8. Stage 1 of the Procurement Process - Analyse
8.1 This chapter highlights that effective planning should be carried out before any procurement process begins. This planning should include consultation with stakeholders, those who might use the services, and their carers (see chapter 6), about what is needed and the available budget. It should also include early market engagement to understand the solutions that might be available and to understand how a requirement can best be met.
This chapter also describes the main procurement rules that apply, at different thresholds, where a public body is procuring a care and/or support service.
Quality and cost considerations before procuring
8.2 In accordance with regulation 76(9) of The Public Contracts (Scotland) Regulations 2015, a public body may now also take account of some other issues when procuring these services including:
- the quality of the service;
- the continuity of the service;
- the affordability of the service;
- the availability and comprehensiveness of the service;
- the accessibility of the service;
- the needs of different types of service users;
- the involvement of service users; and
8.3 This is not an exhaustive list and there may be other considerations that a public body may also take account of and which are relevant on a case-by-case basis.
8.4 The Public Contracts (Scotland) Regulations 2015 confirm that a public body is not able to award a contract on the basis of lowest price only. This includes contracts for health or social care services that fall within the scope of those Regulations. This means that, in accordance with regulation 76(10) of The Public Contracts (Scotland) Regulations, contracts for these services must be awarded on the basis of both quality and price.
Application of the rules - Thresholds and other considerations before procuring care and support services
8.5 A public body should first consider the total value of a care and support contract. This includes, where appropriate, any option for an extension of the contract. More detail on valuing contracts which must be advertised on the OJEU, is in regulation 6 of The Public Contracts (Scotland) Regulations 2015. It is for a public body to assess whether there is a cross-border interest i.e. interest from bidders from another member state of the EU.
€750,000 and above
Must be advertised in OJEU and the light touch provisions in The Public Contracts (Scotland) Regulations 2015 apply
£50,000 - €750,000
May award without seeking offers, but should consider the TFEU fundamental principles where relevant. For contracts over £50,000, a contract award notice must be published on PCS and certain other rules apply (see paragraph 8.12).
May choose to seek offers: in which case all provisions of the Procurement Reform (Scotland) Act 2014 apply
8.7 The specific rules that apply to the procurement for care and support contracts at these different threshold levels are described in more detail below.
Specific rules for care and support contracts over €750,000
8.8 For contracts or framework agreements with a value greater than, or equal to €750,000 all of the 'light-touch' provisions (described in regulations 74-76 of The Public Contracts (Scotland) Regulations 2015) apply. Specifically, the following applies. Public bodies must:
- publish a contract notice or Prior Information Notice (PIN) as a call for competition (unless it is a direct award without competition) on PCS for onward submission to the OJEU;
- publish a contract award notice; and
- continue to follow a process that ensures the observance of the TFEU fundamental principles of transparency, equal treatment and non-discrimination, proportionality and mutual recognition.
Also, regulation 58(1) and 58(3) of the Public Contracts (Scotland) Regulations 2015 require that a public body must consider whether any of the mandatory exclusion grounds referred to in those regulations apply in respect of the potential service provider.
Specific rules for care and support contracts between £50,000 and €750,000 - award with advertising
8.9 For contracts or framework agreements with a value of £50,000 or more, but less than €750,000, a public body should decide, on a case-by-case basis, whether or not to seek offers in relation to the proposed contract.
8.10 The flowchart at Annex 6 provides some illustration of the sort of things that might be considered by a public body when deciding whether to seek offers for contracts of this value. A number of factors may influence this decision, as explained below, but are not limited to:
- the estimated value of the contract;
- the application of the procurement rules, procurement policy and benefits and risks to people who use services and service delivery;
- application of local financial regulations and standing orders; and
- the specifics of the sector concerned (for example, the size and structure of the market and commercial practices).
8.11 Where a public body chooses to seek offers in relation to a contract, then as with all contracts with a value of £50,000 or more, it must be advertised on the Public Contracts Scotland (PCS) website. All of the provisions of the Act will apply in that case.
