Public sector spending on goods and services across Scotland amounts to over £10bn per year. In procurement terms, Scotland’s Registered Social Landlords (RSLs) are public sector bodies and so must comply with all procurement legislation; this includes the new Scotland Procurement Reform Act (2014)which will become law by April, 2016 and will have implications for all RSLs.
What are the implications of the new legislation?
The new legislation brings changes that will have practical implications for RSLs as contracting authorities who purchase works, goods and services. These implications are:
- A much greater emphasis on a duty to procure sustainably (in social, economic and environmental terms) with a particular emphasis on an RSL’s local economy and the reduction of inequality in its community
- Formal procurement process is now required at lower thresholds (£2m for works and £50k for goods/services)
- Greater transparency with a mandatory procurement strategy when aggregate expenditure is greater than £5m per annum, a procurement report at the end of each financial year and a contracts register published on RSLs’ websites.
What will this mean for RSLs?
At first glance, RSLs will be concerned at the perceived increase in the amount of procurement bureaucracy necessary to meet the requirements of the new legislation. The most sensible first action is to take the time to assess the extent to which your organisation’s current procurement arrangements are compliant.
The biggest change relates to sustainable procurement and the duty that is now being placed on RSLs, requiring a concerted effort to engage with local suppliers, assess local capability and consider the social and economic benefits to their local economy.
But this duty being placed on RSLs does raise some questions:
- Are potential suppliers in RSLs’ local communities aware of how to access contract opportunities?
- Is it the responsibility of RSLs to undertake capacity building with local SMEs?
- What will it mean for the use of RSLs’ existing frameworks, which may not have been set up with the local economy in mind?
- Will there be an increase in the level of challenge from unsuccessful bidders who lose out to local suppliers?
- What if a successful supplier fails to deliver the expected community benefits by the end of a contract.
The lower thresholds should not be onerous for most RSLs who already use Public Contracts Scotland and this will help to drive good practice through a standardised sector wide approach. For those that do not use PCS, it would be prudent to identify how this capability can be established in your organisation.
The emphasis on greater transparency will create some short-term work developing your procurement management and updating strategies, policies, and reporting procedures to bring them into line with the new legislation.
And all RSLs will need to spend time briefing committee members and staff on the implications of the new legislation.
This is an opportunity to innovate
Whilst many may view the requirements of the new legislation as an additional administrative burden, there are others who will see the opportunity for RSLs to develop the role of community anchor. This might see the rise of commissioning RSLs that, as well as procuring what they need from local suppliers, also buy services from other RSLs, social enterprises, charities, local authorities, or other community based organisations. By so doing, RSLs spend their tenants’ rents in their tenants’ communities and create opportunities locally: fundamentally, more money is retained in RSLs’ local economies.
Consequently, RSLs should view the new legislation not as a threat but as a significant opportunity for wider role innovation that could really benefit local communities, local economies and local people.
MainStreet works with RSLs to optimise procurement
Mark McLintock, a Director at MainStreet Consulting, has worked with many RSLs and recently led a project with a Glasgow-based RSL reviewing their procurement procedures. Mark and his colleagues assessed compliance with the new legislation, developed a new suite of procurement documentation, examined contract management and drafted an action plan in place for improving procurement performance.
Mark is the principal author of a report examining procurement in the affordable housing sector, published by the Scottish Government in March 2011.
Mark is also a committee member of Ore Valley Housing Association and is Chair of their CHAP project, a £35 district-heating project.