Lessons learnt and knowledge shared: What UK policymakers and procurers stand to gain from the scrutiny of the Procurement Reform (Scotland)

In the coming months, MSPs on the Scottish Parliament’s Economy, Energy and Fair Work committee will be scrutinising The Procurement Reform (Scotland) Act and considering what the impact has been since it was introduced in 2016. 

A brilliant piece of legislation, its main feature is a sustainable procurement duty which puts a legal obligation on public sector buyers to consider how their procurement activity can be used to improve the economic, social and environmental wellbeing of their area, promote innovation and facilitate the involvement of SMEs, third sector and supported businesses.

The Act is market-leading in many ways but is little-known outside of Scotland. It asks much more of public sector buyers than the equivalent UK legislation – the Social Value Act. Although the Social Value Act has been around since 2012 many procurers in England & Wales (particularly those working outside local government) are only just starting to look at some of these issues seriously now, with the introduction of new guidelines and an explicit requirement that social value be included in central government contracts from January 2021.  

Since 2015 I have been working with public sector procurers and suppliers across Scotland to help implement the Act, empower local communities and work with private sector suppliers to identify and deliver meaningful benefits through their contracts without raising costs. Do it well and everybody benefits from sustainable procurement. Do it badly and it becomes an add-on which drives up costs and leaves suppliers feeling resentful and exploited.

Procurers in Scotland have amassed a wealth of knowledge and experience in the last five years that policymakers really need to know about and the timing of Holyrood’s scrutiny provides a perfect opportunity to share this knowledge with Westminster and other public sector buyers outside of Scotland.

If you work in public sector procurement or are a public sector supplier, I would really encourage you to submit your thoughts to the committee which you can do here. As a former Prime Ministerial adviser I know that good government and good legislation only occurs when there is proper feedback and input from all the stakeholders involved. 

In the meantime, if you lead a public sector organisation and you want to know how you can make better use of the Procurement Reform Act to deliver improved outcomes for your communities and local economies here are my recommendations for medium to long-term changes you could make as well as suggestions for things that could be done immediately. I’d love your feedback and if you have any others or anything else you’d like to add please put your thoughts in the comments or contact me directly.

Medium to Long-Term recommendations

1.     Elevate the status of procurement in your organisation

One of the main barriers to sustainable procurement is where it sits. It might sound harsh but procurement is often viewed (incorrectly in my opinion as simply the mechanism by which an organisation buys things. It is also a ‘dark art’ whose very opaqueness prevents CEOs and Management Teams from recognising it as a powerful tool for delivering its strategic objectives. 

If Covid has taught us anything it’s that how the public sector spends our money is vitally important. Any procurement professional will tell you that good procurement is about so much more than just agreeing a price. It is as important to delivering policy outcomes as economic development and it should be viewed as such.  There are some incredibly talented, brilliant people working in public sector procurement who believe that their field has the power to transform their organisations, but there are a lot of competing demands on their time and they do not have the internal influence needed to drive change. The Scottish Government’s embracing of Community Wealth Building is helping but until sustainable procurement is higher on the priority list of senior management, procurement teams will never have the resources and authority they need.

2.    Know what will make a difference

A lot of money has been spent on some great programmes to educate procurers, but it’s largely been focused on the procurement process and rarely on practical things that suppliers could do to create social value. Many procurers don’t have enough visibility over the day-to-day delivery of their contracts and so are unable to identify where unsustainable practices are occurring. In addition, they struggle to understand what their communities need or how to ask for things that don’t cost suppliers a fortune and drive prices up. Much greater engagement with suppliers is required than currently takes place at the moment.We should also be connecting procurement teams with economic development and the third sector and teaching them how to ‘think differently’ so that they can see first-hand how exciting and transformational this approach can be.

3.    Focus on outcomes not measurement

For many public sector buyers, this will require a complete mindset shift. Procurement is fundamentally about measuring things, but you can’t do social value properly if you start with measurement.  Sustainable procurement only works if you start from the beginning by looking at the outcomes you want to achieve via delivery of the contract. You then use this to develop assessment criteria and thus ensure that the procurement process is used to deliver them. Measurement is important but it should come last. During the criteria development process, procurers should be asking themselves five key questions:

1.    How will this contract be delivered and where are there opportunities to add value?

2.    What is the change I want to see via the delivery of this contract;

3.    Who are the stakeholders who will be most impacted by the change and what does that look like for them;

4.    What, specifically, can I ask my suppliers to do to deliver these outcomes; and? 

5.    Is what I’m asking my suppliers for proportional and relevant to the contract? 

4.    Maximise supplier expertise

Sustainable procurement is not just about jobs, apprentices and school talks. There is so much more that companies are doing (and could do more of); things that don’t get captured when you use limited menus. To really make this approach a success it is essential that procurement teams move away from including generic menus for suppliers to choose from and ask them what they could do instead.

