Public Procurement: A consultation on changes to public procurement rules in Scotland

Transcription

1 Public Procurement: A consultation on changes to public procurement rules in Scotland Federation of Small Businesses Scotland April 2015

2 Introduction The FSB is Scotland s largest direct-member business organisation, representing around 20,000 members. The FSB campaigns for an economic and social environment which allows small businesses to grow and prosper. Over the last decade, the FSB has highlighted the difficulties small businesses face trying to sell goods and services to the public sector. We have worked closely with the Scottish Government, other parts of the public sector and other supplier organisations, to address these challenges. Good progress has been made in many aspects of procurement from the development of Public Contracts Scotland, to the introduction of a standard prequalification questionnaire and, ultimately, the statutory responsibility on public bodies to consider how they can improve the involvement of small businesses, as part of the sustainable procurement duty. Yet for many small businesses the last decade of public procurement is characterised by a focus on bulk-buying and financial savings. Poor procurement practice is often dominated by a risk-averse, tick-box approach. Such an approach loses sight of what really matters to the end-user of the service, as well as preventing small businesses and other small organisations from proving their worth. There is always a concern that a legislative approach creates more bureaucratic processes. In our response we have highlighted where the Act risks sending us back to square one in procurement reform. Nevertheless, the Procurement Reform Act presents an opportunity to public bodies in Scotland to focus on what they want to achieve from their 10bn spend. It creates a framework to move from pockets of good practice on flagship projects, to a more comprehensive and strategic approach across organisations. We believe this enables public bodies to focus on priorities beyond savings, such as more resilient, shorter supply chains, sustainable employment and improving the circulation of public money in local economies. We look forward to working with public bodies to make the most of these opportunities. 2

3 We have also highlighted areas on which we believe further discussion is required with suppliers before the Scottish Government makes decisions about how to proceed. Lastly, given the breadth of the consultation, we have not answered every question, focusing our response mainly on matters of policy, rather than technical process. Questions Q1 Procurement Strategy and Report Statutory Guidance The purchasing of goods and services by the public sector can achieve a range of wider societal, environmental and economic outcomes, as well as being a tool for financial savings. A public body s priorities will differ according to commodity or service purchased, or the locality or size of the organisation. Statutory guidance for procurement strategies needs to help public bodies focus more clearly on their priorities and how these will be achieved through procurement. As such, the strategy process is vital to driving the good practice envisaged by the Act. The Act sets out certain requirements for procurement strategies. In addition, we suggest that the statutory guidance on strategies should: Set out that best practice would be to include all procurement spend by the public body in the strategy, not just regulated procurement (as defined by the Act). Encourage public bodies to set out priorities for certain types of contract, such as financial savings, user satisfaction, sustainability or local employment. Specifically outline how public bodies will be expected to monitor and report on 30 day payment terms in the supply chain. Require the public body to consult on the procurement strategy (over and above the statement on general consultation required by section 15 (5) (b) (ii) of the Act). This should include: o How the public body will ensure a whole organisation input to the strategy o How the public body will ensure feedback of end-users, customers and suppliers is reflected in strategic priorities Set out the public body s approach to breaking contracts into lots, including the process for reaching decisions on lotting. 3

