Procurement activity: annual report 2022 to 2023

2. Overview of procurement activity

2.1 Summary of procurement activity

All contracts regulated under the 2014 Act (£50k or more for goods or services, £2 million or more for works) must be advertised on the PCS website. For those procurements with a value of less than £50k for goods and services and less than £2 million for works, there is no requirement to use PCS but many still do. During the 2022 to 2023 financial year, there were 5,176 registrations on PCS. This included individual buyer and supplier user registrations, and organisation registrations.

According to PCS’ usage report for 2022 to 2023, 14,895 new public sector contract opportunities were advertised. Of those new opportunities, 91.1% (13,581 total) were low value contracts, of which 77.7% (11,579 total) were Quick Quotes (a simplified process for procuring lower value contracts). A total of 18,079 suppliers were awarded contracts through PCS in 2022 to 2023. Of these, 71.9% (13,004 total) were Scottish,^[10] Where supplier size is known, and where suppliers have registered to PCS with a Scottish-based business address.› 77.3% (13,979 total) were Small and Medium-sized Enterprises (SMEs),^[11] Where supplier size is known.› and 60.2% (10,894 total) were Scottish SMEs.^[12] Where supplier size and location is known.›

In their annual procurement reports, 129 public bodies (97%, n=133) provided information on the number and size of their regulated procurements. Across these 129 public

bodies, 7,025 regulated contracts were awarded.^[13] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, four of which had not provided this data.› The total reported regulated spend amounted to £9.2 billion.

7,025

According to information provided by 129 public bodies in their annual procurement reports, a combined total of 7,025 regulated contracts were awarded by these public bodies.^[14]

The procurement activity of different public bodies reflected a diversity of goods, services and works:

• local government: health and social care, active travel, and housing support;
• central government and other significant bodies: employee assistance, catering, payroll, legal, and digital services;
• universities and colleges: IT, HR, catering, insurance, facilities, and security services;
• health sector: agency staff, patient transport, information systems, and vaccines; and
• registered social landlords: maintenance, retrofit housing projects, EV charging points, and housing developments.

Emerging this year was the added difficulty to public spending of the cost of living crisis. Twenty-six public bodies’ annual procurement reports (19.5%, n=133) contained information on the impact of the cost of living crisis on their procurement activities. Public bodies noted specific difficulties around the highest inflation rate in 40 years, rising costs of raw materials, and an energy price shock as putting added pressures on their procurement spending. These pressures occurred as they were still recovering from the impacts of the COVID-19 pandemic.

Aberdeen City Council noted in their annual procurement report that they had been unable to procure some council services due to the difficult position of the market:

The Council experienced significant changes to the financial environment in the reporting period, challenges in 2022/23 included being unable to allocate out to Council services the procurement budget savings identified of £1m due to the market position for many goods and services. The rate of inflation at a 40-year high affected the cost of goods and services to the Council, whilst the rate of inflation and RPI fell slightly in November 2022, the situation remained challenging as high inflation impacted on the costs of supplies and services, fuel, and energy.”^[15]

According to the Hub, total known procurement spend in 2022 to 2023 was £16.6 billion, of which £8.9 billion (53.4% of total known procurement spend) was with suppliers in Scotland.^[16] Where they have registered a Scottish-based business address.›

£16.6 billion

Known Scottish public sector procurement spent was £16.6 billion, of which £8.9 billion was spent in Scotland alone.

Examples of the goods, works and services procured from suppliers outwith Scotland include pharmaceuticals, medical and surgical equipment suppliers, civil engineering and construction of buildings, and computer systems integration.^[17] These examples represent business activities where at least £400 million of procurement spend outwith Scotland was reported. The examples were drawn from the Hub’s data, and cover procurement spend with suppliers not registered to a Scottish address.›

Figure 3 shows the breakdown of known procurement spend within Scotland by sector for each year from financial year 2017 to 2018.

Source: Scottish Procurement Information Hub (the Hub)

Generally, the pattern of known public procurement spend distribution among the sectors appears to be returning to pre-pandemic levels. However, there are two factors which have impacted the distribution of procurement spend over the year. First, there has been a general increase in spending across each sector apart from central government bodies. There are several potential causes for this. Reported procurement spend has increased each year since reporting began.^[18] Previous reports are available here: 2018-2019, 2019-2020, 2020-2021, 2021-2022.› Second, the increased inflation seen during the cost of living crisis may have further pushed up spending. Several public bodies noted this in their annual procurement reports.

According to data recorded in the Hub, the financial year 2022 to 2023 saw central government’s known procurement spend decrease by 39.0% compared with the previous year (from £2.1 billion to £1.3 billion). This was largely due to the nationalisation of rail services on 1 April 2022.

On the nationalisation of rail services, Transport Scotland noted in their annual procurement report that:

Transport Scotland spent over £800 million on procured contracts during the reporting period. This value is lower than in recent financial years due to a reduction in spend on COVID-19 pandemic recovery as well as the nationalisation of Scotrail Trains Limited in April 2022 meaning that provision of this service is no longer classed as a procured contract.”^[19]

2.2 Impact on the economy

Using the latest Scottish Government Input-Output model of the economy, it is estimated that the £16.6 billion of known procurement spend in the financial year 2022 to 2023 supported around £13.7 billion of activity, around 120,000 full-time equivalent jobs and contributed around £7.5 billion to Scottish GDP within the wider domestic economy when taking into account supply chain and re-spending of wage effects. This represents around 4.4% of the Scottish economy. It should be noted that these effects are estimated using a pre-Covid model of the Scottish economy.^[20] For more information about the development and use of Scottish Government Input-Output tables please see the Scottish Government website.›

The following sections will examine this impact in more detail. This will be based on the four objectives outlined below.

