Procurement strategy: April 2021 to March 2023

6. Our policies

This second part of our procurement strategy describes those specific policies that we aim to support through public procurement.

The Scottish public sector spends over £12 billion each year buying goods, services and works. This is a significant sum and it is right that people expect it to be spent

in a way that aims to deliver the most benefits possible to society. We design our procurement policies with that aim in mind while also carrying out procurements that are transparent and fair.

Our procurement policies shape and support public procurement activity across Scotland. The last substantial update to our domestic legislation occurred between 2014 and 2016. As part of that process we carried out a public consultation about the policy options available to us. Taking account of the views expressed in that consultation, we have reflected a number of policies which have wider benefits (e.g. social, environmental) in our procurement law and in statutory guidance which public bodies must comply with. We developed statutory guidance on Fair Work practices, for example, for use by public bodies when buying goods, services and works.

In this part of our strategy we set out our general policies and a statement on how we will monitor those policies over the period of the strategy and reflect on them in our annual procurement report. This includes how we are responding to the global climate emergency.

6.1 Applying community benefit requirements in our contracts

Background

The 2014 Act describes a community benefit 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'.

We continue to mainstream the use of community benefit requirements in public contracts to deliver wider benefits for local communities and wider society. This complements our aim to facilitate access to procurement for SMEs, the third sector and supported businesses and helps us to deliver wider social and economic benefits as part of our public spending decisions.

Our policy

We use community benefits in our public contracts where possible. Community benefits help to deliver, for example, better employment opportunities and we have achieved a range of recruitment, training and other opportunities for SMEs, the third sector and supported businesses as a result of the use of these. We consider community benefit opportunities at the development stage of our regulated procurements and handle these in one of two ways:

1. Mandatory – In this scenario we ask bidders to deliver community benefits (for example, targeted training, recruitment and other opportunities in the supply chain) as part of a contract specification. These requirements then form part of the tender evaluation and will be scored.

We use this approach if:

• the contract is of high value;
• it is of medium to long term; and
• where it is clear that including a community benefit in a contract could add to its social or economic effect.

2. Voluntary – We use this approach in cases where it is not appropriate to make community benefits a mandatory requirement. We ask that voluntary community benefits are only offered where these do not place too much of a burden on the bidder but may result in the contract delivering extra value. We ask bidders to consider what community benefits they can offer as part of their bid.

In this scenario community benefits are not part of the tender evaluation. Where a bid, that voluntarily offers a community benefit is accepted, any offer of community benefits is contractually binding.

Monitoring

Our contract notices for regulated procurements record whether contractors must deliver any community benefits. We also record any community benefits that have been delivered as part of our contract management arrangements. Contract notices for our regulated procurements

are published on our national public procurement advertising portal, PCS. We collect information about benefits delivered and will report on these in our annual procurement report of our performance against this procurement strategy.

Impact of Scottish Government policy

For over a decade, Scotland has been recognised as a leader in promoting social and economic benefits to communities through its public procurements^[6]. Community benefit requirements have been used increasingly in public contracts across the Scottish public sector. These have delivered thousands of targeted training and recruitment opportunities and opened up opportunities for local organisations (including the supported employment sector, community and social enterprises) in the supply chain.

As a result of our procurement legislation, all Scottish public bodies must consider the use of community benefit requirements for

regulated procurements. They must also explain in the contract notice why community benefits have not been included in any contracts valued at £4 million or more.

They must produce annual procurement reports and include a summary in those of any community benefits delivered that year through their procurements.

In December 2020 we published Scottish Procurement Policy Note SPPN 10/2020: Measuring social impact in public procurement. It clarifies Scottish Government policy on social impact and includes a range of case studies to demonstrate how positive social impacts are being achieved across the public sector in Scotland.

More information about community benefits is available on our website.

6.2 Consulting and involving people affected by our procurements

Background

We consult with and involve people from all sectors with an interest in our work in many ways. For example, the private sector, third sector and trade unions are represented on our Procurement Supply Group and the public sector is represented on our Public Procurement Group. The construction industry is represented on the Construction Leadership Forum. A brief description of the functions of these groups is described at section 1.

Our policy

Where appropriate we work with people who use services, potential suppliers and others to help us design procurements. This can vary from market research, Requests for Information (RFI) exercises, to supplier engagement days or the design and piloting of services. For national contracts we may involve people who use services through 'user intelligence groups', for example, and for other contracts we match the involvement of people to the specific circumstances.