4 Require spend analysis to inform the strategy, particularly spend with micro and small businesses. Set out how public bodies should measure progress on priorities by establishing relevant KPIs. Consider a stronger focus on capturing qualitative measures of success. Set out how public bodies could consider and address training/capability issues to deliver priorities of the procurement strategy. Annual procurement reports should: Report on relevant KPIs to demonstrate incremental progress. As a minimum, publish spend with suppliers broken down by locality and business size (including micro and small businesses). Publish spend with central purchasing bodies. Demonstrate where approaches have changed to respond to feedback and complaints/appeals associated with procurement. Q2 Sustainable Procurement Strategy Statutory Guidance We welcome the statutory duty for public bodies to consider the impact of their procurement practices on the economic, social and environmental wellbeing of their area. Public bodies should see compliance with the duty as a useful step in developing priorities for their procurement strategy. We recognise the need to ensure a consistent approach regarding the requirements and reporting of the duty and note the development of tools to support public bodies. We would welcome further discussions with the Scottish Government on how best to reflect the requirements of section 9 (1) (a) (ii) regarding facilitating involvement of SMEs. However, we also want to ensure that as well as developing tools to help consistent reporting, we recognise and encourage the different approaches necessary to meet the duty. In other words, wellbeing priorities might look different for a small, island local authority, compared to a large, national organisation. Q3 Community Benefits Statutory Guidance The financial threshold for mandatory use of Community Benefit Clauses (CBCs) means these are not routinely impacting on the smallest businesses. However, we 4

5 are keen to ensure that guidance does not entrench a tick-box approach to CBCs, meaning they are used routinely below the financial threshold, thereby creating further barriers to small businesses. Above all, guidance should stress the importance of co-design and innovation in CBCs. For example, enabling large companies to go further with new ideas for community benefit, whilst enabling small firms to demonstrate their capacity for local employment and training. Q5 Reserving Contracts Before implementing the extension of reserved contracts, the Scottish Government should ensure that public bodies have transparent processes in place to determine how contracts will be reserved. This will ensure that local businesses, especially existing suppliers, are not unfairly denied the opportunity to bid to supply a public body. Q10 MEAT Many small businesses feel procurement has been dominated by processes which reward low price above all other factors, enabling larger operators to undercut smaller firms. We therefore support use of MEAT but concerns about points allocated to cost, compared to other factors, continues to be a source of frustration to smaller organisations. Q11 Lots We recognise the Scottish Government s current approach to collaborative purchasing, particularly through the Centres of Expertise. This move to collaborative, centralised purchasing has been, by far, the single biggest change to small businesses bidding for public contracts in Scotland in recent years and is the main source of frustration. While the case to purchase certain categories of goods and services centrally is understood, the case to continue to increase the number of collaborative contracts has not been made. The evidence is clear that more of the money spent with local, small firms stays in the economy, compared to money spent with large firms. Public contracts can also be a useful economic development tool but many businesses will want to start small and grow into 5

6 supplying the public sector. Further aggregation continues to make it more difficult for small firms to bid and a central purchasing body will always be more remote and feel less accessible to a small business. As a result, we think the Scottish Government could go further in relation to lots. We understand that public bodies will have to set out why contracts have not been broken into smaller lots but, as outlined above, we would like public bodies to consider their approach to collaborative purchasing/lotting on a more strategic basis. We think public bodies should be required to set out their approach in their procurement strategy and report on this each year. The Scottish Government should also produce guidance on how such approaches might support a public body s compliance with the Sustainable Procurement Duty. We further believe that the ability to determine that certain commodities should always be broken into smaller lots, and that no supplier should win more than one lot, is a valuable development tool. There may be instances where there is a compelling case to protect shorter supply chains, for example in relation to fresh produce. The Scottish Government should keep the decision to intervene under review on an annual basis. To inform decision making, the Scottish Government should ensure that relevant statistical evidence is available to understand progress on lotting in Scotland. Q11-13 Sub-Contractor Information We agree that asking all contractors to provide information on sub-contractors could be an unnecessary burden. However, we need to ensure that larger contractors understand that they will be expected to provide information about treatment of businesses in their supply chain e.g. payment terms. It is also worth aiming for a consistent approach by public bodies to gathering necessary data in order to improve our understanding of the supply chain. Again, the Scottish Government should consider advising public bodies on what information would be helpful. It should also consider whether an annual, centrally coordinated survey of sub-contractors would help reduce the burden on public bodies whilst still ensuring a supply of data. Q14 Direct Payments to Sub-Contractors Tackling unfair payment terms is still dominated by a culture of fear and uncertainty. We lack good analysis of the extent of the problem and whether there 6

