By applying exclusion grounds and establishing relevant and proportionate selection and award criteria for regulated procurements, a contracting authority can ensure that economic operators who deliver public contracts, do so in full compliance with the law and supporting principles. The Scottish Government expects economic operators which are awarded public contracts to adopt corporate social responsibility policies appropriate to their business and the public contract, an ethical approach as an employer, and support our aim to achieve value for money by balancing cost, quality and sustainability.
Where relevant to do so, criteria must be in support of the priorities set out in a contracting authority’s procurement strategy, and support its sustainable procurement duty and community benefit requirements (see earlier Chapters for further details on these obligations).
This Chapter focuses on the following three areas:
Exclusion grounds – There are circumstances in which an economic operator must be excluded from the procurement process. There are other circumstances in which a contracting authority can determine, on a case-by-case basis whether an economic operator should be excluded. These are referred to as mandatory and discretionary exclusion grounds, respectively.
Selection criteria – There are also different criteria which are used in order to determine the suitability of economic operators to perform the contract. These are referred to as selection criteria. These criteria consider an economic operator’s suitability to pursue a professional activity, it’s economic and financial standing and technical and professional ability.
Award criteria – These are used to determine which economic operator is best placed to deliver and which should be awarded the contract. A contracting authority has discretion to determine what award criteria apply in relation to individual regulated procurements. In all cases award criteria must be proportionate and relate to the goods, works or services to be provided.
Exclusion grounds, selection and award criteria must be clearly defined in the procurement documents, to ensure a common understanding of the requirements by all economic operators. These criteria must not be changed or waived during the procurement process.
5.2. PURPOSE OF THIS CHAPTER
This Chapter describes what is required of a contracting authority when selecting economic operators and awarding contracts in relation to regulated procurements. These requirements do not apply to a call-off contract, which is a contract awarded under a framework agreement. It must be read alongside regulations 57 to 69 of The Public Contracts (Scotland) Regulations 2015, which relate to EU-regulated procurements and regulations 8 to 10 of The Procurement (Scotland) Regulations 2016 which relate to regulated procurements below EU contract threshold values. This Chapter provides guidance on the assessment of the suitability of economic operators expressing an interest in being selected to tender or to become a contract supplier, and the basis on which the contract is awarded. It must also be read in conjunction with the other Chapters of this statutory guidance.
5.3. LEGAL BASIS OF THIS CHAPTER
The Scottish Ministers have published this statutory guidance under section 29 of the Act. A contracting authority must have regard to this Chapter in relation to the selection of tenderers and the award of contracts for regulated procurements where the estimated value of the contract is equal to or greater than £50,000 for goods and services and £2 million for works, and which is not otherwise exempt from regulation. Contracting authorities are further encouraged to follow this statutory guidance wherever it is appropriate to do so, for example for lower value or exempt contracts where a formal tender evaluation is to be undertaken.
Separate statutory guidance, associated with this Chapter, has also been published on Addressing Fair Work Practices, including the Living Wage, in Procurement.
Regulations 57 to 69 of The Public Contracts (Scotland) Regulations 2015 set out the requirements for EU-regulated procurements in respect of the choice of participants and awarding contracts. These regulations cover the requirements in respect of mandatory and discretionary exclusion grounds, and the application of selection and award criteria relevant to individual procurement exercises. They also set out the requirements for the capability and capacity of an economic operator, what is expected of sub-contractors and where bids are made by consortia.
Regulations 8 to 10 of The Procurement (Scotland) Regulations 2016 set out the requirements for regulated procurements below the EU contract threshold values in respect of mandatory and discretionary exclusion grounds and the application of selection criteria relevant to individual procurement exercises.
5.4. EXCLUSION OF ECONOMIC OPERATORS
There are circumstances in which an economic operator must be excluded from the procurement process, and there are other circumstances in which a contracting authority can determine on a case-by-case basis whether an economic operator should be excluded. These are referred to as mandatory and discretionary exclusion grounds, respectively.
In the case of mandatory and discretionary exclusion grounds, an economic operator must be given the opportunity to provide evidence which proves that it has taken sufficient and appropriate remedial action to demonstrate that it has ‘self-cleansed’ (i.e. that the problem will not occur and that the economic operator can be regarded as reliable).
