Post-legislative scrutiny: Procurement Reform (Scotland) Act 2014

SCVO response to the Scottish Parliament Economy and Fair Work Committee's consultation on Assessing the impact of the Procurement Reform Act

About our submission

We have undertaken substantial scoping work and engagement with voluntary organisations to inform our position on procurement reform in Scotland, which includes:

• Reviewing and analysing existing research and responses and submissions to previous consultations.
• Commissioning interviews with voluntary organisations about funding and procurement.
• Conducting a joint survey on accessing public procurement with Social Enterprise Scotland.
• Hosting a small focus group to test SCVO’s position on procurement reform with charity leaders.

SCVO would be pleased to expand on our submission during an oral evidence session.

Our position

Contract income from the public sector constitutes a significant portion of the voluntary sector’s income, accounting for a quarter of the sector’s income in 2021, approximately £1.8bn. Regrettably, Scotland’s approach to public procurement not only hampers the potential of voluntary organisations to innovate and deliver new solutions as part of broader public service reform, but also intensifies the challenges faced by people and communities in Scotland.    

The Procurement Reform (Scotland) Act 2014 was viewed as promising legislation. SCVO recognises its potential in enhancing public procurement in Scotland. Still, implementation of reform has lagged well-meaning policy. Instead of the Act serving as a catalyst for broader reforms, contracting authorities are still grappling with procurement changes agreed upon nearly a decade ago. While some progress is evident, the pace of change remains frustratingly slow.

Voluntary organisations, whether directly involved in public procurement or considering their involvement from sidelines, must confront complex systems and processes, insufficient contract funding, and a short-term bidding and retendering cycle that undermines long-term impact. These organisations have been left questioning: does the public sector genuinely understand our operations, ethos, and the value we could bring if viewed as trusted partners in the delivery of public services?

The ideals of community wealth building, sustainable procurement, and a wellbeing economy risk being reduced to mere rhetoric without a procurement system centred on outcomes and impact. Reform of public service delivery must align funding with strategies, policies, and the latest in a long list of taskforce recommendations, and in a way that maximises all our talents. While public procurement was brought about through good intentions, its present state saps resources, morale, and innovation.

Our response

SCVO is pleased to provide written evidence for the 'Assessing the impact of the Procurement Reform Act' consultation, which builds on the former Economy, Energy, and Fair Work Committee's inquiry into the Act in 2021.

2021 Scottish Parliament consultation

SCVO, along with other voluntary organisations, participated in the 2021 consultation. We recommend that the Committee reviews these past responses alongside new submissions, as many voluntary organisations feel overloaded with consultations so may not respond afresh. If response rates are low, the Committee should not interpret it as a lack of interest in procurement reform. Many voluntary organisations are put off engaging on procurement because of perceptions of complexity, which we detail in our response.

Technical definitions – commissioning and procurement

From the outset, it is important to distinguish between two often-confused terms used interchangeably:

• Commissioning: This is the strategic planning done by public bodies for services. Ideally, it should be a joint effort with other sectors, including the voluntary sector. Its aim is to develop a strategic view of how to get the best outcomes and impact from public money.
• Procurement: This refers to the actual contracting based on commissioning. However, commissioning doesn’t always need to lead to procurement; done well, it could result in a grant, either direct or competitive, or some other approach. Procurement should only be used if it is the right fit, not as default. 

We discuss this in more detail in our response to Question One.

Latest findings from SCVO’s State of the Sector statistics

Contract income from the public sector is a significant part of the voluntary sector’s income and accounted for a quarter of the sector’s income in 2021, around £1.8bn. SCVO’s own analysis of charity accounts shows that income from public sector contracts and other non-grant public sector income has more than doubled since 2007 and increased by almost £0.5bn between 2018 and 2021. 

Q1: What are the main barriers to businesses accessing public procurement contracts in Scotland, and how have these barriers changed since the Procurement Reform Act (Scotland) 2014 was implemented?

Findings from a recent (September 2023) joint survey of voluntary organisations by SCVO and Social Enterprise Scotland support much of what we already know from a plethora of evidence that is publicly available; Scotland’s procurement system is falling far short of expectations and of where people, communities and voluntary organisations need it to be. Despite some organisations reporting a good success rate in winning public contracts, the overwhelming sentiment is one of dissatisfaction. The majority of those surveyed that have bid for contracts in recent years described their experience as "poor," with "neither good nor bad" as the next most frequent response.

