Public Procurement: A Consultation on Changes to the Public Procurement Rules in Scotland

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Contents

Foreword

Executive Summary

1. Introduction

2. Taking social, environmental and employment issues into account
2.1 Overview
2.2 Statutory guidance – Corporate Procurement Strategy
2.3 Statutory guidance – Sustainable Procurement Duty
2.4 Statutory guidance – Community benefits in procurement
2.5 Principles of procurement
2.6 Reserved contracts for supported businesses
2.7 Reserved contracts for health, social and cultural services
2.8 Labels
2.9 Technical specifications
2.10 Contract award criteria

3. Making contracts more accessible for smaller businesses
3.1 Overview
3.2 Breaking contracts into smaller lots
3.3 Asking for information about sub-contractors
3.4 Paying sub-contractors directly

4. Selection criteria and grounds for exclusion
4.1 Overview
4.2 Selection criteria
4.3 Groups of businesses
4.4 Criminal convictions
4.5 Tax evasion
4.6 Bankrupt or insolvent businesses
4.7 Exceptional circumstances
4.8 Other grounds for exclusion
4.9 The length of time a business can be excluded
4.10 Excluding sub-contractors
4.11 Statutory guidance – selection of tenderers and award of contracts

5. Contracts for care, support and other specific services
5.1 Overview
5.2 "Light-touch" regime
5.3 Statutory guidance – procurements for health or social care contracts

6. Procedural rules
6.1 Overview
6.2 Using a prior information notice as a call for competition
6.3 Negotiated procedure without prior publication
6.4 Reduced timescales in a restricted procedure
6.5 Examining tenders before verifying selection criteria
6.6 Incomplete or wrong information
6.7 Modifying contracts

7. Rules about communication
7.1 Overview
7.2 Electronic communication
7.3 Electronic communication in concession contracts
7.4 Electronic catalogues
7.5 European single procurement document
7.6 E-Certis
7.7 Award notices when calling-off a framework
7.8 Dynamic purchasing systems

8. Central purchasing bodies
8.1 Overview
8.2 Central purchasing bodies in Scotland
8.3 Central purchasing bodies in other countries

9. Enforcement and monitoring
9.1 Overview
9.2 The options open to Scotland
9.3 Remedies Directives

10. Open contracting

11. How to respond to this consultation

Annex A – International agreements

Annex B – Respondent information form

Footnotes

1. http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0024

2. http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:JOL_2014_094_R_0243_01

3. http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0023

4. http://www.legislation.gov.uk/asp/2014/12/contents

5. http://www.scotland.gov.uk/About/Performance/purposestratobjs

6. http://www.scotland.gov.uk/Topics/Government/Procurement/about/spd-aims

7. http://www.scotland.gov.uk/Resource/Doc/324602/0104497.pdf

8. http://www.scotland.gov.uk/Resource/0043/00436662.pdf

9. http://www.scotland.gov.uk/Resource/Doc/96269/0023302.pdf

10. http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/72587.aspx

11. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/255900/2901399_OpenGovernment_NAP_summary.pdf

12. http://www.open-contracting.org/global_principles

Foreword

We have a clear vision in Scotland to focus Government and public services on creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth. The public sector spends around £10 billion a year on buying goods, works and services. This means that public procurement – and the efficiencies and simplifications that can be made to improve supplier access to public contracts – is a significant lever at the Scottish Government's disposal to help support economic growth.

We believe that suppliers want consistency, reduced bureaucracy and improved access to public procurement opportunities. The past few years have seen a period of significant improvement in public procurement in Scotland through the reform agenda. The Procurement Reform (Scotland) Act 2014 builds on this improvement. It establishes a national public procurement framework that introduces a Sustainable Procurement Duty, requires greater transparency through the publication of Procurement Strategies and Annual Reports and, amongst other provisions, greater consistency in advertising contracts.

The improvements that we have made to procurement procedures are giving businesses the opportunities to access public contracts and the £10 billion that the public sector spends annually – but we can, and must, do more if we are to deal with the economic challenges that lie ahead.

This consultation is concerned with the Government's proposals to implement further changes to the public procurement rules in Scotland. When implementing the new laws we have a number of options and choices to make. We believe that our choices should build upon our work to date to improve public procurement: by simplifying the public procurement process further; supporting wider public policy aims (environmental and social, for example) and by further improving supplier access to public contracts.

It also gives us a chance to consult formally on the principles which will underpin a range of statutory guidance relating to important issues, such as how a potential contractor treats its employees.

The purpose of this consultation document is to seek your views on what choices we should make when making further changes to the public procurement rules.

Overall, if we are to deliver sustainable economic growth, it is essential that we continue to use the power of public spending to deliver greater public value and drive efficiencies. The procurement reform agenda, the implementation of the Procurement Reform (Scotland) Act 2014 and the new EU procurement rules, collectively, will help us further to deliver these aims. The proposals in this document, and your views on them, are therefore essential to ensuring that public procurement continues to improve and also contributes to the Government's strategic objectives for Scotland.

So, as I am sure you will agree, this consultation covers issues which are important for Scotland and I would strongly encourage all those who have an opinion on what we are proposing to respond to it.

Keith Brown MSP
Cabinet Secretary for Infrastructure, Investment and Cities

Executive Summary

This consultation document describes, and seeks views on, the Scottish Government's plans to change the public procurement rules in Scotland. These changes are a result of new European legislation (also known as European Directives) about public procurement and must be implemented in new Scottish Regulations by 18 April 2016. It is our aim to introduce new legislation at the end of this year.

Procurement law is devolved to the Scottish Parliament, and Scottish Ministers are responsible for deciding how best to implement these changes.

There are three new Directives; the Public Procurement and also the Utilities and Concessions Directives. This consultation is concerned mainly with the Public Procurement Directive. This is because it applies to the majority of public contracts in Scotland. Also, many of the changes are broadly similar across all three of the new Directives.

Some of the changes introduced by the new Directives are mandatory and we have no choice but to implement these by the 18 April 2016 deadline. There are also some elements where we have a choice about whether to, or how best to, implement further change. These discretionary elements, and our plans to implement these, are the main focus of this consultation document.

The consultation also considers elements of the Procurement Reform (Scotland) Act 2014. That Act covers many lower value procurements. The consultation discusses these elements of the Act that, in particular, have yet to be further described in Scottish Regulations or guidance.

Views about these questions should be sent by 30 April 2015 to:

Nesta Devereux
Consultation Project Manager
The Scottish Government
Scottish Procurement
2nd Floor
Europa building
450 Argyle St
Glasgow
G2 8LG

E-mail to: ScottishProcureConsultation@scotland.gsi.gov.uk

Responses to this consultation will inform the development of new draft Scottish Regulations.

1. Introduction

Public procurement is the term we use to describe how the government, councils and other public sector organisations create contracts to buy or lease things. This can include goods like books and computers, services like legal advice and accountancy, and works like building roads and hospitals.

The public procurement rules describe how the public sector buys these things. The European Union sets rules for all Member States. Each Member State has to make these rules the law in their own country.

The Scottish Parliament is responsible for making these laws in Scotland. The UK Parliament is responsible for making these laws in England, Wales and Northern Ireland.

There are three new sets of European rules which talk about public procurement. These are known as Directives. In this document, we call these 'the Directives':

- The Public Procurement Directive (2014/24/EU)[1];

- The Utilities Directive (2014/25/EU)[2]; and

- The Concessions Directive (2014/23/EU)[3].

The European Commission has also adopted a Directive on e-invoicing in public procurement which came into effect on 26 May 2014. It promotes e-invoicing as the standard model for public procurement and we have to make these rules in Scotland by 27 November 2018. We are not asking, in this document, for opinions on that Directive. We plan to consult on it separately.

Most public contracts are covered by the rules in the Public Procurement Directive. The Utilities Directive covers contracts which are awarded by entities like, for example, Scottish Water, which undertake one of the activities defined in the Directive. The Concessions Directive covers contracts where a public sector organisation agrees – as part of a contract to build and, or, to operate something like a leisure centre or toll road, for example – that the contractor will be entitled to generate income.

We (the Scottish Government) have to make these rules law in Scotland by April 2016, but we plan to make them law in 2015. We have some choices about how we do this, so we are asking for your opinion on these choices. We are not asking for opinions on those parts of the Directives where we have no choice about how we make these rules in Scotland.

The rules in the Directives apply to higher value public contracts. We are also asking for your views about new rules and guidance for lower value contracts. In May 2014, the Scottish Parliament passed a new law called the Procurement Reform (Scotland) Act 2014[4], which allows us to make new rules for much lower value contracts, as well as, in some instances, for higher value contracts. In this document, we call this 'The Act'. The Act also allows us to publish statutory guidance which public bodies will have to consider before carrying out a procurement exercise.

Throughout this document, we refer to 'public bodies' as short-hand for all organisations which are subject to public procurement laws. This includes government, councils, universities and colleges, the NHS and registered social landlords.

We also refer throughout this document to 'businesses' as short-hand for all organisations which might bid for and win public work. This includes public corporations, private companies, sole traders, the third sector and supported businesses.

The Directives

Procurements covered by the Directives are called 'EU regulated procurements'. That is, the rules in the Directives will apply to contracts which are worth more than a certain value; the value is different for different types of bodies and different types of contract:

Body

Buying / Contract type

Value (ex VAT)

Central Government

Goods or Services

£111,676

Non Central Government

Goods or Services

£172,514

Utility bodies

Goods or Services

£345,028

All bodies

Works

£4,322,012

All bodies

Concessions

£4,322,012

Although the Directives do not apply to contracts worth less than these amounts, all contracts, regardless of value, should be awarded in a way which is consistent with the EU Treaty principles of equal treatment, non-discrimination, transparency, proportionality, and mutual recognition.

The Directives will replace older Directives from 2004. The new rules should make the process of buying things faster, easier and simpler for buyers and sellers. For example, the minimum timescales are shorter and there are more procurement procedures to choose from.

The Directives are broken up into different parts called 'Articles'. We will quote the relevant Article number when referring to it in this document.

In this document, we say what the choices we have to make are and what we think we should do. We want to know what you think about these choices and our suggestions.

The Act

The Act also allows us to make new rules and guidance for public bodies buying goods and services worth more than £50,000 and works worth more than £2 million. These are called 'regulated procurements' (not to be confused with 'EU regulated procurements').

We call contracts worth more than these amounts, but less than the EU thresholds mentioned in the Directives 'lower value regulated procurements'. Some of the rules which the Act allows us to make will only apply to these lower value regulated procurements.

The Act is broken up into different parts called Sections. We will quote the relevant Section number when referring to it in this document.

The Scottish Model of Procurement

In Scotland, we have been involved in a programme of improvement and reform of public procurement since 2006. The Scottish Model of Procurement puts procurement at the heart of Scotland's economic growth, and sees procurement as an integral part of policy development and public service delivery. It's a simple concept – business friendly and socially responsible. Looking at outcomes not outputs, it uses the power of public spend to deliver genuine public value beyond simply cost or quality in purchasing.

Government-led, it benefits from strong political leadership, including from four successive Cabinet Secretaries. It is also owned by all of the Scottish public sector, working together to develop key strategic relationships across sectors with a project level partnership to agree solutions to specific problems.

The Scottish Model of Procurement is not just about cost and quality, but about the best balance of cost, quality and sustainability in the widest sense – including economic, social and environmental measures. Part of this is an emphasis on making sure that businesses which work for the public sector treat their employees well. Statutory guidance on selection of candidates and the award of contracts will deal with issues such as the payment of a living wage and ending blacklisting. This is discussed in section 4.11 of this document.