5.4.1. Grounds for the exclusion of economic operators
For regulated procurements there are particular circumstances in which a potential economic operator must be excluded. These are known as mandatory exclusion grounds. There are other grounds where it is for a contracting authority to determine whether that particular exclusion should be applied on a case-by-case basis, these are known as discretionary exclusion grounds. Regulation 58 of The Public Contracts (Scotland) Regulations 2015 and regulations 8 and 9 of The Procurement (Scotland) Regulations 2016 set these out in both instances. An economic operator must be given the opportunity to provide evidence which proves that it has taken sufficient measures to demonstrate its reliability (see section 5.4.5. on self-cleansing).
Mandatory exclusion grounds – must be applied in all regulated procurements; these include circumstances in which a potential supplier has been convicted by final judgement of one of the criminal offences contained in the relevant regulations. These are contained in regulations 58(1) and 58(3) of The Public Contracts (Scotland) Regulations 2015 and regulations 8(1) and 9(1) of The Procurement (Scotland) Regulations 2016.
An economic operator must not be excluded indefinitely from participating in procurement activity. In respect of mandatory exclusion grounds, an economic operator must only be excluded for a maximum of five years from the date of the conviction, three years for a breach of the blacklisting regulations, or in the case of a breach of tax or social security obligations, until the amount owed is paid, including any applicable interest or fines, a binding agreement to pay it has been entered into, or it becomes otherwise no longer owed.
Discretionary exclusion grounds – may be applied in regulated procurements; these are circumstances in which a potential supplier is in one of the circumstances listed in regulations 58(4) and 58(8) of The Public Contracts (Scotland) Regulations 2015 and regulations 9(2) and 9(5) of The Procurement (Scotland) Regulations 2016.
Economic operators must not be excluded indefinitely from participating in a procurement exercise. In respect of discretionary exclusion grounds, an economic operator must only be excluded for a maximum of three years from the date of the relevant event.
5.4.2. Derogation from mandatory exclusion considerations
Under regulation 58(6) of The Public Contracts (Scotland) Regulations 2015 and regulation 8(3) and 9(4) of The Procurement (Scotland) Regulations 2016, where there are exceptional circumstances, a contracting authority may, for overriding reasons relating to the public interest, disregard any of the mandatory exclusion grounds when making a decision in respect of the selection of an economic operator. This provision is known as a derogation from the mandatory exclusion considerations. This ensures that a contracting authority is able to respond to unforeseen emergency circumstances.
There is no definitive list of situations in which this derogation can be used and any decision should be made on a case-by-case basis. A contracting authority should be able to demonstrate that the actual or potential harm is so great, that the public interest in using the derogation outweighs the public interest in excluding an economic operator. An example may be where urgently needed vaccines or emergency equipment can only be purchased from an economic operator to whom one of the mandatory exclusion grounds otherwise applies.
Each situation must be judged on its merits, but the following situations are, on their own, unlikely to meet this test:
- when an economic operator which should be excluded is offering a substantially better quality/more economical product or service; and
- when there would otherwise be a lack of competition.
5.4.3. Applying exclusion grounds to sub-contractors
In complying with its sustainable procurement duty, a contracting authority must facilitate the involvement of small and medium enterprises, third sector bodies and supported businesses in a procurement process. This can include the use of sub-contractors to support the delivery of the contract.
Under regulation 71(9) of The Public Contracts (Scotland) Regulations 2015, for EU-regulated procurements, a contracting authority can require confirmation of whether there are any mandatory or discretionary grounds for the exclusion of any sub-contractor involved in the delivery of the contract. Where this information is sought the ESPD (see section 5.6.) must be used.
Where there are mandatory grounds for the exclusion of a sub-contractor, a contracting authority must require that they are replaced. Where there are discretionary grounds for the exclusion of a sub-contractor, a contracting authority can choose whether it should be substituted. A contracting authority must decide whether to apply discretionary exclusion grounds to sub-contractors involved in the contract delivery on a case-by-case basis, taking into account the various circumstances of the contract.
The Procurement (Scotland) Regulations 2016 do not extend the application of mandatory and discretionary exclusion grounds to sub-contractors for regulated contracts below the EU threshold contract value. However, a contracting authority may wish to consider the circumstances where this approach may be applied in order to safeguard the effective delivery of the contract.
If an economic operator is in a situation which might result in its exclusion, it must be given the opportunity to provide evidence to show that it has taken sufficient and appropriate remedial action to demonstrate its reliability. See regulations 58(13) to 58(17) of The Public Contracts (Scotland) Regulations 2015 and regulations 8(6) to 8(10) of The Procurement (Scotland) Regulations 2016. This is known as self-cleansing. Specific guidance on how an economic operator can take self-cleansing action in respect of tax and social security obligations is detailed in section 5.4.5. of this Chapter.