During financial year 2022 to 2023, the Public Procurement Group (PPG), comprising the heads of Procurement Centres of Expertise and senior Scottish Government procurement officials, commissioned a cross sectoral working group to work collaboratively to develop the Public Procurement Strategy for Scotland 2023 to 2028 (PPSS). The PPSS sets out the vision and ambition for public procurement in Scotland in respect to wider policy objectives.

The vision statement of the PPSS is:

“putting public procurement at the heart of a sustainable economy to maximise value for the people of Scotland.”

The objective of the PPSS is to deliver public procurement that is:

1. good for businesses and their employees

2. good for places and communities

3. good for society

4. open and connected

2.3 Good for businesses and their employees

The Public Procurement Strategy for Scotland 2023 to 2028’s objective “good for businesses and their employees” is to maximise the impact of procurement to boost a green, inclusive and wellbeing economy, promoting and enabling innovation in procurement.^[21] This definition can be found in the PPSS: Public procurement strategy: 2023 to 2028 – gov.scot›

2.3.1 Small and Medium-sized Enterprises (SMEs)

SMEs are businesses with less than 250 employees.^[22] This definition can be found in the Scottish Government’s SME and third sector action plan 2024-2026.› According to data reported to the Hub, a total of £15.0 billion was spent with suppliers whose business size was known in financial year 2022 to 2023. According to data reported to the Hub, of the £8.9 billion of known procurement spend in Scotland, suppliers’ business size was known for £7.7 billion, of which £4.7 billion was spent with SMEs. This means that for every pound of known procurement spend in Scotland, 61 pence went to a SME. The largest share of public procurement spend with SMEs in Scotland where supplier size was known went to medium enterprises (£3.0 billion, or 38.8% of total), followed by small suppliers (£1.3 billion, or 16.3% of total) and micro suppliers (£459.1 million, or 6.0% of total).

£4.7 billion

According to data reported to the Hub, known public procurement spend in Scotland totalled £7.7 billion where business size was known. Of that, 61.1% (or £4.7 billion) went to a SME.

Figure 4 provides a full breakdown of the proportions of known procurement spend in Scotland that went to suppliers of different sizes, as well as the numbers of suppliers represented by each size category. Micro businesses made up the smallest proportion of spend in Scotland (6.0%), but represented the largest proportion of suppliers on the Hub (41.2%). Overall, SMEs represented the majority of known procurement spend within Scotland (61.1%), despite representing only 40.2% of Scottish turnover (as provided in the Businesses in Scotland data for 2023).^[23] The Companies Act 2006 defines turnover as ‘the amounts derived from the provision of goods and services, after deduction of (a) trade discounts, (b) value added tax, and (c) any other taxes based on the amounts so derived’.

Sources: Scottish Procurement Information Hub and Businesses in Scotland data for 2023

According to the Hub, there has been a trend towards SMEs’ proportion of known Scottish procurement spend increasing each year since the pandemic year of 2020 to 2021, as indicated in Figure 5. Spend with Scottish SMEs (where their location and size was known), was reported as £4.2 billion in last year’s report, whereas the total spend with SMEs in Scotland in financial year 2022 to 2023 was £4.7 billion, where business size and location was known.^[24] Public procurement spend is considered to be in Scotland where suppliers have registered a Scottish-based business address.› This was an increase from 54.9% of procurement spend in Scotland where business size and location was known, to 61.1%.

Source: Scottish Procurement Information Hub (the Hub)

Sub-contracting is an important way for SMEs to be involved in public contracts. Fifty-five public bodies (41.4%, n=133) provided information in their annual procurement reports about the value of contracts sub-contracted to SMEs during the year. Across these 55 bodies, the reported combined value of contracts sub-contracted to SMEs was £166.9 million.^[25] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 78 of which had not provided this data.›

During the reporting year, the Scottish Government also continued to provide part-funding to the Supplier Development Programme (SDP). The SDP was established to improve the capacity and capability of Scottish businesses interested in supplying to the Scottish public sector through training, advice, guidance and Meet the Buyer events. The SDP’s annual report for 2022 to 2023 shows that 1,988 new registrations were made to the programme during the year, bringing the total number of registrations to 21,583.

2.3.2 Third sector organisations

The Scottish Government defines the third sector as organisations (other than bodies established under an enactment) that exist wholly or mainly to provide benefits for society or the environment.^[26] This is the definition provided in the procurement SME and third sector action plan 2024-2026.› For the purposes of this report, the third sector includes charities, social enterprises and voluntary groups.

To gather accurate information on procurement activity in Scotland with third sector organisations in financial year 2022 to 2023, the list of suppliers receiving payment from a public body under a public contract (as noted in the Hub data) was linked with data on all of the known social enterprises in Scotland (gathered as part of the Social Enterprise Census). This was combined with the Hub’s data on the registered charity status of individual suppliers to establish, as much as possible, where payment for supplying a public sector contract went to third sector suppliers specifically. This was the approach adopted in the last report.

However, it is worth noting that the Hub does not verify whether a supplier receiving payment for supplying a public sector contract is a voluntary group. Additionally, the steady rise in the number of social enterprises identified since 2015 in the Social Enterprise Census suggests that there are likely to be new organisations which have been formed since the most recent census in 2021, or which were not included for other reasons. As such, the figures presented are an estimate.