The Act is the latest part of this work. We think that the Act and the Directives give us an opportunity to develop the Scottish Model of Procurement even further.

Open contracting

The Scottish Government has also committed to consulting on the principles of open contracting, and so we have included a question in this consultation in order to seek your views on this topic.

2. Taking social, environmental and employment issues into account

2.1 Overview

Public bodies in Scotland spend about £10 billion each year buying goods, services and works. We think that spending that money in a way which considers social, environmental and employment issues can make big improvements to communities across the country. Both the Directives and the Act take a similar view – this is covered in Article 18(2) of the Public Procurement Directive and Sections 8 and 9 of the Act.

The Act requires that before a public body buys anything, it must think about how it can improve the economic, social and environmental wellbeing of its area. This is called the sustainable procurement duty and will be a legal requirement when the Act is fully implemented. This applies to regulated procurements worth more than £50,000 in the case of goods and services, and £2 million in the case of works contracts.

Our planned approach to statutory guidance and some of the changes in the Directives are discussed in this section.

The Directives also say that a public body should think about these matters. We agree that the new focus in the Directive on social, environmental and employment issues is a positive development. This is because we believe that by using our contracts in this way, businesses which sell to the public sector know that they are expected to act in a responsible way which treats people, especially their employees, local communities and the environment well.

This is an important part of the way we want to see public procurement carried out in Scotland.

Public bodies must bear in mind that the Directives say that they must still treat all businesses equally. This means that when taking account of these issues they cannot, for example, favour businesses based on their nationality or geographic location.

2.2 Statutory Guidance – Organisational Procurement Strategy

Section 15 of the Act requires any public body that spends £5 million or more in any financial year to have a Procurement Strategy that sets out how it intends to carry out procurements regulated by the Act. The Strategy will also contain information on a public body's approach to a range of considerations, including how it engages with those affected by its procurements; its approach to promoting health and safety and the procurement of fair and ethically traded goods and services. We expect that the Strategy will demonstrate how the public body intends to comply with the general duties in the Act. These are described in more detail later in this section.

In addition to the Procurement Strategy, the public body must prepare an annual report on how its procurement activity has complied with its procurement strategy, and on expected future regulated procurements.

The Procurement Strategies, any revisions to them, and the annual reports will be published and will be used by Scottish Ministers to create an annual summary report on procurement activity in Scotland.

We will publish statutory guidance on the preparation of the strategies and reports.

Proposal for Procurement Strategy and Annual Report Content

A Procurement Strategy must contain information on how expected regulated procurements:

- Are being undertaken in compliance with EU Treaty Principles of equal treatment, non-discrimination, transparency, proportionality and mutual recognition.

- Are being undertaken in compliance with the sustainable procurement duty.

- Contribute to the carrying out of a public body's functions and the achievement of its purposes.

- Deliver value for money.

It must:

- Explain how the public body intends its approach to regulated procurements involving the provision of food to:

(i) improve the health, wellbeing and education of communities in the authority's area, and

(ii) promote the highest standards of animal welfare

- Describe how the public body intends to achieve prompt payment in the supply chain.

It must also describe the public body's general policy on:

1. The use of community benefit requirements.

2. Consulting and engaging with those affected by its procurements.

3. The payment of a living wage to persons involved in producing, providing or constructing the subject matter of regulated procurements.

4. Promoting compliance by contractors and sub-contractors with the Health and Safety at Work etc. Act 1974 and any provision made under that Act.

5. The procurement of fairly and ethically traded goods and services

The annual report must report against compliance with these factors.

The Procurement Strategy must be produced or reviewed annually. The Annual Report must be published as soon as practicable after the end of each financial year.

Proposal for Statutory Guidance

Section 20 of the Act says that we must publish guidance on the strategy and report. This may include:

- The approach to consultation in preparation of the strategy.

- The form and content of strategies and reports.

- The approval process for strategies.

We recognise that many public bodies already have strong internal governance in place and produce and adhere to Organisational Procurement Strategies. We will use the Public Procurement Reform Programme to learn from existing approaches to strategies and reporting. We must also ensure that the guidance meets the distinct requirements of the Act and aim to produce guidance on form and content that contributes to the transparency aims of the legislation.

We expect that development of all the other statutory guidance required by the Act will inform the Organisational Procurement Strategy and Annual Reporting statutory guidance.

Question

Q1 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

2.3 Statutory Guidance – Sustainable Procurement Duty

Section 10 of the Act says that we may make statutory guidance about the sustainable procurement duty.

The Scottish Government's purpose is:

'to focus government and public services on creating a more successful country, with opportunities for all to flourish, through increasing sustainable economic growth.'[5]

This is reflected in the Scottish Model of Procurement, particularly the priority of making sustainable procurement 'business as usual' for the public sector in Scotland.

The sustainable procurement duty in the Act could be defined in terms of how procurement can help to achieve the Scottish Government's purpose. There is also overlap across other legal requirements such as the Climate Change (Scotland) Act 2009 and equality legislation.

Since 2011, the Scottish public sector has been adopting a consistent approach to sustainable public procurement. This approach is currently being tailored to help public bodies meet the requirements of the sustainable procurement duty and it is envisaged by the Public Procurement Reform Programme that the approach will form the basis of statutory guidance on the duty.

Proposal

In order to help public bodies to ensure that their procurement activity contributes to the purpose and will comply with the sustainable procurement duty, and with the help of organisations from across the public sector, we are currently testing and refining a set of tools that could be used.

The tools are used by public bodies to analyse the opportunity to maximise social, economic and environmental outcomes through their procurement activity. They will enable organisations to develop action plans, aiding compliance with the Act's requirements and ensure that resources are focussed where they need to be, help embed relevant and proportionate requirements into contracts and encourage good practice. They are:

A prioritisation methodology – this is a spreadsheet-based tool which is derived from the 16 National Outcomes that define sustainable economic growth for Scotland, and provides a systematic approach to achieving sustainable procurement. Using spend data and identifying opportunities across contracts, it will help public bodies to focus resources in areas with the greatest potential to deliver social, economic and environmental benefits.

A Flexible Framework – many public organisations are already familiar with earlier versions of the Flexible Framework. This tool should feed into annual procurement reports to demonstrate progress against organisational procurement strategies. It aims to be scalable and 'flexible', in proportion to the needs of each individual organisation. The Flexible Framework generates an action plan for organisations on how they can progress.

Summary

The sustainable procurement duty, as outlined in the Act, sets out specific duties to improve the economic, social, and environmental wellbeing through regulated procurement. A consistent approach to complying with this duty is being developed and tested across the public sector in Scotland and is expected to form the basis of statutory guidance.

Question

Q2 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

2.4 Statutory Guidance – Community Benefits in Procurement

Community benefits in procurement have been a key strand of procurement policy in Scotland since 2008 with an expectation that they will be routinely included in contracts. Section 24 of the Act gives this expectation a legal basis. It defines community benefits in procurement as:

'a contractual requirement imposed by a contracting authority-

(a) relating to:

(i) training and recruitment, or

(ii) the availability of sub-contracting opportunities, or

(b) which is otherwise intended to improve the economic, social or environmental wellbeing of the authority's area in a way additional to the main purpose of the contract in which the requirement is included.'

The Act requires public bodies to apply the sustainable procurement duty to all regulated procurements; to 'opt out' of community benefit clauses for contracts at or over £4 million and requires publication of what community benefits they intend to include and what they actually achieve.

Section 25 of the Act allows us to make statutory guidance to assist with compliance with these rules. We will produce statutory guidance on community benefits which will address:

- Defining the appropriate community benefit through stakeholder engagement.

- What to say in the contract notice and contract award notice.

- Circumstances where community benefits would not be relevant or proportionate.

- Reporting of expected and achieved benefits.

The guidance will draw on lessons learned by those who have used community benefit in procurement clauses.

The statutory threshold for community benefit clauses is currently set at £4 million, but Ministers have the option to amend this figure, should they wish.

Question

Q3 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

2.5 Principles of procurement

The Directives require businesses to comply with environment, employment and social laws when they are working on a public contract. This means national and European law, as well as relevant collective agreements and specific international agreements. These international agreements are listed in Annex A.

Article 18(2) of the Public Procurement Directive and Article 36(2) of the Utilities Directive require all countries in the European Union, including Scotland, to take "appropriate measures" to make sure that this happens. This applies to public contracts and utilities contracts. We think that there are two ways we could do this:

- We could make a rule that says that individual public bodies have to make sure this happens.

- We could specify in the legislation that all public bodies must have clauses in their contracts that require contractors to comply with all relevant law and collective agreements, and which allow public bodies to end a contract if the contractor involved in performing the contract does not meet these requirements.

Whatever we do, we will have to be able to demonstrate that we are taking "appropriate measures". We do not think that the first option will go far enough and plan to take the second approach.

Although there is no requirement to do so in the Concessions Directive, we will also encourage public bodies to think about taking the same approach when awarding concession contracts.

Question

Q4 We believe that a statutory obligation on public bodies to include relevant clauses in their contracts is the best way to ensure that contractors comply with all relevant laws and collective agreements. This should also ensure that public bodies are able to end contracts where a contractor does not meet these requirements. Do you agree or disagree with this position? Please explain your answer.

2.6 Reserved contracts for supported businesses

The existing rules allow public bodies to 'reserve' contracts to businesses where more than half of the workers are disabled people. These are known as supported businesses. This means that if a public body reserves a contract, only supported businesses would be allowed to bid for it. The rule which allows public bodies to do this is known as Article 19.

All three of the new Directives provide a choice about whether to continue to allow public bodies to reserve contracts or not. In the new Public Procurement Directive, this rule is found in Article 20 (it is in Article 38 of the Utilities Directive and Article 24 of the Concessions Directive). However, the type of business which this applies to has changed. Under the new rules, public bodies will be able to reserve contracts to sheltered workshops or for the contract to be performed as a sheltered employment programme, as has been the case to date. However, the new rules also allow that contracts can be reserved to businesses whose main aim is to socially and professionally integrate disabled or disadvantaged people. A further change is to the threshold of workers who must meet that description, from 50 per cent to be more than 30 per cent of the workers.

There is no Article in any of the Directives which provides clarity about the definition of "disadvantaged workers". Recital clauses appear at the start of the documentation and before the main text (Articles) of the Directives; these do not have any legal force but are designed to assist the reader to understand the intent of the legislation. Recital 36 of the Public Procurement Directive states:

"Employment and occupation contribute to integration in society and are key elements in guaranteeing equal opportunities for all. In this context, sheltered workshops can play a significant role. The same is true for other social businesses whose main aim is to support the social and professional integration or reintegration of disabled and disadvantaged persons, such as the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups."

Allowing public bodies to award contracts through this process is, we believe, a good way of using public money to help people who might be unable to get a job through the open labour market. That is why we already have a framework agreement in place which lets public bodies buy furniture, clothing, signs and document management services from supported businesses.

We are keen to see opportunities like this, so we do plan to continue to allow public bodies to reserve contracts in this way.

This would apply to higher value contracts covered by the Directives. Section 11 of the Act means that this definition would also apply to lower value regulated contracts reserved to supported business.

Questions

Q5 Is there still a case for reserving contracts for supported businesses in Scotland?

Q6 Do you think that the definition of a "disadvantaged person" in this context should be "the unemployed, members of disadvantaged minorities or otherwise socially marginalised groups"? If not, what do you think the definition should be and why?

2.7 Reserved contracts for health, social and cultural services

We can choose to allow public bodies to reserve the right to bid for some contracts to certain types of organisation. This is a completely different type of reserved contract to the type mentioned in section 2.6 of this document. Details are described in Article 77 of the Public Procurement Directive.

