Procurement strategy update

Part 2

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 £11 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 legal, transparent and fair.

Our procurement policies shape and support public procurement activity across Scotland. For example, we are responsible for giving effect to EU procurement directives in Scots law. When the last directives were published in 2014 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 also 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 updated strategy we set out our general policies and also a statement on how we will monitor those policies over the period of the strategy and reflect on them in our annual procurement report.

6.1 Our policy on 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”.

The use of community benefits in our public contracts helps us to deliver wider social and economic benefits as part of our public spending decisions. Scottish public bodies must now consider the use of community benefits for regulated public contracts.

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 or contractual – 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 may 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 for all bidders. 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 is accepted, any offer of community benefits is included in the contract to be signed by the bidder.

Monitoring

Our contract award notices for regulated contracts record whether we expect our contractors to 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 delivered benefits and will report on these in our annual procurement report of our performance against our procurement strategy.

Impact of Scottish Government policy

Community benefits contribute to a number of national outcomes including more and better employment opportunities and tackling inequality. Scotland has been recognised as a leader in promoting social and economic benefits to communities through its public procurements ^[5] . Since 2008 community benefits 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 and other social and community enterprises) in the supply chain.

As a result of our procurement legislation all Scottish public bodies must consider the use of community benefits for regulated procurements. They must also explain in the contract opportunity 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.

For example the Fair Start Scotland programme will deliver new employment services for those who want to work and need help to enter into, and remain in, work and will begin from 3 April 2018. It will provide a range of support intended to respond flexibly to individual needs. A key element of the procurement exercise for this was to ensure that service providers would embrace the delivery of community benefits through the contract and that these benefits would be built into service delivery.

More information about community benefits is available on our website.

6.2 Our policy on 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. 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 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. Our 2017 Interpreting, Translation, and Transcription Services Framework illustrates this approach. It provides access to public services for those whose first language is not English and who would otherwise be excluded from using those public services.

We embarked on a broad engagement plan consulting with, amongst others, people who use services, business, courts, equality and human rights representatives. When the tender documents were released a supplier day helped the market to understand the procurement process and how to submit a bid. The views of the market and stakeholders informed the tender documents for the framework. As a result, the operating procedures were changed to streamline the ordering process. We have also incorporated counselling and assistance for interpreters and increased security standards into the framework. Our supplier also commits to paying the ‘real’ Living Wage to staff and freelance linguists.

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.

As an organisation, we do not buy many of these services directly, as these are often bought by local authorities, integration authorities and sometimes health boards but we do recognise the importance of these 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 the services. 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.

In 2017, our Procurement Journey was enhanced to include our specific guidance about the procurement of health or social care services. This also 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. It balances procurement legislation with the principles of best value and also outcomes for people. Our current Scottish procurement regulations and guidance came into force on
18 April 2016.

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 Our policy on Fair Work practices including paying the ‘real’ Living Wage to people involved in delivering our contracts

Background

We believe that Fair Work practices are central to improving business, society and the lives of individuals and their families.

Fair Work balances the rights and responsibilities of employers and workers and can generate benefits for individuals, organisations and society. Fair Work is defined through five dimensions: fulfilment; security; opportunity; respect and effective voice. These dimensions cover the ability of workers; to have a say and to influence and change working conditions; to both access and progress in work; to have fair working conditions and to be treated fairly at work. Further details can be found in the Fair Work Framework published by the Fair Work Convention.

The Scottish Government considers that the payment of the ‘real’ Living Wage is one of the clearest ways a potential supplier can demonstrate that it takes a positive approach to its workforce, particularly when adopted as part of a wider package of Fair Work measures. This may include, for example, adopting working practices which do not exploit workers and tackling gender pay gaps. The ‘real’ Living Wage is an hourly rate set independently and updated annually by the Living Wage Foundation. A business’s Fair Work practices can have a direct impact on the quality of service it delivers and sometimes, on the goods it supplies and works performed through public contracts.

The Scottish Government also invites Scottish businesses to sign up voluntarily to the Scottish Business Pledge. The Pledge is a shared ambition of boosting productivity, competitiveness, sustainable employment and workforce engagement. It has nine key elements at the heart of which is the payment of the ‘real’ Living Wage.