An economic operator must prove that it has:
- paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct;
- clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities; and
- taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct.
When considering any self-cleansing measures, a contracting authority must consider all relevant factors, including the gravity and particular circumstances of the criminal offence or misconduct. Where a contracting authority considers that the evidence provided proves that the measures taken are sufficient to demonstrate the reliability of an economic operator, it must not exclude that economic operator from the procurement activity (although a contracting authority may still, nonetheless, decide after applying selection criteria, to select an economic operator to submit a bid).
Where a contracting authority is of the view that the remedial action taken is not sufficient to demonstrate a potential economic operator’s reliability, it must provide the economic operator with a statement outlining the reasons for the decision. The statement of reasons must be provided as soon as is reasonably practicable. It should be in writing and allow the economic operator to understand why the self-cleansing measures taken are insufficient, and the basis of the decision.
5.4.5. Mandatory and discretionary exclusion grounds
Annex B.1. provides details of the breakdown of the different types of exclusion grounds, which apply to regulated procurements, with an explanation of whether they are mandatory or discretionary.
The Scottish Government regards blacklisting or the compiling of a blacklist as totally unacceptable. Blacklisting refers to the practice of systematically denying individuals employment, who would otherwise be able to be employed, on the basis of information, accurate or not, held in some type of database.
The Employment Relations Act 1999 (Blacklists) Regulations 2010 provide rights for individuals if blacklisting results in refusal of employment, detriment, dismissal or redundancy. A breach of these Regulations is a mandatory exclusion ground. See regulation 58(3)(b) of The Public Contracts (Scotland) Regulations 2015 and regulation 9(1) of The Procurement (Scotland) Regulations 2016. A breach must be established on the basis of a judicial finding, for example, by an employment tribunal or court, or an admission by the economic operator concerned. An economic operator which has been found to breach or which has admitted to breaching these Regulations must be excluded from the procurement process in respect of regulated procurements unless it can demonstrate to the satisfaction of the contracting authority that it has taken sufficient appropriate remedial steps.
An economic operator which has breached the relevant legislation is required to disclose full details of the breach, including any successful action against it and/or, any finding by an employment tribunal that a complaint raised under the relevant legislation is well-founded.
Tax and social security obligations
The Scottish Government treats tax and social security obligations seriously.
For EU-regulated contracts, under regulation 58(3)(a) of The Public Contracts (Scotland) Regulations 2015, a contracting authority must exclude an economic operator where it has been subject to a binding decision (judicial or administrative) and which is found to be in breach of its legal obligations to pay tax or social security. A judicial decision is one which is made by a court or tribunal. An administrative decision is one which is made by the relevant tax authority in the UK or in the Member State where the economic operator is established.
In respect of regulated contracts, under regulation 58(4) of The Public Contracts (Scotland) Regulations 2015 and 9(2) of The Procurement (Scotland) Regulations 2016, a contracting authority can also exclude an economic operator where it establishes by any appropriate means that the economic operator has breached its tax or social security obligations. This means that where there is evidence which falls short of a judicial or administrative decision, a contracting authority still has the option of excluding an economic operator where it thinks it is appropriate to do so. A contracting authority must determine on an individual basis whether a particular piece of evidence which falls short of a judicial or administrative decision is sufficient to demonstrate “appropriate means”.
Examples of evidence which may demonstrate breaches in tax or social security obligations, which a contracting authority can seek clarification from an economic operator, could include:
- credit references, i.e. details of any outstanding tax debt;
- company accounts, depending on the size of the tax debt an economic operator may be obliged to include this in its accounts;
- an admission by an economic operator to an Occasion of Non-Compliance ( OONC); or
- an admission by an economic operator of the failure of an avoidance scheme which it was involved in and was, or should have been, notified under Disclosure of Tax Avoidance Scheme ( DOTAS).
Where an economic operator admits to a breach of its tax or social security obligations, which did not involve a judicial or administrative decision, in order to determine the nature of the breach, a contracting authority can request further details and any mitigating factors, from the economic operator. This could include:
- a brief description of the OONC and which tax it applied to;
- where the OONC relates to a DOTAS, the number of the relevant scheme;
- the date of the original breach;
- corrective action taken by the economic operator to date;
- planned corrective action to be taken;
- changes in personnel or ownership since OONC; and
- changes in financial, accounting, audit or management procedures since the OONC.