Of 40 respondents, only three felt that it has become easier for voluntary organisations to secure contracts in recent years. Just four believed there had been any improvement in the procurement process at all. These findings echo concerns that SCVO has consistently heard from the voluntary sector, reinforcing the urgent need for reform. Evidence provided to the former Economy, Energy, and Fair Work Committee by organisations outwith the voluntary sector show a similar sentiment with the slow pace of improvement to the public procurement system since 2014. Those issues felt across sectors are only amplified for a voluntary sector that is stretched and has little time and resources to devote to complex tender processes.   To build a more equitable and effective procurement ecosystem, we need to focus on several key areas:

Streamline bureaucratic requirements for organisations bidding for contracts

SCVO has consistently heard that Scotland's procurement system needs to be simplified. A key step toward simplification would be to minimise bureaucratic obstacles, such as the cumbersome and intricate forms. Often, tender documents include questions that are not relevant, due to the reliance on one-size-fits-all templates; this unnecessarily complicates the application process. It would be more effective to begin by narrowing tenders to only the essential information, eliminating unnecessary questions – for example, questions about accreditations that are irrelevant to the contract in question. Contracting authorities should write Invitations to Tender (ITTs) in clear, straightforward language, and tendering portals should meet accessibility standards, so that they are easily navigable for all users.

Another area for improvement is the consistency in procedures across local authorities. Despite all using the same procurement guidance, each local authority has a different contracting and reporting mechanism. As one organisation pointed out, "In some areas, the level of detailed reporting and scrutiny is excessive — do these local authorities apply the same level of scrutiny to their own services?" For further details, please refer to our response to Question 7.

Equitable access for smaller, specialist voluntary organisations

Expert services are often provided by small, specialist charities. Current procurement models frequently neglect the unique challenges facing those small, expert organisations and favour larger entities, particularly those in the private sector, who benefit from economies of scale in a competitive and cost-driven landscape. Procurement officers are reluctant to subdivide their programmes into smaller, more manageable lots that would be more suitable for these smaller organisations and would provide the best service to individuals. Even when such lotting occurs, there is still a range of obstacles, such as timeframes, effectively excluding the organisations that could provide the best outcome for the service users.

One organisation told SCVO, "Procurement is a business function well-suited to larger commercial entities that have dedicated resources for it, something many voluntary organisations lack.” Even a larger voluntary organisation shares similar concerns despite having more resources. One told SCVO, "massive private sector providers are increasingly snapping up employability contracts, but these are focused on high-volume, low-impact services. A significant concern is an unfair 'pricing war'." For more details, please refer to our response to Question 6.

Shift from short-term to fair and sustainable multi-year contracts

One-year contracts pose significant challenges for long-term planning and often result in expensive redundancy processes and financial risk shifting onto voluntary organisations. For instance, social care organisations in the voluntary sector have had to exit public contracts due to the unmanageable cycle of frequent re-tendering, as shown in CCPS's research commissioned in 2019. This short-term approach undermines the principles of Fair Work and is disruptive, even distressing, to service users who lose the secure and familiar services they rely on.

Longer-term contracts are essential to achieve sustainable outcomes, allowing for more effective long-term planning and capacity-building and lasting benefit and impact for service users and public service delivery at large. The constant need to provide monitoring information during annual re-bidding processes is disproportionate and benefits no one. The excessive time and resources spent repeatedly applying for contracts drain time and money that could be better utilised elsewhere for both the bidder and the procurer. One organisation told SCVO, "What is most effective are reasonably long-term agreements, ideally a minimum of three years, with an option to extend for an additional two."

Commissioning human services such as social care or mental health services should be viewed as an investment; a long-term, strategic investment approach is the best way to maximise scarce public funds as well as being better for those receiving the services.

Tender for contracts with fair funding levels

Competitive tendering focused primarily on price often leads to contracts that lack adequate funding for the expected outcomes. This puts more strain on an already under-resourced sector, compelling organisations to find resources elsewhere (i.e. subsidise the contract) or compromise quality. SCVO’s research indicates that voluntary organisations increasingly must find additional funds to maintain services, effectively subsidising their contracts with public authorities with money from reserves or from fundraising. That’s both unethical and unsustainable.

Organisations have also reported that Service Level Agreements (SLAs) are often inflexible, lacking mechanisms for periodic reviews with no way to take account of inflation or other unexpected changes. Providing sufficient funding for services is crucial to maintaining financial sustainability for providers, and therefore for service delivery to often vulnerable people. The current procurement practices of public authorities undermine their claims to promote Fair Work principles, including the commitment to pay the Real Living Wage and job security.

Foster collaboration not competition between sectors and organisations

The current procurement system relies heavily on competitive tendering as a way to reduce costs. While this approach may drive down short-term costs, it generates unnecessary bureaucracy and uncertainty which in fact adds costs in the medium to long term. It creates competition at the expense of much-needed collaboration. Prioritising low-cost tenders can lead providers to withdraw from, or return, contracts that become unviable. We need funding mechanisms that encourage collaboration between organisations, whatever sector they are in, rather than driving competition.

Despite the existence of the Sustainable Procurement Duty, price continues to dominate the evaluation of bids. This focus on low costs discourages investment in the workforce and compromises quality standards; it doesn’t take account of what’s best for the people receiving the service.  One organisation told SCVO, "The government seems to fundamentally believe that a market-based approach delivers value and helps to eliminate corruption. However, this leaves little room for collaborative or innovative efforts that could add social value."