The total known spend through public procurement in Scotland with third sector organisations in financial year 2022 to 2023 was estimated to be £1.2 billion. This accounted for an estimated 13.3% of all known Scottish public body procurement spend in Scotland, an increase from the estimated 12.5% of procurement spend in Scotland in financial year 2021 to 2022 reported in the last report.

£1.2 billion

Third sector organisations received an estimated £1.2 billion (or 13.3%) of known public procurement spend in Scotland during the reporting year.

In their annual procurement reports, public bodies outlined a variety of approaches to encouraging engagement between third sector organisations and their procurement activities. NHS Highland highlighted their engagement with third sector organisations and their ‘Community Benefits Gateway’ to promote their wider strategic objectives:

We engage with Third Sector organisations to promote the ‘Community Benefit Gateway’ and increase visibility of local projects, working closely with our colleagues in Public Health to support local social mitigation plans. NHS Highland Procurement contributed directly and significantly to the development of our Anchors Strategic Plan 2023-26 to deliver our three strategic objectives:

• Deliver the best health & care outcomes for our population
• Be a great place to work for our people
• Create value by working collaboratively to transform the way we deliver health and care.”^[27]

2.3.3 Supported businesses

Supported businesses are defined as organisations whose main aim is to integrate disabled^[28] The Equality Act 2010 defines as: “A person (P) has a disability if— (a) P has a physical or mental impairment, and (b) the impairment has a substantial and long-term adverse effect on P’s ability to carry out normal day-to-day activities.”› or disadvantaged people, both socially and professionally, and whose workforce comprises at least 30% disabled or disadvantaged people.^[29] There is no authoritative definition of “disadvantaged”. However, the EU Public Procurement Directive 2014/24/EU describes disadvantaged persons as: “The unemployed, members of disadvantaged minorities, or otherwise socially marginalised groups.”›

During financial year 2022 to 2023, 119 public bodies (89%, n=133) provided information detailing how they facilitated involvement from supported businesses.^[30] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 14 of which had not provided this data.› From this engagement, 22 regulated contracts were awarded to supported businesses. One hundred and seven public bodies (80%, n=133) provided data on the value of their total spend with supported businesses, worth a combined total of £22.8 million.^[31] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 26 of which had not provided this data.› Of this total, the majority was spent by local government bodies (£14.8 million). This figure is less than the £27.9 million reported as spent with supported businesses in financial year 2021 to 2022 but is higher than the £13.3 million reported as spent in financial year 2020 to 2021.

£22.8 million

According to information provided by 107 public bodies in their annual procurement reports, a combined total of £22.8 million of public procurement spend in Scotland went to supported businesses^[32] from these public bodies.^[33]

In their annual procurement report for 2022 to 2023, the University of Strathclyde outlined the specific procurements which they reserved for supported businesses during the financial year:

During the reporting period, University Procurement recorded spend of circa £400,000 with 4 Supported Businesses.^[34]

2.3.4 Spend in Scotland by supplier business sector

The Standard Industrial Classification was used to provide a breakdown of the business sectors of Scottish public procurement spend in financial year 2022 to 2023.^[35] Until the 2021 to 2022 report, the business categories were based on the “vCode” classification, which was developed and is owned by the third party supplier responsible for providing the Scottish Procurement Information Hub.› According to the Hub, the largest share of spend in Scotland where business size was known (£2.4 billion, or 27.1% of spend) was with suppliers operating in the construction sector, followed by the human health and social work activities sector (£2.0 billion, 22.8%). Meanwhile, known spend with suppliers in the transportation and storage sector decreased from £1.3 billion (14.6%) in 2021 to 2022 to £466.0 million (5.3%) in 2022 to 2023 following the nationalisation of rail services.

Table 1:

Scottish public body procurement spend in Scotland by supplier business sector (where supplier sector is known and could be matched with the Standard Industrial Classification)

Business sector	Value of spend	% of spend
Accommodation and food service activities	£105,400,392	1.2%
Administrative and support service activities	£1,091,934,516	12.3%
Agriculture, forestry and fishing	£59,485,925	0.7%
Arts, entertainment and recreation	£123,764,508	1.4%
Construction	£2,400,366,722	27.1%
Education	£129,518,370	1.5%
Electricity, gas, steam and air conditioning supply	£71,876,244	0.8%
Financial and insurance activities	£116,671,202	1.3%
Human health and social work activities	£2,018,459,550	22.8%
Information and communication	£134,440,131	1.5%
Manufacturing	£156,579,180	1.8%
Mining and quarrying	£79,834,241	0.9%
Other service activities	£24,806,231	0.3%
Professional, scientific and technical activities	£779,965,539	8.8%
Public administration and defence; compulsory social security	£46,127,209	0.5%
Real estate activities	£74,755,316	0.8%
Transportation and storage	£465,958,467	5.3%
Water supply; sewerage, waste management and remediation activities	£243,519,407	2.8%
Wholesale and retail trade; repair of motor vehicles and motorcycles	£721,956,835	8.2%
Total	£8,845,419,985	100.0%
Source: Scottish Procurement Information Hub (the Hub)

2.3.5 Fair Work First

Procurement exercises provide an opportunity for public bodies to promote high quality and fair work practices among suppliers towards their employees and the wider labour force.^[36] The statutory guidance under the 2014 Act lays out public bodies’ duties towards Fair Work First, and its benefits.› In May 2022, the Scottish Government published updated guidance under the Procurement Reform (Scotland) Act 2014 to include a chapter on Fair Work First in procurement and to increase understanding of how Fair Work First requirements should, and can, be included in public procurement. Due to come into effect after the 2022 to 2023 financial year, the specific practices encouraged included payment of the real Living Wage, channels for effective workers’ voice, no inappropriate zero-hour contracts, addressing workplace inequalities, flexible and family friendly working practices, and opposing fire and rehire practices.

