International Association of Contract and Commercial
Management’s (IACCMS) Europe Seminar, Berlin, 25 April 2013
Transforming Public Procurement: The Scottish Story
Introduction
William Edmondstoune Aytoun, the poet, scholar and translator of Faust
into English, wrote “Give me one hour of Scotland, Let me see it ere I
die”. I am going to give you 30 minutes.
To describe how Scotland has transformed public procurement and
developed a distinct approach – the Scottish Model. An approach that is
both business friendly and socially responsible. And that goes beyond
traditional thinking to put procurement and commercial management
right at the heart of Scotland’s economic recovery.
But first a bit of context.
Scotland. A country known for bagpipes, whisky, shortbread, haggis.
Castles, lochs and stunning scenery.
Strong sense of tradition, history and identity. And a thriving modern
economy. The home of golf, welcoming the Ryder cup in 2014. Hosting
2014 Commonwealth Games – following the practice run in London last
summer - and a front-runner to host the Youth Olympics in 2018.
Scotland in context
Scotland today is a country of 5.2m people, with an economy growing
marginally faster than the rest of the UK.
Scotland has always had its own legal system, and since 1999, after a
gap just shy of 300 years, its own parliament, responsible for many
aspects of domestic policy.
The basis of the Devolution Settlement was that any powers not
specifically reserved to the UK Government in London were
devolved to the Scottish Parliament.
Procurement is a devolved responsibility.
And of course September 2014 sees a referendum on full
independence.
Government in Scotland - Leadership
The Scottish Parliament is a unicameral system, with 129 MSPs.
Since 2007, Scottish National Party has formed the government, since
2011 with an overall majority in the parliament.
Scottish Government has single National Purpose, delivering
sustainable economic growth. All government & public sector activities
geared towards this objective.
Government in Scotland: Structure.
32 local authorities; 21 Health Boards, single police and fire service, and
range of arm’s length bodies providing range of services.
Public service reform agenda based around 4 “pillars” of prevention,
performance, people and partnership.
Public sector in Scotland works together towards overall aim of
sustainable economic growth.
Scottish Procurement Landscape
Nowhere is that more evident than in the area of public procurement.
Around 12-15 billion Euros spent each year. Roughly half by local
government, a third by health.
Main areas of expenditure are what you would expect –
construction, social care and facilities management highest areas of
spend.
Procurement Reform - a brief history.
Scotland’s journey of procurement reform began in 2006 with publication
by a report by the renowned expert John McClelland. McClelland
identified issues common to many of you who have had dealings with
public sector – fragmented demand, low skills base, little use of market
intelligence.
In essence, back in 2006 public sector didn’t know what it was spending,
whom it was spending with or what it was getting for the money.
Fast forward 7 years. Our reform programme has transformed the
procurement landscape in Scotland. Spend is categorised with active
programmes of collaboration covering some 20% of public spend and
delivering over £1.2bn savings. Investment in management information
means that we have common systems and processes. Investment in
people and skills means that we have built levels of procurement and
commercial capability.
Across the whole of the public sector, we have a recognised approach to
procurement – the Scottish Model.
The Scottish Model
Business friendly, socially responsible. Putting procurement at the
heart of Scotland’s economic recovery.
The Scottish Model sees procurement not as a technical or back office
function, but as an integral part of policy development and service
delivery.
Like all good ideas, it’s a simple concept. Looking at outcomes not
outputs, and using the power of public spend to deliver genuine
public value beyond simply cost/quality in purchasing.
Over the remainder of my time, I’m going to describe the key ingredients
of the Scottish Model, why they work, and where we’re going on the
journey to tomorrow’s world.
Government led public sector owned
Public procurement is Government led, with strong political leadership
from three successive Cabinet Secretaries. But owned by the whole of
the public sector. A Reform Board bringing together strategic leaders
from each part of the public sector owns a single overall strategy. That
means all of the public sector is signed up to the same high level
outcomes and targets, with a strong focus on collaboration, nationally
and sectorally.
Partnership with business
Strategic relationship with key business and third sector organisations,
and a project level partnership with business/third sector to develop
specific solutions to specific problems.
Not easy by any means, and at times plain difficult, where expectations
can’t be met or where interests diverge. But it’s worth it – both to be
able to have those conversations, and through involving the business
community not just in identifying barriers to access but developing
practical and affordable solutions.
Like our standardised prequalification questionnaire, tackling one of the
biggest bureaucratic burdens that small businesses face in bidding for
public work. Or our informal dispute resolution system, the Single Point
of Enquiry.
The results speak for themselves, with over 82% of contract awards
in 2012 advertised on the Public Contracts Scotland portal being
won by SMEs.
Value for Money (VfM) triangle
The VfM triangle sums up the Scottish Model of Procurement. Value for
money in Scottish procurement is not just about cost and quality, but
about best balance of cost, quality and sustainability.
Yes we want to improve supplier access to contracts. Yes we want to
deliver savings and benefits. Yes we want to promote collaboration and
efficiency. But Sustainability is at the heart of all we do. And
understanding that is key to understanding the Scottish Model.
Sustainability at the heart of all we do
Scotland is a leading exponent of the Marrakech process. We trained
over 300 public procurement professionals last year. Looking at
sustainability considerations at every stage of the procurement cycle to
understand and capture social economic and environmental benefits.