Examples of contracts for certain service categories that can be reserved include:

- Administrative.

- Educational.

- Healthcare and housing.

- Supply of domestic help.

- Nursing and medical staff.

- Pre-school and higher education.

- E-learning.

- Adult education at university level.

- Staff training.

- Training facilities.

- Health and social work.

- Library.

- Archives.

- Museums and other cultural services.

- Sporting.

- Services provided by social membership organisations.

- Services provided by youth organisations.

The types of organisation that can bid for a contract which a public body has 'reserved' in this way must:

- Have a public service mission linked to the services in the contract.

- Reinvest its profits to help achieve its objective, or distribute profits based on participation in the organisation.

- Have a management or ownership structure which is based on employee ownership or participation.

- Not have been awarded a contract for the service by the same public body in the past three years.

In effect, Article 77 of the Public Procurement Directive gives us the option to allow only certain organisations to bid for certain types of contracts. Contracts which are reserved in this way can last for no longer than three years and a public body cannot use this provision to award a contract to the same organisation more than once within a three year period.

This provision was negotiated into the Directive by the UK Government as a means of facilitating its policy aims on mutuals, where public sector bodies are transferred into mutual organisations. There may, however, be other non-public sector bodies who also meet the test above, which could potentially merit contracts being awarded under this provision. We are not, however, aware of any arguments that currently support reserving contracts for these specific types of organisations in Scotland, and we therefore believe this to be less of an issue in Scotland.

The European Commission has committed to reviewing the effect of this clause by April 2019.

Question

Q7 Our view is that we are not aware of any arguments that currently support reserving contracts for mutual and other non-public sector bodies in Scotland, and we believe this is less of an issue in Scotland. Do you think there are any advantages or disadvantages to applying this provision to the procurement activities of public bodies in Scotland? Please explain your answer.

2.8 Labels

Article 43 of the Public Procurement Directive and Article 61 of the Utilities Directive say that public bodies can ask for the works, goods or services which they are buying to have been given a label which certifies that these meet specific environmental, social or other characteristics. Public bodies will be able to ask for this in technical specifications, award criteria or contract conditions.

The labels' standards may be environmental, social or something else, but the label must be:

- Linked to the subject of the contract (and all criteria must be relevant).

- Clear to judge in an open and fair way which does not discriminate.

- Open to anyone who meets the standards.

- Certified by a third party.

Public bodies must accept all labels which have equivalent standards. Public bodies must also accept other evidence from businesses which have not been able to get the label within the relevant time constraints of a particular tender exercise.

We think this is a good step, because it encourages public bodies to think about environmental and social factors. We think this gives public bodies an opportunity to focus on fairly and ethically traded goods, where it would make sense to do so. It also fits with what the Act says. The Act says, at section 15(5), that public bodies must say what their policy is on fair and ethical trading.

Because of this, we plan to apply the same rules about labels to lower value contracts as well.

Question

Q8 Should the rules about labels which apply to contracts that are EU regulated procurements also apply to lower value regulated procurement contracts covered by the Act? Please explain your answer.

2.9 Technical specifications

Article 42 of the Public Procurement Directive explains what a public body can ask for when it describes what it wants to buy. These are known as technical specifications.

The technical specifications can now refer to any stage of the life cycle of what is being bought. This means the costs of buying it, using it, maintaining it and disposing of it can be addressed if they are relevant to the contract and proportionate to the contract's value and aims.

The Act allows us, at Section 30, to make new rules about the technical specifications for lower value regulated contracts. We think that it is simpler and easier for everyone if we apply the same rules to all contracts, (that is, both the higher value contracts covered by the Directives and the lower value regulated contracts covered by the Act), so this is what we plan to do.

Question

Q9 Do you think we should align the rules on technical specifications for all regulated procurements, including those lower value procurements regulated by the Act? Please explain your answer.

2.10 Contract award criteria

Article 67 of the Public Procurement Directive, Article 82 of the Utilities Directive and Article 41 of the Concessions Directive describe what factors public bodies can take account of when deciding who to award a contract to. These are known as contract award criteria.

The Directives say that these criteria must be linked to the subject of the contract and must allow for competition between different businesses. The public body must also say how many marks it will give to each of the criteria.

At the moment, contracts can be awarded either on the basis of the lowest price, or to the 'most economically advantageous tender', a term which is usually shortened to 'MEAT'.

The new Public Procurement and Utilities Directives say that all contracts must be awarded to the 'most economically advantageous tender'. Even though 'MEAT' is a well-known term, however, what we mean by 'MEAT' is changing, which might cause some confusion. What we currently understand as 'MEAT' and what the 2004 Directives described as 'MEAT' will now become known under the new Directives as the 'best price-quality ratio'. Best price‑quality ratio will now be just one of the factors which public bodies can choose to assess as part of the new definition of MEAT.

Public bodies will now be able to decide what 'MEAT' means on a contract-by-contract basis. They will be able to choose how much emphasis to put on the price, and how much to put on the cost (including the whole of life, or life-cycle cost, of the product or service).

Public bodies must also say how many points they will give to the different factors which they have decided make up 'MEAT'. If a public body decides just to set minimum acceptable standards for the contract and to award all available points to price or cost, this will mean that price or cost is, in effect, the only award criterion on which bids which meet the standards will be assessed.

For public contracts and utilities contracts, we could choose not to allow public bodies to award all the available points to price or cost. If we did this, we could say whether this applied in the case of all contracts, or only for certain types of contracts.

We believe that it is important to balance cost, quality and sustainability to get the best value for money. This is described in the value for money triangle, which is an important part of the Scottish Model of Procurement[6].

Because of this, we think that contracts should never be awarded on the basis of lowest price or lowest cost alone, and so we plan to make rules which will prevent this. We plan to apply these rules to all circumstances. We also plan to say in statutory guidance allowed for under Section 29 of the Act that this applies to lower value regulated contracts as well. Public bodies would still, of course, be able to award the majority of available points to price or cost, if that reflected their priority for the contract in question.

Question

Q10 We believe that contracts should not be awarded on the basis of price or cost alone? Do you agree or disagree? Please explain why.

3. Making contracts more accessible for smaller businesses

3.1 Overview

The new Directives aim to make it easier for smaller businesses to bid for public contracts. This could benefit much of the private and third sector.

Sections 8 and 9 of the Act have the same aim. Part of the sustainable procurement duty on all public bodies is that before they buy anything, they must think about how they can make it easier for smaller businesses, the third sector and supported businesses to bid for the contract, and how they encourage innovation.

These organisations are very important to the Scottish economy, and we are keen to make sure that as many of them as possible can bid for public contracts. That is why we involve business organisations in the Public Procurement Reform Programme and fund the Public Contracts Scotland advertising portal and the Supplier Development Programme.

Over the last few years, things we have done have helped to make this easier, include, for example:

- Creating Public Contracts Scotland (PCS), the website for advertising public contract opportunities.

- Standardising the pre-qualification questionnaire.

- Using the PCS advertising portal to advertise sub-contracts on major contracts.

- Funding the Supplier Development Programme.

In 2012-13, almost half of the £10 billion the public sector spent buying things went directly to micro, small and medium-sized businesses (known as SMEs). More will have been spent indirectly with SMEs through sub-contracts.

3.2 Breaking contracts into smaller lots

One way to make it easier for smaller businesses to be able to bid for public contracts is to split large contracts into a number of smaller ones. These smaller parts are called lots, and can, for example, be based on location or type of good or service.

Article 46 of the Public Procurement Directive states that all public bodies must think about splitting contracts into lots. When a public body does not split a contract into lots, it must explain why it did not.

We can choose to allow a public body to award more than one lot to the same business, so long as it has said that it might do this in the advert. We plan to allow public bodies to do this.

The Directive also states that public bodies could be required to split certain types of contracts into lots. We could also say in which situations they would have to do this. For example, we could say that all contracts for a certain product or service should be split into lots.

Public bodies will already have to think about splitting contracts into lots. We think that they should keep the right to choose not to split their contracts into lots if it would not make sense to do so. We do not, therefore, plan to force public bodies to split their contracts into lots.

Article 65 of the Utilities Directive provides similar options.

Question

Q11 We believe that public bodies should retain discretion to split requirements into smaller lots and to award more than one lot to the same bidder. Do you agree or disagree with this? Please explain your answer.

3.3 Asking for information about sub-contractors

Article 71 of the Public Procurement Directive, Article 88 of the Utilities Directive and Article 42 of the Concessions Directive describes those elements which are relevant to sub-contracting. It provides that public bodies can choose to ask businesses bidding for work to say which parts of the contract that they plan to sub‑contract and to whom. We could decide to make rules which say that public bodies must ask for this information in all cases.

However, to ask for this information routinely on larger projects, involving lots of sub‑contractors, for example, could be costly, resource intensive and slow the overall procurement process down, rather than streamline it. This could, in turn, reduce opportunities to open up the supply chain.

For these reasons we think that public bodies should have the flexibility to decide when it is appropriate to use the facility to ask for information about sub-contractors on a case-by-case basis. As a result, we do not plan to insist that public bodies always ask bidders about the parts of the contract that they plan to sub‑contract and who those sub-contractors are.

There are some limited circumstances where, as a result of Article 71, public bodies will need to ask businesses for some information about their sub-contractors. The requirement for this information applies to works contracts and to service contracts provided at premises under the public bodies oversight only (there are also similar clauses in the Concessions Directive). The information should be provided only after a contract award and before the contract begins.

The information includes the sub‑contractors':

- Name.

- Contact details.

- Legal representatives.

This information must also be updated if it changes, or if new sub-contractors are appointed.

We can choose to extend this rule so that it also applies, for example, to contracts for the supply of goods, for services provided off-site, or to sub-contractors of the main sub-contractor.

If we did this, on the one hand, it could help public bodies understand the supply chain better. On the other hand, it could remove flexibility and result in extra work for public bodies and also for businesses – especially where there is a long and, or, complex supply chain. There is also a question about whether we should – and how we would – limit the use of this rule, for example, to certain types of contracts, certain public bodies or suppliers. Opting to implement some of the provisions around sub-contracting but not others could create confusion.

For this reason, we do not plan to require public bodies to apply this rule to other types of contracts. Instead, we plan to leave the choice up to individual public bodies to decide, on a contract-by-contract basis, whether to require this information down the supply chain.

Since we do not plan to extend this rule to other contract types we also do not plan to make any related changes to who should deliver this information. The articles make clear that public bodies are responsible for obtaining this information about sub-contractors from the main contractor. There is an option to transfer that obligation (to deliver the information) onto main contractors, instead. We do not plan to do this.

As we do not plan to implement the optional rules included in the article, we will not apply these to regulated procurements covered by the Act either.

Questions

Q12 To avoid creating unnecessary confusion, we believe that public bodies should have the discretion to decide whether to request additional information about sub-contractors. What are your views about this?

Q13 The Directives also make clear that public bodies are responsible for obtaining any information about sub-contractors from the main contractor. There is an option to transfer this obligation (to deliver the information) to the main contractor. We do not plan to transfer that obligation to the main contractor. What are your views about this?

Q14 We believe that we should not apply similar provisions on sub-contracting to contracts covered by the Act, as we do not think this would be proportionate. Do you agree or disagree with this?

3.4 Paying sub-contractors directly

Currently, public bodies usually pay the business which is known as the main contractor when they procure any goods, works or services. This business will then, in turn, pay any other businesses which it has used as sub-contractors under the contract.

