs, apprenticeships, work placements, training and wider fair pay and conditions of employment.

In 2016 we also removed the option in our procurement legislation for higher value public contracts to be awarded on the basis of lowest cost or price only. This means that, in awarding a contract, Scottish public bodies must consider factors associated with the quality of products and services and that can result in wider economic benefits. Our 2016 statutory guidance Selection of Tenderers and Award of Contracts makes it clear that this approach should also be applied to award criteria for lower-value regulated contracts.

Reserving contracts for supported businesses

Procurement legislation defines supported businesses as businesses for which the core purpose is the social and professional integration of disabled or disadvantaged persons and where at least 30% of the employees of those businesses are disabled or disadvantaged persons.

Public bodies can choose to limit participation in a competition, to supported businesses, only where there are enough suitable suppliers.This approach recognises that supported businesses have a valuable role both as a stepping stone into mainstream employment for disabled and disadvantaged persons as well as for those who are unable to progress on to the open labour market.

That is why we committed, in action plans that underpin Scotland's Social Enterprise Strategy 2016-2026, to continue to work with supported businesses across Scotland, seeking creative ways to enable them to flourish commercially and sustain employment for disabled and disadvantaged people. This underlines our commitment to make it easier for public bodies to identify and reserve contracts for a wider range of social enterprises covered by the definition of a supported business for the purposes of public procurement legislation. An online register comprising social enterprises and supported businesses across Scotland was established in October 2017 and is embedded within the Partnership for Procurement (P4P) website.

Also, the supported business framework provides an easier route for public bodies to contract with supported businesses on that framework for the following goods and services:

• personal protective equipment (PPE) and uniforms;
• furniture and associated products;
• signage; and
• document management services.

The framework runs until 9 December 2021 but there is an option for a further one year extension.

We continue to take the engagement of SMEs, the third sector and supported businesses

in public contracts very seriously, including when we are considering how our contracts are advertised and awarded in Scotland.

We recognise the link between this and local economic, social and environmental wellbeing. There is always more to do and we are committed to ongoing improvement in our procurement approaches to support a stronger economy and the ongoing support

of a range of commercial organisations across Scotland.