Avoid making procurement the default approach

SCVO's interviews with voluntary organisations in 2021 highlighted varying approaches across local authority areas. While some have increasingly resorted to competitive tendering over the past two or three years, others have reverted to grant-based funding after acknowledging the limitations of tendering for sourcing certain services. This prevalence of tendering has significantly impacted on voluntary organisations, who are far less able to access public procurement opportunities.

One organisation told SCVO, "Switching from grants to tendering has added a considerable workload. We've had to restructure our fundraising strategy and build capacity accordingly." Another organisation added, "We need alternative engagement models for local authorities to interact with the third sector that aren't solely contract-based." SCVO advocates for a more nuanced approach that doesn't automatically equate commissioning with procurement/contracts. It is evident that public authorities tend to default to contracts in situations where direct funding and grants would be more appropriate for all concerned.

However, decisions and agreement at the commissioning stage as to the correct approach for funding any given services must be ethical. This means involving people, communities, and providers in the co-design and redesign of services. This form of collaborative commissioning is vital for ensuring the best outcomes for people and that the correct decisions are made.

Commission and procure for outcomes, not processes

Civil servants and commissioners often focus on specific tasks and activities in contracts rather than outcomes, frustrating voluntary sector suppliers. It is often the case that documentation provides little to no space for organisations to focus on impact and outcomes, constraining them to focus on activities and outputs. One organisation told SCVO, ‘We need to be able to root in outcomes and impact from the beginning of the process but, unless you cram it into a question, there isn’t much focus on this from those pulling the bid forms together.’  

This rigid approach prevents services from being person-centred. Procurement must be outcomes-focused and geared toward how the public pound can make the most difference. A relationship-based approach in service delivery requires the contracting body to trust the service provider to know the right way to achieve the best outcomes for the people using their services. SCVO supports CCPS’s call for collaborative, participative, and ethical commissioning frameworks that prioritises people over price and competition.

Adopt equitable and transparent partnership approaches to commissioning and procurement

Organisations are frustrated with being contracted to deliver a service but not involved in the development of the spec/programme of work. It leads to organisations feeling that local authorities and HSCP’s do not understand what they do and could achieve, do not value the expertise they bring, and they feel as though any engagement is just a ‘tick box.’  Organisations have told SCVO that too often recognition of the voluntary sector is ‘window dressing’ rather than a real attempt to work with the sector to think differently and being open to new ways of delivering services. Therefore, the best outcomes for people and communities are not realised. One organisation told SCVO, ‘The procurement system needs to engage in a way that creates space for ideas and solutions – government alone is running out of these.’

Voluntary organisations feel strongly that the public sector needs to change how it engages with our sector, including in the construction and evaluation of tenders that ensure they can bid in realistic terms. Voluntary organisations can play a greater role in collaborative commissioning and planning to improve both the process and the outcomes. These opportunities need to be fair and respect the sector as a partner. There are too many examples of public authorities extracting expertise and then moving on to other less experienced providers who will deliver at lower costs, or switching how a service is funded from grant to contract to reduce costs. See our response to Question 6.    

Greater knowledge and understanding of the voluntary sector

Voluntary organisations are keen to see a shift in the public sector's engagement with them, particularly in planning, contract construction and evaluation. Playing a more active role would enable them to submit bids under realistic terms and would deliver a better product for the service user. It would be a significant improvement if those preparing contracts or funding agreements understood the context the provider is working in rather than treating them as a commodity. While these organisations can contribute meaningfully to collaborative commissioning and planning, the opportunities must be genuinely equitable, viewing the voluntary sector as a key delivery partner not simply as a source of free consultancy.

Enhanced and tailored support

A recent survey by SCVO and Social Enterprise Scotland found that many voluntary organisations acknowledge the increased availability of guidance and support to access procurement opportunities. Still, those that had not bid for public contracts in recent years felt that more support would encourage them to consider bidding. They expressed a desire for more guidance from the public sector, individualised 1-1 support, and case studies showcasing successful bids from similar organisations.

While SCVO recognises the availability of crucial support through avenues like Just Enterprise, the Supplier Development Programme, Third Sector Interfaces, and local authorities, navigating these resources can be daunting and a challenge. Many organisations struggle to find the time to engage with these supports effectively, especially when content is tailored to a broad audience. As one organisation told SCVO, "There's a need for someone who can offer targeted assistance, tailored to our specific organisation and bid. We're inundated with information, but often the actual support is limited."

Q2: Does the sustainable procurement duty mean that adequate weighting is given to environmental considerations?

SCVO recognises the potential of the Sustainable Procurement Duty (SPD) to stop focusing simply on cost, but for valuing social, environmental, and wider economic factors. Unfortunately, that is not what happens in practice; many tenders still overly prioritise cost in the scoring process. Price is clearly important, but this money-centric approach undermines the stated commitments of Scottish Government and others to address climate change, poverty and inequality. Longer-term outcomes for society and individuals would be better addressed through a more holistic, and realistic, approach. As one organisation told SCVO, “It remains challenging to get contracting authorities to recognise the added value they get from voluntary sector providers compared with private providers, but this is challenging in context that they are always cash strapped.”