We have promoted the use of community benefit clauses since 2008,
creating over 3500 training and employment opportunities. Two
examples – Commonwealth Games and Glasgow Housing Association.
And under legislation shortly to go before the Scottish Parliament, all
major contracts will include community benefit clauses.
Savings of course are vital. But the Scottish Model shows that saving
money goes hand in hand with responsible purchasing. Take the
national electricity contract, for example. 99% of public sector bodies
elected to participate (their choice). 100% renewable. Savings of over
£20m a year. Available to 3rd sector bodies.
Or take our national framework for supported businesses, providing a
vital lifeline worth up to £5m a year to companies providing hope to
some of society’s most vulnerable citizens.
Innovation through the supply chain
Procurement is one of the 6 key priorities in the Government Economic
Strategy. That means understanding the broader economic impact of
purchasing decision. Making it easier for firms to bid for public contract
opportunities and setting the standards we expect others to follow.
So Scottish Government pays over 95% of invoices within 10 days of
receipt. Our standard terms and conditions require 30 day payment
throughout the supply chain. We’re trialling project bank accounts to
free up liquidity in the construction sector.
We’re working with suppliers to use the supply chain to create jobs and
attract investment. Sub-contract opportunities often openly advertised.
£60m Scottish Crime Campus project in one of Scotland’s most deprived
areas saw major opportunities for local businesses, jobs for local people
and, for Balfour Beatty the prime contractor, an opportunity to refresh
their own supply chain.
The Scottish Model creates an environment that encourages innovation.
Take our new Biomass Energy supply framework. £50m green energy
contract for whole of the public sector that will deliver renewable heat
using residue from forestry.
A great example of how the social, local economic and environmental
aspects of sustainability can be brought together in a way that not only
saves public money (£8.5m), not only reduces carbon emissions (200k
tonnes), but directly creates up to 275 jobs and is already stimulating the
growth of a new industry in Scotland.
Capability is key
Good intentions are nothing without people skilled to deliver them.
Procurement centres of expertise established covering each part of
public sector. These are not just buying consortia but charged with
building capability, promoting collaboration and driving forward the
reform agenda.
The Reform Programme has a national target on improved levels of
capability with an annual Procurement Capability Analysis applied
across the public sector. Capable purchasers are one side of the
equation. Competitive suppliers are the other, and we’re looking at ways
to support small businesses to become more competitive in bidding for
public contracts.
Our Procurement Journey toolkit provides standard streamlined
processes for public sector purchasers, aimed at ensuring a common
experience for suppliers. The parallel Supplier Journey means that
suppliers know what to expect at each stage of the procurement
process. And what to do if things are going wrong.
And our Procurement People of Tomorrow programme, developed in
partnership with CIPS, is both about developing today’s procurement
professionals but working with schools and colleges to grow the
commercial leaders of tomorrow.
Shared Services
Underpinning the Scottish Model is a track record of shared services to
standardise, simplify and support procurement and commercial
management. Our e-Commerce strategy spans the procurement
lifecycle from strategy development to payment.
At its heart is the single national contracts portal, Public Contracts
Scotland. Over 21,000 new business opportunities advertised in the last
year, 84% registered users SMEs.
Embedded within PCS are tools like Quick Quote, for simple low value
procurements; PCS Tender, delivering the standard prequalification
questionnaire; and Collaborate Content, providing access to 1.2 million
products and services.
One single P2P system covers over half public sector procurement
spend, and our Information Hub captures and analyses over £9bn spend
across all sectors. Scotland is one of the leading participants in the
PEPPOL initiative. We have 7 years of data to play with and use to
drive value. Almost a fifth of public procurement spend through
national or sectoral collaborative contracts.
Procurement Today
The results speak for themselves. In terms of savings, social and
environmental benefits, stimulating growth, and removing barriers to
access for competitive SMEs. SMEs account directly for 46% of
procurement spend – that ignores the spend to SMEs through the supply
chain. They represent 37% of Scotland’s GDP. Around half of that goes
to companies with less than 50 people. SMEs won 82% of contracts
advertised through PCS in 2012. That isn’t a result of a target, but a
consequence of the Scottish Model of business friendly, socially
responsible procurement.
Procurement Tomorrow
But the journey of transformation is far from complete. This year we’ll be
introducing a Procurement Reform Bill to the Scottish Parliament to
define the Scottish Model in statute.
The aim of the bill is simple: to make it simpler to do business with the
public sector in Scotland; and to make it simpler for the public sector to
spend money wisely.
The Bill is likely to contain general duties around proportionality,
economic, social, health, environmental wellbeing; access for SMEs and
3rd sector bodies; encouraging innovation.
And specific statutory requirements including publishing procurement
strategies; use of single national portal; community benefits clauses in
major contracts; standard and proportionate prequalification; and dealing
with inappropriate conduct.
And earlier this year we commissioned an independent review of
construction procurement. We expect to receive the report this summer,
outlining how the Scottish Model can deliver greater value from this
major area of spend.
The Scottish Model: further reading
In conclusion, the Scottish Model looks beyond procurement as simply a
way of buying goods and services. It shows how an approach that is
both business friendly and socially responsible can not only deliver cost
efficiencies but also support innovation, investment and sustainable
economic growth. Thank you.
Speech by Alastair Merrill,
Director of Procurement and Commercial