The Public Procurement Directive says, in Article 71, that we can choose to let public bodies pay sub‑contractors directly if the sub-contractor requests this, and if the contract also allows this to happen. We could also go further and provide for a direct payment facility even where a sub-contractor does not request this. This is also included in Article 88 of the Utilities Directive.

The provision has likely been included in the Directives because sub-contractors have complained over the years that main contractors often do not pay them on time. Sub‑contractors are often smaller businesses, and if they are not paid on time, this may seriously affect the viability of their business.

Such a change would be complicated and may, for example, require public bodies to make changes to their payment systems which could place disproportionate burdens and costs on them. It may also require new systems of contract management to be adopted to, for example, ensure that the public body was able to confirm that work had been completed to the satisfactory standard under the contract by the sub-contractor before paying the invoice.

We are committed to ensuring prompt payment of commercial debt. We have implemented EU Directive 2011/7/EU in the form of the Late Payment of Commercial Debts (Scotland) Regulations 2013. These Regulations require public bodies to pay commercial debt within 30 days. The Scottish Government Procurement Policy Handbook also separately confirms that public bodies are bound by Late Payment legislation.

Also there could be other ways to make sure that sub-contractors are paid on time. For example, we are trialling a new way of working in the construction sector called Project Bank Accounts. These are being used to allow all payments to go from the public body into a trust account. From that trust account, the payments go quickly and directly to the main contractor and participating sub-contractors. By speeding up cash-flow, Project Bank Accounts have the potential to transform the process and to ensure the on-going solvency of businesses. This particularly applies to smaller businesses more vulnerable to the effects of late payments. The pilot phase is on‑going and so it is too early yet to confirm whether Project Bank Accounts can be rolled out across the construction sector or more widely.

Another way for sub-contractors to receive payment quicker is for all contracts to contain a 'prompt payment' clause. We introduced this as a standard clause in Scottish Government contracts in 2009. The essential features of the clause are that valid invoices must be paid within 30 days of receipt at all stages of the supply chain relating to the contract. We encourage other public bodies to take a similar approach.

Also, the Act will require public bodies to set out in their procurement strategies how they intend to ensure, as far as is reasonably practicable, that all contractors and sub-contractors are paid within 30 days of submitting a valid invoice.

Overall, we think that ensuring similar payment terms for sub-contractors, as for main contractors, is a good thing. As described, there are some measures underway or already in place to try to address this. Also we can see that direct payment, as another means of achieving this objective, is very complicated and could mean public bodies assuming some responsibilities that should arguably remain with the main contractor.

This means that it is unlikely that it would be desirable to allow direct payments to sub-contractors in every case, but it might be desirable in some circumstances. As a result of this, we plan to allow public bodies to pay sub-contractors directly, but only in circumstances where it has been written into the contract and where the sub‑contractor asks for this facility.

Question

Q15 We believe that similar payment terms for sub-contractors, as for main contractors, is a good thing and there are some measures underway, or in place, to address this. We also believe that direct payments to sub-contractors could be complicated and could mean public bodies assuming some responsibilities that should arguably remain with the main contractor. In light of this, we believe that public bodies should be able to make direct payments to sub-contractors only where the contract allows this to happen and parties agree. Do you agree or disagree?

4. Selection criteria and grounds for exclusion

4.1 Overview

When public bodies spend public money, they have to make sure they spend it responsibly. Part of this is making sure that contracts are only awarded to reputable people or businesses that are capable of delivering the contract, and which behave appropriately when performing the contract.

The Directives set out the things which public bodies can choose to ask businesses to have or to provide, in order to demonstrate that they are reputable and are able to deliver the contract. These are known as selection criteria.

The Directives say that the selection criteria which a public body apply must be about a business's suitability to carry out the work, its economic and financial standing, or its technical and professional ability, rather than how the business proposes to perform the contract in question.

The Directives also describe the things which could lead to a business not being allowed to bid for a contract. These are known as grounds for exclusion.

The Directives say that some grounds for exclusion are mandatory – in other words, a public body must exclude a business when it knows that one of these grounds applies. Other grounds for exclusion are discretionary – in other words, a public body could decide whether or not to exclude a business in one of those situations.

Many of the choices we have to make in this section are about whether to make any of the discretionary grounds for exclusion mandatory.

4.2 Selection criteria

Article 58 of the Public Procurement Directive, Article 80 of the Utilities Directive and Article 38 of the Concessions Directive describe what public bodies can use as selection criteria. We have no choice about how we make this the law in Scotland for EU regulated procurements, but the Act gives us the opportunity to choose whether to apply similar rules for lower value regulated procurements.

Public bodies sometimes say that a business must have a minimum level of yearly turnover to be able to bid for a contract. We think that measuring a business's turnover is, in itself, a poor way of judging whether it can deliver a contract. When a public body asks for a high level of turnover, this can be disproportionate to the contract, and make it harder for smaller, or newer, businesses to bid.

The Public Procurement and Utilities Directives say that if a public body chooses to use turnover as a selection criterion, the minimum level of turnover which it asks for should be no more than two times the value of the contract, apart from in some special cases where there is more risk associated with the delivery of the contract.

We agree that this is a sensible approach, and because of this we plan to make new rules which mean that this limit will also apply to lower value regulated contracts. This is allowed for under Section 28 of the Act.

The Public Procurement and Utilities Directives also say that if a business has a conflict of interest which might mean that it is less able to deliver the contract, then public bodies can treat it as if it does not have the professional ability needed for that contract. This might be the case when a business has another client with competing interests, for example.

We think this is sensible, and so we also plan to put this into the rules for lower value regulated contracts, allowed for under Section 28 of the Act.

Question

Q16 Do you think that the same rules on selection criteria should apply to lower value regulated contracts as to higher value EU regulated public contracts? In particular, should the same rules apply on:

- The use of turnover as a selection criterion?

- The right of a public body to assume that a business does not have the professional ability needed for the performance of a specific contract, if that business has a conflict of interest which might mean that it is less able to deliver the contract?

Please explain your answer.

4.3 Groups of businesses

Article 19 of the Public Procurement Directive, Article 37 of the Utilities Directive and Article 26 of the Concessions Directive say that different businesses can come together to form a group in order to bid for and work on a contract.

A group of businesses will not have to take any specific legal form in order to bid for a contract. Public bodies are able to specify how groups of businesses will meet the tests of economic and financial standing and technical and professional ability which are necessary in order to bid for a contract. In addition, the Directives state that we may, in legislation, establish national standards of tests that groups of businesses will need to meet.

We do not think that setting national standards would make things any simpler. In fact, we think it could make it more complicated if it was to remove any flexibility that public bodies need to consider what tests of economic and financial standing and technical and professional ability will be necessary for a particular contract.

Question

Q17 Do you agree or disagree that public bodies should retain the flexibility to decide for themselves the basis upon which groups of businesses will be able to meet tests of economic and financial standing and technical and professional ability that will be necessary to perform a particular contract or should there be national standards? Please explain your answer.

4.4 Criminal convictions

Article 57 of the Public Procurement Directive, Article 80 of the Utilities Directive and Article 38 of the Concessions Directive say that a public body must exclude a business from bidding if it, or someone who holds a senior position in it, has been convicted of any of the following:

- Participating in a criminal organisation.

- Corruption.

- Fraud.

- Terrorist offences.

- Money laundering or terrorist financing.

- Child labour and other forms of human trafficking.

The Act says, at Section 27, that Scottish Ministers may make new rules that a public body must also exclude a business from bidding for lower value regulated contracts if it, or someone who holds a senior position in it, has been convicted of certain offences listed in the rules for lower value regulated procurement.

The Act does not specify what these rules should be; we can choose which offences are on that list. We could list the same offences as those in the Directives, or we could choose to list more, fewer or different offences.

We think it is important that we make things as simple and as consistent as possible, and so we plan to list the same offences as are listed in the Directives. We also plan to require public bodies to exclude a business from bidding for lower value regulated contracts if it, or someone who holds a senior position in it, has been convicted of any of the offences on the list.

Questions

Q18 Should the list of criminal convictions which may result in exclusion from bidding be the same for all regulated contracts, regardless of value? Please explain your answer.

Q19 Should public bodies be required to exclude a business from bidding for lower value regulated contracts if it, or someone who holds a senior position in it, has been convicted of any of the offences on the list?

4.5 Tax evasion

Article 57 of the Public Procurement Directive, Article 80 of the Utilities Directive and Article 38 of the Concessions Directive say that public bodies must exclude a business if a court, tribunal or administrative decision has found that it has breached its obligations to do with paying tax or social security.

The Directives also say that we can choose to make a public body exclude a business if it can demonstrate, by any 'appropriate means', short of a court, tribunal or administrative decision, that it has breached these obligations. If we decide not to do this, the public body would still be able to decide whether or not to exclude a business in this situation.

The Directives do not define what 'appropriate means' are. Each public body will therefore need to decide on a case-by-case basis whether any evidence it has is enough to be described as 'appropriate means'. If we choose to say that public bodies must exclude a business on the basis of an 'appropriate means' test, without a definitive description of what these 'appropriate means' are, this may lead to confusion among both public bodies and businesses about the circumstances which would lead to an automatic exclusion.

We do not believe that tax evaders should win public contracts. Because of this uncertainty, however, and the risk of legal challenge it would create for public bodies, we do not think that that it would be sensible to make this a mandatory ground for exclusion. This means that public bodies would only have to exclude a firm which has breached its obligations to do with paying tax or social security if this has been established by a court, tribunal or administrative decision.

We can also choose to allow public bodies to decide not to exclude a business which has breached its tax obligations, and where this has been established by a court, tribunal or administrative decision, if it would be disproportionate to do so. We accept that there will be times when it would not be proportionate to exclude businesses for tax offences. This may particularly be the case when the amount unpaid is very small in comparison to the value of the contract. A public body which acted disproportionately could be at risk of legal challenge; because of this, we believe we have to allow public bodies to have the ability to make this choice.

Section 28 of the Act allows us to make regulations which say that a public body may also exclude a business from bidding for lower value regulated contracts if it has breached its obligations in relation to the payment of tax. For reasons of consistency, we plan to allow this in the new rules.

Questions

Q20 Should public bodies retain the discretion to decide whether or not to exclude a business from bidding for a contract where the body can demonstrate by appropriate means, short of a court, tribunal or administrative decision, that the business has breached its obligations to do with paying tax or social security contributions?

Q21 Should public bodies be given the discretion not to exclude a business which has breached its obligations to do with paying tax or social security contributions, and where this has been established by a court, tribunal or administrative decision, if it would be disproportionate to do so?

Q22 Should public bodies also have the discretion to exclude a business from bidding for lower value regulated contracts if it has breached its obligations in relation to the payment of tax?

4.6 Bankrupt or insolvent businesses

Article 57 of the Public Procurement Directive, Article 80 of the Utilities Directive and Article 38 of the Concessions Directive say that if a business is bankrupt or is in insolvency proceedings, a public body can choose to exclude it. Those who are responsible for spending public money have a duty to protect that money. Businesses which are bankrupt or in insolvency proceedings are likely to be at high risk of failing to deliver a contract. It is therefore likely that a public purchaser would want to exclude such businesses from competition.

We could choose to go further and say that public bodies must exclude businesses which are bankrupt or in insolvency proceedings. If we did this, we could also choose to take extra steps. We could also:

- Allow public bodies to decide not to exclude businesses in these circumstances, if those businesses can show that they will be able to deliver the contract, despite being bankrupt or in insolvency proceedings.

- Remove public bodies' discretion and say that they must not exclude businesses in these circumstances, if those businesses can show that they will be able to deliver the contract, despite being bankrupt or in insolvency proceedings.