SCVO consistently calls for public authorities, including the Scottish Government, to adopt a broader view of economic value - one that fully acknowledges the voluntary sector's contribution to Scotland’s economic and environmental landscape. This involves recognising the contributions made in areas like up-skilling/re-skilling, local economies, and fair and sustainable economic transformation. By adopting this broader perspective, the focus moves from mere cost evaluation to understanding a contract’s longer-term benefit to society. This approach enables better decisions that contribute to society's overall well-being.

The most recent Scottish Government Spending Review focused on procurement as an area for reform to deliver efficiencies in public spending. Efficiency is important in any procurement system and the current, short-term, bureaucratic approach is undoubtedly inefficient.  For example, we should move away from short-term contracts that drain time, capacity, and morale in favour of multi-year investment with streamlined systems and processes. Regarding "efficiency" simply as a low immediate cost presents a significant risk to the stated aim of using public sector procurement as a driver to achieve a fairer, greener, healthier Scotland. If public authorities expect their efficiencies, or savings, to be met by essentially sub-contracting that responsibility to voluntary, or indeed private, organisations, we lose sight of people and communities, and damage the infrastructure we all rely on.

The Sustainable Procurement Duty has the potential to ensure that contracting authorities get the balance right in securing “Best Value” However, voluntary organisations heavily involved in procurement have told SCVO that they have seen no improvement since 2014.  Best Value, as defined by Audit Scotland, ‘is about ensuring that there is good governance and effective management of resources, with a focus on improvement, to deliver the best possible outcomes for the public.’  The current system actively gets in the way of that due to its narrow focus on cost, driven by a competitive tendering environment that does not prioritise broader outcomes. As one organisation we spoke to noted, "The public sector needs better ways to engage with the voluntary sector to truly realise 'best outcomes.’ The argument for tendering services is always around ‘best value’ but public sector doesn’t get best value from procurement currently."

Especially in sectors such as social care, the prevailing tendency has been to prioritise cost at the expense of the wellbeing of individuals receiving care, despite rhetoric about person-centred services. To counter this, a more balanced approach is required, one that factors in social, environmental, and economic considerations when evaluating tenders. Currently, aspects like environmental sustainability often get short shrift due to cost concerns. There must be a more equitable balance across these aspects of bids. Greater involvement of the voluntary sector and communities through collaborative commissioning models is vital to ensuring human and environmental needs and rights are supported through contracts.   

Procurement is a powerful tool that the Scottish Government, local government, the NHS, and other public authorities have at their disposal to shape the economy in a manner that delivers wider social and environmental benefits. That cannot be achieved while cost remains the single most important factor when evaluating and scoring bids. Nor can it be achieved when contracting authorities are failing to ask potential suppliers to demonstrate impact and outcomes in their bids, as we raise under question 1. Therefore, SCVO encourages the Committee to strengthen the SPD to ensure a more balanced, outcomes-based approach to procurement and to genuinely support Community Wealth Building in practice, not just in rhetoric. See our response to question 8.

To promote wider value through procurement, SCVO supports conditionality clauses in contracts that aim for social and environmental good. However, we have significant concerns that the growing complexity of these conditions —relating to Fair Work, Net Zero, and more — could outpace the voluntary sector's capacity to adapt, particularly when meeting those conditions is not funded. Inconsistent government support poses risks for the voluntary sector's sustainability and effectiveness. One organisation told SCVO, “while contracts may reference needing apprentices, other parts of government are cutting support for apprenticeship programmes – this is very bad for some voluntary organisations in terms of risk.”

Q3: The sustainable procurement duty aims to promote fair work practices. How effectively is this reaching secondary suppliers and the wider supply chain?

Following up our response to Q2, Fair Work is one of the broader benefits that requires far greater attention in commissioning and procurement processes. While we acknowledge the Scottish Government's efforts to update the Supplier Journey to reflect its approach to Fair Work, far greater attention is needed on the buyer side to ensure that tenders and the approach to tendering support Fair Work. At the moment, the process actively undermines it.

Data from Scotland's Third Sector Tracker indicates a growing concern about the impact of rising operating costs, inflation, and financial pressures. Core operating costs continue to increase, with more organisations reporting a negative impact on their ability to deliver services. A large majority (71%) of organisations report facing financial challenges, up from 67% in December 2022, while more than half (51%) of organisations report that rising costs are having a negative impact on delivering their core services or activities - a rise of 5% since December 2022.