Monitoring

We record any complaints about failure to consult on any of our contracts and our annual procurement report on our performance will look at these. It will include information about any conclusions we reach and any measures taken in response to complaints.

Impact of Scottish Government policy

It is particularly important to involve people in social care procurements. This is because the quality or availability of these services can have a significant impact on the quality of life and health of people who might use them. Also services are becoming increasingly personalised to better meet people's needs which, in turn, can have implications for how support is planned and purchased. We will carefully consider relevant recommendations about this in the report following the Independent Review of Adult Social Care.

As an organisation, we do not buy many of these services directly, as these are often bought by local authorities and sometimes health boards, but we do recognise the importance of these services to people who use them. For that reason we have set out in our procurement guidance that where public bodies do buy these services they should involve people who use them. They may also take account of the following issues among other things:

• the quality, continuity, affordability, availability, comprehensiveness and accessibility of the service;
• the needs of different types of people who use services and their carers; and
• innovation.

Our Procurement Journey includes specific guidance about the procurement of health or social care services. This helps public sector buyers and suppliers take account of these issues when they are either placing or bidding for these contracts. Our approach is to encourage the involvement of people in public procurements more generally.

Our approach is also in line with wider Scottish Government guidance on strategic commissioning. One of the key principles of that guidance is that the commissioning

process should be equitable and transparent and open to influence from all stakeholders via ongoing dialogue with people who use services, their carers and providers.

6.3 Fair Work practices including paying the 'real' Living Wage to people involved in delivering our contracts

Background

Fair Work is work that offers effective voice, opportunity, security, fulfilment and respect; that balances the rights and responsibilities of employers and workers and that can generate benefits for individuals, organisations and society. We believe that fair working practices are central to supporting sustainable and inclusive growth and a wellbeing economy.

Addressing Fair Work specifically in procurement processes can impact on the way the contract is delivered and have a meaningful impact on those working on the contract.

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. These challenges have made clear that adopting a Fair Work approach is now more important than ever.

The strategic ambitions for Fair Work are set out in the Fair Work Convention's Framework and Scottish Government has set out actions, in its Fair Work Action Plan. That Action Plan prioritises Fair Work First (FWF), which is the Scottish Government's flagship policy for driving high quality and fair work across the labour market in Scotland by applying Fair Work criteria to public funding. FWF asks businesses bidding for a public contract to commit to meeting all five FWF criteria,
which 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; and
• providing fair pay for workers (for example, payment of the 'real' Living Wage).

To support this agenda through procurement, in October 2015, the Scottish Government published statutory guidance on Addressing Fair Work Practices including the Living Wage in procurement. To support the practical application of the statutory guidance, we also published Best Practice Guidance and a Toolkit in July 2018 for public bodies and suppliers.

On 29 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 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.

In the coming year our suite of published guidance and tools will be reviewed and, where necessary, will be updated to reflect updates in line with the Fair Work First policy. These changes will be reflected in
the Procurement Journey.

We are also encouraging Scottish businesses to commit to fair work and wider productivity and competitiveness ambitions across the whole of their business through the refreshed Scottish Business Pledge criteria, launched in October 2019 and due to be reviewed in 2021. More information about addressing Fair Work practices in procurement is available on our website.

Our policy

Our policy is to consider Fair Work practices as early as possible in all of our procurements and to target this by including award criteria in contracts, where proportionate and relevant to the contract.

We became an Accredited Living Wage employer on 1 June 2015. This requires us to commit to paying at least the 'real' Living Wage to all of our directly employed staff and to address the payment of the 'real' Living Wage to contractors working on our premises. We also ask if bidders are Accredited as Living Wage employers and whether they have signed up to the Scottish Business Pledge.

As a result of this robust approach we have secured a range of Fair Work practices in a number of our significant contracts. We have updated our procurement processes to ensure Fair Work First criteria are included in all relevant procurements. Early examples include:

• the Fair Start Scotland contracts, designed to help people into work;
• a ten-year Facilities Management contract, for Scottish Government premises and several public sector partners;
• the procurement for Electronic Monitoring of Offenders; and
• The Electronic Counting of Votes contract.

Monitoring

We record any commitments made by suppliers to pay the 'real' Living Wage^[7] in our contract award notices, which are published on PCS. These will be included in the annual procurement report of our performance against this strategy.