Our policy

We became an accredited Living Wage employer on 1 June 2015. This means that we have made a commitment to pay 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, including those delivering our catering and cleaning services. Our policy is to consider Fair Work practices as early as possible in all of our procurements. 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 payment of the ‘real’ Living Wage can be included as an important part of the procurement exercise.

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

• The extent to which the quality of the delivery of a contract can be affected by the way those working on it are engaged.
• Any risk that suppliers could use unfair employment practices – e.g. by not offering the ‘real’ Living Wage, or where workers are not offered stability of employment such as through the inappropriate use of zero hours contracts.

As a result of this robust approach we have secured a range of Fair Work practices, including the payment of the ‘real’ Living Wage, in a number of our significant contracts.

Our catering tender piloted our approach to Fair Work practice. All five bidders made a commitment to pay staff the ‘real’ Living Wage and also included other Fair Work related practices in their tenders. The successful bidder included proposals to directly improve conditions for workers. Also, in the contract to supply our water and waste-water billing services the provider pays at least the ‘real’ Living Wage to those who deliver the contract and has also signed the Scottish Business Pledge.

The Warmer Homes Scotland contract provides energy-efficiency measures for homes in vulnerable communities. As part of the delivery of this contract 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. The contract ensures fair working conditions including the ‘real’ Living Wage for those delivering the contract and also those involved in the subcontracting supply chain. It makes sure that our suppliers are providing jobs, training and work placements.

Monitoring

We record any commitments made by suppliers to pay the ‘real’ Living Wage in our contract award notices which are published on our national public procurement advertising portal 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 in all relevant contracts. We monitor performance through our contract and supplier management. We also 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

We are leading by example and were the first government in the UK to adopt the ‘real’ Living Wage in our public sector pay policy. In October 2015 we published statutory guidance on Addressing Fair Work Practices including the Living Wage in Procurement. This guidance has been built into our Procurement Journey at all relevant stages to help ensure best practice.

Through our national policies we are promoting the payment of the ‘real’ Living Wage in public sector contract settings where low pay can be an issue. These include commitments made by the Scottish Government and local government to pay the ‘real’ Living Wage from 1 October 2016 to care workers providing direct care and support to adults in care homes, care at home and housing support. This decision benefits up to 40,000 people and has recently included extending the Living Wage to cover sleepover hours during 2018-19.

Also, as part of the expansion to 1140 hours of funded Early Learning Childcare ( ELC) entitlement, a new Funding Follows the Child approach which will safeguard and prioritise quality whilst increasing choice for parents and carers will be introduced by 2020. The Scottish Government is committed to providing the funding to enable payment of the ‘real’ Living Wage to all childcare staff in private and third sector providers who are delivering the funded early learning and childcare entitlement by 2020. The Scottish Government is working closely with local authorities and delivery partners in particular through the ELC Service Models Working Group on the development and implementation of the Funding Follows the Child approach and on delivering the ELC ‘real’ Living Wage commitment.

We are committed to supporting the work of the Fair Work Convention whose vision is 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. This includes extending the use of the ‘real’ Living Wage in Scotland and fully supporting the three year strategy (2018 to 2021) to make Scotland a Living Wage nation.

6.4 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

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 policy

We want to prevent or reduce any workplace factors that may cause ill health and injury and 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 European Single Procurement Document ( ESPD) 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 ESPD can be found in section 1 of this document. Our ESPD 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 Our policy on 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 to promote 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 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 ICT team were an early adopter of the sustainable procurement tools for our collaborative ICT products agreements with a developing focus on ethically traded supply chain; see case study. A balanced scorecard has been created for contract management of these agreements and we work closely with suppliers to monitor practices and mitigate potential risks associated with human rights and/or ethical procurement risks in the supply chain.

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. We also published a Scottish Procurement Policy Note ( SPPN) in 2016 (09/2016) Ensuring compliance with environmental, social and labour laws to encourage 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

The UN Guiding Principles on Business and Human Rights are based on a framework which includes business responsibility to respect human rights and to remedy any negative impacts. Our International Development Strategy includes a ‘do no harm’ approach to sustainable development. This 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.