Encouragingly, recent statistics show a significant reduction in those paid below the Real Living Wage in Scotland’s voluntary sector - from 13.7% in 2021 to 6.3% in 2022. However, the Real Living Wage should be a bare minimum, not an aspiration, and no new figures are available concerning age, ethnicity, disability, and type of work. Nor does it address paying a fair rate for the job. This decrease in the number of people paid below the Real Living Wage fails to tell us how organisations have managed to reduce the gap. Many voluntary organisations continue to top up funding out of their own income from other sources to ensure their staff are paid at Real Living Wage rates, propping up public services with income raised for their charitable purposes. Voluntary organisations across Scotland have sought to prioritise the wellbeing of their staff through the pandemic and the cost-of-living crisis, often through their reserves. The latest Third Sector Tracker results reveal concerns that charities’ reliance on reserves is "unsustainable."

Recent research by CCPS reveals a 20% pay gap between NHS support workers and voluntary sector social care support workers who are starting out in their career. There needs to be an honest and open conversation – hopefully taken forward by the Committee – about the differential between working in the same job in councils or the NHS compared to the voluntary sector. During recent engagement, we learned that one charity was expected to deliver a personal care service for £16 per hour, in comparison to a similar service in the local authority that cost £24 per hour. The wage gap and broader gap in costs awarded between the voluntary sector and public authorities exacerbates recruitment and retention challenges, and a lack of uplifts in contracts to provide annual pay awards to voluntary sector staff often compounds this. One organisation told SCVO:

"We budgeted for a salary uplift of 1%, which had been the pattern for a number of years, while the COSLA pay award was 3.5% with a 3% in the following year. Although the Scottish Government recommended a 2.3% uplift to the third sector and gave local authorities additional funding to pay for the uplift, the local authority only gave 1.7% and kept the additional funding." 

While the direct impact of this is on staff pay, it has a knock-on effect on other terms and conditions. The organisation quoted above has had to close the defined benefit pension scheme to new employees due to cost, so new employees do not get the same employment terms as existing employees or comparable local authority staff, making it even harder to recruit and retain staff. 

Scottish Government has committed to providing the necessary funding in the next Budget to increase the pay of social care workers in the private, third and independent (PVI) sectors in a direct care role and those working in the PVI sector to deliver funded early learning and childcare, to at least £12 per hour from April 2024. However, CCPS and the sector at large view this as too late. Moreover, it highlights the fragility of the current system, where the voluntary sector can only hope for the best and plan for the worst. We urge the Committee to clearly back and champion CCPS's 4 Steps to Fair Work Campaign. 

It is not only the level of funding that is important to delivering Fair Work through grants or contracts. How contracting authorities issue money to voluntary organisations also matters. In August, SCVO and the TSI Scotland Network published the paper, 'Fair Funding and Fair Work.' This paper shows how unfair funding practices undermine Fair Work, including job security, staff fulfilment, opportunity for stability and development, respect, and having an effective voice. 

For Scotland to be a Fair Work Nation, Scottish Government needs to work across departments, with local government, independent funders, and the voluntary sector, to ensure that organisations have the support they need. As with grant funding, there is a pressing need to shift to longer-term contracts that offer more predictable funding, annual inflation-based uplifts, and sufficient support for the Real Living Wage. In conversations with SCVO, various organisations have indicated that current contracts are static in value, lacking any mechanism for negotiation or flexibility. Many expressed the sentiment that voluntary organisations are expected to subsidise local authority and Health and Social Care Partnership (LA/HSCP) services by using their charitable funds. One organisation said, "Each year, we are raising a larger percentage of income to subsidise services."

It is also vital that voluntary organisations receive the core funding and full costs of delivering a service (such as training and development, utilities, and support staff). Feedback to SCVO has highlighted that organisations often struggle to secure funding for essential organisational costs such as management, development, IT, and financial services, all of which are necessary for fulfilling contracts. Even though organisations endeavour to achieve full-cost recovery, this is seldom provided. One organisation told SCVO, "We rarely receive core funding for organisational costs, but these costs are 25% of our budget. We must fund core functions from each contract, but this can make our prices uncompetitive when we are in a competitive tendering situation." 

Public authorities must improve the accessibility of procurement opportunities, including renewal funding, to support services' long-term viability and effectiveness. These services often fall by the wayside when funding dries up despite remaining a priority area, leading to job insecurity and redundancies. A case in point relates to services for older people. One organisation told SCVO that the alignment between policy goals and funding has been inconsistent, jeopardising services' sustainability and expansion. They noted, "Earmarked funding, such as the 'Transforming Care for Older People Fund,' was once a reliable source but is no longer available" despite intentions to "eventually mainstream new pilot services established through initial transformation funding".  This tendency to end one funding stream and replace it with the latest new thing, with no option to sustain things that are making a difference, is undermining Scotland’s ability to achieve its National Outcomes.

Failure to address these weaknesses has a significant impact. It affects employees' job security, increases the risk of redundancies, and leads to low morale among staff and volunteers. These people feel undervalued and live in perpetual uncertainty, hindering their ability to secure mortgages or even rental agreements. The attrition of skilled and experienced staff from the voluntary sector to public or private sector roles further exacerbates the issues. Voluntary organisations find it increasingly difficult to keep pace with salary increases and professional development opportunities available in other sectors, hindering their capacity to recruit, retain, and develop staff. This impacts directly onto the people in receipt of their services.