We believe that the best approach is to give public bodies as much discretion in this area as the Directives allow, so that whatever decision is taken, it is reached on the basis of the individual circumstances applying at that time.

While we believe that public contracts should generally not be awarded to businesses in these situations, making this a mandatory ground for exclusion might, in some circumstances, hinder a public body's ability to assist a company that is in the process of being rescued.

Because of this, we do not plan to say either that public bodies must exclude businesses in these circumstances, or that public bodies must not exclude businesses in these circumstances.

We also believe that, because it is important to make things as simple and as consistent as possible, the same rules should apply to the award of public contracts, concession contracts, utilities contracts – where they are awarded by public bodies – and to lower value regulated contracts.

Questions

Q23 Should public bodies retain the discretion to decide whether or not to exclude a business which is bankrupt, or is in insolvency proceedings from bidding? Please explain your answer – in particular, if you think that public bodies should have discretion in these situations, do you think that discretion should apply in every circumstance?

Q24 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

4.7 Exceptional circumstances

Article 57 of the Public Procurement Directive, Article 80 of the Utilities Directive and Article 38 of the Concessions Directive say that we can choose to allow public bodies to decide not to exclude businesses which would normally be excluded because they breach one of the mandatory grounds for exclusion relating to criminal convictions and tax obligations. This would only be in exceptional circumstances, when it would be in the overriding public interest.

We believe that the exclusion grounds for criminal conviction and breaches of tax and social security obligations are important. However, we also believe that in exceptional circumstances, for example relating to public health or the protection of the environment, public bodies should be given the option of inviting a bid from a business that would otherwise be excluded from competition on a mandatory exclusion ground. Because of this, we plan to allow public bodies to decide not to exclude businesses in exceptional circumstances, when this would be in the overriding public interest.

Questions

Q25 Should a public body be allowed not to exclude a business with disqualifying criminal convictions, or which has breached its obligations to pay tax or social security, in exceptional circumstances? Please explain your answer.

Q26 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

4.8 Other grounds for exclusion

Article 57 of the Public Procurement Directive, Article 80 of the Utilities Directive and Article 38 of the Concessions Directive list some other reasons a public body can choose to exclude a business from bidding for contracts. These are mainly to do with:

- Breaking environmental, social and labour law.

- Grave professional misconduct.

- Distortion of competition (through various deliberate means and through the prior involvement of a business in the procurement process).

- Conflicts of interest.

- Poor performance in previous contracts.

Environmental, social and labour law means national and European law, as well as some international agreements. These international agreements are listed in Annex A.

Article 38 of the Concessions Directive also includes a discretionary exclusion ground for defence and security concessions, when contracting with a particular business might be a security risk.

If we want to, we can decide to take this choice away from public bodies, and require that they exclude businesses in any of these situations.

We have given serious thought to doing this when businesses have, for example, behaved dishonestly with the aim of affecting competition, have done things like blacklisting workers, or when there is a conflict of interest.

We believe, however, that it is important to strike a balance here. This should provide public bodies with the ability to exclude businesses from competition in these situations, while still allowing them to assess individual circumstances and reach appropriate and proportionate decisions in order to get the best value for money and minimise the risk of legal challenge. Because of this, we do not plan to make public bodies exclude businesses in these circumstances.

Similarly, when a business relies on another organisation to help it meet the selection criteria, Article 63 of the Public Procurement Directive and Article 79 of the Utilities Directive say that public bodies must also check whether that other organisation is in any of these situations. If such an organisation is in one of these situations, the public body can require that the business replaces it. We can also decide to take the discretion away from public bodies in these circumstances, and require that other organisations must be replaced where there is evidence that they are in breach of any non-mandatory ground for exclusion. For the same reasons, we think it would be better to leave this to the discretion of the public body.

Questions

Q27 Should the law allow public bodies the discretion to decide whether or not to exclude bidders in situations where there is evidence of a breach of environmental, social and labour law obligations, grave professional misconduct, distortion of competition, a conflict of interest, a significant failure to perform in an earlier contract, or a security risk (in the case of defence and security concessions)? Please explain your answer.

Q28 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

4.9 The length of time a business can be excluded

At the moment, grounds for exclusion last indefinitely. For example, relevant criminal convictions are never considered to be 'spent' as far as procurement is concerned.

Article 57 of the Public Procurement Directive, Article 80 of the Utilities Directive and Article 38 of the Concessions Directive say that if a business has done something which could lead to it being excluded from bidding for contracts, it can take steps to put this right. These steps can include paying compensation, co-operating with authorities and apologising, as well as taking steps to make sure it does not happen again. This is known as "self-cleansing". This is new and viewed by some as being more proportionate than the situation at the moment, as it allows for a business to demonstrate that it has taken steps to make amends.

It is up to the public body awarding a contract to decide if the "self-cleansing" steps which the business has taken are enough, bearing in mind the circumstances of the case, and of the contract in question, to allow a business to bid.

The Directives also say that we can decide the length of time a business can be excluded from bidding for contracts if it does not take sufficient 'self-cleansing' measures. This can be up to a maximum of five years from the date of conviction, in the case of criminal offences, and three years from the date of the relevant event in most other cases. Businesses which have breached their obligations relating to tax or social security will remain excluded from bidding for contracts until the tax has been repaid or the business has entered into a binding agreement for repayment.

We believe that the grounds for exclusion are serious, and those who do not take "self-cleansing" measures should not win public contracts. Because of this, we plan to make the maximum length of exclusion the longest allowed by the Directives.

Questions

Q29 Do you agree or disagree with our proposed maximum periods of exclusion? Please explain your answer.

Q30 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

4.10 Excluding sub-contractors

Currently, public bodies are only required to check that there are no grounds to exclude potential main contractors.

Article 71 of the Public Procurement Directive, Article 88 of the Utilities Directive and Article 42 of the Concessions Directive can enable public bodies, where they choose, to also verify whether grounds exist to exclude sub-contractors for reasons of a breach of environmental, social and labour law obligations.

We can also go further and require public bodies to check this information.

Whether the public body checks this voluntarily or because it has to, if it turns out that a business is in one of the situations which would mean that it must be excluded, the public body would have to demand that the main contractor replaces the sub-contractor with a different one.

There is a further option here where a public body may decide, or may be required to, replace a sub‑contractor where discretionary exclusion grounds exist.

These steps are about trying to make sure that public sector money only goes to businesses that have not acted inappropriately. While this is clearly a good thing, we also have to consider the amount of work that this could mean for public bodies. Also, we believe that main contractors should generally be responsible for managing their supply chain rather than public bodies, and for ensuring that any sub-contractors they choose to work with them on a public contact adhere to the same standards that the public body expects of the main contractor itself.

Because of this, we do not plan to make public bodies check this information in every case.

Question

Q31 Should public bodies be required to check that sub-contractors do not fail any of the exclusion criteria?

4.11 Statutory guidance – Selection of tenderers and award of contracts

The Regulations will describe the basis on which a supplier can be excluded from a procurement exercise and the criteria which can be applied when awarding a public contract.

In addition, Section 29 of the Act allows Scottish Ministers to publish statutory guidance in relation to the selection of tenderers and the award of contracts, which would apply to all regulated procurements.

It is through this statutory guidance that we plan to address issues, such as, for example, how a business treats its employees, and how public bodies should take this into account as part of the procurement process.

The status of this guidance means a public body will have to show that it has had regard to the guidance.

The statutory guidance cannot add to the list of grounds on which a business can be excluded from bidding for public contracts, as these are already set out in European law, but it can identify the principles and values which should be applied when considering a business's suitability to deliver a public contract.

Here, we describe some of the principles we think that guidance should cover.

When assessing a business's suitability, it is important to take a balanced approach to ensure that contractors delivering public contracts are capable, reliable and, where relevant, demonstrate that they meet high standards and values.

The standards and values might include:

- Fair employment – We are right to demand high standards of employment practices from our contractors, to enable and support the delivery of high quality public services, works and supplies. In particular, the public sector has a right to expect its contractors to treat their employees fairly and with respect.

- Environmental – contractors should care for the environment by minimising environmental impacts, for example by conserving energy and reducing waste.

- Proportionate approach to risk – when considering the suitability of a business, buyers should make a balanced decision, taking into account the presentational, operational and reputational risks associated with the effective delivery of the contract

- Engagement - buyers should engage openly and constructively with the market, trade unions and civic groups to understand what it is realistic to expect from contractors

- Self-cleansing - businesses should be allowed to demonstrate that they have put in place sufficient remedial action to offer guarantees about their suitability to deliver a contract in the future, where there have been doubts about its performance or other aspects of the business in the past. The guidance will provide a framework for assessing this remedial action.

The areas in which the guidance will apply are likely to be focussed around a potential contractor's approach as an ethical employer and its conduct in business.

Employee relations – The guidance will consider what ethics a contractor adopts as an employer. This is because we recognise that an employer's approach to their staff will have an impact on the quality of the service, works or goods supplied.

We propose that the statutory guidance will set out a clear presumption that public bodies should exclude businesses in the following situations, unless it would be clearly disproportionate for them to do so, or the business has taken appropriate remedial measures:

- When a business has engaged in blacklisting of workers.

- When a business has failed to meet its obligations under the Trade Union and Labour Relations (Consolidation) Act 1992.

- When a business has failed to meet its obligations in relation to labour laws or collective agreements.

Additionally, we propose that the guidance will say that businesses which have contracts with public bodies should have a positive approach to their workforce, where this can be demonstrated to have an impact on the quality of the product, service, or works delivered. This might include, for example:

- A positive recruitment and retention policy, for example towards Modern Apprenticeships and gender balance.

- A positive package of remuneration measures, including paying at least the Living Wage and making additional provisions for childcare.

- Training and support.

- Ensuring that zero hours contracts are not used inappropriately.

- Flexible working and flexi time.

- Career breaks.

A potential supplier's conduct in business – We are right to expect businesses which are awarded public contracts to operate within the law, and commit to corporate social responsibility policies appropriate to their business.

Whilst public bodies should retain the legal flexibility not to have to exclude businesses in situations set out in sections 4.5 and 4.8 of this document, we propose the statutory guidance will set a clear presumption that they should exclude businesses in the following situations, unless it would be clearly disproportionate, or the business has taken appropriate remedial measures:

- When a business has breached its obligations relating to the payment of tax or social security contributions, even where this has not been established by a court or administrative decision.

- When a business has exploited assets in illegal settlements.

- When a business has behaved dishonestly in an attempt to distort competition or to gain an unfair advantage.

Question

Q32 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

5. Contracts for care, support and other specific services

5.1 Overview

Buying social and other specific services (which includes other types of services to the person, for example, event services, job search services, probation and also prison services) is a complex area. It requires special consideration within a public body's overall approach to the procurement of goods, works and services. This is because these services can have a big impact on the quality of life and health of service users. Also, more and more of these services are now being personalised to better match individual needs.

For these reasons, these services are purchased differently to other service types. At the moment, contracts are split into two categories, known as Part A contracts and Part B contracts. Contracts for services to the person are Part B services. This means that fewer rules apply to the procurement of these contracts than if these were classed as Part A services. The current Part B approach gives public bodies flexibility to decide how to handle these contracts on a case by case basis. For example, public bodies have some discretion to decide how they apply the EU Treaty principles, including whether these require advertising and competition, and also the form that this should take.

5.2 "Light-touch" Regime

Articles 74-77 of the new Public Procurement Directive, Articles 91-94 of Utilities Directive, and Article 19 of Concessions, introduce some changes, and further simplifications, to the rules for the award of these contracts. The key change is the removal of Part B and the introduction of a new regime (known as the "light‑touch" regime) for the handling of care and support service contracts.

