Procurement Reform Bill : Consultation response from the Scottish Fair Trade Forum

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1 The Scottish Fair Trade Forum 1 2 Thistle Court Thistle Street Edinburgh EH2 1DD Procurement Reform Bill : Consultation response from the Scottish Fair Trade Forum Overview The Forum welcomes this timely government response to some of the problems faced in achieving sustainable public procurement, both now and in the future. The Forum is pleased to see positive support from the government to promote compliance with social and labour law, including related national and international commitments. To this end, it is good to see steps being taken in support of variant bids, reducing tendering thresholds and support for assisted businesses alongside social reporting measures. However, it is the opinion of the Forum that the application of fair and ethical trading at all stages in the public procurement process should be made clear to public bodies awarding contracts. In particular, guidance on the legality and ways in which public bodies can stipulate a preference for fairly traded goods could be stronger. Whilst variant bids are a good way of informing authorities of alternative product sources, the plans set out in the SSPAP of 2009 and the provision of supported businesses needs to be made clear. To this end, and with a view to increasing the transparency of the procurement process, social reporting measures could also be stronger specifically including questions on what public bodies are doing to ensure they meet the Scottish Government s Fair Trade commitments. The response that follows outlines recent regional developments and precedents that could be used in the Scottish case, alongside point by point discussion on relevant elements of the bill.

2 Recent developments in Public Procurement at the European level Concerns surrounding the issue of Fair Trade and the public procurement process usually centre on the perception that ruling in favour of any one product or company is unlawful or an invitation to litigation requests from unsuccessful bidders. However, recent developments in the European Court of Justice in May 2012 outline clear rules regarding the specification of ethically traded products. In 2008, in the province of North Holland, a dispute erupted between the Dutch Government and the European Community. The source of dispute was a tendering procedure for a public contract for the supply and management of automatic coffee machines, with reference made by the Local Authority to products bearing labels such as Max Havelaar the Dutch Fairtrade sister label. The EC referred the Netherlands to the European Court of Justice in 2010 for non compliance with EU public procurement rules. The most significant outcome of this hearing however was the clarification by the ECJ that the inclusion of ethical/fair Trade considerations throughout the tendering process was legal and thus removed doubts over the legality of making production ethics a buying criterion. The Court made it absolutely clear that Local Authorities can proactively choose to buy Fairtrade and fairly traded goods, and that a public buyer has the right to demand Fair Trade or ethical standards and supplier chains. Clarifying this legal uncertainty means authorities can now stipulate their preference for higher ethical production as opposed to specifying a particular label or partner label from within the Fair Trade movement. With this precedent created, it is the opinion of the Forum that a sustainable future in public procurement should involve clear guidance on the legality and preference the government has to engage in ethical procurement. The first Fair Trade Nation the Welsh approach to public procurement The approach outlined above has been adopted by the Welsh Assembly Government as the first Fair Trade Nation in the world. Steps have been taken in procurement chains to include specific duties and contract criteria that encourage campaigning, buying or awareness raising activities by those in receipt of a contract. Indeed, steps have been taken in procurement chains that include specific duties on those in receipt of major contracts to contribute to national policy objectives i.e. inclusion of fairly traded products. In addition, the Welsh Assembly Government has provided freely available favourable guidance on Fair Trade procurement as well as providing information from the European Fair Trade Association (EFTA) regarding sustainable procurement. In a similar approach to the decision outlined above, the Welsh approach seeks to avoid specifying one label, yet clearly defines what they consider to be a fairly