We need to see the following in public contracts in Scotland:

• multi-year investment of three years or more
• annual uplifts built in, at a level as close to inflation as possible, and mechanisms to renegotiate in times of rapid and unexpected inflation growth
• all procured contracts have both the Real Living Wage and annual uplifts to the Real Living Wage built into the amount awarded
• ensure that funding decisions are taken and communicated within agreed timescales
• close the differential between working in the same job in councils or the NHS compared to the voluntary sector
• work with the voluntary sector to ensure that good practice is highlighted and shared
• publish the proportion of contracts that are delivered on a multi-year basis, uplifted to keep pace with inflation, and accommodate payment of the Real Living Wage.

Q5: How effective are community benefit requirements in procurement contracts, and how appropriate is the £4 million threshold?

SCVO believes that the Procurement Reform (Scotland) Act 2014 has enhanced the promotion and use of community benefits, including generating employment and training opportunities, building capacity in community organisations, and minimising negative environmental impacts. However, SCVO believes that commissioning authorities are still not taking a strategic approach to community benefit where the voluntary sector and communities are actively engaged in shaping the benefits they would like to see.

The voluntary sector remains an untapped resource in relation to taking a strategic approach to community benefit. SCVO emphasises the importance of increasing engagement between the public and voluntary sectors to identify the priorities, limitations, and possibilities from the buyer's viewpoint. Voluntary sector involvement can maximise community benefits and take a more holistic approach. Community wealth building should be a catalyst to improve the participation of the voluntary sector and social enterprises in place-based decision-making.

The funding and operational challenges raised throughout our response demonstrate the need to use community benefits to ensure that private sector organisations that deliver large contracts support voluntary sector development and capacity through supply chains. While the Procurement Reform (Scotland) Act 2014 requires large suppliers to include in Annual Procurement Reports a summary of any community benefit requirements fulfilled during each year, it is unclear what level of independent auditing takes place to ensure impact and outcomes are met. Increased use and weighting of community benefits linked to supporting the development of charities, social enterprises and voluntary groups and more market engagement with voluntary sector suppliers, as proposed by the former SENScot, could support greater alternative investment in the voluntary sector.

SENScot delivered a Scottish Government contract, "Developing Markets for Third Sector Providers," a public sector-facing support programme aimed at embedding social value in procurement. This work facilitated a Public Sector Community Benefits Champions Group that promoted community benefits and engaged with the voluntary sector. The Network organised regular meetings and workshops on procurement and shared good practices with more than 100 procurement professionals from across the public sector. Sadly, the Network ceased with the end of the contract.

Q6: What is your experience of tendering or bidding for framework contracts and lots within large contracts, are these becoming more prevalent in Scotland, and what is your view on how accessible these opportunities are?

SCVO believes that there is considerable room for improvement in the design of public procurement frameworks. Poorly designed frameworks make the tendering process difficult, hindering effective competition and project implementation, with vague wording of what is required and too much focus on inputs and outputs rather than outcomes and impact. Lot divisions in frameworks often benefit organisations that have long been part of the framework at the expense of new entrants. Identifying existing frameworks can be challenging for new entrants, often requiring a Freedom of Information (FoI) request to ascertain their names. A more transparent approach is needed in both the creation of and access to these frameworks.

The Social Enterprise Strategy covers collaborative commissioning where local authorities and voluntary organisations could work together to develop new services and frameworks. As we note elsewhere in our response, voluntary organisations feel strongly that the public sector needs to change the way it engages with our sector, and this includes the construction and evaluation of contracts, including the division of lots. There is also a problem with when new entrants can join a framework. The way the Scottish Government releases procurement frameworks every 3-4 years aligns poorly with industry practices, and suppliers should be able to join a framework more often than every 3-4 years.

Non-committal frameworks also create uncertainty, resulting in precarious work and disempowered workers, and SCVO has long called for an end to non-committal frameworks in procurement contracts. One organisation told SCVO ’We are a small organisation, and it is a huge risk to join a framework without a guarantee of a proportion of that framework. If there was more clarity, we could put in place the resources and capacity to ensure we can deliver.’  

SCVO’s engagement with voluntary organisations supports the finding of the Scottish Government’s report, Public procurement - views and experiences: research, which states: ‘insufficient lotting of contracts has a significant impact on organisations’ ability to bid for public contracts, particularly smaller organisations.’ Even when lotting is used, large lots push out smaller voluntary organisations from delivering local services. Small, specialist organisations may be best placed to provide specific parts of a larger lot, but they are excluded. More sophisticated lotting of contracts where voluntary organisations are involved in shaping those lots would make procurement more inclusive and deliver better services to people.

Q7: What is the administrative burden of complying with procurement regulations in Scotland, and how has this changed since the 2014 Act was implemented?