Under these new "light touch" arrangements, the rules relating to the award of these contracts will only apply to public contracts worth more than €750,000 (which is equivalent to around £590,000 at the moment). When a public body awards a contract worth more than this, it will have to:

- Publish a Contract Notice or Prior Information Notice to advertise the contract (unless it is a direct award without competition).

- Publish a contract award notice.

- Follow any national rules relating to the procurement process itself that we also put in place (see paragraphs immediately below).

We must also decide what other rules should apply when awarding these contracts. Articles 74-77 describe those procedural rules that must apply. These may require public bodies to take account of the following issues:

- The quality of the service.

- The continuity of the service.

- The affordability of the service

- The accessibility of the service.

- The availability and comprehensiveness of the service.

- The needs of different types of service users.

- The involvement of service users.

- Innovation.

As public bodies will now need to think about all of these things when awarding social and other specific services contracts, this approach should, in itself, eliminate the award of lowest price only for these contracts. However, we could go further and specifically prohibit the award of these contracts on the basis of lowest price only – in other words, by requiring that public bodies must award these contracts on the basis of the best price-quality ratio (this used to be called the most economically advantageous tender, or 'MEAT'; see section 2.10 above).

Otherwise, we expect that only limited regulation will apply to contracts for these services. This is similar to the approach taken by the UK Government. That is, the Scottish rules will require compliance with the basic Treaty principles (transparency, equal treatment, non-discrimination) together with the publication requirements for contract opportunity and award notices as described in this section. We envisage that public bodies will be able to decide to use the procedures, tools and techniques of their own choosing, whether similar to those in the main rules or not.

We believe that these combined requirements are sufficient, should not make things too complicated and should also ensure that public bodies – and contractors – focus on the quality of services. This approach should also preserve as much of the existing flexibility as possible. That is, public bodies will largely be free to judge how the procurement rules might best be applied on an individual case-by-case basis for social and other specific services contracts.

The changes apply to a wide range of services. The full list of these services, covered by the light-touch regime can be found in Annex XIV of the Procurement Directive. Some contracts that were formerly "Part B" but are not listed in the Annex, will be subject to the full EU procurement rules.

Also, the Act applies to all public contracts for services worth more than £50,000. Reflecting the light-touch regime in the Directives, the Act contains a provision which will enable public bodies discretion to award a contract for social and other specific services without competition, for example. It also, at Section 13, states that Scottish Ministers must publish guidance on carrying out a procurement for health or social care contracts. We propose to use that guidance to set out the processes that should be followed leading to the award of a contract for social or health care services in more detail.

Overall, the changes introduced by the new European Directives should mean that fewer care and support service contracts in Scotland will be subject to the full EU rules. We believe this is a positive development in a very complex area. It means that only limited rules will continue to apply to care and support services contracts.

Some of these rules are not included in, or are not relevant to the Utilities or Concessions Directives. Those that are included in those Directives are broadly the same.

Questions

Q33 We expect to apply only limited rules to contracts for social and other specific services to the person. These will require compliance with the basic Treaty Principles and publication of contract opportunity and award notices as described in this section. Do you agree or disagree that these rules will be sufficient for an effective light-touch regime? Please explain your answer.

Q34 We believe that contracts should not be awarded on the basis of price or cost alone? Do you agree or disagree with this position? Please explain why.

5.3 Statutory guidance – procurements for health or social care services

Section 13 of the Act requires us to publish guidance for public bodies on awarding contracts for these services. We plan to write this guidance during 2015 and think that it should be based on the following principles:

- That only limited procedural rules should apply.

- The key messages and principles in the 2010 Procurement of Care and Support Services Guidance[7] continue to be relevant.

- Public bodies should make sure that the way they buy care and support services should focus on outcomes, strategic commissioning, personalisation of services, and the involvement of end users. As a result of the Directives, public bodies should also now specifically consider the following issues:

- Quality.

- Continuity.

- Affordability.

- Accessibility.

- Availability and comprehensiveness of the services.

- The specific needs of different categories of service users.

- The involvement and empowerment of service users.

- Innovation.

Public bodies should also continue to take account of the EU Treaty principles of transparency, equal treatment and non-discrimination, proportionality and mutual recognition when awarding all care and support contracts.

Decisions about the procedures which public bodies use, including decisions about advertising, should be up to them, and public bodies should be free to judge how these principles might best be applied on a case-by-case basis.

Question

Q35 What are your views about what should be included in this Statutory Guidance? Please explain your answer

6. Procedural rules

6.1 Overview

People sometimes complain that the public procurement rules make the process too slow and complicated. This is frustrating for everyone, whether they are public bodies trying to buy things or businesses trying to sell things.

Many of the proposals in this section are meant to try to make public procurement faster and easier for everyone involved.

As well as the options which we have to think about, there are a number of changes over which we have no choice.

It is important that measures to speed up the process are balanced by a focus on transparency and fairness.

6.2 Using a prior information notice as a call for competition

Normally, a public body has to publish an advert (sometimes also called a contract notice), before it invites businesses to bid for that contract. This is known as a call for competition.

The Directives say that there are different ways this can be done. A Prior Information Notice (PIN) could be used in some situations. A PIN is something which public bodies can use to tell people what they are planning to buy over the next year, but without actually starting the competition to buy at the time of publishing the PIN.

Article 26 of the Public Procurement Directive says that we can choose to allow all or some non-central authorities (that is, all public bodies apart from central government and the NHS) to use a PIN as the call for competition. In practice this would mean that once a PIN has been published there would be no further requirement on the public body to publish a contract notice at the point in time when the body wished to start the procurement process. They would be able to do this in either a restricted procedure or in a competitive procedure with negotiation. For this to be allowed, the PIN would have to describe the goods, services or works that the public body plans to buy, and it must be published between 35 days and one year before the body invites bids or expressions of interest.

We think that public bodies should be allowed to use PINs in that way. This is because it can reduce the amount of time it takes to buy things, which is better for both the buyer and the seller.

We plan to allow all public bodies in Scotland, apart from central government and the NHS, to use PINs in this way.

Section 23 of the Act also allows us to make new rules about publication of contract notices for lower value regulated contracts. Because we think this is a good option for public bodies to have, we also plan to make rules which say that this is allowed for lower value contracts as well.

Questions

Q36 Should provision be made for the use of a Prior Information Notice by non-central authorities (where they choose) as the call for competition in restricted procedures and competitive procedure with negotiation? Please explain your answer.

Q37 Do you agree or disagree that this provision should also apply to lower value regulated contracts, that is, those that are below European regulated thresholds and are regulated by the Act? Please explain your answer.

6.3 Negotiated procedure without prior publication

Article 32 of the Public Procurement Directives permits us to choose whether or not to allow public bodies to negotiate the award of a contract without any advertisement, or call for competition. This would only be allowed in specific cases, including when:

- The goods, works or supplies can only be supplied by one business for technical reasons.

- The public body is buying a work of art or artistic performance.

- There have been no suitable bids for a contract in a previous competition.

- Exceptional circumstances, such as a national emergency, mean that the contract has to be awarded quicker than adhering to the timescales set out in the Directives would allow.

This is not new; public bodies in Scotland can do this at the moment. But they must take care doing so, because awarding a contract without advertising in other circumstances is not allowed, and doing this when there are no grounds for not running a competition denies other businesses the opportunity to win the contract.

We think that public bodies need to be able to award contracts without advertising in these situations. Because of this, we plan to continue to allow public bodies to do so. This would apply to public contracts and utilities contracts.

Section 14 of the Act allows us to make rules on this for lower value contracts. Because we think this is a good option for public bodies to have, we also plan to make rules which say that this is allowed for lower value regulated contracts as well.

Questions

Q38 Do you agree or disagree that public bodies should be permitted to award a contract without competition in the circumstances permitted by the Directives? Please explain why.

Q39 Do you agree or disagree that public bodies should also be permitted to award lower value regulated contracts in similar situations? Please explain why.

6.4 Reduced timescales in a restricted procedure

Article 46 of the Utilities Directive says that in a restricted procedure, the utility body and all the businesses invited to submit a bid can agree on a deadline for submitting bids, if they want to. If there is no agreement, then the deadline must be at least ten days from the day the invitation to tender was sent.

The Public Procurement Directive says that the deadline for submitting bids in a restricted procedure must be at least 30 days from the day the invitation to tender was sent.

It also says, in Article 28, that we can choose to allow some or all public bodies, apart from central government and the NHS, to agree a shorter deadline with the businesses invited to bid. If we allow this, and the public body and bidding businesses do not manage to agree on a deadline, it must be at least ten days from the day the invitation to tender was sent.

We think that if public bodies and bidding businesses can agree shorter deadlines, this is a good thing. It can make the process simpler, easier and faster.

Public bodies must still consider how complicated the contract is before they set any deadlines.

Because of this, we plan to allow all public bodies, apart from central government and the NHS, to do this.

Question

Q40 Do you agree or disagree that all non-central authorities using the restricted procedure should be able to set the time limit for the receipt of tenders by agreement with candidates? Please explain why.

6.5 Examining tenders before verifying qualification criteria

In competitions under the open procedures, public bodies may decide to evaluate all the bids before checking if there are any grounds for exclusion and confirming the companies meet the selection criteria (described in section 4 of this document). Article 56 of the Public Procurement Directive and Article 76 of the Utilities Directive say that we can stop altogether or limit the circumstances in which a public body can look at bids before it checks that a business meets the qualification and exclusion criteria. This option applies to open procedures for the award of public contracts and utilities contracts.

The reason that a public body might do this is because there may be circumstances where bids are not overly complex or complicated and can be evaluated reasonably quickly. It means that the public body only has to check the qualification criteria for the business which submitted the highest scoring bid. This is likely to be particularly helpful when the public body has received a lot of tenders.

Because of this, we do not plan to stop or limit the circumstances in which public bodies can do this.

Question

Q41 When using the open procedure, should public bodies retain the flexibility to determine whether to evaluate bids before evaluating qualification and exclusion criteria? Please explain your answer.

6.6 Incomplete or wrong information

Article 56 of the Public Procurement Directive and Article 76 of the Utilities Directive allow public bodies to ask businesses to add to or clarify their tenders where they seem to have been submitted with wrong or missing information or documents.

We can choose not to allow public bodies to do this. But we think that public bodies should have the flexibility to ask businesses to clarify or add to their tender, so long as they do so in a way which does not discriminate, which is transparent, and which treats everybody equally. We also believe that this is fair on all businesses, who may otherwise find their bids automatically excluded due to an administrative error in submitting their bids. Because of this, we do not plan to stop public bodies from doing this.

Question

Q42 Should public bodies be allowed to ask for supplementary or missing information and to ask a company to provide clarification of their bid?

6.7 Modifying contracts

Article 72 of the Public Procurement Directive describes when a public body can change or modify a contract without having to start a new procurement process. That is, a public body can modify a contract or a framework agreement in one of these situations:

- Where the original contract allows for modifications and these would not change the overall nature of the contract or framework agreement.

- Where additional works, goods or services are needed, but it would not be practical to change the supplier for economic or technical reasons, or because it would cause significant inconvenience or substantial duplication of costs to do so. Any overall increase in price must not be more than 50 per cent of the value of the original contract.

- Where the public body needs to modify a public contract or a concession contract because of circumstances it could not have predicted, so long as the modifications would not change the overall nature of the contract or framework agreement and any overall increase in price is not more than 50 per cent of the value of the original contract.