Further, an update to the Scottish Government’s Fair Work First guidance was published near the end of the financial year, in March 2023. This guidance was designed to encourage the adoption of fair work principles in public funding across Scotland, building on the Scottish Government’s commitment to include Fair Work First (including payment of the real Living Wage) in its contracts and grants.

In the 2022 to 2023 financial year, 112 public bodies (84%, n=133) provided evidence of Fair Work First criteria being used in their regulated procurements.^[37] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 21 of which had not provided this data.› One hundred and six bodies (80%, n=133) included information on the number of regulated contracts awarded during the financial year which contained a scored Fair Work First criterion.^[38] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 27 of which had not provided this data.› This totalled 2,889 regulated contracts. Ninety-three bodies (70%, n=133) provided information on the number of unique suppliers committed to paying the real Living Wage in delivering their regulated contracts, accounting for 2,694 unique suppliers overall.^[39] This figure was drawn from analysis of the 133 annual procurement reports submitted for analysis, 40 of which had not provided this data. This figure will likely reflect an element of double counting. This is because while each public body provides information on their number of unique suppliers, it is likely that at least some suppliers were awarded regulated contracts by more than one public body during that year; these suppliers would therefore be counted more than once.›

2,889

According to information provided by 106 public bodies in their annual procurement reports, a combined total of 2,889 contracts with a scored Fair Work criterion were awarded by these public bodies.^[40]

The Scottish Public Pensions Agency outlined their approach to Fair Work First in their annual procurement report, highlighting their efforts to integrate these principles into their procurement processes.

• Embed Fair Work First (FWF) guidance in our tender process where relevant and proportionate, and work with our contractors to promote fair working practices
• Monitor FWF commitments made by our suppliers through our contract management processes
• Follow Scottish Procurement Policy Note 3/2021 – Implementation of Fair Work First in Scottish Public Procurement. This explains how public bodies should apply the FWF criteria and follow regulated procurement processes. SPPA embeds FWF guidance in all relevant tender documentation in order to promote fair work practices and ensure the payment of the real Living Wage
• Ensure appropriate contract management handover packs to support contract managers monitor FWF practices as part of the regular meetings”^[41]

2.3.6 Prompt payment

Prompt payment is important to the sustainability and resilience of supply chains. In April 2022, Scottish Procurement Policy Note SPPN 2/2022 was published, providing details of how public bodies should embed prompt payment in their supply chains. This replaced the previous SPPN on prompt payment from 2009. It asked public bodies to ensure that contracts are awarded to bidders who have good payment performance history and systems in place so that their full supply chain is paid on time and within the terms of the contract. The SPPN also noted that these prompt payments were critical for the ongoing economic recovery.

In financial year 2022 to 2023, 102 public bodies (77%, n=133) provided data on the number of regulated contracts containing prompt payment contract terms.^[42] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 31 of which had not provided this data.› This totalled 4,218 regulated contacts.

4,218

According to information provided by 102 public bodies in their annual procurement reports, a combined total of 4,218 regulated contacts were awarded which included contract terms requiring the prompt payment of invoices.^[43]

Public bodies reported on their performance in prompt payment of their supply chains through their annual procurement reports. One hundred and two public bodies (77%, n=133) provided information on the number of regulated contracts awarded in financial year 2022 to 2023 containing a requirement for the prompt payment of invoices in their supply chains. This totalled 4,218 regulated contracts.^[44] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 31 of which had not provided this data.›

Public bodies also provided evidence in their annual procurement reports about their own prompt payments. One hundred and seven public bodies (80%, n=133) provided data on their invoices having been paid on time.^[45] By “on time”, we mean within the time period set out in the contract terms.› Across these 107 public bodies, the average percentage of invoices paid on time was 89%.^[46] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 26 of which had not provided this data.›

2.4 Good for places and communities

The Public Procurement Strategy for Scotland 2023 to 2028’s objective “good for places and communities” is to maximise the impact of procurement with strong community engagement and development to deliver social and economic outcomes as a means to drive wellbeing by creating quality employment and skills.

2.4.1 Spend in Scotland by supplier location

In financial year 2022 to 2023, Scottish public bodies awarded contracts to suppliers from communities across Scotland.

Figure 6 shows the distribution of procurement spend received by suppliers based in each of Scotland’s 32 local authority areas. According to the Hub, of the £8.9 billion of known public procurement spend in Scotland, suppliers based in the City of Edinburgh received the most public procurement spend (£1.4 billion, or 16.3% of known public procurement spend in Scotland), followed by Glasgow City (£1.3 billion, or 14.4% of known public procurement spend in Scotland). The next largest recipient of procurement spend was North Lanarkshire (£905.9 million, or 10.2% of total), then Perth and Kinross (£429.9 million, or 4.9% of total) and Aberdeen City (£419.2 million, or 4.7% of total).

Source: Scottish Procurement Information Hub (the Hub)

According to the Hub, of the £8.9 billion of known public procurement spend in Scotland, the local authority areas which received the largest proportion of known public procurement spend in Scotland largely reflected the areas with the most Scottish turnover, according to the Businesses in Scotland data for 2023. Suppliers registered in the City of Edinburgh, Glasgow City, North Lanarkshire, and Aberdeen City received the largest proportion of known public procurement spend. Meanwhile, businesses in Glasgow City generated the largest proportion of Scottish turnover (16.1% of total Scottish turnover), followed by the City of Edinburgh (12.4%), and Aberdeen City (10.9%). North Lanarkshire was the area with the fifth largest turnover (5.3% of total Scottish turnover), as can be seen in Figure 7.

Sources: Scottish Procurement Information Hub and Businesses in Scotland data for 2023

Figure 8 shows that the local authority areas who had the least amount of known procurement spend frequently had a very high proportion of procurement spend with SMEs, where business size was known. Na h-Eileanan Siar and the Shetland Islands, the two local authority areas with the least amount of known procurement spend (£21.6 million and £36.6 million respectively) both had 99.0% of their known procurement spend with SMEs. The next two smallest known procurement spend areas, West Dunbartonshire (£54.7 million total procurement spend, 81.7% with SMEs) and Moray (£55.8 million total procurement spend, 69.4% with SMEs) followed the same pattern.

2.4.2 Spend in Scotland by SIMD quintile

The Scottish Index of Multiple Deprivation (SIMD) classification allows us to gauge the extent to which suppliers based in communities across the socio-economic spectrum are delivering public contracts and benefiting from public sector procurement spend.^[47] Note that the analysis draws on the postcodes of where suppliers are registered as based, and therefore does not uncover the onward impacts of the spend itself. Therefore, what is being measured is the extent to which public procurement suppliers are based in areas of greater or lesser deprivation. To gather accurate information on deprivation in suppliers’ local areas in financial year 2022 to 2023, the list of suppliers receiving payment from a public body under a public contract (as noted in the Hub data) was linked with public SIMD data, broken down by postcodes. However, not every supplier’s postcode could be linked between these two datasets. This is the same method used in the last report^.

According to the Hub, the total known public procurement spend in Scotland was £8.9 billion. Of that total, the level of deprivation in suppliers’ local areas^[48] Deprivation statistics are calculated down to the level of ‘data zones’, of which there are 6,976 in Scotland.› was known for £8.7 billion. Of this £8.7 billion, £3.1 billion (or 34.9%) was awarded to suppliers in the 40% most deprived areas. This is an increase from 33.2% (£2.9 billion) of known public procurement spend with the same reporting public bodies in the last report. Suppliers in the 60% most deprived areas received £4.8 billion (or 54.6%) of known public procurement spend in Scotland.^[49] Public procurement spend is considered to be in Scotland where suppliers have registered a Scottish-based business address.›

£4.8bn

The level of deprivation in suppliers’ local areas was known for £8.7 billion of public procurement spend in Scotland. Analysis showed that 54.6% (or £4.8 billion) of that spend went to suppliers based in the 60% most deprived areas.^[50]

Figure 9 compares known public procurement spend in Scotland by SIMD with the total number of businesses and turnover.^[51] This data is from the Businesses in Scotland dataset, but is not published publicly. › Public procurement spend within SIMD quintiles showed similar patterns as with the number of businesses and Scottish turnover. The only exception was in the most deprived quintile, which received 19.3% of known public procurement spend in Scotland in financial year 2022 to 2023, whereas they had 12.8% of total businesses, and accounted for 14.3% of total Scottish turnover.

Sources: Scottish Procurement Information Hub, Businesses in Scotland data for 2023, Scottish Indices of Multiple Deprivation (SIMD)

2.4.3 Spend in Scotland by urban/rural classification

The Scottish Government’s urban/rural classification is useful in building an understanding of the extent to which public procurement spend is helping to drive economic growth in all kinds of communities. This data is recorded in the Hub.

As seen in Figure 10, 90.0% of known public procurement spend in Scotland was in urban areas (large urban or other urban categories, where urban/rural classification was known).^[52] Note that in Figure 10, urban areas include large urban areas, other urban areas, accessible small towns, remote small towns and very remote small towns. Rural areas comprise accessible rural areas, remote rural areas and very remote rural areas.› This is similar to the 91.1% of known procurement spend in urban areas recorded in the previous year’s report. In more detail, the total spend in large urban areas was 51.1% of all known Scottish public procurement spend, followed by known spend in other urban areas (33.8%). Rural areas (accessible rural, remote rural and very remote rural) constituted 10.0% of total known Scottish public procurement spend.

Source: Scottish Procurement Information Hub (the Hub)

2.4.4 Proximity of spend in Scotland

In their annual procurement reports, public bodies note the role of procurement in strengthening their local economies. The Hub tracks the contracts that public bodies procured from suppliers based in their local area.

During the reporting year, 37.5% of all known Scottish public body procurement spend in Scotland where supplier location was known was with suppliers based within the local authority area of the purchasing body. This amounted to £3.3 billion of known procurement spend in financial year 2022 to 2023.^[53] Spend is classed as local if the purchasing authority is based in the same local authority area as the supplier, whereas it is classed as elsewhere if they are in different local authorities. The analysis is dependent on known supplier postcodes, which are matched to the list of postcodes in the local authority area in which the customer is based. The local authority area is defined by the ONS.›

Compared to the last report, this represents a decrease in both amount and proportion of total procurement spend in Scotland made within the local area of the purchasing body. In 2021 to 2022, known proximal spend was £3.8 billion, or 43.3% of total known spend in Scotland.