The administrative burden of complying with procurement regulations in Scotland presents several challenges for voluntary organisations, businesses, and public agencies alike. However, it is not simply regulations that add to the administrative burden, but the approaches and processes that different public authorities adopt. Together, these issues range from unnecessary complexity in tenders to issues around conditionality, inconsistent funding processes, and more.

In our response to Question One, we highlight that the current procurement regime in Scotland remains unnecessarily difficult for voluntary organisations to navigate and remains a major barrier to making the most of procurement, and is a drain on already-stretched resources. A recent survey by SCVO and Social Enterprise Scotland revealed that the primary reason organisations had not bid for public sector contracts in recent years was a lack of staff capacity to draft complex bids. This was closely followed by difficulties in navigating the system.

SCVO’s engagement with voluntary organisations and research from other sector intermediaries show several areas where improvements can be made: 

1. Reduce length and complexity of forms: Overcomplicated tenders make it difficult for organisations, particularly small and medium-sized ones, to bid effectively.
2. Stop using generic templates: Requiring excessive insurance or other generic terms regardless of the scale of the contract can deter smaller organisations from bidding, or indeed are completely prohibitive.
3. Ask the right questions: Often, tender documents include questions that are not necessary for the actual scope of work, making the process unnecessarily cumbersome. For example, requirements for infrastructure projects are applied to services.
4. Only seek necessary accreditations: Demanding accreditations such as ISO Certification, not relevant to the project, discourages smaller organisations from participating.
5. Use Quick Quote facility: Greater use of quick quote facilities can increase the speed with smaller contracts, reducing time and cost.
6. Ensure consistency across contracting authorities in so far as possible: Different contracting authorities have varied and complex funding systems that make it difficult to navigate tenders consistently.

A major barrier to improving the current procurement landscape is the lack of feedback mechanisms. While SCVO welcomes the Scottish Government research into the barriers to accessing procurement opportunities, and we welcome the many opportunities to engage with the Scottish Government, such as through the Procurement Suppliers Group, constructive feedback on tender submissions at a contracting authority level is often lacking, making it difficult for suppliers to improve future bids and for contracting authorities to learn from what does or does not work.

Many of the challenges listed above are compounded by point 6, ‘Consistency across contracting authorities.’ Organisations frequently deal with multiple funding streams, each with its distinct rules and requirements, thereby complicating the tracking and reporting process. This complexity is exacerbated by the varying approaches adopted by different public authorities in the application, scoring, and management of bids. This inconsistent and convoluted landscape means that voluntary organisations must dedicate considerable effort and resources to understand and adapt to each specific set of guidelines, thereby placing a drain on their administrative capacity and resources that often receive no funding. 

SCVO recognises that local authorities and other public bodies will have varying levels of capacity and resources and therefore operate differently. While it would be difficult to achieve completely consistency across these contracting authorities, a greater level of consistency could be achieved through simplifying bidding processes more generally. Adaptations mentioned in ‘Public procurement – views and experiences: research’ include ‘asking questions in the same way, in the same order, to ‘reduce the amount of time spend tailoring the same information each time they bid.’

Throughout our response, we have touched on the importance of collaborative commissioning and the development of contracts in partnership with the voluntary sector. This is vital to achieving Best Value, but is seldom recognised in the initial stages of project development. This means that organisations invest time and resources working with the public sector only to see the fruits of their labour put out to tender, without any compensation for their time. Extracting the voluntary sector’s expertise and networks is not something that should be expected for free.

We have also raised the issue that commissioning should not always result in procurement. One organisation explained to SCVO that their local authority put them through competitive tendering for a service when their previous SLA had expired. This resulted in weeks of work, but they were the only organisation with capacity to deliver in the area and they were the only bidder in the process. This is a complete waste of time and resources and demonstrates why new models for local authorities which are not purely contractual are needed.

Organisations have also told SCVO that timescales also place a significant burden on the voluntary sector workforce. One charity leader explained that local authorities often publish tenders in the week before Christmas when they realise they have not spent all their budget. This is an annual occurrence and means that staff must give up their holidays to ensure the organisation can put in a bid within the short window available. Another organisation told SCVO that despite seeking an extension of the application window over the school summer holidays in the pre-qualifying questionnaire they submitted, from four to six weeks, the local authority ignored this request.

SCVO has also heard that voluntary organisations can struggle with holding effective in-contract discussions with contracting authorities. It is not unusual for issues to surface with contracts during the delivery period and there is a need to have mechanisms in place to address these challenges to ensure optimal delivery to achieve the best outcomes. Organisations currently find it difficult to re-engage in contract discussions, which has been even more important in recent years when the external environment has necessitated changes to contracts to adapt delivery during the pandemic. One organisation told SCVO, “It’s taken close to two years of trying to secure changes in the contract that open things up a bit for us.”  

Q8: How can procurement policy in Scotland support the strengthening of local supply chains?