Robust procedures have been introduced to help all those involved in procurement across the organisation to consider our policy on Fair Work practices and Fair Work First in all relevant contracts. We aim to ensure a consistent approach across the wider central government sector by offering support and guidance as part of our responsibility to increase procurement capability in the sector.

Impact of Scottish Government policy

Procurement policy and practice is enabling the wider delivery of the Fair Work agenda through national policies.

The Scottish Government continues to provide funding to enable adult social care workers to be paid the 'real' Living Wage. Guidance to support the delivery of the Living Wage commitment includes advice on how this can be implemented where services are outsourced through public contracts. We will continue to progress work in this sector and will reflect on the recommendations from the Independent Review of Adult Social Care and continue with the immediate actions identified by the Fair Work in Social Care Group.

The Scottish Government has committed to the funding to enable payment of the 'real' Living Wage to all childcare staff delivering the expansion of 1,140 funded Early Learning and Childcare entitlement. Guidance was published in April 2019 to support local authorities to reflect this commitment in their procurement processes. The COVID-19 pandemic has impacted on the pace of this expansion and interim guidance on Funding Follows the Child was published in July 2020.

We will carefully consider the recommendations of the Fair Work Convention's Construction Inquiry, which is due to report later in 2021. Where appropriate, we will develop our Client Guide to construction projects to include guidance for public bodies to help them further deliver on Fair Work First obligations.

We are committed to supporting the work of the Fair Work Convention which shares the Scottish Government's vision that by 2025 people in Scotland will have a world-leading working life where fair work drives success, wellbeing and prosperity for individuals, businesses, organisations and society. The Scottish Government will be including Fair Work First in all contracts awarded from April 2021, wherever it is appropriate and relevant to do so, and we will support the wider implementation of Fair Work First, as it applies to procurement, across the wider public sector.

6.4 Making sure our contractors and subcontractors comply with the Health and Safety at Work etc. Act 1974 and any provision made under that Act

Background

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. Guidance is included within the Procurement Journey to support buyers in effectively incorporating appropriate health and safety considerations within procurement exercises.

Our policy

We want to prevent or reduce any workplace factors that may cause ill health and injury by managing risk proportionately, sensibly and practically. We believe that it is important that those bidding for our contracts are also able to show that they are responsible and respect any health and safety obligations. That is why it is a standard condition of our contracts that the contractor must keep to all laws that apply, all requirements of regulatory organisations and industry good practice. This includes any relevant health and safety law. Also, whenever a contractor's staff are on our premises, under the terms of our standard contracts, they must keep to our own health and safety requirements.

Monitoring

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

Impact of Scottish Government policy

The Single Procurement Document (SPD) is a document that is used by bidders to self-declare that they have the capability and capacity to deliver a contract. More detail about the SPD can be found in section 1 of this document. Our SPD guidance gives all public sector buyers advice about how to apply selection criteria about, amongst
other things, a bidder's approach to
health and safety.

6.5 Procuring fairly and ethically traded goods and services

Background

The sustainable procurement duty requires public bodies to consider how they can improve their area's economic, social and environmental wellbeing with a particular focus on reducing inequality and to act in a way to secure these improvements.

This includes taking a robust approach in procurement processes to tackling criminal activity, including human trafficking and exploitation, modern slavery, corruption and fraud and also promoting positive practices. Respecting human rights, for example, can have business benefits such as enhancing reputation and brand value, increasing the customer base, attracting and retaining a diverse skilled workforce (which can in turn increase innovation and productivity) and reducing risk of court proceedings.

Our policy

Considering the risks and opportunities at an early stage in a procurement process enables us to take account of ethical issues when assessing a bidder's overall suitability and reliability to be awarded a contract. This includes considering whether the bidder has been convicted of certain criminal offences or has committed any acts of professional misconduct while running their business.

Early consideration during the procurement process of ethical issues also enables us to consider opportunities to promote positive outcomes. For example, we use contract criteria to encourage transparency in the supply chain which, in turn, supports positive practices and is in line with our Fair Trade Nation status to promote the use of fairly traded goods and services.

Contract and supplier management are key, and appropriate measures are adopted on a case-by-case basis. Our collaborative procurement teams were early adopters of the sustainable procurement tools for our collaborative ICT products framework agreements with a developing focus on ethically traded supply chains. The ICT team continues to focus on ensuring that suppliers on our frameworks for IT products conduct appropriate due diligence in relation to supply chain activities and provide transparency of business and supply chain operations. This is to ensure that legislative obligations and best practice are applied and adopted.