5.    Get to know your suppliers better

In order to achieve sustainable procurement goals suppliers need to be treated as collaborative partners. Nothing is possible unless procurers get a better understanding of how their suppliers operate, what challenges they face and how they deliver contracts. The public sector simply doesn’t understand the private sector well enough. Both sides are reluctant to communicate, but the onus should be on procurers to spend more time on market engagement and building better relationships with businesses.

There’s so much innovation happening in the private sector - things that would be hugely beneficial to communities - but suppliers aren’t asked about it or encouraged to include it in their tenders, often because procurers either don’t know about it or are asking for the wrong things.

6.    Prioritise ‘value’ over ‘cost’

If the relationship between the public and private sector is really going to improve then price needs to stop being the main driver in awarding contracts. Suppliers are having a tough time at the moment; margins are tight and many feel unfairly vilified by the public sector (we shouldn’t forget that the private sector generates the wealth to pay the taxes which keep the country going). The sustainable procurement duty at its heart is about giving the public sector a mechanism to enable them to choose their suppliers based not on price alone. Until you enable a supplier who isn’t the cheapest to score higher than someone who is, you are never going to be able to get to where you want to be. I know some horror stories about suppliers with bad practices being awarded contracts over ‘better’ companies simply because the better companies were more expensive (because they don’t cut corners). In the long run it nearly always ends up costing the public sector more.

7.    Remove some of the barriers for SMEs and smaller companies

The Procurement Reform (Scotland) Act  is supposed to facilitate the involvement of SMEs, third sector and supported businesses, but lots of small businesses choose not to work with the public sector and not just because it’s onerous and admin-heavy. It’s a vicious circle; procurers lump contracts together into large lots in order to minimise their administrative burden but that makes them too large for smaller, more local firms to bid for. The public sector needs to be more sympathetic to the hoops they’re asking suppliers to jump through and make lots smaller and more accessible to small and local businesses who don’t have specialist teams of bid writers at their disposal.

There’s evidence to show that smaller firms are cheaper to manage, which would save money in the long-term. But procurers can only do all this if they have enough resources to make it happen and as previously noted, procurement is not a well-resourced department in most local authorities. Teams are stretched and simply do not have the skills or expertise to undertake a lot of the additional work that would be required.

Identifying contracts where a local supply chain exists, and advertising the opportunities across a multitude of channels rather than relying on PCS as their only form of distribution, would also make public contracts more accessible. PCS and PCT also need to be much easier to navigate and understand.

Immediate changes

These changes are not going to happen overnight. But there is still plenty of things the Government and public sector procurers can do immediately:

Celebrate the successes. Procurers who are doing it well are not getting any recognition – raising their and sharing their learnings would motivate and guide everyone else. 

Celebrate the suppliers who do it well. This is a completely missed area. The suppliers who put the effort into doing it well should be rewarded with some positive PR about their business. 

Record the benefits across Scotland (not just by local authority/region). Part of the challenge for suppliers is that they are often based in a different local authority area, so if they do create a job it’s not counted’. By measuring the benefits centrally, there would be a clearly picture of the value being delivered nationally and it would encourage greater partnership working. 

Create a national knowledge platform. This would enable procurers to combine learnings and share their knowledge with each other.

Create a working group. This should be a practical group full of experts with a clear remit to drive change. No single authority has it completely right at the moment, but if you put together all their learnings, you’d get a lot of the answers. 

Produce standard questions and award criteria. Done right, this would be hugely beneficial, not just to procurers, but also to suppliers who will see a reduced burden on them when bidding.   

This Act review will be a pivotal moment for Scottish procurement. There’s a lot more that needs to be done; it’s a big challenge and it can’t be solved overnight with one or two things. But there is some great work being done by some excellent people working in both the procurers and suppliers space across Scotland. Now is an opportunity for policymakers and procurers from across the UK to learn from the experts and use this knowledge to improve procurement processes, better support communities and stimulate post-COVID economic recovery through the creation of social value.

Sarah Stone a former No 10 External Relations Adviser and Founder and Director at social value agency Samtaler. She specialises in stakeholder engagement and social value creation; identifying practical ways organisations can create real social value that benefits everyone.