Annex A
STUC Response to the Scottish Executive’s Consultation on the Draft Regulations implementing the Public Sector and Utilities Procurement Directives
Introduction
1.1 The STUC represents some six hundred and thirty thousand workers across Scotland, the members of our affiliated trade unions.
1.2 We speak for trade union members in and out of work, in the community and in the workplace. Our affiliates have interests in all sectors of the economy.
1.3 Therefore, the STUC is able to provide a unique perspective on the performance of the economy, the challenges it faces, and the effectiveness of public agencies in responding to those challenges.
1.4 The STUC welcomes this consultation on the draft regulations implementing the new Public Sector and Utilities Procurement Directives, which we believe introduce important new opportunities to assist Scotland’s workers, communities and industry.
1.5 The STUC would like to offer our sincere thanks to Paul McNulty and Ian Moore from the Scottish Executive’s Procurement Directorate for participating in our consultation seminar held on 7 November 2005.
1.6 Recognising that most issues are common to both Directives, we have focused our response on the Public Sector Procurement Directive. We do not intend to respond separately on the Utilities Directive but would ask the Scottish Executive to recognise that our comments are applicable to the corresponding regulations in the Utilities Directive text.
Public Procurement
2.1 Public procurement suddenly became a high profile issue following this year’s Business in the Parliament Conference where a number of business people criticised the Scottish Executive for failing to do more to assist Scottish businesses win public contracts.
2.2 Procurement has long been a major issue for trade unions but it has often been difficult to promote it as such given that it is often clouded in highly technical language and obscure legal terminology.
2.3 The STUC has two main aspirations for procurement policy:
• For procurement to play a pivotal role in securing the future of Scottish manufacturing. Trade unions recognise that public authorities must operate within tight EU competition rules but so far other countries have been far better at giving their manufacturers a slice of the public procurement cake; and,
• For procurement to be used to drive up standards across the economy. Contracts drawn up with suppliers and service providers can incorporate clauses on better employment standards, training provision, health and safety and environmental sustainability. There is great potential for procurement to help make Scotland a better place in which to live and work.
2.4 This is why the STUC welcomes the two new directives, which introduce additional scope to meet the aspirations outlined above. Unfortunately, the Scottish Executive, following the lead set by the Office of Government Commerce (OGC), appears intent on taking a minimalist approach to the transposition of these directives into Scottish law.
2.5 There is now a clear divergence between positive procurement agenda promoted by trade unions, progressive employers and some public sector bodies and local authorities which seeks to promote high standards and inclusiveness. The OGC, and by association the Scottish Executive, appears to be backing the discredited low-cost, low value agenda; an agenda that does not sit well with the Smart, Successful Scotland enterprise strategy.
2.6 Moreover, it is the positive agenda, that seeks to promote high skills and high value among procurers and suppliers and end discrimination that is the truly efficient one. Public sector bodies that do not promote skills, or do not take steps to fully utilise the contribution of women, disabled or black and ethnic minority employees, on the spurious basis that developing their talents is a short term ‘cost’, are taking the inefficient approach.
2.7 As part of a new positive approach to procurement, the Scottish Executive should actively look at how policy can be used to provoke better performance and drive up employer involvement in training, for example, by requiring employers engaged in government contracts to have a high quality apprenticeship system in place.
2.8 The STUC and our affiliated trade unions are seriously concerned about the lack of such a policy at Scottish level. Cost remains the fundamental determinant of success with other factors given cursory consideration if indeed they are considered at all. Over the past few years, Scottish workers have suffered from a number of poor procurement decisions ranging from the strategically inept (Ferguson’s shipyard losing crucial orders to a Polish shipyard) to the grotesque (‘Make it in Scotland’ sweatshirts manufactured in China).
2.9 The Scottish Executive must recognise the full scope of the Directives and develop a new positive procurement policy. In this context, the STUC notes and supports the GMB’s call for a Sustainable Procurement Task Force for Scotland.
Consultation and Implementation Process
3.1 Perhaps the most frustrating aspect of this consultation process has been the unwillingness of the Scottish Executive to use its devolved powers to implement on a separate and distinct basis from the Treasury’s Office of Government Commerce (OGC). Procurement is a devolved issue. In transposing these important new Directives, the Scottish Executive has an real opportunity to create a new procurement regime that benefits Scotland’s workers, businesses, communities and environment. There is no persuasive reason for following the OGC’s lead.