7 has been any progress, making it difficult to gauge whether public policy interventions to date have been successful. In the short term, the Scottish Government should ensure the recommendations in the Construction Procurement Review are implemented; namely, ensuring public bodies effectively resource contract management to undertake monitoring (by surveys, samples or reports). We also wonder whether there are opportunities to go further with Scotland s major contractors, perhaps by insisting upon open book accounting for flagship projects. We are also keen to explore how we might progress direct payment to subcontractors. There are a number of benefits to this approach, not least of which is tackling the cashflow problems associated with endemic late payment. There are wider benefits, however, such as protection from bad debts higher up the supply chain. We would welcome further discussions with the Scottish Government on direct payment. Q18-19 Criminal Convictions The list of convictions between the Act and the Directive should be consistent. Q Tax Evasion Small businesses will expect tax evaders to be excluded from bidding for public contracts. In the event that tax evasion is suspected or known, but no conviction exists, the public would still expect public bodies to take reasonable steps to apply the appropriate means test set out in the Directive. We accept that there may, on occasion, be exceptional circumstances where minor non-payment would make exclusion from bidding disproportionate. However, the Scottish Government should clarify in guidance the limited circumstances in which discretion would be allowed. Q23-24 Bankruptcy As above, we recognise that certain circumstances may arise where a business in bankruptcy or insolvency proceedings should be allowed to bid. Again, consistency between the Directive and the Act is desirable. 7

8 Q25-26 Exceptional Circumstances As outlined above, we note that there may be exceptional circumstances where mandatory exclusions should be set aside. For the avoidance of doubt, such circumstances should not include the fact that the supplier concerned was the only bidder for the contract as designed. In other words, we cannot excuse unacceptable behaviour due to the limited nature of competition for some contracts. To ensure a consistent approach and limited use, we consider that public bodies should have to seek authority from Ministers before exercising such discretion. Q27-28 Exclusion We understand that automatic exclusions for a wide range of issues could result in a disproportionate response. Nonetheless, responsible businesses which comply with the law expect a level playing field and will expect the Scottish Government to encourage public bodies to take a robust approach. Therefore, guidance should make clear the Scottish Government s expectations of public bodies. Q31 Excluding Sub-Contractors We recognise that resources limit the extent to which public bodies can check information on sub-contractors. However, we cannot allow main contractors to cut corners by sub-contracting to less reputable firms, to the detriment of responsible businesses. Having learned the lessons associated with payment terms in the supply chain, there must be a threat that information on sub-contractors will be checked by contracting authorities. Q32 Selection of Tenderers and Award of Contracts One of the most common difficulties experienced by small businesses trying to win public contracts is the sheer volume of bureaucracy associated with bidding the more complicated the process, the more difficult it becomes for small firms and organisations. 8

9 The Act attempts to streamline such processes but also risks introducing new tick box approaches, as set out above. This risk is particularly acute in relation to guidance relating to selection of tenderers. This guidance must be carefully developed and implemented to avoid repeating previous mistakes. We understand that public bodies want to use public procurement to leverage good environmental, social and economic outcomes. But the process of procurement almost always reduces good outcomes to written policy statements and specific criteria. The result can be that it is not the organisation delivering the best outcomes which succeeds, but those with well-resourced bid-writing teams. We must ensure that good intentions don t result in more hurdles for small organisations, which will simply walk away from bidding for public work. In the Act, the guidance specifically refers to issues relating to employment, where this is relevant to the contract being delivered. The discussion of guidance in the consultation paper covers a far broader range of issues and cites general standards and values, as well as the ethics of the business. We agree that businesses which break the law and exploit their workers should be excluded from bidding for public contracts. However we do not agree that lawabiding, responsible small businesses should be excluded for not meeting standards that much of the public sector is yet to achieve, for example in relation to flexible working or environmental performance. We must also emphasise that if extra requirements are to be placed on those bidding for work, then public bodies should be willing to pay more for the contract. We also question whether certain ethical standards are only to be expected in relation to those directly involved in the delivery of the contract, or whether the employment and environmental practices of companies in their entirety are to be considered? Notwithstanding these points of principle, a number of questions arise about the guidance including: When the guidance should be used by public bodies. The extent to which supply chains or other providers would be included. How relevancy of certain standards and values will be determined. How scoring criteria for this should be developed. How the approach will link with other policies e.g. encouraging involvement of small businesses. Whether any monitoring or checking will take place to verify information received. 9