Community wealth building has the potential to ensure the progressive procurement of goods and services is strengthened through developing robust local supply chains of local organisations, including voluntary organisations, to ensure that people and communities benefit from employment and retain wealth locally. This is one of the five pillars of community wealth building, and SCVO believes that public partners need to use the full legislative levers and guidance at their disposal to maximise their spending power, and this will require strengthening the Sustainable Procurement Duty and ensuring that the Committee’s inquiry makes direct recommendations to inform the development of community wealth building plans and future legislation in Scotland.

At present, SCVO has little evidence to show that the public sector is meaningfully incorporating community wealth building considerations into procurement activity at scale. SCVO has not heard from anyone in the sector who has benefitted from this change in focus, although we recognise that there are efforts to develop legislation and other levers in relation to community wealth building. While CWB is mentioned in the Scottish Government’s new procurement strategy, we have not seen any significant inclusion or progress in local authority procurement reports beyond community benefits, (including reports from CWB pilot areas), which is significant as most voluntary sector contracts are with local authorities.

Anecdotally, one TSI that SCVO spoke to in a CWB pilot area reflected that it was difficult for them to get in touch with the procurement team in their local authority, despite numerous attempts. Another TSI in a CWB pilot area disclosed that while the head of procurement at the NHS in their area was willing to open contracts locally, they were unwilling to shoulder the time/monetary costs that would come with breaking down a large contract into smaller contracts to make it more accessible to the sector. This example shows that many of the issues raised in our response to this inquiry must be addressed for Community Wealth Building to play out in practice, not simply in words.

There is a risk that community wealth building is the latest example in a long list of bright ideas with little spark to ignite them. Organisations interviewed by SCVO explained one of the biggest issues across commissioning and procurement is turning policy into practice. While there are good examples of where something is a clear policy priority, contracting authorities are not able to act on these policies and deliver, often caught up in bureaucracy. One organisation said, “‘the Coming Home report says what needs to be done – everyone agrees – but there is no finance to make it happen at local authority level.” Another said, “even where there are strategic plans and commitments, there is often no funding to deliver the commitments.”

There will be examples of where some progress has been made. For example, North Ayrshire Council has amended its standing orders to ensure it looks to local suppliers and where possible include five local organisations in tendering as part of the community wealth building agenda. While this is a positive step and SCVO does not have further details on the impact of this specific example, many of the challenges outlined throughout our response, such as poor contract terms and conditions and bureaucratic processes, remain major barriers for voluntary organisations even when actions are taken to ensure that they as suppliers are considered because of their local connections.

The organisations SCVO engaged through the consultation process on community wealth building are generally supportive of CWB principles and believe the five-pillar approach is a holistic way to bring together things which have been previously siloed. However, as with procurement, concerns were raised around inaccessible language, the top-down approach taken by local authorities and the Scottish Government, the exclusion of the voluntary sector in planning and decision-making, fraught relationships between the sector and local government, limited resources to support with implementation, the need for policy coherence with other legislation, and the effectiveness of proposed legislation if these issues are not addressed. Many of these same issues can be found across procurement systems and reflect deep rooted issues in the public sector’s engagement with Scotland’s voluntary sector.

To support community wealth building through procurement practices, SCVO recommends:

• CWB action plans should explicitly commit to using the flexibilities in commissioning and procurement to enhance local supply chain development and encourage greater collaboration in design and delivery of public services and support for our communities.
• Contractors must provide reports on CWB, and the Scottish Government’s annual procurement report should detail total contract contribution.
• CWB could be scored in the tendering process, rather than being treated as a side benefit.
• Councils need to get much better at signposting private organisations that win large contracts to potential voluntary sector sub-contractors in their local areas.

About SCVO

The Scottish Council for Voluntary Organisations (SCVO) is the national membership organisation for the voluntary sector. SCVO represents the sector at a national level and provides advice and services to voluntary organisations. We champion the role of voluntary organisations in building a flourishing society and support them to do work that has a positive impact. Along with our community of 3,500+ members and supporters, we want to see a thriving voluntary sector at the heart of a successful, fair and inclusive Scotland.

About Scotland’s voluntary sector

The voluntary sector in all its diversity is a powerful force for positive change and a significant part of our economy. From grassroots volunteer-run community groups like village halls and playgroups to major providers of public services in social care and housing, the voluntary sector is present in every aspect of our society and is the glue that holds communities together, with over 46,500 voluntary organisations and 1.2million volunteers.

Together these organisations employ over 135,000 paid staff. A quarter of charities employ staff, and the average income of these charities is around £900k. However, three-quarters of charities are run entirely by volunteers and have an annual turnover of less than £100k. Many deliver vital services and work with some of Scotland’s most marginalised communities. SCVO’s State of the Sector statistics for 2022 are available online.

Contact

Paul Bradley - Policy and Public Affairs Manager (up to 28 September 2023)

paul.bradley@scvo.scot | Tel: 0131 474 8000

To get in touch with SCVO after this date, please contact Kirsten Hogg – kirsten.hogg@scvo.scot