3.2 The Scottish Executive decided to implement separately from England but on the basis that the Scottish regulations would ‘mirror’ the OGC’s. The only discernible rationale for this curious process are the spurious references to ‘burdens’ possibly arising from businesses having to deal with two sets of regulations. Businesses tender for contracts, not regulations.
3.3 Also, the timescales are challenging to say the least. The consultation finishes on 17 November and the Directives must be transposed to Scottish law by 31 January 2006. Therefore, the assumption is that draft regulations will be laid with the Parliament in early December. The STUC does not believe that this process allows sufficient time for officials to redraft the regulations in light of consultation responses. The process has simply not been managed in a way that allows the Scottish Executive’s Procurement Directorate true flexibility to implement the Directives in the best interests of Scotland. Time constraints will ensure that the OGC regulations are essentially replicated in Scotland.
3.4 The OGC is clearly driving the process across the UK but the STUC is clear that the legal obligation on the Scottish Executive is to reflect the directives, not the views of the OGC. Crucially, the current approach could actually undermine much of the good practice developed since devolution such as the STUC/Scottish Executive PPP Protocol.
The Draft Regulations
Regulation 7 implementing Article 19 (Reserved contracts)
4.1 The STUC acknowledges some improvements in the draft regulations relating to the handling of reserved contracts, though the terminology of sheltered workshop and programmes remains unacceptable.
4.2 The use of reserved contracts and supported employment programmes is an important social issue and there is a serious shortage of good quality work going into supported employment factories. Article 19 states:
“Member states may reserve the right to participate in public contracts awards procedures to sheltered workshops or provide for such contracts to be executed in the context of sheltered employment programmes where most of the employees concerned are handicapped persons, who, by reason of the nature or the seriousness of their disabilities cannot carry out occupations under normal circumstances”.
4.3 The STUC does not consider the use of the terms “sheltered workshop” and “sheltered employment programmes” to be correct or acceptable. The GMB’s response to the earlier consultation was very clear on this point and it is disappointing that their comments have yet to be taken on board.
4.4 However, the STUC does welcome the recognition that this is a very important provision and we look forward to the Executive providing clear, positive and constructive guidance on how purchasers can make best use of this provision.
4.5 The STUC is also concerned that the increased use of framework agreements, dynamic purchasing systems, central purchasing bodies and competitive dialogue could limit the scope for supported employment programmes to be involved in seeking public contracts.
Regulation 45 implementing Article 25 (information on sub-contracting)
5.1 The STUC deeply regrets that this Article has been implemented as optional and not mandatory. Trade unions have repeatedly expressed concerns that sub-contracting is often used in cost cutting, usually by driving down workers’ terms and conditions. We repeat our call for a mandatory requirement for contracting authorities to require tenderers to indicate the share of the contract they intend to sub-contract to third parties, as well as to indicate if a sub-contractor is likely to sub-contract further aspects of the work. It will be particularly important for the public authorities to have any knowledge of any sub-contracting in order to ensure compliance with the PPP Protocol and any future guidance on two tier workforce matters.
5.2 The STUC is seriously concerned at the rationale for adopting this article as optional – ‘to allow contracting authorities as much flexibility as possible’. The consultation document states that this ‘squares with the devolved responsibility for procurement decisions’. Unfortunately, it does not square with Scottish Executive policy on the two-tier workforce.
5.3 The regulations should further require sub-contractors and sub-sub contractors to comply with the social, employment and environmental provisions of the legislation.
Regulation 38 implementing Article 27 (Obligations relating to taxes, environmental protection etc.)
6.1 The STUC deeply regrets that Article 27 has not been implemented as mandatory. An obligation on the part of public contractors to state the body or bodies from which tenderers can obtain appropriate information relating to taxes, employment protection provisions, working conditions and environmental protection would strengthen the statutory guidance legislation already in place such as the PPP Protocol. It would also support any future legislation designed to tackle the two-tier workforce.
6.2 The wording relating to employment protection differs from that of the EU Directive Article 27 and we would prefer the original wording to be used:
“A contracting authority which supplies the information referred to in paragraph 1 shall request the tenderers or candidates in the contract award procedure to indicate that they have taken into account, when drawing up their tender, of the obligations relating to employment protection provisions and the working conditions which are in force in the place where the works are to be carried out or the service is to be provided”.
6.3 The STUC also rejects any suggestion that such an obligation would add unnecessary burdens or bureaucracy. On the contrary, we believe that failing to comply with required taxes, environmental protection, employment protection provisions and working conditions, as a result of not receiving appropriate information regarding requirements, would entail a much higher burden in the long run.