Note – these examples relate to the UK tax regime, and there will be equivalents in other Member States, which should be considered as required.
Self-cleansing – tax and social security contributions
Where an economic operator can provide evidence that it has fulfilled its obligations by paying the amount due, it must not be excluded from the procurement exercise on this basis alone. See regulation 58(5) of The Public Contracts (Scotland) Regulations 2015 and 9(3) of The Procurement (Scotland) Regulations 2016. This can include circumstances where it has entered into a binding agreement with a view to paying the taxes or social security contributions, including any interest due. Evidence of this could include a receipt or confirmation of payment requested from the relevant tax authority or a written copy of the agreement to pay obligations.
Additionally, for EU-regulated procurements, under 58(7) of The Public Contracts (Scotland) Regulations 2015, where the exclusion of an economic operator would be clearly disproportionate, either because a minor amount of tax or social security contributions is owed or an economic operator has not had sufficient time to pay the amount owed, a contracting authority may decide not to exclude the economic operator.
A contracting authority must take a balanced view when deciding not to exclude on this basis. This could include consideration of the economic operator’s overall tax and social security obligations and the overall risk to the effective delivery of the contract. For example there may be instances where an apparent “minor amount” may significantly affect the liquidity of an economic operator and its ability to perform the contract, or where sufficient time did exist for the outstanding amounts to be paid.
Social, environmental and labour laws or obligations
Economic operators are bound to operate within the limits of a wide range of legislative provisions, and in respect of procurement processes, we regard social, environmental and labour law obligations as critical to the effective delivery of public contracts. These obligations include any relevant national and European law, as well as relevant collective agreements and specific international agreements.
Under regulation 58(8)(a) of The Public Contracts (Scotland) Regulations 2015 and 9(5)(a) of The Procurement (Scotland) Regulations 2016, an economic operator may be excluded where a contracting authority can demonstrate that the economic operator has breached any of these obligations. This exclusion ground is discretionary and, it is therefore for the contracting authority to decide if exclusion is appropriate.
When determining whether to exclude an economic operator on this basis, a contracting authority should be proportionate in its decision, taking into account the size of the contract, the relevance of the breach, and its impact on the operational and reputational risk to the delivery of the contract.
Bankrupt or insolvent businesses
Where an economic operator is bankrupt or is the subject of insolvency proceedings a contracting authority can choose whether to exclude it from the procurement exercise. See regulation 58(8)(b) of The Public Contracts (Scotland) Regulations 2015 and regulation 9(5)(b) of The Procurement (Scotland) Regulations 2016. Potential evidence to assist in making this decision could include: copies of accounts verifying they have sufficient liquidity to perform the contract; its business plan outlining steps it will take to address concerns; or references from other recent customers.
When considering whether to exclude an economic operator who has become, or is at risk of becoming bankrupt or the subject of insolvency proceedings, a contracting authority must consider the potential risks associated with the delivery of the contract. This includes the impact this may have on the sub-contracting supply chain. This can also include the scale of the contract and any potential consequences of the contract failing. Additionally, a contracting authority may take into account the potential benefits of awarding a contract to an economic operator in these circumstances. These can include providing opportunities to contribute to: increased employment opportunities in communities; the wellbeing of local and regional communities or helping unlock the innovation or economic potential with local businesses.
5.5. BASIS ON WHICH TO SELECT ECONOMIC OPERATORS
Selection and award criteria must not be confused. Selection criteria are concerned with the capability and capacity of an economic operator to deliver the contract, they do not focus on how an economic operator proposes to perform the contract in question. Award criteria are discussed below at paragraph 5.7.
The Public Contracts (Scotland) Regulations 2015 and The Procurement (Scotland) Regulations 2016 determine what criteria can be used to select economic operators. These are in respect of its suitability to pursue a professional activity, its economic and financial standing, and its technical and professional ability. A contracting authority has discretion to determine how to apply these selection criteria to individual regulated procurements.
In all cases criteria must be proportionate to the contract in question, taking into consideration the nature, scope, size and scale of the contract. Selection criteria must always be designed to select the most suitable economic operators on their merits and should not be designed with the intent solely of reducing the number of economic operators that are qualified to participate.
5.5.1. How groups of economic operators meet selection criteria
In meeting its sustainable procurement duty, a contracting authority is required to consider how in conducting the procurement process, it can facilitate access to contracts for SMEs, third sector bodies and supported businesses. One way to do this is to ensure that the process allows groups of economic operators to work together to develop a joint bid to participate in procurement opportunities.
