SCVO response to Scottish Government consultation on Changes to the Public Procurement Rules in Scotland

Introduction

With the recent introduction of the Scottish Government’s new economic strategy and fair work agenda, now is an opportune time to ensure that procurement is used to tackle poverty and inequality.  As we said in our paper An Economy for All, there are four principles around which we can build a successful economy and society:

1. The well-being and collective prosperity of people across Scotland must be the end goal of our economy
2. All work must be properly valued, decently paid and secure
3. The value of people’s voluntary and unpaid contributions to economy and society must be recognised
4. The economy is a part of our environment and we must use our economy to enhance, not destroy, our environment

Procurement processes, guidance and legislation can contribute to all of these, and we welcome the Scottish Government’s moves in this direction.  We hope that the Scottish Government takes this opportunity to make procurement a real building block in their desire to achieve social justice. Over the past two years, SCVO has been working with members, politicians and civil servants on the issue of procurement and improved funding arrangements.  Indeed, alongside funding, many members cite procurement and procurement processes as the biggest issue facing their organisations.  On 23^rd April, SCVO held a roundtable event with members and some of the Scottish Government procurement team.  This response both reflects some of the comments made as well as further thoughts which we have developed. SCVO has also been working again with a grouping of civil society organisations, as we did throughout the Procurement Reform (Scotland) Bill, who have produced a briefing regarding a range of issues.  SCVO supports that document, entitled Civil Society Priorities for Procurement in Scotland:  A Strong, Healthy and Just Society, Living within Climate Limits. Many of our partner organisations in that grouping have also responded to this consultation in areas where their own expertise lie regarding, for example, selection criteria, grounds for exclusion, and contracts for care and support. We broadly support their responses. For our own response, we focus mainly on the consultation section entitled ‘Taking social, environmental and economic issues into account’.

Statutory Guidance and Principles

(Q2, Q4, Q10) So far there has been a lack of clarity for procurement professionals regarding procurement processes and what is possible within the law.  The writing of this statutory guidance gives the Scottish Government a real opportunity to clarify what we want to see from procurement here in Scotland, and how that can be turned into a reality for Scottish society.  As we all know, rather than a narrow focus on savings and efficiency, procurement can fulfil many aims of the programme for Government:

• Creating more, better paid jobs in a strong, sustainable economy.
• Building a fairer Scotland and tackling inequality.
• Passing power to people and communities.

The creation of this statutory guidance is a real opportunity to ensure that everyone involved in procurement – from Ministers to procurement officers – know how they can help to achieve these aims through public procurement.  This is where the overarching focus of the statutory guidance should lie. Furthermore, SCVO has for many years heard from members about the difficulty across Scotland (not in all cases, but in many) of being faced with a very risk-averse approach to procurement by public bodies.  The ambiguity of the law around this issue can lead procurement officers to feel obliged to seek service providers by going out to tender, whether the law requires it or not.  Whilst ambiguity can help ensure that legislation is flexible over time as contexts change, in terms of Scottish procurement it has not so far served the majority of our members well, nor those who they seek to support:  on often very small budgets, much time and money is being wasted on overly long and complicated tendering processes.  For this reason, SCVO believes that the statutory guidance must be clear and explicit, rather than ambiguous and open to interpretation. Moreover, the guidance must differentiate between the purchasing of ‘things’ and the buying of ‘services’. Whilst we welcome the differentiation made in the Act for health and social care contracts, there are many other areas where services are procured that have a significant impact on people – youth work, for example – and these too need contracts that provide workers with decent pay and security, and which enable relationships to develop with vulnerable clients.  Weightings in the evaluation of bids should be adjusted accordingly to reflect workforce matters. Such contracts should be fully and sustainably funded, and procuring on cost alone must not be an option. Similar to the above point on ambiguity, SCVO also believes that a statutory obligation on public bodies to include relevant clauses in all of their contracts will help ensure that the law is followed by contractors and that provision is made within the value of the contract to ensure that such law is met by contractors. Finally, we are concerned that the tools being proposed by Scottish Government with which public bodies will be able to ‘analyse the opportunity to maximise social, economic and environmental activity’ may not give sufficient emphasis to social and environmental benefits.  This is due to the tools’ reference to the 16 National Outcomes which have an overarching ‘Purpose’ of working towards ‘sustainable economic growth’.  So whilst we are pleased that the Act points out that references to the wellbeing of the contracting authority’s area include reducing inequality, we note that it is important to measure improvements properly; we therefore commend the broad-based Oxfam’s Humankind Index as a more appropriate tool.

