Procurement strategy update

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 small and medium enterprises, 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 2016 Small Business Survey Scotland was published in August 2017 and showed that 63% of SMEs with employees were looking to grow their sales over the next three years. Also, the Social Enterprise Census was published in September 2017 and showed that 52% of the social enterprises surveyed describe the public sector as customers and 20% had bid for a public sector contract in the preceding 12 months with three-quarters of those bidding being successful.

We have already 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;
• improved ways for suppliers to give and receive feedback;
• removal of the option in our procurement legislation for public contracts to be awarded on the basis of lowest cost or price only; and
• more scope to reserve contracts for supported businesses.

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

Easier access to public contracts

We have introduced a comprehensive and joined-up set of tools, policy support and guidance to simplify our processes and to increase access to information and opportunities for buyers and suppliers. These include our PCS website and the Procurement and Supplier Journeys which are summarised at section 1 of this document. The Supplier Development Programme also continues to run supplier focused events and works with partners and external organisations to help SMEs and third sector organisations win work and to grow their business.

The 2014 Act requires public bodies to consider how they might facilitate the involvement of SMEs, the third sector and supported businesses. It makes it easier for them to find and win contracts by ensuring that contract opportunities are advertised through PCS cementing the website’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 including for SMEs. We know that 60% of the suppliers awarded contracts through PCS during 2016 were SMEs located in Scotland.

We continue to develop our collaborative procurement strategies to also 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’. Currently, more than 50% of our collaborative suppliers are SMEs. A notable example is the suite of marketing services which was awarded in summer 2017. All 23 suppliers are SMEs – 19 are Scottish SMEs, while another three are SMEs with a significant Scottish presence. We will continue to use lotting strategies and frameworks for our national contracts where appropriate to enhance opportunities for a range of organisations and for those operating niche markets and in local areas.

Our Scottish Procurement Information Hub identifies that, where the size of the supplier was known, SMEs were direct recipients of 49% of annual public sector procurement spend in 2015-16.

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

As well as providing funding to the Supplier Development Programme we currently fund ‘Partnership for Procurement’. This is a programme that provides a range of support specifically to third sector organisations wishing to form consortia to bid for public sector contracts. We also deliver support and training for third sector organisations linked to the Just Enterprise third sector contract. Also, the Developing Markets Contract, which ran from 2011-2017, was set up to increase understanding in the public sector of community benefits, to implement sustainable procurement with respect to the third sector and to support the use of Public Social Partnerships. The Scottish Government is currently reviewing both the Just Enterprise contract and the Public Social Partnership model and is developing its future approach with a view to further increasing third sector involvement in procurement.

Removal of the option for public contracts to be awarded on the basis of lowest cost or price only

In 2016 we removed the option in our procurement legislation for higher value public contracts (i.e. above EU regulated thresholds) to be awarded on the basis of lowest cost or price only. This means that public bodies in Scotland must consider other factors associated with the quality of products and services and that can have 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 below the EU threshold levels.

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 reserve contracts for supported businesses, where there are enough suitable suppliers, without opening the opportunity up to wider market competition. 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, within the first of three action plans underpinning ‘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. That action plan underlines our commitment to make it easier for public bodies to identify and reserve contracts for a wider range of social enterprises now covered by the change in definition of a supported business for the purposes of public procurement legislation. As a first step, an online register comprising social enterprises and supported businesses across Scotland was established in October 2017 and is embedded within the Partnership for Procurement website ( P4P).

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:

• Textiles and Personal Protective Equipment
• Furniture and associated products
• Signage
• Document management

The current framework runs until September 2018. It will ensure continued access to the market for those supported businesses which are on the framework while we continue to consider how we best facilitate market access for supported businesses.

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.

We will prepare our first annual procurement report under the 2014 Act later this year to reflect on our performance against our procurement strategy. It will include a summary of any steps we have taken to involve supported businesses in regulated procurements.