Specific rules for care and support contracts between £50,000 and €750,000 - award without advertising
8.12 For contracts of this value, a public body may choose to award care or support contracts, or framework agreements, without seeking offers in relation to the proposed contract. This is consistent with the provisions of section 12 of the Act and this best-practice guidance should be read together with that. Under the Act, there are some provisions that still apply when a public body chooses to award without advertising. These are:
- Section 23(2) of the Act: A public body must publicise a contract award notice on PCS;
- Section 27 and Section 28 of the Act: A public body must consider whether any of the mandatory exclusion grounds referred to in The Procurement (Scotland) Regulations 2016 apply in respect of the potential contractor/service provider; and
- Section 35 of the Act: A public body must keep and maintain a register of contracts (a 'contracts register').
And more generally:
- Section 15 of the Act: A public body which expects to have significant procurement expenditure (equal to or greater than £5,000,000) in the next financial year must, before the start of that year:
a) prepare a procurement strategy setting out how it intends to carry out regulated procurements; or
b) review its procurement strategy for the current financial year and make such revisions to it as the authority considers appropriate.
- Section 18 of the Act: A public body which is required to prepare or revise a procurement strategy in relation to a financial year must prepare an annual procurement report on its regulated procurement activities as soon as reasonably practicable after the end of that financial year.
8.13 In addition to these minimum requirements, a public body, when not seeking offers in relation to a proposed contract, should also consider, where applicable, the general duties (section 8 of the Act); technical specifications (section 30 of the Act); and charges for participation in the procurement process (section 31 of the Act).
Specific rules for care and support contracts below £50,000
8.14 Care and support contracts, or framework agreements, with a value below £50,000 are not regulated under the Act. As a matter of best practice a public body should however consider following a procurement process that is proportionate to the value of the contract.
Rules covering other services (i.e. those services that are not principally health or social or care and support) and which are also covered by the 'light-touch' regime
8.15 Albeit not the main subject of this best-practice guidance, there are some other services covered by the 'light-touch' regime that are not health or social care. Schedule 3 of the Public Contract (Scotland) Regulations 2015 also describes those services. The 'light-touch' EU rules also apply to these other services for contracts above the threshold (i.e. above €750,000). For below that threshold any procurement of these services is regulated by the Act.
Procurement staff should note how these other services (i.e. non-health or social or indeed, care and support) are managed. In summary, the rules for these other services are that, for above EU threshold (i.e. €750,000) contracts, the 'light-touch' rules apply. See paragraph 8.8 for the main rules applying at that level. For below the EU threshold (i.e. between £50,000 and €750,000) - and unlike for health or social services contracts (including care and support) of the same value - there is no bespoke provision which allows general exemption from advertising these other services. This means that contracts of that value for these services are subject to the full provisions of the Act. Contracts below £50,000 are not regulated by either the Act or Regulations.
8.16 The TFEU fundamental principles apply to all procurement activity of cross-border interest and regardless of value. This includes the principles of transparency, equal treatment and non-discrimination, proportionality and mutual recognition which should be adopted by a public body when running a competition. This also includes contracts below the EU-regulated procurement thresholds and including contracts which are otherwise exempt from application of the Regulations).
8.17 It is the responsibility of an individual public body to decide whether, and at what level, advertising is required taking account of the procurement rules.
8.18 A public body is largely free to decide to use the procurement procedures, tools and techniques of its own choosing where procuring a health or social care services contract. That said, as a matter of best practice, it is likely it will want to follow a procurement procedure that is proportionate to the value of the contract and to take account of some fundamental considerations (for example fair work matters and other matters described in more detail in the statutory guidance which support the Act).
Analysis - Establishing individual needs and intended outcomes
8.19 As a matter of best practice, a public body should have a local commissioning strategy and/or service(s) plan which establishes strategic and individual needs and determines what type of service should be put in place to meet those needs and deliver the intended outcomes. A public body should ensure that there is clarity about:
- the needs to be met and the outcomes to be delivered by the service taking into account requirements of the public sector equality duty;
- how people who use services and their carers will be involved in defining their needs, expressing their wishes and choices and influencing the design of the service;
- what positive outcomes the service is intended to deliver;
- what choice and control the service will provide for people who use services;
- how the service will meet the National Care Standards; and
- how the service will contribute to the public body's organisational objectives.