Reserved Contracts

(Q5, 6, 7)  We agree with the principle of reserving contracts for those business that employ ‘disadvantaged’ people, as, if used, it could encourage more businesses to employ more of their workforce from disadvantaged groups, allowing greater access for such groups into work should they so wish.  However, there are some issues raised by our members that the Scottish Government might wish to be aware of, particularly around the suggested definition of a ‘disadvantaged person’ as being ‘the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups’. Firstly, if in providing work to someone who is unemployed, one brings them out of that disadvantage, what effect will that have on the organisation who has been awarded such a contract?  That is to say, will organisations that seek to reduce disadvantage be in a strange way incentivised to keep a certain percentage of their employees at an economic or social disadvantage in order to keep their contract?  Secondly, as discussed above, ambiguity in law can lead to risk-averse decision making by procurement professionals.  Whilst the broad definition suggested by Scottish Government allows a wide scope of organisations to potentially fall under its umbrella, members are concerned that such a broad scope could lead to contracting authorities simply not using the option to reserve contracts as they feel that doing so will be too open to legal challenge. Therefore, SCVO advocates that reference is made to the Equality Act 2010’s protected characteristics in order to define a clear definition of disadvantage:  those who fall into an age group that is disadvantaged in the workforce (generally, those at the lower and upper ends of the working age population); people with a disability; those from ethnic minorities; LGBT people; those from minority religions.  Such a clear definition would enable procurement professionals to feel secure in reserving contracts under this Article without fear of legal challenge, and should lead to a good number of contracts being reserved under this Article to the ultimate benefit of those affected by such disadvantage. SCVO is also interested in the potential use of reserved contracts for certain social enterprises and mutuals as proposed in Article 77.  If done right, we believe it could enable more innovation and ultimately lead to better results for service users.  That said, some members have expressed concern relating to some of the restrictions placed on organisations through this Article, so we would welcome more detailed discussions on this with all key stakeholders.

Living Wage

(Q32) SCVO strongly supports the introduction of the Living Wage, and would like to see it being used in all public procurement contracts and more.  Whilst we are disappointed not to see the Living Wage in the Procurement Reform (Scotland) Act 2014, we welcome the move by Scottish Government to address this in the statutory guidance, and hope to see contracting authorities across Scotland use this guidance in order to pay the Living Wage.  Furthermore, whilst we understand the difficulty of implementation, especially for third sector organisations that often run on very tight budgets, we do believe that we can and must transition to a Living Wage economy. Like Unison and others, we disagree with the Scottish Government in that we have seen Unison’s legal advice which states that it is in fact possible to stipulate payment of the Living Wage as a condition for performance of the contract.  We therefore believe that the procurement guidance should leave room for contracting authorities to choose to stipulate the payment of the Living Wage as a condition for performance.  For example, the guidance could state something to the effect that "the Scottish Government has been told that it is not possible to stipulate payment of the Living Wage as a condition for performance of the contract. However, contracting authorities who wish to do so should take appropriate legal advice." Finally, we would like to take this opportunity to stress once again the need for such contracts to be fully resourced – many third sector organisations already work on incredibly small margins and cannot always afford to offer increases in pay unless such increases are reflected in the money provided by contracting authorities.  Moreover, with both minimum wage and Living Wage increases occurring each year, all contracts that run over the time that a wage increase occurs must have a clause within that contract whereby contracting authorities agree to pay either statutory or Living Wage increases across the course of the contract to enable providers to pay those increases to their staff.  This is especially important when increases are expected to rise significantly over the next few years as is currently the case according to political party pledges. Ultimately the Living Wage is about providing better quality jobs to employees, with a knock-on effect on better quality services for service users, and an improved and fairer economy – using procurement to attain the Scottish Government’s aim to create better paid jobs in a strong economy, and to build a fairer Scotland for all. Please also see the Civil Society Priorities document  for more on the Living Wage and on wider work force issues.