Also, in line with our legislative requirements, we have updated our standard contract terms and conditions to allow for contract termination in the event of failure by a contractor to comply with its legal obligations in the fields of environmental, social or employment law. Our approach is described in Scottish Procurement Policy Note SPPN 9/2016: Ensuring compliance with environmental, social and labour laws, which encourages all public bodies to consider a similar approach.

Monitoring

Our annual procurement report will include a statement about the effectiveness of our selection procedures and we are keeping a central record of the value of fairly-traded products bought or sold under our catering contract.

Impact of Scottish Government policy

Our International Development Strategy includes a 'do no harm' approach to sustainable development. It requires all government, local government, public bodies, private sector, communities and individuals to adapt their behaviour in support of UN Sustainable Development Goals. We are committed to helping deliver those goals

and our National Performance Framework is Scotland's way of localising these global goals, putting human rights at the heart of how we assess national performance. We are updating our sustainable procurement tools to ensure, amongst other things, that our procurement decisions align with this benchmark.

The sustainable procurement tools enable public buyers to take an ethical approach in their procurements. This includes taking account of human trafficking considerations. For example, we check whether existing, relevant contractors have published a Slavery and Human Trafficking Statement to ensure compliance with section 54 of the Modern Slavery Act 2015. The tools are being used widely across the public sector to consider ethical issues systematically alongside other socio-economic and environmental factors. Considering ethical issues early in the procurement process, through use of the tools, enables relevant requirements to be included in contracts and frameworks leading to improved supply chain transparency.

Scottish Procurement Policy Note SPPN 3/2020: Reducing the risk of human trafficking and exploitation in the performance of public contracts is aimed at helping to reduce the risk of human trafficking and exploitation in the performance of public contracts. Consistent with our Trafficking and Exploitation Strategy, the approach we are taking recognises that, by buying fairly and ethically-traded goods and services, our choices and actions can have positive outcomes for people and communities locally, nationally and internationally.

6.6 Contracts involving food to improve the health, wellbeing and education of communities in Scotland and promote the highest standards of animal welfare

Background

We recognise that buying healthy food and drink can have major social, economic and environmental impacts. It can have benefits on community health, wellbeing and social justice through access to good nutrition including fresh and seasonal produce and training opportunities.

Our policy

As an organisation we seldom buy food directly but we do use our catering framework to achieve a range of benefits. Our approach is to make sure that this keeps to government policies on healthy eating and nutrition, promoting fresh, seasonal, fairly traded and local produce and to UK buying standards. These standards take account of factors including production, traceability, authenticity, origin, ethical trading, animal welfare, environmental standards and health and waste.

Leading by example, the Scottish Government's catering contractor was accredited with the Soil Association, Food for Life Catering Mark Silver Award across the four main Scottish Government sites. The service provider also holds the Healthy Living Plus award within all of its Scottish Government restaurants. Our catering contractor also works with local communities to provide work placements and is committed to paying its staff at least the 'real' Living Wage.

Our catering contract provides that:

• the majority of fresh beef, lamb, pork (not including bacon) and baked goods is Scottish;
• all fresh fish is accredited by the Marine Stewardship Council (MSC);
• all eggs are free-range;
• almost all milk and cream used in food preparation is organic and Scottish;
• chickens are from the UK to keep to the Red Tractor assurance scheme and our Soil Association Food for Life award;
• all hospitality tea, coffee and sugar is fair trade accredited; and
• coffee grounds are recycled as compost for customers to use.

Monitoring

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

Impact of Scottish Government policy

Our national food and drink policy: Good Food Nation promotes buying and use of healthy, fresh and environmentally sustainable food for catering. Our January 2011 guidance 'Catering for Change: Buying food sustainably in the public sector' is for use by public sector organisations when buying food or catering services. The welfare of farm animals reared in Scotland for products used in food in our catering contract and other public contracts is safeguarded under legislation we have introduced to protect animals on farm and at slaughter.

We are also working to increase the sourcing of Scottish products further through public sector contracts. Our Programme for Government outlines a number of commitments that put local sourcing at the heart of public sector supply chains. This includes expanding the Food for Life programme to increase the amount of locally sourced and produced food in Scotland's schools.

6.7 Paying invoices in 30 days or less to our contractors and subcontractors

Background

Our late payment legislation requires all public bodies to pay invoices within 30 days. There is also specific guidance on late payment legislation.