Our 2017-18 Programme for Government incudes a commitment to review our National Performance Framework to embed the UN Sustainable Development Goals and put human rights at the heart of how we assess national performance. We will update our sustainable procurement tools to ensure that our procurement decisions align with this benchmark.

The Scottish Parliament unanimously passed the Human Trafficking and Exploitation (Scotland) Act 2015. In May 2017 we published the Trafficking and Exploitation Strategy which sets out our approach and commitment to tackling human trafficking. Implementation groups have been set up to support the delivery of the three action areas under the strategy. Action area three - Address the conditions that foster trafficking and exploitation – will include a focus on what procurement can do to help tackle this issue.

6.6 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

We recognise that buying 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:

• all fresh beef, lamb, pork (not including bacon) and baked goods are 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 for products used in food 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.

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.

A comparison of Scottish sourced produce on our catering contract between 2008 and 2017 is provided at Table 2 below.

Table 2

Scottish sourced produce on our catering contract – a comparison of 2008 and 2017

Produce	2008	Jan – Mar 2017
Fresh beef	47%	100% Scottish
Fresh lamb	17%	100% Scottish
Fresh pork meat	41%	100% Scottish*
Fresh fish	65%	100% MSC Certified, landed in Scotland
Fresh bakery	99%	100% from Scottish producers
Milk and cream	99%	99% Scottish, 1% Red Tractor / UK
Cheese and butter	n/a	49% Scottish, 25% Red Tractor / UK, 26% EU
Gammon and Bacon	n/a	47% Scottish, 50% Red Tractor / UK, 3% EU
Fresh fruit and fresh veg	30%	28% Scottish, 18% Red Tractor / UK, 26% EU, 28% Worldwide
Fresh chicken	68%	100% Red Tractor / UK**
Eggs	n/a	100% Free-range, Red Tractor / UK

* excludes bacon.

**
the supply of Scottish farm assured chicken is completely controlled by the retail sector. This is a nationwide issue for all sectors outwith retail and is something being considered by the industry. To ensure the contract is compliant with the Soil Association’s Food for Life award Red Tractor accredited chicken is used on the Scottish Government contract.

6.7 Our policy on 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. Our Procurement Policy Handbook reinforces this and applies to all Scottish contracting authorities. 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 10 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 2016-17 we paid 98.6% of valid invoices in ten days or less and 99.8% within 30 days.

Monitoring

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

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 ( Scottish Procurement Policy Note (SPPN) 08/2009) 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 2016-17 showed that overall the percentage of invoices paid within 30 days by councils increased from 89.5% to 93.1% 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. 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 have the potential to transform the process and to 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. Public bodies covered by the Scottish Public Finance Manual need to include project bank accounts in their tender documents for building projects over £4.1 million and civil engineering projects over £10 million. We engage regularly with other public bodies to encourage them also to use project bank accounts.

As a result of this policy, the first public works projects to include project bank account requirements for subcontractors (valued around £375 million) were advertised by public bodies on PCS during 2017-18. Some of these projects are expected to start on site this year 2018-19. A further £440 million of public works projects (also including project bank account requirements) are scheduled to be advertised by public bodies on PCS soon with some of these projects also expected to start on site this financial year 2018-19.

We also invite Scottish businesses to sign-up voluntarily to the Business Pledge which we launched in May 2015. This recognises that businesses play a key part in creating a strong inclusive economy. The Pledge involves nine 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, these are:

• Paying the ‘real’ Living Wage
• Not using exploitative zero hours contracts
• Supporting progressive workforce engagement
• Investing in youth
• Making progress on diversity and gender balance
• Committing to an innovation programme
• Pursuing international business opportunities
• Playing an active role in the community
• Committing to prompt payment

In addition to the other elements, those businesses that make a commitment to the Scottish Business Pledge agree 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 pledge companies is growing. At the end of February 2018 there were more than 440 companies which had committed to the Scottish Business Pledge. These businesses collectively provide 92,230 Scottish jobs. Further detail is available from the quarterly published statistical overview of the Scottish Business Pledge.