Procurement reform on the cutting edge

Economic benefits will flow from changes to procurement, says Graeme Young . Picture: PA

Economic benefits will flow from changes to procurement, says Graeme Young . Picture: PA

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Economic benefits will flow from changes, says Graeme Young

THE Scottish Government published the report it commissioned on public sector construction procurement last month. Many of the report’s recommendations build on legislative proposals laid before the Scottish Parliament – the Procurement Reform (Scotland) Bill. These initiatives are part of the wider Public Procurement Reform Programme, which the Scottish Government has steadily taken forward over the last eight years, and which has put Scotland at the cutting edge of procurement reform.

The Scottish Model of Procurement, as it is now being called, puts procurement at the heart of Scotland’s economic recovery. The Government’s message is: “It is a simple concept – business-friendly, socially responsible. Looking at outcomes not outputs, it uses the power of public spend to deliver genuine public value beyond simply cost/quality in purchasing.”

The reforms involve corralling the myriad of Scottish public sector organisations into adopting a single set of processes when awarding contracts. It means the mandatory use of a single advertising portal – Public Contracts Scotland (PCS). The construction procurement review recommends making use of PCS mandatory for creating tender documents, using standard question sets as the basis for submitting tender returns. These measures should make it easier for the thousands of small and medium sized Scottish businesses to tender for contracts.

On one view, this all looks like procurement nirvana. However, while procurement still has to operate within the parameters set by EU law.

This is recognised by the Procurement Reform Bill, which effectively creates a formalised two-tier tendering system in which a different set of rules apply to contracts below and above EU thresholds. The current EU thresholds are between £113k and £173k for supply and services contracts and £4.3 million for works contracts. Contracts with an estimated value exceeding these thresholds will be subject to a different set of EU rules, which are currently being re-written in Brussels.

There is also another potential rub in the reforms. While standardisation is intended to help simplify and streamline the tendering process, the reforms also introduce a new sustainable procurement duty and requirements to make procurement more socially responsible. This requires public sector organisations, for each contract that they award, to consider how its procurement process can improve the economic, social and environmental wellbeing of its area, facilitate involvement of SME, third sector and supported business and promote innovation.

Again, this raises the potential for discrimination and preferences for “local” contractors, risks that authorities will have to manage carefully when fulfilling their new duties. Similarly, the reforms promote the use of community benefits clauses. These also rub awkwardly against some of the principles of EU law. The draft new EU directives require that they be treated as contract performance conditions and have no impact on the assessment of tenders.

With public sector spend in Scotland estimated to be over £9 billion, the reform programme and the most recent developments in the form of the Procurement Reform Bill and the construction procurement review also provide an interesting backdrop to the future of Scotland’s economy more generally.

While the Scottish Model of Procurement is putting procurement at the heart of Scotland’s economic recovery, where does this sit within the wider independence debate?

The Scotsman and The Institute of Directors, “The Independence White Paper: A Business Plan for Scotland?” conference on Tuesday, 3 December 2013, (sponsored by Dundas & Wilson) will see keynote speakers drawn from the world of politics and business debating the merits of the The Independence White Paper, due to be published on 26 November, 2013.

That debate is likely to include discussion of the importance of public sector spend to Scotland’s economy and the future of Scotland within the EU.

• Graeme Young is a partner with Dundas & Wilson 
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