10 The serious implications of the interpretation and implementation of this guidance by public bodies means that this requires more detailed, collaborative discussion between government, buyers and suppliers. We look forward to further discussions on the matter. Q42 Incomplete Information Yes, public bodies should be able to contact a bidder to clarify the information in their bid or to check for missing information. Indeed, this is the kind of approach that should be encouraged and outlined in a public body s approach to facilitating the involvement of small businesses and third sector organisations. Q46 & Q49-50 Electronic Information In general we welcome moves to increase the use of electronic communication in procurement processes. However, we share the Scottish Government s concerns about the need for both suppliers and public bodies to prepare for more significant change. We have no strong views on whether the development of the Single European Procurement Document should be delayed but want to ensure that businesses can place their trust in a stable system. In our view, this is an area which would benefit from more detailed discussion with supplier representatives. Q55-56 Central Purchasing Bodies We believe that there is a place for central purchasing bodies, particularly to bring innovation to procurement. However, the current Scottish approach could be improved. The system should be more transparent to ensure greater accountability to taxpayers. As highlighted above, we believe that public bodies should set out their approach to collaborative purchasing (including use of central purchasing bodies) in procurement strategies, including reporting spend with such bodies in annual procurement reports. Moreover, we should monitor whether purchasing by sector remains the most effective approach. As sectors become more integrated through community planning partnerships, might there be wider benefits to considering geographic collaborative purchasing? 10

11 Q58 Monitoring and Enforcement We recognise progress made on procurement reporting in Scotland. We agree that statutory powers may be necessary to ensure good data collection from public bodies in order to improve our understanding of Scotland s 10bn procurement spend. To be effective, such powers need to be backed up by adequate resources to undertake the monitoring and reporting of procurement. Resource constraints are likely to be a problem whichever part of government undertakes this role. However, we would prefer to see a degree of separation between the government department which makes the rules, and that which reports upon progress. Q59-62 Remedies The creation of the SPoE was an important step in enabling small businesses to raise concerns about procurement. It also allows analysis of problems and common instances of bad practice. However, it has always been clear that the SPoE does not have the power to resolve all complaints. We consider court action to be inaccessible for most small businesses due to the prohibitive costs. As a result, we are clear on the need for a review body, which is both user-friendly and empowered to investigate and resolve more complex complaints. We recognise the difficulty in balancing these priorities against the formal, robust structure required to handle such complaints. There is a compelling case to consider the role of an ombudsman. This option would offer a degree of independence from government, which is likely to increase the level of trust from complainants. It would also enable independent monitoring and reporting on procurement in activity, presenting authoritative advice and evidence to the Scottish Government. We do not advocate setting up additional structures lightly but consider that there may be real benefits in such an approach. However, we are happy to discuss further the option of considering whether a first tier tribunal could perform similar functions, on the basis that it must be accessible to small business users. 11

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13 The FSB is Scotland s largest directmembership organisation. It campaigns for a better social, political and economic environment in which to work and do business. With a strong grassroots structure and dedicated Scottish staff to deal with Scottish institutions, media and politicians, the FSB makes its members voices heard at the heart of the decision-making process. It is therefore recognised as one of Scotland s most influential business organisations. The FSB also provides a suite of services to help our members reduce the cost and risk of doing good business from legal and tax protection to business banking. 74 Berkeley St, Glasgow, G3 7DS t: f: e: Scotland.policy@fsb.org.uk w: