Publication - Research publication

Analysis of the impact and value of community benefit clauses in procurement

Published: 26 Jun 2015
Part of:
Research
ISBN:
9781785444777

This research draws on data from a large scale e-survey of public organisations and in-depth analysis of 24 individual contracts.

55 page PDF

1.9 MB

55 page PDF

1.9 MB

Contents
Analysis of the impact and value of community benefit clauses in procurement
1. Background and Brief

55 page PDF

1.9 MB

1. Background and Brief

Background

Community Benefit (CB) clauses have been a key strand of procurement policy and practice in Scotland since 2008[3] and there is an expectation that they will be routinely included in contracts. This commitment to CB clauses was outlined by John Swinney, Deputy First Minister, in March 2010 who stated:

"The first question that we should ask when developing any contract specification should be: 'Can we include a community benefit clause?"'.

The Procurement Reform (Scotland) Act 2014, which received Royal Assent in June 2014 and is summarised below, gives the expectation that CB clauses will be used wherever there is an appropriate a legal basis.

Procurement Reform (Scotland) Act 2014

The Procurement Reform (Scotland) Act 2014 establishes a national legislative framework for public procurement that supports Scotland's economic growth by delivering social and environmental benefits, supporting innovation and promoting public procurement processes and systems which are transparent, streamlined, standardised, proportionate, fair and business friendly.

The Act states that procuring organisations are required to act in accordance with the sustainable procurement duty. This requires procuring organisations to consider how the procurement process can:

  • Improve the economic, social, and environmental wellbeing of the authority's area.
  • Facilitate the involvement of small and medium enterprises, third sector bodies and supported businesses in the process.
  • Promote innovation.

Where a procuring organisation expects to have significant procurement expenditure in the next financial year, it must prepare a procurement strategy that sets out how the authority intends to carry out regulated procurements and include a statement on:

  • The use of community benefit requirements; and
  • How it consults and engages with those affected by its procurement.

Within the Act, a community benefit requirement is a contractual requirement imposed by a procuring organisation relating to:

  • Training and recruitment.
  • The availability of sub-contracting opportunities.
  • Other activities intended to improve the economic, social or environmental wellbeing[4] of the authority's area in a way additional to the main purpose of the contract[5].

The Act stipulates that where a procuring organisation is to let a contract valued at £4 million or above, it must consider during the design of the tender whether to impose CB requirements as part of the procurement.

Every procuring organisation is then required to prepare an annual procurement report at the end of each financial year on its regulated procurement activities.

In combination with the reform of European Commission legislation in relation to procurement which is making it clearer that CB clauses can be used, the Procurement Reform (Scotland) Act 2014 should lead to greater use of CB clauses going forward - making it critical that the impact they are having on the Scottish economy is understood.

In Scotland, the public sector spent £10.4 billion on goods, works and services in 2012/13[6]. This presents a significant opportunity and, particularly during a time of economic austerity, it is critically important that maximum benefit is achieved from this purchasing power.

Whilst the impetus behind the use of CB clauses has mainly come from public sector organisations, increasingly many contractors are also keen to commit to CB clauses as they align with and demonstrate contractors' wider commitment to society and enable them to deliver on their Corporate Social Responsibility (CSR) agenda[7]. Indeed, without their support and commitment to CB clauses, the opportunities would not be realised.

Previous Research

The research has been set in the context of the existing literature around how CB clauses have been used. The literature review is included in Appendix 1, but the main findings can be summarised as follows:

  • CB clauses have predominantly been used by public agencies to create targeted training and recruitment opportunities from the construction of new physical developments. Less common is the use of CB clauses in end-use, service contracts.
  • In terms of their aims, CB clauses have been used for economic aims (e.g. training, recruitment, SME and social enterprise opportunities) and social aims (e.g. the provision of community facilities). CB clauses have also varied in their direct and targeted aims versus indirect and broader aims.
  • Much of the literature has focused on how CB clauses can be used most effectively. Drawing on previous examples, good practice has been identified at each stage of the procurement process beginning with early consideration of CB clauses at the pre-tender stage to effective management and monitoring of CB clauses at the delivery stage.

Brief

The overarching purpose of this research is to assess the usage of CB clauses, and the impact these have on employment and skills development - with a particular focus on the benefits to more disadvantaged groups including young people, disabled people, women and ethnic minorities.

A number of specific objectives are set out in the Brief:

  • "A summary of policy and legal drivers for building CB clauses into contracting arrangements and ensuring their effective implementation.
  • Collect and analyse both qualitative and quantitative data on the value of CB clauses in relation to employment and skills activities. The elements of value to be assessed include:
    • The additionality in terms of employment and skills flowing from the CB clauses. At the national level in terms of the overall contribution to National Outcomes, but also for specific priority groups.
    • The sustainability of the added value achieved in terms of the sustainability of the jobs generated and the retention in jobs of individuals from priority groups benefitting initially from the CB clauses.
  • Recommendations on the monitoring and evaluation of these clauses in the medium to long term, which will require guidance on improvements to systems for collating data around the impacts of CB clauses."

Research Methods

The review carried out for the Procurement Reform (Scotland) Act 2014 concludes that too much of the existing evidence base consists of descriptive case studies with insufficient material on outcomes and impacts. To date, little work has been done around monitoring the impact of CB clauses, which is critical to provide an evidence base that will:

  • Help to evaluate existing approaches.
  • Provide a rationale for continuing, or potentially expanding the approach.
  • Demonstrate tangible benefits.

This study seeks to address this through delivering a robust evidence base in line with the aims and objectives articulated in the Brief. In broad terms this comprises of:

  • A review of literature on CB clauses and effectiveness, with a summary of this contained in Appendix 1.
  • A broad based e-survey of CB activity across Scotland. More than 350 organisations were invited to participate including:
    • All 32 local authorities.
    • Central government departments and key government agencies, e.g. Scottish Enterprise, Highlands and Islands Enterprise and Skills Development Scotland
    • Scotland's Colleges and Universities.
    • All Registered Social Landlords (RSLs).
    • Urban Regeneration Companies (URCs).
    • NHS central procurement.
  • The selection of 24 contracts for in-depth follow up. In each instance this involved interviews with the procuring organisation, the main contractor and (where appropriate) sub-contractors.
  • Analysis of CB clause usage, outcomes and impacts drawing on the e-survey and in-depth interviews.
  • The development of recommendations and conclusions around the monitoring and evaluation of CB clauses.

Report Structure

Following on from Chapter 1 - Background and Brief, which includes the summary of the policy and legal drivers for building CB clauses, the report is organised under the following chapters:

The report is supported by two separate appendices:

  • Appendix 1: Review of Literature on Community Benefits.
  • Appendix 2: Data for Contracts Examined In-Depth.

Contact

Email: Joanne Farrow