Care and Support

(Q33, 34, 35)  We leave the majority of this section to others, but wish to make the following point: Given the changing procurement market, with the introduction of self-directed support, personalisation, care packages and so on, clear guidance is necessary to ensure that whilst we go through this transition period, we get things right from service users.  This includes areas such as being able to ensure continuity of care, ensuring care budgets are high enough to allow people to pay the living wage, and discussions around how to support communal services such as day centres.  Public bodies should be raising standards by using procurement to promote implementation of the Living Wage and through support for the Ethical Care Charter and the UN Guiding Principles on Business and Human Rights.  Health and social care, and perhaps in the future other services too, will soon not operate under old-style procurement processes, and we hope that this new guidance will enable a smooth transition through such a change.

Open Contracting and Engagement

(Q32, 63) The above comment brings us onto the subject of open contracting.  Co-design of services, working with a broad range of organisations and service users, can help public bodies to create the best services needed for their area.  It is essential that such dialogue is enabled and encouraged if we want to see new ideas being both piloted and mainstreamed in the future, helping us to find the best way to combat the social and economic disadvantages that many of Scotland’s communities face. It should be noted that a co-production process should not lead to the exclusion of organisations who take part in such a process from bidding to run any such service, as long as the process is open and clear.  A clear process as to how such co-design can operate within legal parameters would be helpful.

Other issues

(Q1) In terms of the statutory guidance on a public body’s Procurement Strategy and Annual Report, we would like to see firm, clear guidance around how people affected by procurements are consulted and engaged – we do not wish this to become a mere tick-box exercise by contracting authorities, but rather be a way to fully engage in local issues and to co-design services as discussed above. (Q16) In terms of turnover, we do not believe that turnover should be used as a selection criterion by contracting authorities.  If it is used, we agree that the minimum level of turnover asked for by contracting authorities must be no more than two times the value of the contract for all contracts of any size.

Conclusion

In summary, procurement must move away from a ‘cost alone’ principle, and instead towards one that tackles inequality and poverty.  Such an approach would include the Living Wage, allow contracts to be reserved for those who employ disadvantaged people, and cover a host of other areas as discussed here and in the Civil Society Priorities document.  By concentrating on these issues, procurement can help achieve social justice across Scotland and beyond. It is essential that we take this opportunity to encourage procurement officers to move away from a risk-averse approach.  As discussed above, tendering is not always best for service users.  We need procurement officers to:  have the confidence to use grants or other forms of financial support; to work with organisations and users to co-design services; and to set priorities for areas in partnership with all stakeholders.  One of the aims of this guidance must be to make such change possible. This statutory guidance provides a real opportunity for Scotland to better use its procurement spending to improve Scottish society and economy, to reduce inequality and increase prosperity for all.  SCVO looks forward to further discussions with Scottish Government on the issues raised here in order to help achieve this goal.  We hope that Scottish Government seizes the opportunity that this guidance presents with both hands.

Contact

Jenny Bloomfield Policy Officer Scottish Council for Voluntary Organisations, Mansfield Traquair Centre, 15 Mansfield Place, Edinburgh EH3 6BB Email: jenny.bloomfield@scvo.scot Tel: 0131 474 8000 Web: www.scvo.scot