3 traded product by referring to the definition of Fair Trade adopted by the European Parliament. Scotland has gone some way to foster this approach, specifically the Sustainable Procurement Action Plan which includes many steps in favour of sustainable procurement, but implementation has been patchy and inconsistent. With this in mind, the Forum supports strengthened guidance and rigorous auditing/reporting measures. Detailed responses Part 1: Public procurement processes are transparent, streamlined, proportionate, standardised and business-friendly 1.1 Impact Assessments The Government intends to carry out Impact Assessments regarding the viability of this bill once enacted and it is mentioned that these assessments will take into account environmental concerns and equalities. It is the opinion of the Forum that in line with the precedent set in the Sustainable Procurement Action Plan of 2009 of supporting ethical procurement and the firm commitment to Fair Trade policy, it would be appropriate that a further assessment be explicitly carried out in line with the government s international development obligations. 1.2 Proposed public duty on Effectiveness and Transparency The bill mentions the inclusion of a specific duty beyond the consideration of Best Value principles currently in place for public procurement, widening in scope to include effectiveness and transparency. This duty is aimed at removing some of the barriers that SMEs and social enterprises face in accessing contracts, and this approach is welcomed by the Forum. All aspects of the bill however need to address the issues that affect the inclusion of fairly traded goods. Knowledge about where Fair Trade products have been used would be essential, and procurement processes must be transparent in order to identify any problems of access for small wholesalers in the future of Scotland s procurement landscape. 1.3 Optional Prequalifications Optional prequalifications are a useful method by which public bodies may customise their procurement plans in line with their product/service needs. The

4 approach that the bill takes to include a comprehensive online portal of questions to which businesses may respond is a welcome inclusion to the procurement process. One additional option, for those public bodies wishing to engage in ethical purchasing (either through variant bids or other means), could be to include questions for businesses on the basis of their product/service traceability or lineage in accordance with Fair Trade principles. This may also serve to provide further consideration by those doing business with public bodies to engage with the concept of fairly traded goods. Part 2: Making it easier for business, particularly newer businesses, SMEs and the third sector to access public contract opportunities and sub-contracting requirements 2.1 Contract charges for bidding Currently there are charges in place when bidding for public contracts and it has been noted that these can deter smaller social enterprises or co operatives. Therefore, the Forum welcomes the call to drop charges as this will encourage smaller businesses to bid without anticipating lost revenue. 2.2 Value threshold for advertising Currently there are rules stipulating that for a tendering opportunity to be advertised in the official online portal for Scotland, the threshold at this level should be at least 50,000. The Forum believes however that lowering the level to 10,000 would give small businesses and the third sector the chance to be aware of, and potentially bid for, contracts that would otherwise pass them by. 2.3 Sub-contracting opportunities The bill proposes to make sub contracting opportunities known through the current Scottish online portal. In particular this is meant to include smaller businesses in larger contracts. This is something the Forum supports as it would give smaller businesses dealing in Fair Trade products the opportunity to join up to deliver on a contract, as well as providing ample opportunity for those engaged in ethical trading to take part in supplying products for larger contracts. Part 3: Smarter use of public procurement to encourage innovation and growth 3.1 Proposed environmental public duty (Climate Act 2009) The bill proposes to use its influence to create demand for new markets in both existing and new products. In this mission, the bill proposes to place a specific duty

5 on public sector bodies in line with targets from the Climate Act 2009 to encourage reduction in waste and carbon emissions. Whilst this is a welcome measure to reduce Scotland s carbon footprint and encourage innovative products, there needs to be clear guidance to support public bodies when dealing with potential policy conflict between carbon footprints and ethical products from developing countries and local products. 3.2 Developing mandatory variant bids The bill proposes that a higher degree of variant bids should be submitted alongside all general bids. This is something the Forum supports, particularly in line with recent European Union policy developments. By making variant bids mandatory, the bill can encourage behavioural change in consumption patterns; and a variant bid in this context is an alternative way of meeting the purchaser s requirements including a preference for ethical trading. Part 4: Taking account of social and environmental sustainability issues through public procurement 4.1 Behaviour change The Forum is pleased to see the commitment to encouraging behaviour change through procurement with reference to socially conscious markets and the promotion of fair and ethical trading. 4.2 Proposed reporting measures in relation to procurement The consultation document indicates a preference for a duty that asks public bodies to report on their global awareness and what steps are being taken to ensure social and environmental viability in supply chains. At the Forum, we support the emphasis on sustainable business, and would therefore welcome clarification on reporting on the social aspects of sustainability. We believe that the existence of ethical markets and fair trading is an important measure of how well public bodies are doing in procurement/encouraging awareness, and would therefore suggest that this be included and clarified in self reporting measures. October 2012