This item was published during the term of a previous administration that ended in April 2007
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New rules for public sector contracts
31/01/2006
New regulations come into force today which improve the opportunity for businesses in Scotland, particularly SMEs and supported businesses, to secure public contracts.
The Executive is introducing new rules on public sector contracts which mean that lower value contracts - below £94,000 for goods and services contracts and below £3.6 million for works contracts - will usually need to be advertised.
This should allow many more Small and Medium Enterprises to bid for these lower value contracts as they would previously often have been awarded without advertising. This could provide a significant boost for SMEs, as public procurement in Scotland is estimated at around £8 billion a year.
The regulations also allow scope for contracts to take account of wider social objectives, such as supported-employment programmes. Minister for Finance and Public Service Reform Tom McCabe said:
"I believe this is good for businesses and good for the taxpayer. Exposing more contracts to competition should result in better value for money, in cost and quality. The new provisions on social issues such as reserving contracts for supported businesses will provide new opportunities to integrate procurement activity with wider social objectives.
"We are taking this step in direct response to recommendations from the Scottish business community and trade unions. We have listened to the concerns they have raised - and we have acted."
Deputy First Minister Nicol Stephen added:
"This move will make it easier for businesses in Scotland to compete for public sector contracts. I am confident this move will deliver significant benefits, particularly for SMEs. We are continuing to look at a range of other initiatives to improve access to public sector contracts for Scotland's businesses and will report on these soon."
Andy Willox, Scottish Policy Convener of the Federation of Small Businesses, said:
"This is good news for small businesses in Scotland that are interested in accessing public sector contracts. Small businesses often find it difficult to find out about work that is up for grabs, and being able to identify new business opportunities is a first step towards being able to compete for and, hopefully win new business."
Allan Mitchell of CBI Scotland said:
"We view this as a very positive development. Scottish businesses don't expect to be handed contracts on a plate, but they do expect to get a fair chance to compete and the new regulations should help them do just that. Also advertisement for lower value contracts does not need to be international and it is unlikely that businesses outside Scotland will be interested in tendering for lower value contracts. So most of the economic benefits of this measure should fall to Scottish businesses."
Hugh Scullion of Amicus added:
"Amicus recognises that the Scottish Executive has, by introducing these regulations to Scottish legislation, attempted to allow issues such as skills, opportunities for disadvantaged workers and proper treatment of workers from overseas to be constructively addressed. We look forward to continuing to work with the Executive to ensure the creation of a procurement process which will benefit Scotland's workers, communities, businesses and environment."
The Executive has been discussing with business representatives including the Federation of Small Businesses, CBI Scotland, Scottish Chambers of Commerce and the Institute of Directors what measures could be introduced to help Scottish SMEs compete more effectively for public contracts. One of the main recommendations was that the lower value contracts which are of most interest to many SMEs should be opened up to more competition. Such contracts are often awarded without any advertisement and this makes it difficult for SMEs to identify business opportunities.
Other key recommendations were that the Executive should introduce:
- Standardised pre-qualification requirements and forms for tenderers (to be used by all public sector bodies)
- A "Code of Practice" for buyers and suppliers
- A single website for advertising contracts
The standardised pre-qualification form and Code of Practice are being finalised and are expected to be introduced in the first quarter of 2006 and the Executive is currently examining options for meeting the recommendation on a website for contract advertisements.
The new regulations ("The Public Contracts (Scotland) Regulations 2006" and "The Utilities Contacts (Scotland) Regulations 2006") which come into force on January 31 make it a legal requirement that contracts other than those of very low value should normally be advertised.
Exceptions to this would be where the body concerned has a legitimate business reason for not advertising or where the contract was of such a low value that advertising would incur disproportionate costs. Under previous procurement regulations, only higher value contracts had to be advertised. These new regulations should result in more small and medium sized contracts being advertised locally.
Previous legal requirements for advertising varied slightly according to the type of public body (e.g. between central and local government), but did not apply below the level at which contracts must be advertised in Europe (£94,000 for goods and services contracts and £3.6 million for works contracts). A company which has missed out on a business opportunity because a public body has not complied with the requirement to advertise can now challenge the decision in the Scottish Courts.
The regulations also, for the first time, allow public bodies in Scotland to reserve contracts, of any value, for supported employers, helping ensure that companies such as Remploy get a fair share of public sector business. Supported businesses/factories are those which provide employment opportunities for disabled persons. The regulations also provide that contracts can include clauses intended to tackle wider social and environmental objectives, for example by requiring the contractor to provide training and employment opportunities for the long term unemployed.
The public procurement market in Scotland is significant, estimated at around £8 billion a year. Higher value contracts are already subject a requirement for EU wide advertising, details of current EU advertising thresholds.