£3.3bn

According to data from the Hub, £3.3 billion (or 37.5% of £8.9 billion total) of public sector procurement spend in Scotland was with suppliers based within the local authority area of the purchasing body.

2.4.5 Community benefits

Scottish public bodies use community benefit requirements within their procurement exercises to deliver a wide range of economic, social and environmental benefits to communities across Scotland. Under the 2014 Act, public bodies must consider whether to include community benefit requirements in all contracts with an estimated value of £4 million or more.

One hundred and eighteen public bodies (89%, n=133) provided information on community benefits requirements in their procurement exercises. From these public bodies, a total of 199 regulated contracts with a value of £4 million or more and a further 1,565 regulated contracts with a value of less than £4 million were awarded with community benefits requirements during the financial year 2022 to 2023.^[54] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 15 of which had not provided this data.›

Ninety-one public bodies (68%, n=133) provided information on the types of community benefits delivered. As shown in Figure 12, the most common types of community benefits delivered were apprenticeships (as reported by 79% of the 91 public bodies providing the relevant information), work placements (78%), and training and qualifications (68%).^[55] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 42 of which had not provided this data.›

Source: Analysis of public bodies’ annual procurement reports for 2022 to 2023

As part of its commitment to meet local priorities using procurement and community benefits, Dumfries and Galloway Council outlined in their annual procurement report how they coordinated with a variety of stakeholders to create a community benefits “Wishlist”.

“Community benefits are built into the Council’s procurement processes and have been designed to bring added value to local communities when the Council tenders for a contract by ensuring that by winning a tender for Goods, Works and / or Services, a Supplier gives something back to the people of Dumfries and Galloway directly. As part of our commitment to driving uptake of Community Benefits, the Council reviewed how Community Benefits are delivered with [the] aim of improving the process for both community groups to communicate their needs and Suppliers to be matched to supporting or providing these needs. To encourage and promote effective collaboration and partnership working between the Council, the local communities that it supports and its Supply Chain, Procurement engaged with stakeholders, suppliers, and community groups to develop and launch a Community Benefits Wishlist (“the Wishlist”). The Wishlist allows us to share the requests for support that our Council receives from groups across the Dumfries and Galloway region with Suppliers to allow them to see the range of community benefit opportunities that they may be able to support as part of their Community Benefit commitment. The Wishlist also helps the procurement team to actively match appointed suppliers and contractors with local community groups who have expressed a ‘wish’ to receive support such as project specific assistance, equipment/materials donations, financial support, sponsorship, volunteering hours, work experience, mentoring and so on. It is still early days for the Wishlist, and the procurement team continues to work on developing and refining the format and points basis to ensure that the needs of local communities are best served and make it easier for suppliers and contractors to fulfil the commitment they made to delivering Community Benefits as part of their tender and contract.”^[56]

2.5 Good for society

The Public Procurement Strategy for Scotland 2023 to 2028’s objective for “good for society” is to ensure that public sector procurement is efficient, effective and forward thinking through continuous improvement to help achieve a fairer and more equal society.

2.5.1 Equal treatment and non‑discrimination

Public bodies are required to carry out their regulated procurement activities in line with general duties of equal treatment and non-discrimination.^[57] This is defined within the Procurement Equality Duties. › This helps to encourage competition by ensuring that a wide range of potential suppliers are able to bid for public contracts – and this, in turn, enables the Scottish public sector to deliver better value for public money.

The 2014 Act does not require public bodies to report on how they have carried out their regulated procurement activity in line with equal treatment and non-discrimination duties. However, in financial year 2022 to 2023, 123 public bodies (92%, n=133) provided this evidence.^[58] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 10 of which had not provided this data.› This was an increase from financial year 2021 to 2022, when 80% (106, n=132) of submitted annual procurement reports included information on how these duties had been met.^[59] These figures were drawn from analysis of the 132 annual procurement reports submitted for analysis, 26 of which had not provided this data.›

Examples of this evidence included: the use of Equality and Human Rights Impact Assessments (EQHRIAs) for regulated procurements, ensuring that corporate policy and procurement manuals were aligned with equal treatment and non-discrimination duties, and requiring internal justification of “single source” suppliers (using a single supplier when others are available).

2.5.2 Climate change

The Sustainable Procurement Duty requires public bodies to consider, among other things, how they can improve the economic, social and environmental wellbeing of their area.^[60] The Sustainable Procurement Duty is included in the 2014 Act. › Public bodies also use their annual procurement reports to detail how their regulated procurements are used to address climate issues.

In June 2022, the Scottish Government published the Scottish Procurement Policy Note SPPN 3/2022. It strengthened the commitment for public bodies to use their public procurement spend to ‘support climate and circular economy ambitions’, as well as their reporting duties towards these commitments. This encouraged better alignment between public bodies’ annual procurement reports and their climate change reports.