Regulation 18 implementing Article 29 (Competitive Dialogue)
7.1 The consultation document states: “the final text for this Article was achieved after lengthy negotiation and lobbying, with the UK’s aim being that the procedure should fit as much as possible with UK best practice on the award of PFI and PPP contracts”.
7.2 The STUC rejects claims that PFI offers either value for money, or in many instances, quality employment conditions and protections. PFI is not a ‘best practice’ development in public contracting across Europe and should not be portrayed as such.
7.3 Again, we have to raise a serious question over process. The Scottish Executive and STUC, through the PPP Protocol, have taken a very different approach to PPP contracting. This section of the consultation is a direct lift from the OGC consultation paper and therefore it is unclear whether the Protocol is regarded as ‘best practice’ in this context.
Regulation 19 implementing Article 32 (Framework Agreements)
8.1 The STUC are concerned about a potential lack of transparency within framework agreements which allow call off contracts without the need to go out to tender or to advertise in the Official Journal of the European Union. Such framework agreements often leave employees in an unenviable position, not knowing whether their service will be contracted out or if their employment will be transferred to a service provider. It also raises difficulties about compliance with TUPE legislation, the Best Value Code of Practice and Scottish protocol provisions.
8.2 In our view the Directive should require contracting authorities to ensure that trade unions are consulted at the earliest convenience, before each contract is entered into under framework agreements.
Regulation 23 implementing Article 45 (personal situation of the candidate or tenderer)
9.1 The STUC welcomes Article 45 and the opportunity to use exclusion from public procurement as a means to sanction and deter corruption. We regret, however, the transposition of the derogation into Scottish law and ask that conditions under which the derogation can be applied are included in the regulations.
9.2 The STUC considers that exclusion from public procurement provides a potentially powerful deterrent, but that its effectiveness depends on the existence of an information system at EU level whereby public authorities within the UK and across the EU can access information on the corruption convictions of companies. We request that tendering authorities be required to be proactive and take steps to ensure that companies tendering for contracts do not have corruption convictions including:
i) Checking existing databases and debarment lists; and, ii) Requesting that all tenderers confirm that neither the economic operator nor its directors nor any other person who has powers of representation, decision or control of the economic operator has been convicted of any of the offences covered in Regulation 23(1) or the grounds covered in regulation 23 (4).
Regulation 21 implementing Article 54 (Electronic Auctions)
10.1 The STUC acknowledges that it can be efficient to purchase some goods and services by means of electronic auctions (e-auctions). However, it must be clear in both the regulations and the accompanying guidance that the use of e-auctions is not appropriate for contracts involving the transfer of staff. Such behaviour would be likely to force down wage rates and other terms and conditions of employment and may contravene the Acquired Rights directive 2001 and the TUPE regulations.
10.2 The STUC notes that the National e-Procurement project has included labour-intensive services, including cleaning, grounds maintenance and staffing and temporary recruitment, in a list of viable categories for e-auction. The STUC believes that e-auctions should not be used for purchasing services that are labour intensive for the same reason i.e. that this would risk pushing down wage rates and other terms and conditions of employment.
Regulation 30(6) implementing Article 55 – Abnormally Low tenders
11.1 The STUC believes that Regulation 30(6) on abnormally low tenders does not reflect the prominence given to this in the Directive, where it is covered as a separate Article (Article 55) in its own right (for instance, the Directive text states that the contracting authority may seek further details in relation to ‘the economics of the construction method, the manufacturing process or the services provided’). This is a significant change from the text of the Directive. The STUC further believes that Article 55 should be transposed in full as a separate regulation point. The regulation should provide clear focus and prominence to be given to compliance with employment protection and working conditions, as is the case in the Directive (‘compliance with the provisions relating to employment protection and working conditions in force at the place where the work, service or supply is to be performed’).
11.2 The social issues guidance accompanying the regulations should also properly reflect the significance of this point.
Use of term “Contract Documents”
12.1 The consultation document states: “The term ‘contract documents’ is defined in regulation 2(1) as: ‘the invitation to tender for or to negotiate the contract, the descriptive document (if any), the proposed conditions of contract, the specifications or description of the services, goods, work or works required by the contracting authority and of the materials nor goods to be used in or for such work or works, and all documents supplementary thereto”.