Our policy

We are committed to prompt payment of invoices both to and by our contractors and their subcontractors. We commit to pay valid invoices within 30 days of receipt and, as a condition of contract, we require this commitment to apply through the supply chain relating to the contract. This condition, when applied throughout the supply chain, must also make clear that if a subcontractor believes that invoices are not being paid within 30 days they can raise the issue directly with us.

Also, as part of our plan to support economic recovery and sustainable economic growth in Scotland, we announced in October 2008 that we would aspire to a ten day target for paying bills to businesses in Scotland. This is a key objective and an important expression of our commitment to support businesses and goes beyond our commitment to pay suppliers within 30 days. So while valid invoices must be paid within 30 days, we pay as many as possible within ten days. In the financial year 2019-20 we paid 98.7% of valid invoices in ten days or less and 99.7% within 30 days.

Monitoring

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

We keep our prompt payment policy under review and will act on the results of a Supplier Survey which was published in March 2021. This will include a particular focus on payments in the supply chain.

Impact of Scottish Government policy

Public bodies are major buyers of goods and services within their local economies and across the Scottish economy as a whole. While other public bodies are responsible for their own procurements we asked them in Scottish Procurement Policy Note SPPN 8/2009: Payment of Invoices in Public Contract Supply Chains Within 30 Days to follow our example by including 30-day payment terms in their contracts and to extend these down the supply chain. This is because we believe that all public bodies should treat their suppliers fairly including by paying them promptly.

Councils, for example, are independent bodies and so are not subject to our own policy on prompt payment. However they are subject to prompt payment legislation and are also under a legal duty of Best Value. This includes ensuring that suppliers are paid promptly. The Local Government Benchmarking Framework (LGBF) operated by the Society of Local Authority Chief Executives (SOLACE) and also the Improvement Service, through which council performance against a wide range of indicators is collated and published, includes information on payment performance for each of Scotland's 32 councils. The most recent LGBF report for 2019-20 showed that overall the percentage of invoices paid within 30 days by councils increased from 89.5% to 91.7% since 2010-11.

The construction sector can suffer from late and extended payment terms from business to business. As a result we rolled out our project bank account policy in September 2016 under Scottish Procurement Policy Note SPPN 10/2016: Implementation of project bank accounts in construction contracts. This creates a bank account, usually for a construction project, out of which a public body can pay supply chain firms directly as well as making payments to the main contractor. It protects participants' cash from upstream insolvency with payments received within five days of deposit. By speeding up cash flow project bank accounts can transform the process and ensure the ongoing solvency of businesses. This particularly applies to smaller firms at tiers two and three, which are more vulnerable to the effects of late payment.

In 2019 we delivered on our Economic Action Plan pledge to increase the number of projects to which project bank accounts apply. As a result project bank accounts are now available to more small businesses after we brought more Scottish Government construction contracts into scope: infrastructure projects over £5 million, replacing the previous £10 million threshold and building projects over £2 million instead of £4 million. Prompt payment is good for businesses and their employees and the additional protections project bank accounts have against the effects of upstream insolvency also make them good for the economy and society. We regularly engage with partners outside Scottish Government and urge others to follow our lead by implementing project bank accounts on their construction contracts.

As a result of this policy, around £700 million of public works projects have been awarded to date with project bank account requirements for subcontractors.

Also, in the forthcoming Scottish Government Civil Engineering Framework, there will be a requirement for suppliers to report monthly on their payment performance covering their supply chain for works contracts awarded under the framework.

We also invite Scottish businesses to make a voluntary commitment to the Scottish Business Pledge which was first launched in May 2015 and was refreshed in October 2019. This recognises that businesses play a key part in creating a strong inclusive economy. The Business Pledge involves ten individual strands of business improvement activity which many companies across Scotland have already adopted because they deliver substantive business benefits and contribute to inclusive growth.

In addition to the other elements, those businesses that make a commitment to the Scottish Business Pledge can commit to work towards ensuring the prompt payment of their subcontractors or suppliers. By agreeing to pay invoices on time businesses set in motion a 'supply chain reaction' which can boost companies' competitiveness, which is a key element of Scotland's Economic Strategy.

The response from businesses in Scotland has been positive and the number of Business Pledge companies is growing. Further detail is available from the quarterly published statistical overview of the Scottish Business Pledge.