The Sustainable Procurement Tools website, which is designed to help public sector organisations identify and address how they can optimise the economic, social and environmental outcomes of their procurement activity, was expanded in the reporting period. Further, in June 2022, the Circular Procurement and Supply eLearning was added to the suite of tools.^[61] More information on the number of completions of these eLearning modules is provided in section 2.6.3 of this report: Improving procurement capability and professional development.›

One hundred and seven public bodies (80%, n=133) who provided an annual procurement report in financial year 2022 to 2023 provided evidence addressing environmental wellbeing and climate change through their public procurement activities. Examples of the ways in which public bodies said they had carried out their procurement activity with regard to environmental well-being and climate change included:

• environmental considerations in tender documentation, including tender scoring criteria;
• aligning corporate climate and economic development initiatives;
• using climate action plan templates.
• using the Scottish Public Procurement Prioritisation Tool to test for environmental factors;
• procurement staff training, including the Climate Literacy for Procurers eLearning modules provided by the Scottish Government; and
• asking suppliers to provide a Climate Change Plan as part of the selection stage for contracts deemed to be “relevant” or “priority” contracts.^[62] These examples were drawn from analysis of the 133 annual procurement reports submitted for analysis, 26 of which had not provided this information.›

Stirling Council’s annual procurement report provided a case study to illustrate how environmental concerns were addressed throughout a specific procurement process. This procurement process was for the delivery of bicycle and pedestrian paths across the council’s area.

Case Study: Development of Walk Cycle Live Stirling (WCLS) – Construction, ref. SC2122-0057

“The work was to create two high quality active travel corridors with enhanced placemaking opportunities at key locations on the routes. The development provided sustainable travel options which prioritise journeys on foot or by bike. These corridors connect Stirling University, Forth Valley College, local schools, communities, employment centres, transport hubs, leisure, recreation and tourism opportunities with the wider Stirling and Clackmannanshire region and the city centre.

Included within the ITT was the following scored question weighted 10%:

Please detail how your organisation will respond to the Climate Emergency. Your response should include (but not be limited to) the following:

• How your organisation will commit to reducing greenhouse gas emissions in relation to the delivery of this contract. For example, direct emissions from heating, electricity use and transport, and indirect emissions from the extraction of raw materials, processing, manufacturing, delivery and distribution of goods and services …

As a result, the suppliers committed to the following … :

• Transport and Vehicle emissions: The supplier reviewed the type of vehicles that they use and committed to renewing their fleet of vehicles that will be used in delivery of this project to a Euro 6 standard engine. They replaced their three-year-old 7.5t tipper with a brand-new Euro 6 engine model. They also acquired a new 10t tipper, 3 20t tippers and 2 tractor loader units all to this standard.
• … The supplier reduces their carbon footprint by monitoring and understanding energy use throughout the Company. They participate in EU ETS, a significant amount of their energy use data is subject to external audit.
• Energy Use Reports crossing Liquid fuels, gas and electricity are produced monthly. There is particular emphasis on their Asphalt Plants that use about 2/3rds of their total energy consumption. At the asphalt plants they measure and record, distribute and review Kerosene, LPG, and Electricity usage by tonne of product delivered to customers. They only operate efficient, modern, and well-maintained plant/equipment to minimise carbon usage. Usage is also affected by how effectively the operators use plants and equipment. Usage statistics help users make the right decisions and minimise wastage. The supplier has an Energy Committee where the energy usage is reviewed and discussed every 6 months. Reports of usage by billing units (Litres, Tonnes, and kWh) and also TCO2 are circulated prior to meetings and discussed …”^[63]

2.6 Open and connected

The Public Procurement Strategy for Scotland 2023 to 2028’s objective for “open and connected” is to ensure procurement in Scotland is open, transparent and connected at local, national and international levels.

2.6.1 Openness and transparency

The Scottish Government is committed to being open and transparent regarding how public money is spent. While there is no legislative duty for public bodies to report on how they have acted in line with the principles of openness and transparency, many do so in their annual procurement reports.

In financial year 2022 to 2023, 118 public bodies (89%, n=133) provided evidence of having carried out their regulated procurements in accordance with the duty of transparency.^[64] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 15 of which had not provided this data.› This evidence included requesting any supply chain opportunities be advertised on PCS, using clear language to reduce barriers to participation, and publishing their contract registers.

Forty-three public bodies (32%, n=133) produced and submitted a published annual procurement report in time to be included in this analysis despite not reaching the £5 million threshold for one to be legally required.^[65] Note: this includes only the annual procurement reports that were submitted to the Scottish Government in time to be included in this report.›

2.6.2 International influence of Scottish public procurement

The Scottish Government is committed to staying connected with the international public procurement community to support the development of best practice in the field. Representatives of the Scottish Government engaged with the international commercial and procurement community throughout financial year 2022 to 2023. The focus of this engagement was twofold. Firstly, to benchmark our approaches in Scotland to deliver and demonstrate progressive and impactful sustainable procurement learning from others. Secondly, to share, and where requested, to support other countries on leveraging the Scottish Government’s approach to procurement.

The Procurement People of Tomorrow (PPoT) programme was featured in the Organisation for Economic Co-operation and Development’s (OECD) report on ‘Professionalising the public procurement workforce’.^[66] OECD’s report on ‘Professionalising the public procurement workforce’, January 2022.› This followed on from engagement with the OECD and other governments globally in financial year 2021 to 2022. Subsequently, the Scottish Government engaged with members of the OECD on internationalisation and procurement, in March 2023.