12.2 The STUC calls for the maximising of information requirements relating to specifications of social, employment and environmental considerations in the contract documents.
Clarification of social and environmental criteria
13.1 This section begins: “The new Public Sector Directive clarifies the scope to include environmental and social issues in the public procurement process”. The STUC deeply regrets this interpretation. The Directive does not ‘clarify’ the scope, it extends the scope. Even, at this late stage, we wish this to be taken into account in the UK regulations.
13.2 Moreover, we recognise that Regulation 39 states:
(1) A contracting Authority may stipulate conditions relating to the performance of a public contract, provided that those conditions are compatible with Community Law and are indicated in:
• The contract notice; or, • The specification of the contract documents
(2) The conditions referred to in paragraph (1) may include social and environmental considerations.
13.3 We believe, however, that this is totally inadequate in terms of giving full force to the new provisions contained in the new Directives. The fact that this regulation appears as a ‘miscellaneous’ provision on page 54 of a document (excluding appendices) that is 60 pages long, rather at the front of the regulations, is a telling sign of the priority given to the new provisions by the OGC. It is doubly disappointing that the Scottish Executive has saw fit to replicate the OGC’s draft regulations when it does not have to do so.
13.4 We welcome Regulation 30(1) which states that a “contracting authority shall award a public contract on the basis of the offer which (a) is the most economically advantageous from the point of view of the contracting authority; or (b) offers the lowest price”.
13.5 The correct wording i.e. ‘from the point of view of the contracting authority’ has been inserted following trade union lobbying.
13.6 However, Regulation 30(2) lists criteria to determine this point of view as “including quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales service, technical assistance, delivery date and delivery period and period of completion”.
13.7 The STUC believes that more enlightened public authorities will consider other issues to be economically advantageous, including basic skills delivered to workers providing the good or service, employment and training opportunities, equality, thereby using talents of all the workforce and addressing pockets of long-term unemployment. We believe the fact that such social and employment issues can be included in the list of criteria defining what might be “economically advantageous” should be stated clearly under Regulation 30(2).
Guidance
14.1 The STUC appreciates that the Scottish Procurement Directorate intends to publish guidance to accompany these regulations. It is disappointing that draft guidance could not have been published with this consultation – again, timescales will simply not allow for a further consultation in time for the transposition of the Directives.
14.2 It is our hope that the guidance will be published in the spirit of the Directive rather than the narrow interpretation suggested by the draft regulations. However, we fear that, once again, the SPD will be forced through time constraints to replicate the guidance currently being drafted by the OGC. This is unacceptable. We expect the SPD to take full advantage of the powers available to them and produce comprehensive guidance that recognises the full scope of the directives.
Conclusion
15.1 Throughout the consultation process trade unions have highlighted in written submissions the fact that the new Directives give additional scope for contracting authorities to include social, employment and environmental criteria in public contracts.
15.2 For example, Recital 33 of the new Public Sector Directive states:
“Contract performance conditions are compatible with this Directive provided that they are not directly or indirectly discriminatory and are indicated in the contract notice or in the contract documents. They may, in particular, be intended to favour on-site vocational training, the employment of people experiencing particular difficult in achieving integration, the fight against unemployment or the protection of the environment. For instance, mention may be made, amongst other things, of the requirements – applicable during performance of the contract – to recruit long-term job-seekers or to implement training measures for the unemployed or young persons, to comply in substance with the provisions of the basic International Labour Organisation (ILO) Conventions, assuming that such provisions have not been implemented in national law, and to recruit more handicapped persons than are required under national legislation”.
15.3 The new Directives also define “the most economically advantageous tender” on which a contract award may be based as being “from the point of view of the contracting authority”. This is a significant new development. It is given force in Regulation 30(1) but is not acknowledged in any OGC or Scottish Executive document as being either new or significant.
15.4 Neither the OGC or Scottish Executive has, at any stage, acknowledged that new rights to consider employment, social and environmental issues, beyond those that existed previously, are contained in the new Directives. The STUC has no wish to change the Directives, our desire is simply to see them implemented as adopted at European level. By denying proper recognition of the new social, employment and environmental opportunities, it is the OGC and Scottish Executive that, by default, seek to change the Directives.
15.5 Therefore, our key demand is to see, even at this late stage, proper recognition of the new social, employment and environmental clauses implemented as Scotland transposes the Directives. We seek such recognition in the texts of the Scottish regulations and the accompanying guidance. Our campaign on this issue will continue.
STUC November 2005