- Where, in some circumstances, the supplier has changed.

- Where the changes are not substantial.

We do not have any choice about how we make this the law in Scotland. But we can choose to also apply it to lower value contracts. We think the new rules on modifying contracts are quite restrictive and that applying them to lower value contracts could create unnecessary risk and burdens for public bodies. We do not, therefore, intend to apply them to contracts regulated by the Act.

Question

Q43 Do you agree or disagree that the rules in the Directives about modifying contracts should not apply to contracts under the Act? Please explain why.

7. Rules about communication

7.1 Overview

The Directives say that all communication about procurement should be electronic and set a deadline to achieve this.

We think the focus on electronic communication is good, because it helps to make the process of buying things easier, faster and more transparent.

In Scotland, we also have a focus on electronic communication. For example, in 2008, we created Public Contracts Scotland (PCS) – a website for advertising and bidding for contracts. The Act says that public bodies have to publish contract notices and contract award notices on PCS.

Although we are enthusiastic about electronic communication, we also see that public bodies and companies need time to prepare before they have to do everything electronically.

7.2 Electronic communication

The Directives give us four decisions to make about how we apply rules about electronic communication in Scotland. These all apply to public contracts and utilities contracts. The first three options can be found in Article 22 of the Public Procurement Directive and Article 40 of the Utilities Directive. The fourth option can be found in Article 90 of the Public Procurement Directive and Article 106 of the Utilities Directive.

The first decision is about the use of technologies like tools for Building Information electronic Modelling, known as BIM. BIM is a process used in construction to design and manage buildings and other facilities. If we wanted to, we could say that BIM, or other electronic tools, must be used in all public works contracts and design contests.

A report on the review of Scottish public sector procurement in construction[8] said that BIM could help to make projects more efficient. It recommended that BIM should be introduced in central government contracts, and encouraged in other public contracts. At the moment, we are working with the Scottish Futures Trust and other parts of the public sector, as well as the construction industry, to make that happen. Because this work has already started, but still has some way to go, we do not plan to say that BIM must be used in all contracts.

The second and third decisions we have to make are about security levels. We can choose either to set out the precise levels of security that are needed for electronic communication for every contract, or to set general rules, within which public bodies can act appropriately. We can also choose either to say precisely when advanced electronic signatures should be used, or to set general rules.

Because of the number of very different types of contracts which are awarded in Scotland, we do not think that one set of rules on electronic security would work. We think that public bodies should be able to choose to act appropriately on a case-by-case basis. We do not plan to set specific rules for either of these situations. We plan instead to set rules, which will make up a general framework, which public bodies must stay within.

The fourth decision which we have to make is about the deadline for making sure all communication about procurement is electronic. We can choose to say that all communication must be electronic on the day that our new rules come into force. This will be around the end of 2015. Or, we can choose to delay this deadline until 18 October 2018 for all public bodies apart from central purchasing bodies. We can choose to delay this deadline until 18 April 2017 for central purchasing bodies.

We have made good progress to increase electronic communication in Scotland and we are enthusiastic about this. But it is important that all of our public bodies' systems are able to cope with this change. This needs more time, and so we plan to delay these deadlines for the longest time allowed.

This delay would not apply to all electronic communication, however. We cannot delay the need to communicate electronically when a public body is:

- Organising a dynamic purchasing system.

- Carrying out an electronic auction.

- Dealing with electronic catalogues.

- Sending notices.

- Making procurement documents electronically available.

Questions

Q44 We believe we should continue to progress the work plan from the Construction Review report, rather than requiring the use of BIM or similar in works contracts and design contests. Do you agree or disagree? Please explain your answer.

Q45 Do you agree or disagree that we should establish an overall confidentiality and security framework which individual public bodies would use to inform their own approach to the security handling of electronic communication? Please explain your answer.

Q46 Do you agree or disagree that we should maximise the time available to implement fully electronic procurement processes and defer the requirement for full electronic communication for the maximum permissible time?

7.3 Electronic communication in concession contracts

When it comes to concession contracts, the Concessions Directive says at Articles 33 and 34 that public bodies must use electronic communication for sending:

- Concession notices (advertising the contract).

- Concession award notices.

- Notices about changes to a concession contract.

We are allowed to make rules to say that all other communication must also be electronic if we want to. This is allowed by Article 29 of the Concessions Directive.

If we do not do this, the Directive says that all other communication must be by one of these ways:

- Electronic.

- Post or fax.

- Spoken, including by telephone (so long as this is not about an essential part of the process, and is recorded in writing afterwards).

- Hand delivery (when a receipt is given).

Concession contracts, by their nature, will mostly be complex, high economic value contracts which are more likely to be handled through an electronic procurement system. Also, we think that electronic communication is important to make procurement simpler, faster and more transparent. For the same reasons, we also think that it is important that the rules for different types of contracts are the same wherever possible. Because of this, we do plan to make rules that say that all communication about concession contracts should be electronic.

Question

Q47 Do you agree or disagree that all communications about concession contracts in a procurement exercise should be by electronic means?

7.4 Electronic catalogues

An electronic catalogue is an electronic list of things which a business sells and the prices which it charges.

Article 36 of the Public Procurement Directive, and Article 54 of the Utilities Directive say that public bodies are allowed to require businesses to submit their bids as electronic catalogues. To be able to do this, the public body must have said this in the contract notice, and must tell businesses about the format they want the catalogue to take.

We can, if we want, say that electronic catalogues must be used for some types of procurement.

We do not plan to make this a rule. We think that public bodies should be able to choose when it is appropriate to use electronic catalogues.

Question

Q48 Do you think that public bodies should retain the flexibility to decide when the use of electronic catalogues is appropriate? Please explain your answer.

7.5 European single procurement document

Article 59 of the Public Procurement Directive says that there should be something called a European Single Procurement Document (ESPD). The European Commission will decide what this should look like.

The ESPD will allow businesses to declare that they meet the selection criteria set out for a contract, and that they are not in any of the situations which would mean that they should be excluded from bidding. These are discussed in section 4 of this document.

The point of the ESPD is to make it easier and faster to bid for public contracts. Businesses will be able to submit an ESPD as evidence that they should be able to bid to any public body in the European Union.

In Scotland, we have already made bidding easier by standardising the questions which businesses might be asked at the selection stage of a procurement process. This is known as the standard Pre-Qualification Questionnaire, which will be reviewed and updated in light of the new Directives and to ensure that it is consistent with the ESPD.

We can choose to delay the need to provide the European Single Procurement Document, in electronic format, only until 18 April 2018.

The Directives say that when a public body already holds documents from a business the business should not have to send these documents to the public body again. We can also choose to delay this provision coming into force until 18 October 2018.

We think it would be sensible to delay both of these things to give public bodies enough time to prepare, and to change their systems and the way they do things, and so we plan to do this.

Questions

Q49 Do you agree or disagree that we should defer the requirement to provide the European Single Procurement Document in electronic form only until 18 April 2018? Please explain your answer.

Q50 Do you agree or disagree that we should defer until 18 October 2018 the provision that says businesses should not have to submit supporting documents where the public body awarding the contract holds these? Please explain your answer.

7.6 E-Certis

E-Certis will provide online information about the types of certificates and documents which businesses might be asked to provide in each Member State of the European Union to demonstrate that they meet the criteria needed to bid for a contract.

Article 61 of the Public Procurement Directive says that public bodies should mainly ask for certificates or documents which are included in e-Certis. This is meant to make it easier for businesses, especially when they are bidding for work in another country.

We can choose to delay the deadline for public bodies to have to use e‑Certis in this way until 18 October 2018. We think that public bodies will need time to prepare for this change, and so we plan to delay it until then.

Question

Q51 Do you agree or disagree that we should defer the obligation on public bodies to use e-Certis until October 2018?

7.7 Award notices when calling-off a framework

Article 50 of the Public Procurement Directive says that when a public body 'calls-off' from a framework agreement, it does not normally need to publish a contract award notice.

We can choose to make public bodies group award notices for all call-off contracts and send them to the Official Journal of the European Union every three months.

We believe that increasing transparency is an important part of improving procurement. But we need to balance this against increasing the risks or burdens on purchasers.

The Act already says that public bodies have to publish award notices for call-off contracts which are worth at least £50,000 for goods and services and at least £2 million for works on the Public Contracts Scotland website. Because of this, we do not think that we need to ask public bodies to publish any additional notices to do with public contracts.

But the Act does not apply to utilities contracts. We think that call-off contracts which are worth more than the relevant threshold set out in Article 15 of the Utilities Directive should also be published. Because of this, we plan to apply this new requirement to utilities contracts.

Question

Q52 Do you agree or disagree that we adopt this option for utilities contracts? Please explain your answer.

7.8 Dynamic purchasing systems

The new Public Procurement Directive simplifies the rules around how a dynamic purchasing system (DPS) will work, with the aim of encouraging the circumstances where it could be used, for example by removing the requirement to advertise the award of contracts made under the DPS.

A DPS can be used for common purchases which are easily available on the market. It is a fully electronic system which sets out the requirements of the goods, works or services at the outset, and new suppliers can be added to the system at any point, so long as they meet the selection criterion. There is no limit to the duration of a DPS.

Section 7 of the Act allows Scottish Ministers to introduce regulations about DPS for procurements regulated under the Act.

We propose to extend those provisions in relation to DPSs, which are contained in Article 34 of the Public Procurement Directive, to lower valued regulated procurements, in order to provide purchasers with an additional tool to support their procurement activity.

Questions

Q53 Do you think that dynamic purchasing systems should be available as a tool for purchasers in respect of regulated procurements?

Q54 Do you think that the same rules which apply in Article 34 of the Public Procurement Directive should be extended to lower value regulated procurements under the Act?

8. Central purchasing bodies

8.1 Overview

There are some organisations which buy things on behalf of more than one public body. These are called central purchasing bodies.

In Scotland, there are four main central purchasing bodies:

- Scotland Excel, which buys things for councils.

- NHS National Procurement, which buys things for the NHS.

- Advanced Procurement for Universities and Colleges, which buys things for universities and colleges.

- The Scottish Government, which buys things for central government agencies and for the whole of the public sector.

Together, these are known as Centres of Expertise. Setting up Centres of Expertise was one of the key recommendations of the report in 2006 by John McClelland[9] which started the procurement reform programme in Scotland.

8.2 Central purchasing bodies in Scotland

Article 37 of the Public Procurement Directive gives us three decisions to make about central purchasing bodies in Scotland. These apply to public contracts and to utilities contracts (Article 55), but not to concession contracts.

The first decision is whether or not to allow public bodies to ask central purchasing bodies to buy goods and services for them. This would also apply to works, if the contract is a utilities contract.

The second decision is whether or not to allow public bodies to buy goods, services and works using dynamic purchasing systems or framework agreements put in place by central purchasing bodies.

At the moment, public bodies in Scotland can do both of these things. Central purchasing bodies have been an important part of our efforts to make public procurement better in recent years. They often get better value for money and help make procurement more professional.

Because of this, we plan to continue to allow public bodies in Scotland to use central purchasing bodies in both of these ways.

The third decision is whether or not to force public bodies to use central purchasing bodies in some situations. Although we think that what central purchasing bodies do is good, we also think that it is important that public bodies are able to choose whether or not to use them on a case-by-case basis. This will allow them to consider all the circumstances of the contract and pick the best option and therefore we think that forcing public bodies to use central purchasing bodies might not allow sufficient flexibility to meet their own local objectives or to deliver value for money in all instances. We do not plan to do this.

Questions

Q55 Do you agree or disagree that we should continue to allow public bodies in Scotland to use central purchasing bodies as described in this section?