Analysing existing arrangements for delivering the service
8.20 A public body should review its existing arrangements for delivering the service with a view to:
- identifying if and how the service needs to change in order to meet individual needs and intended outcomes;
- considering afresh the application of EU law to the public body's existing arrangements and future proposals; and
- evaluating existing arrangements for delivering the service against best value principles.
8.21 Evaluating existing arrangements for delivering the service against best value principles will require a public body to consider:
- whether the service is effective and of good quality;
- what it costs and whether it is cost-efficient;
- whether it promotes equal opportunities; and
- whether it contributes to sustainable development.
8.22 A public body should assess whether the service has met specified key performance indicators and other contractual requirements. It should seek feedback from people who use services and their carers and review other information relating to the quality of the service, including information from contract management and service review and information from the regulatory bodies, including any complaints about the service.
Budget and anticipated contract value
8.23 When a public body is considering budget and anticipated contract value it may take the following into account:
- the balance between small/short-term funding and larger/long-term funding;
- whole-life costs, including set up, running and decommissioning costs;
- the cost of meeting all regulatory requirements;
- additional costs related to location (for example rurality);
- the complexity of the service;
- training and continuing development of staff;
- potential costs of staff transfers under TUPE Regulations;
- additional costs of inflation; and
- any commitments to three-year funding cycles (or longer) where appropriate.
8.24 A public body should also consider whether its own systems (for example, the operation of different administrative systems) and practices contribute to service providers' costs and, if so, whether modifications can be made.
8.25 A public body should assess if, and how, a service needs to change in order to meet individual needs and intended outcomes and consider how it can be improved. It should also assess the need for service continuity.
Considerations when attaching a value to care and support contracts
The direct award of a contract or framework agreement considered to be below €750,000 might be challenged on the basis that the legitimate value of the contract (or contracts awarded under a framework agreement) actually exceed the thresholds in The Public Contracts (Scotland) Regulations 2015 and that the procurement should, as a result, have been conducted in accordance with those Regulations.
Attaching a value to a contract (or contracts awarded under a framework agreement) for care and support services can be subject to a number of variables. A public body should consider first whether the contract is a public contract - i.e. is the awarding body a contracting authority as described in The Public Contracts (Scotland) Regulations 2015 and should, where relevant, also consider the SDS points set out at chapter 6 of this guidance.
For public contracts, ordinarily, where a contract is one of a series of similar contracts, the value of each must be aggregated to determine the estimated value. The care and support landscape is however complex and the needs of those receiving the services also needs to be carefully considered. This includes ensuring compliance with self-directed support legislation and, in particular, assessing the full range of contract types available to deliver individual care provision.
All of this means that a public body should also take account of the key considerations described at chapter 4 of this guidance and which a public body should ordinarily be thinking about when procuring a care and support service. Linked to this is advice also about determining the type and duration of a contract. Ultimately though, a public body should take its own legal advice when seeking to attach a value to a contract in a complex care and support context.
8.26 A public body should undertake research and hold discussions with potential service providers in order to map the market for the particular service. It should take into account service providers which already deliver services locally or more widely to particular care groups and in-house service provision. It should also assess whether other service providers and/or new providers are likely to be interested in delivering the service and might have the capability and capacity to do so. It should consider if there is a need to stimulate and/or shape the market, for example to promote interest from providers with specialist expertise or encourage the growth of social enterprise/community business models. In doing so, it should continue to ensure compliance with the procurement rules, e.g. by ensuring that it does not distort competition or prevent the equal treatment of bidders.
8.27 Prior Information Notices can be used to give prior notification of a requirement to the market.
8.28 As part of its analysis, a public body should consider:
- capability - is the market capable of meeting the requirement?
- capacity - are there enough service providers with sufficient capacity to deliver the service?
- maturity - is the market ready to deliver what is required?
- competitiveness - what is the anticipated level of interest from service providers?
- culture - will delivery of the service require cultural change?
