Deputy First Minister keynote address 2013 at Procurex

Posted in: General News

At the 9th Scottish National Procurement Conference and Procurex Exhibition Nicola Sturgeon, Deputy First Minister gave the following keynote address in the SECC, Glasgow on the 22 October 2013.

Introduction

I am delighted that this year I am able to be here in person.

This conference and the Procurex exhibition are important in bringing together the public sector and industry to debate the future of public procurement in Scotland. It is exactly this sort of joint working which has been and continues to be, so critical to the success of the procurement reform programme in Scotland.

A great example of this is the Procurement People of Tomorrow initiative launched last year. This initiative, to raise the profile of procurement and introduce new ways for young people to enter the profession, was recently recognised at the prestigious Chartered Institute of Purchasing Supply awards.

I’m delighted that some of the HNC and HND students from Glasgow City College who are participating in the initiative are with us today. I’m looking forward to meeting them afterwards.

I also had the opportunity this morning to visit the stand run by BASE – the British Association of Supported Employment. I had the opportunity to underline the commitment of the Scottish Government to supporting people with disabilities to find fulfilling jobs, suitable to their skills. We have been active in helping supported businesses become more commercial and sustainable, through the Supported Businesses Advisory Group chaired by Fergus Ewing, as well as working with social enterprises such as Rehab, represented here today.

We have worked closely with BASE, both to produce guidance for purchasers on Scotland’s supported businesses – copies are available from their stand – and to develop and promote the framework that I announced last autumn.

This makes it quick, easy and cost effective for the Scottish public sector to buy goods and services from Scotland’s supported businesses.

The Scottish Model of Procurement

The role procurement plays in creating opportunities for our young people, and supporting some of society’s most vulnerable citizens, reflects the distinct approach to public procurement that has developed in Scotland since John McClelland published was a ground-breaking report back in 2006.

That “Scottish Model”, if we can call it that, recognises the broader contribution that public procurement can make to economic recovery and to building a fairer society.

Saving money is of course essential given the financial climate, through better demand management, better purchasing decisions, and keeping overheads to business down.

We have a good track record:

  • 30 per cent of public sector spend, over £2.3 billion, is managed through collaborative contracts, delivering over £120 million savings last year.
  • the Procurement Journey provides standardised tools and processes across the public sector;
  • PCS-Tender, the e-tendering application I announced last year, embeds standardised prequalification questions developed hand-in-hand with industry, and allows suppliers to store and resubmit their responses;
  • our e-commerce shared service, now processes 57 per cent of public spend through a single purchase-to-pay system.

But cash savings are only part of the story of spending public money wisely.

The Value for Money triangle – cost, quality, sustainability – is central to the Scottish Model of Procurement. And the economic, social and environmental aspects of sustainability must be at the heart of all we do.

Procurement Reform Bill

They are certainly at the heart of the Procurement Reform Bill which was published and introduced to Parliament earlier this month.

Many of you in this room have contributed significantly to the development of the Bill. I thank you for your help and your on-going support as it enters the next phase of its journey through Parliament, a call for evidence by the lead Parliamentary committee.

The aim of the Bill is to set a framework for public procurement that is both business friendly and socially responsible.

Business friendly by standardising process, streamlining bureaucracy, increasing transparency and encouraging innovation. Socially responsible by looking at the broader economic implications of procurement decisions.

Building in considerations such as community and environmental benefits at the start of the procurement process, not as last minute add-ons, is very important. As is setting clear standards for the conduct of public procurement. And clear standards of business ethics.

Blacklisting

I want to make particular mention of blacklisting. Many of you here will be aware of the issue of blacklisting in the construction industry following an investigation by the UK Information Commissioner. The Scottish Government is already on record as saying that the practice of blacklisting is totally unacceptable. Let me go further today.

We are determined to send the clearest message to industry about the standards of behaviour that we expect from them. We have been discussing with the STUC and individual Trade Unions, guidelines for purchasers.

These guidelines, which we intend to publish very shortly, will enable purchasers to exclude from competition any company that has been found to have blacklisted workers and which has not yet put its house in order. We intend to place these guidelines on a statutory basis through the Procurement Reform Bill and through amendment to existing Scottish procurement regulations.

I hope that the position we have taken, and this statutory approach sends a clear message that blacklisting will not be tolerated in Scotland.