Q56 Do you agree or disagree that we should not require the use of central purchasing bodies for particular types of procurement, thereby allowing public bodies to exercise discretion as to when, and which, central purchasing body to use?

8.3 Central purchasing bodies in other countries

The new Public Procurement Directive says, at Article 39(2) that public bodies are allowed to use central purchasing bodies in other European Union countries. We cannot stop public bodies in Scotland from using foreign central purchasing bodies, but we can limit the way they are allowed to do so, if we want.

We could say that the only way that public bodies could use foreign central purchasing bodies in another Member State would be to ask them to buy goods or services on the public bodies' behalf. Or we could say that the only way they are allowed to use foreign central purchasing bodies is when they are using a framework agreement set up by the foreign central purchasing body.

Some people say that letting Scottish public bodies use foreign central purchasing bodies is bad for Scottish businesses, as they are less likely to win the work.

However, we believe that making the European market as open as possible is generally better than trying to narrow our choices. This is because an open market allows Scottish businesses to win work in other countries. There may also be occasions where a Scottish public body could obtain best value for money by procuring from a foreign central purchasing body.

Because of this, we do not plan to limit the way in which Scottish public bodies can use foreign central purchasing bodies in any way.

Question

Q57 Do you agree or disagree that we should not restrict access by Scottish public bodies to European centralised purchasing activities? Please explain your answer.

9. Enforcement and monitoring

9.1 Overview

Article 83 of the Public Procurement Directive, Article 99 of the Utilities Directive, and Article 45 of the Concessions Directive require that one or more organisations in Scotland should monitor how the procurement rules are being followed, publish the results of any monitoring, and in the case of public contracts and utilities contracts, every three years, report to the European Commission about this.

The information that will need to be included in monitoring reports to the European Commission is:

- Information about those things which are most often done incorrectly, or which most often cause legal uncertainty.

- Information on the level of SMEs' involvement in procurement processes.

- Information on preventing, detecting and reporting of procurement fraud, corruption, conflicts of interest and other serious issues.

The responsible organisation(s) should also be able to inform either the courts, or other relevant authorities, where they have discovered any breach of the rules.

We must inform the European Commission who the monitoring organisation(s) is/are.

9.2 Options

The choice we have to make is how we go about meeting these requirements, and who should be the nominated organisation or organisations.

We could create a new public body to carry out the required monitoring and enforcement. This would promote independent scrutiny and provide a level of assurance to business regarding their rights to raise concerns about procurement processes.

However, it would require new resources to establish and run and it is not clear that setting up a new body would deliver additional net benefits in practice.

Another option would be to use and develop existing functions, for example the Single Point of Enquiry (SPoE). The SPoE was established to deal with business concerns regarding procurement procedures. In order to perform the role required in the Directives, Scottish Ministers would need a new statutory power to request information from public bodies regarding procurement procedures and contracts which are subject to the provisions in the Directives. In effect, this would allow the SPoE to undertake the monitoring and reporting role, supported by statutory powers, to request the information it would require. It would also help the SPoE perform its core function of responding to business requests for advice about procurement practice.

The Directives also say that where a body responsible for monitoring identifies "….specific violations or systemic problems, they shall be empowered to indicate those problems to national auditing authorities, courts or tribunals or other appropriate authorities….".

Other new provisions are:

- That we will ensure that information and guidance and support are available about the interpretation and application of the procurement rules, free of charge to public bodies and suppliers and, in particular SMEs.

- Public bodies must keep copies of all concluded contracts with a value equal to or greater than €1 million for supply and service contracts and €10 million for works, for at least the duration of the contract.

- That public bodies should also grant access to these contract documents – taking account of European Union or national rules on access to documents and data protection.

Question

Q58 Do you agree or disagree that the monitoring and enforcement body for Scotland should be the Scottish Ministers, acting through the existing Single Point of Enquiry? Please explain your answer.

9.3 Remedies Directives

The Regulations which will transpose the new Directives will also need to give effect to the associated EU Directives on remedies (89/665/EC and 92/13/EC – as amended by 2007/66/EC and by the new Directives). These Directives are given effect in the existing Public Contracts (Scotland) Regulations 2012 and Utilities Contracts (Scotland) Regulations 2012 by Part 9 Applications to the Court in each of the Regulations.

When transposing the new Directives we will need to ensure the continued availability of a remedies regime. We propose to do this by setting out the appropriate provisions in the new transposing Regulations, allowing us to revoke the 2012 Regulations.

In setting out the provisions for remedies we could simply copy the approach taken in the existing Regulations. During the consultation on the Act and during the Parliamentary scrutiny process, many stakeholders asked for a different approach to be taken on remedies in Scotland. In particular, the Infrastructure and Capital Investment Committee's Stage 1 Report said "….given the evidence heard in relation to remedies, the Committee also supports the establishment of a tribunal or ombudsman…."[10]

The Remedies Directive make specific provision for the establishment of an independent review body that reviews complaints regarding compliance with EU procurement law. This is an approach which many EU member States have adopted. The Remedies Directive provides considerable discretion to member States as to the form such a review body might take. It does lay down some requirements, summarised as follows:

- The review body must be available at least to any person having an interest in obtaining a particular contract and who has been, or risks being, harmed by an alleged infringement.

- Where an application is made for a case to be reviewed, the public body concerned must not conclude the contract until the review body has made a decision on the application or on interim measures. The suspension must not end before the expiry of the standstill period provided for in the Regulations.

- Decisions of the review body must be effectively enforced.

- If the review body is not judicial in character, written reasons for decisions must always be given and any allegedly illegal measure it takes or alleged defect in the exercise of its powers must be capable of judicial review or appeal to a court or tribunal which is independent of the public body and the review body.

We could establish an administrative review body with statutory powers to act as the first point of escalation for complaints regarding alleged infringements. Such a body would have to be independent and its decisions would have to be capable of appeal to a court or tribunal.

Instead of this, or in addition to, we could, establish a tribunal to hear cases regarding alleged infringement of the rules in the Directives. Having a review body or a tribunal consider cases before they are heard in the courts might result in quicker decisions. Having an administrative review body, whose decision may be subject to further review by a tribunal or court may be considered overly bureaucratic and costly.

We consider that a tribunal, established within the Scottish tribunals system, created by the Tribunals (Scotland) Act 2014, would be likely to provide the most effective form of review. The Act creates two new tribunals, the First-tier Tribunal for Scotland for first decisions and the Upper Tribunal for Scotland, primarily for appeals from the First-tier. The Act provides for tribunals to be grouped by similar subject matter within Chambers of the First-tier, keeping tribunal business within the tribunals system.

It is inevitable that decisions taken by a review body will involve significant risk, including significant financial risk and are likely to be subject to intense scrutiny and potential appeal. Any review body must itself be robust, must follow all due process in its decision making and must have the skills and expertise required to reach its decisions promptly and reliably. Decisions of a tribunal would be authoritative, binding and potentially quicker and less expensive than court process. For these reasons we believe the additional informality of a tribunal is preferable to other potential forms of review body.

Questions

Q59 Do you agree or disagree that we should simply copy the provisions on applications to the court from the existing 2012 Regulations? Please explain your answer.

Q60 Do you think there is a need for a review body which sits beneath the national courts?

Q61 If so, do you think the review body should be established as a tribunal within the Scottish tribunals system?

Q62 Or do you think it should take some other form, for example, a Scottish Procurement Ombudsman?

10. Open contracting

In October 2013, the UK Cabinet Office led and participated in the Open Government Partnership (OGP) Summit in London. The Scottish Government was pleased to support the important initiative of open contracting within the Open Government Partnership (OGP) UK National Action Plan 2013[11]. Open contracting promotes openness and transparency in procurement and refers to practices, which allow for increased disclosure and citizen participation in public contracting. The principles of open contracting have been developed by the Open Contracting Partnership and are available online[12].

In October 2013, the then Deputy First Minister outlined that "the Scottish Government broadly endorses the principles of open contracting and commits to work with civil society and wider stakeholder groups to improve transparency in its procurement practices as part of our continuing programme of procurement reform" (Commitment 13 of the UK National Action Plan 2013). The Scottish Government commitment as outlined in the UK National Action Plan (2013) was to consult on the principles of open contracting. We have included a question in this consultation in order to solicit views from stakeholder groups on this topic.

Question

Q63 What is your view of the Scottish Government's position to broadly endorse the principles of open contracting and commitment to work with civil society and wider stakeholder groups to improve transparency in its procurement practices as part of its continuing programme of procurement reform?

11. How to respond to this consultation

We would like to hear your views on the changes to the public procurement rules in Scotland.

It would be helpful to have your response by email. Email responses should be sent to

ScottishProcureConsultation@scotland.gsi.gov.uk

We are of course happy to receive written submissions too. These should be sent to:

Nesta Devereux
The Scottish Government,
Scottish Procurement,
2nd Floor,
Europa Building,
450 Argyle Street,
Glasgow
G2 8LG.

We would be grateful if you would use the consultation questionnaire provided or clearly indicate in your response which questions or parts of the consultation paper you are responding to as this will aid our analysis of the responses received.

This consultation, and all other Scottish Government consultation exercises, can be viewed online on the consultation web pages of the Scottish Government website at http://www.scotland.gov.uk/consultations.

Handling your response

We need to know how you wish your response to be handled and, in particular, whether you are happy for your response to be made public.

Please complete the Respondent Information Form which forms part of the consultation questionnaire as this will ensure that we treat your response appropriately. If you ask for your response not to be published we will regard it as confidential, and we will treat it accordingly.

You should be aware that the Scottish Government is subject to the Freedom of Information (Scotland) Act 2002 and would therefore have to consider any request made to it under the Act for information relating to responses made to this consultation exercise.

Next steps

If you tell us we can make your response public, we will put it in the Scottish Government Library and on the Scottish Government consultation web pages.

We will check all responses where agreement to publish has been given for any wording that might be harmful to others before putting them in the library or on the website.

You can make arrangements to view the responses by contacting the Scottish Government Library on 0131 244 4552.

What happens next?

Following the closing date, all responses will be analysed and considered along with other available evidence to help us reach a decision on how to implement the policy options in the Directives in the best manner for Scotland. We will issue a report on the analysis of the responses which will be published on the Scottish Government website at: www.scotland.gov.uk/Publications/Recent

Comments and complaints

If you have any comments about how this consultation exercise has been conducted, please send them to:

Nesta Devereux
Consultation Project Manager
The Scottish Government
Scottish Procurement
2nd Floor
Europa Building
450 Argyle Street
Glasgow
G2 8LG.

Annex A - International agreements

The international agreements referred to in sections 2.5 and 4.8 of this document are:

- ILO Convention 87 on Freedom of Association and the Protection of the Right to Organise;

- ILO Convention 98 on the Right to Organise and Collective Bargaining;

- ILO Convention 29 on Forced Labour;

- ILO Convention 105 on the Abolition of Forced Labour;

- ILO Convention 138 on Minimum Age;

- ILO Convention 111 on Discrimination (Employment and Occupation);

- ILO Convention 100 on Equal Remuneration;

- ILO Convention 182 on Worst Forms of Child Labour;

- Vienna Convention for the protection of the Ozone Layer and its Montreal Protocol on substances that deplete the Ozone Layer;

- Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (Basel Convention);

- Stockholm Convention on Persistent Organic Pollutants (Stockholm POPs Convention);

- Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade (UNEP/FAO) (The PIC Convention) Rotterdam, 10 September 1998, and its three regional Protocols.

Annex B - Respondent information form

The Respondent Information Form and Consultation Questionnaire