- how the market is structured - will delivery of the service require service providers to work together in a new way?
- how secure the market is - how will future arrangements impact on the security of the market and/or services?
8.29 A public body should also take account of the policy and approach adopted by its organisation to the delivery of services in-house.
8.30 Comprehensive analysis of the market and the early engagement with potential service providers can provide valuable information on developments in service delivery which can be used to inform the service specification. It enables the public body to understand the number, type and size of potential service providers and to take account of this in determining future arrangements for service delivery. It also enables the public body to identify any barriers to the involvement of potential service providers in the procurement process. EU law is concerned with the EU single market; analysis of the market should therefore have regard to possible interest from providers in other Member States and may assist an authority to identify whether there is a cross-border interest.
8.31 Guidance on developing Strategic Commissioning Plans highlights the need to incorporate a market facilitation plan which is described as:
'Based on a good understanding of need and demand, market facilitation is the process by which strategic commissioners ensure there is diverse, appropriate and affordable provision available to meet needs and deliver effective outcomes both now and in the future.'
8.32 It should present a picture of current supply and demand, what that might look like in the future, and how a public body can support and intervene in the market to deliver this vision. It should set out a clear direction and bring together and analyse a range of data and information. This should include a strategic needs assessment, contract monitoring information, the views and preferences of supported people and the current state of the market (including market gaps). This analysis should be set out in such a way that it supports providers and potential providers to develop their business plans. A public body should do this by engaging with providers throughout the process, sharing intelligence on trends and costs. This dialogue should cover how the public body might structure, support and intervene in the market through investment and disinvestment allowing for planned growth and retraction.
8.33 Further information on market analysis is in the Procurement Journey which is the electronic procurement guidance linked to PCS - the Scottish Government's main advertising portal for all public contracts in Scotland above £50,000. Further advice on market facilitation will also be available from the Scottish Government Health and Social Care Integration Directorate.
8.34 At the analysis stage, a public body should determine what resources are available for delivery of the service. Financial planning is essential to ensure that service specifications are realistic in specifying requirements and outcomes which can be delivered within the available budget and should be informed by a public body's analysis and benchmarking of costs. A public body should consider what funding it can commit to the delivery of a service and for what period of time. In particular, consideration should be given to the anticipated size and shape of service contracts in light of the promotion of self-directed support and any growth in direct payments.
Equality Impact Assessment (EQIA)
8.35 The public sector equality duty set out in the Equality Act 2010 specifically requires public bodies to assess new or revised policies and practices on people with different protected characteristics, taking into account the three needs of the public sector equality duty - to eliminate discrimination; advance equality of opportunity; and foster good relations between people with different protected characteristics. The protected characteristics are age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation.
8.36 Public bodies may also wish to consider the integration of human rights considerations into their impact assessments to help them to meet their obligations under the Human Rights Act 1998. Further information about how to conduct equality impact assessments is available on the Equality and Human Rights Commission (EHRC) website.
8.37 Information gathered during the 'analysis' stage should inform the public body's appraisal of the options for service delivery, including:
- in-house provision;
- shared services; and
8.38 Although consideration of other methods of securing services is outwith the scope of this guidance, it is worth noting that:
- Local policies and procedures for the procurement for care and support services should set out the principles and rationale for selecting providers, including in-house provision. Provision of a service by an arm's length body may be deemed to be 'in-house' in certain circumstances.
- Contracts between a public body and other public bodies (including shared service delivery vehicles) for the provision of services are, in certain circumstances, exempt from the procurement rules.
- A public body should seek legal advice/consider regulation 13 of the Public Contracts (Scotland) Regulations 2015 to establish whether an exemption from the public procurement rules may apply.
8.39 In appraising the options for service delivery, a public body should take into account:
- the timing, cost and nature of the requirement;
- geographic location and/or rurality;
- whether relevant expertise exists within the public body or another public body;
- the potential for innovation;
- whether there is a market of capable service providers;
- the views of people who use services and their carers;
- the views of service providers, their staff and trade unions;
- the benefits and risks to people who use services and service delivery; and
- regulatory requirements relating to services and workforce.