Transparency

Another key element of the Bill is a push for greater transparency in procurement.

As well as being good for business, transparency in procurement is an important tool in the fight against fraud and corruption. The UK Government’s National Fraud Authority estimates over £2 billon lost to the public purse every year through procurement fraud.

In just over a week, the “Open Government Partnership” Summit takes place in London. Over 1000 delegates are expected from over 60 countries, including heads of State. The Open Government Partnership focusses on how transparency in Government can benefit citizens, tackle fraud and corruption and improve value for money for taxpayers. One key component is a formal commitment to Open Contracting.

I am delighted to announce that the Scottish Government intends to join other European and international governments, including the Westminster Government, in making a formal commitment to the principles of Open Contracting.

The Procurement Reform Bill contains proposals on publishing contract notices and contract registers, and on the right to debriefing for participants in a procurement exercise.

Together with our EU obligations and the Public Contracts Scotland portal these will put Scotland at the leading edge of procurement transparency.

Supplier Development Programme

One of the strategic objectives of Procurement reform in Scotland is to remove barriers to bidding for public contracts, particularly for Small and Medium-sized Enterprises (SMEs). We have made good progress, the evidence bears that out. Around 45 per cent of spend goes direct to SMEs, and SMEs are winning over 80 per cent of the contracts advertised on the Public Contracts Scotland portal.

Our standardised pre-qualification questionnaire tackles one of the main barriers smaller businesses face. But public procurement is a very complex beast, and it is challenging for a small business to be faced with weighty tender documents. So we are looking at how we work with industry to help businesses, especially SMEs, to get the skills they need to compete successfully for public contracts.

One initiative is local government’s Supplier Development Programme. This has a strong track record in providing support and training for businesses looking to bid for local government contracts, working in partnership with local economic development teams and purchasers.

We are looking to build on that success, developing a national service and tying the programme in with the Scottish Government’s Digital activity. I hope to make a further announcement on this later in the year.

Construction Procurement

Before I finish, I want to turn specifically to the important issue of construction procurement. Last year I announced that I had commissioned an independent Review of Procurement in Construction. Robin Crawford and Ken Lewandowski are publishing their report today and I strongly recommend it to you.

This has been an excellent piece of work, produced after very extensive engagement across both public and private sector stakeholders, and delivering a very coherent set of recommendations reflecting the importance of construction to Scotland’s economy. Let me take the opportunity to publicly place on record my appreciation for the quality of Robin and Ken’s work.

An indication of the quality of the report is its recognition of the fundamental importance of good design in getting the best outcomes from procurement. That means having the right resources and specialist skills from the outset, and ensuring close and early collaboration between procurement staff, construction professionals, suppliers and, very importantly, end users.

I am considering the full suite of recommendations from the Review very carefully and will respond formally in due course. But let me comment on one in particular, prompt payment is important for any business. The Scottish Government has set the bar high, we pay over 95 per cent of our contractors within ten working days.

Late payment through the supply chain has been highlighted as a particular problem in the construction sector.  One early recommendation from Robin and Ken was on trialling Project Bank Accounts.

I am pleased to announce that we have identified a range of health, local government and transport related projects suitable for trialling Project Bank Accounts. The first of these is already out to competition. Project Bank Accounts do have the potential to significantly improve cash flow in the supply chain, vital to many of Scotland’s smaller businesses.

Conclusion

The underlying importance of procurement, as Scotland’s economic recovery gathers pace, continues to grow.  Six years on from McClelland, the pace of reform must not and is not slackening.

The Procurement Reform Bill, the implementation of the Review of Procurement in Construction and the measures I have announced today take us into a new phase of reform.

Earlier this month, we took the decision to merge the public sector Procurement Reform Board and the private and third sector Procurement Advisory Group. That signals a fundamental shift – from an approach to reform that has been Government-led, public sector-owned, into a new phase of reform that is collectively owned by a partnership of public sector, business and third sector communities.

We’ve already seen the success stories that joint working can bring in simplifying processes, in supporting people with disabilities into work on public contracts, and in producing the Procurement People of Tomorrow.

As I’ve outlined today, there’s a lot more to be done over coming months and years – I am confident in the ‘Scottish Model of Procurement’ reform. It has served us well and will continue to do so.

Today will provide a rich opportunity to get a greater understanding of what that means for you and your business. I wish you well for an enjoyable and productive day.