Alongside this was ongoing engagement with the National Association of State Procurement Officials who requested a presentation on the Scottish Government’s strategy and approach to professionalising public procurement. Similarly, in November 2022, the Scottish Government shared our National Procurement Competency Framework and our lessons learned with the New Zealand Government in support of the development of their Social Services Procurement Competency Assessment.^[67] The New Zealand Government’s ‘Growing procurement capability’.›

Through the Chartered Institute of Procurement and Supply Global Foundation, representatives of the Scottish Government worked with the charity, ActionAid, to strengthen procurement and supply chains in the agricultural sector in Zimbabwe. The project, aligned to the United Nation’s Sustainable Development Goals, focused on the development of more inclusive, diverse and efficient value chains in the livestock industry, helping to improve access to more affordable food sources.^[68] For more information on the projects on which the Scottish Government supported ActionAid, please see ActionAid’s video. ›

In June 2022, the Scottish Government’s approach to procurement was presented as an example of collaboration between the four nations of the United Kingdom at the Civil Service Live conference, the UK Civil Service’s annual national learning conference.^[69] More information on Civil Service Live can be found at the conference’s webpage, found here.›

2.6.3 Improving procurement capability and professional development

There were many initiatives and programmes to improve public procurement capability and professionalism over the course of the 2022 to 2023 reporting year. This included enhancing the existing suite of free-to-access national tools promote and enable best practice; research and surveys to test the impact of public procurement in Scotland and identify opportunities for improvement; and targeted learning and development programmes.

The National Procurement Development Framework allows those working in procurement to assess their skills against expected standards in their role and facilitates access to continuous professional development to grow those skills. In financial year 2022 to 2023, there were 1,448 users of the tool.^[70] This figure was based on the number of individual evaluation codes.› In March 2023, the Scottish Government procured the second-generation of the tool, which brought increased functionality, ease-of-use, and improved reporting of capability assessments against the national procurement and commercial standards.

The Sustainable Procurement Tools were designed to help public sector organisations identify, prioritise and address how they can optimise the economic, social and environmental outcomes of their procurement activity. They include a range of freely available tools, guidance, case studies and eLearning and were updated during the year to include a range of model sustainability tests, new case studies and additional eLearning. In 2021, Climate

Literacy eLearning and a refreshed Introduction to Sustainable Public Procurement eLearning were added. In financial year 2022 to 2023, the eLearning modules had the following completion rates.

• Introduction to Sustainable Procurement eLearning completions: 49 organisations, 215 individual users.
• Climate Literacy eLearning completions: 55 organisations, 235 individual users.
• Circular Procurement and Supply, 26 organisations, 64 individual users.

In February 2023, the Scottish Government published an independent review of Scotland’s sustainable procurement between 2002 and 2022. The report concluded that Scotland’s top-down approach to the generation of policy and underpinning tools, support and guidance has accelerated the pace at which public bodies have been able to deliver socially and environmentally impactful procurements.

The report concluded that tools like the Supplier Journey and the grant funding of the Supplier Development Programme have readied suppliers to meet the needs of public bodies when it comes to bidding for, and winning, public contracts. This has supported initiatives centred around Community Wealth Building, Fair Work, and tackling the Climate Emergency through procurement. The report highlighted the “significance and strength of the Act and the Sustainable Procurement Duty as enablers to driving sustainable procurement outcomes”.

In the reporting year, the Professional Practice and Development forum, made up of representatives from across the public sector, conducted its annual learning needs analysis to identify and prioritise targeted interventions to help drive more consistency of practice across Scotland. For example, in the reporting year, there was a focus on building the awareness of those outside of procurement who can influence and enable procurement and supply chain activity, including running a wide range of events in the Scottish Government’s Commercial Awareness Week. It also included delivering a wide range of national and sectoral capability events throughout the year to help build targeted skills, share and promote best practice.

2.6.4 Innovation

The Sustainable Procurement Duty mandates that before a public body carries out a regulated procurement, it must consider, among other things, how it can promote innovation in the procurement process. Innovation may take the form of innovation in the design and delivery of public services and projects, the procurement of innovative goods, services, and works, or innovative procurement processes and models.^[71] For more information, see the statutory guidance underpinning the 2014 Act, which is available on the Scottish Government website.›

In July 2022, the Scottish Government, in collaboration with National Services Scotland, launched the Scotland Innovates service. Scotland Innovates is the supplier-led innovation service which builds on the success of the NHS Health Innovation Assessment Portal (HIAP). Scotland Innovates is designed to allow suppliers, citizens, and innovators to submit their ideas and solutions for delivery across the public sector. It also provides potential suppliers with information, guidance and support on how to develop ideas and innovations into products and technologies that may be of use in the provision of public services in Scotland.

The following submissions were received through Scotland Innovates during financial year 2022 to 2023:

• ECG Patches (electrocardiogram) with AI interpretation allows patients heart rhythms to be remotely monitored over a longer period than current products.
• Lung AI, to detect lung cancer.

These products and services are being examined through Accelerated National Innovation Adoption pathway (ANIA) for use across Scotland.^[72] Projects being considered, approved or closed by ANIA are listed on their website. ›

In their annual procurement reports, 92 public bodies (69%, n=133) provided evidence of promoting innovation in their procurement processes.^[73] These figures were drawn from analysis of the 133 annual procurement reports submitted for analysis, 41 of which had not provided this data.›

The Scottish Courts and Tribunal Service (SCTS) outlined how their procurement activities have helped to promote efficient digitisation and streamlining of services over the financial year:

SCTS continued to push innovative solutions to address the significant backlog in criminal cases and improve efficiency of operations. Some of these solutions came from partnership working with our existing supply chain to redesign services and help work with an information technology specialist to trial proof [of] concept for new technology to support evidence by commission suites, new Case Management Systems and live streaming of court cases. SCTS have been working collaboratively with the Scottish Government as one of the non-core partners to implement Oracle Fusion Cloud which is a single integrated cloud-based system to replace the existing SEAS Finance and the PeCOS Purchase-to-Pay system.”^[74]