On the 4th October 2013 the Scottish Government published its Procurement Reform (Scotland) Bill. The Government’s objectives for the Bill are well known; it is seeking to increase transparency around the procurement procedure and the award of public contracts, and to encourage greater involvement and improved access to these contracts for SMEs.
This article will examine the impact that the Bill will have on the public sector. A separate article on what the Bill means for the private sector can be found here.
So what does it mean for you?
At first glance the Bill appears to introduce some quite significant and onerous requirements for public sector organisations. In general, the Bill will apply to Contracts with a lower threshold than the Public Contracts (Scotland) Regulations 2012 (the “2012 Regulations”); these thresholds are set at £50,000 for a Public Contract and £2,000,000 for Public Works Contracts. This lower threshold introduces an additional (and sometimes overlapping) regime which will create an additional administrative burden on contracting authorities. In practice many authorities already follow similar procedures for contracts at these values and as such implementation may be smoother than first anticipated.
One of the most notable new obligations is the requirement to produce a ‘procurement strategy’ where the value of procurement contracts in a financial year exceeds £5 Million. This will apply to a significant number of public sector organisations and this means that all contracting authorities will have to consider in advance their procurement needs for the financial year ahead, and formalise this in a document that will be made publicly available. This is beneficial as it will assist authorities in programming and planning procurement spend for the forthcoming budgetary year and developing a corporate approach to procurement.
In developing this strategy, authorities you will need to consider how your organisation will ensure transparency of the procurement process and equal treatment of all potential bidders. On a more practical level, the Bill also obliges you to consider how you will ensure all payments from top to bottom of the contract structure are made within the time period of 30 days. Although onerous this is a practical approach, to ensuring cash flow, which is likely to be of particular importance to SMEs.
The obligation to prepare Procurement Reports has also been introduced which will make information on whether authorities have actually adhered to their procurement strategies throughout the year available to the Public. This will create an additional administrative burden on your organisation; however, it will also allow you to analyse your procedures and progress, identify weaknesses and areas to improve upon to make the process more effective and efficient, creating better value for money procurements in the future.
Feedback to bidders
The legislation also introduces risks into the process of public procurement; particularly with more the requirements placed on authorities to provide information and reasoning in relation to contract awards, even where not previously required to do so under the 2012 Regulations. The provision of information ensures a fair and transparent process; however, the counter balance is that there is also the prospect that it will increase the likelihood of unsuccessful bidders seeking to challenge awards.
Sustainable Procurement Duty
Another important aspect to consider is the requirements in the Bill that oblige public bodies to consider how the economic, social and environmental wellbeing of the local community is enhanced by the procurement process they choose to put in place. You must also seek to facilitate the involvement of SMEs, third sector bodies and supported businesses in the process.
For contracts with a value over £4 Million there is also a requirement to consider inclusion of contractual Community Benefit requirements and it is therefore important that you examine the processes currently in place, in order to ensure that they meet the new requirements. Community Benefit requirements are primarily stated to be contractual requirements around training and recruitment or the availability of sub-contracting opportunities. Although there is a catch all clause here too; in reality this simply codifies existing practice, and in fact there is a danger that such clear requirements may stifle future innovation in this area.
Exclusion on the grounds of criminal activity
One of the most hotly anticipated areas of the Bills are the provisions around blacklisting, as the Scottish Government suggested measures would be included to enable authorities to deal with economic operators that had been found guilty of such practices. The published Bill makes reference to exclusion of economic operators on grounds of criminal activity but only to state that the Scottish Ministers may, by regulations, require a contracting authority to exclude an economic operator; however, to date we have not seen any draft regulations.
As a contracting authority, the Bill means change for you. You will need to both (i) review your existing practices; and (2) put in place additional mechanisms to ensure that your organisation is prepared to meet the requirements of the new legislation.
Whilst the Procurement Reform Bill does introduce some changes into the area of public procurement; the new Bill must be read in conjunction with the Public Contracts (Scotland) Regulations 2012 to give the full picture of procurement rules in Scotland. Whilst the Bill has been said to occupy the space that the EU regime does not, new EU legislation is expected in the near future, and has the potential to introduce further changes. Changes at domestic and EU level seem to be diverging in some areas rather than aligning and this is an area of law set to develop and progress, and both the public and private sector need to be alive to the obligations and opportunities presented to them.