Where groups of economic operators bid for a public contract, regulation 20(5) of The Public Contracts (Scotland) Regulations 2015 enables a contracting authority to specify, for EU-regulated procurements, how a group will meet the tests of economic and financial standing and technical and professional ability as part of the selection stage of the procurement process. This approach should also be adopted where it would be relevant and proportionate to do so for regulated contracts below the EU contract threshold value.
In determining how economic operators which make up the group meet these criteria, a contracting authority must be proportionate, take into account the extent to which any economic operator will be relied on to perform the contract and not create barriers to bidding. This may, for example, be by giving due and appropriate consideration to the time it may take a group of economic operators to properly submit a bid. In determining how groups of economic operators meet these criteria, a contracting authority could describe whether particular members of the group are required to meet all or some of the selection criteria.
5.5.2. Suitability to pursue the professional activity
Where a contracting authority considers it necessary to ensure the effective performance of the contract, it can require that an economic operator bidding for a contract is enrolled in a relevant professional or trade register.
In respect of a service contract, and where there are particular requirements on those operating in a particular services sector, a contracting authority can additionally require an economic operator to prove that it possesses the necessary authorisation or is a member of a particular organisation, which is relevant in its country of origin.
Where such assurances are considered necessary, suitable evidence can be provided by:
- proof of registration to pursue the activity in question, in the relevant professional or trade registers of the country where it is registered;
- providing a special statement or reference by which it can prove its right to pursue the relevant professional activity; or
- ther proof regarding eligibility of the economic operator to perform the activity in question.
These are not requirements in respect of all contracts, and a contracting authority should only insist on these requirements where necessary for the performance of the contract. In making this decision, a contracting authority must take a proportionate approach and must not impose requirements that are not necessary, and which could prevent an economic operator bidding based on its size or status.
5.5.3. Economic and financial standing
Assessing the economic and financial capacity of an economic operator is an important way to ascertain whether it can deliver the contract. In particular, a contracting authority can seek information in respect of a minimum yearly turnover, annual accounts and professional risk indemnity insurance. Any assessment of an economic operator’s financial status must be conducted by suitably trained or experienced personnel. See regulation 59(7) to 59(15) of The Public Contracts (Scotland) Regulations 2015 and regulation 10(7) to 10(14) of The Procurement (Scotland) Regulations 2016.
A contracting authority must consider on a case-by-case basis what criteria are relevant and relate to the nature of the contract. Criteria used must be proportionate and a contracting authority must not set requirements which may arbitrarily reduce the number of economic operators or which would be disproportionate or discriminate against an economic operator based on its status or size.
A contracting authority should take a rounded, commercial approach to considering what is a relevant criterion in respect of economic and financial standing. For some contracts, an assessment of an economic operator’s economic or financial standing may not be required, for example where the contract is low value, low risk or payment does not occur until delivery of the contract is complete.
A contracting authority can require that economic operators have a minimum yearly turnover in respect of the goods, works or supplies to be delivered through the contract. This criterion should only be used as a minimum standard in exceptional circumstances. An economic operator’s turnover may indicate, in broad terms, that it has the capacity to deal with the volume of work, but it is rarely, if ever, a good indicator on its own. An economic operator which has a smaller or un-established turnover may have strength in the form of cash and a strong balance sheet.
Where it is considered appropriate to set a minimum yearly turnover as a requirement for economic operators, this must not exceed two times the estimated contract value, except in duly justified cases such as relating to the special risks attached to the nature of the goods, works or services. Where higher minimum turnover requirements are to be applied, a contracting authority must indicate the main reasons for doing so in the contract notice. Such circumstances can relate to the high risks attached to the performance of the contract or the fact that its timely and correct performance is critical, for instance because it constitutes a necessary preliminary step for the performance of other contracts.
Suitable evidence of an economic operator’s overall turnover can be provided by receipt of a statement of the turnover levels and, where appropriate, of turnover in the area covered by the contract for a maximum of the last three financial years available. If this evidence is not available, additional information and documentation which demonstrates their financial standing can be provided.
Where relevant to the contract, a contracting authority may require an economic operator to provide certain information on its annual accounts, for example showing the ratio between assets and liabilities. A contracting authority must consider what is required on a case-by-case basis.
Suitable evidence can include financial statements and/or annual accounts required under the law of the country in which the economic operator is established. A contracting authority should also be aware that not all economic operators have an audited set of accounts and if a bidder is unable, for a valid reason, to provide the information in the format required, a contracting authority must accept other information where appropriate to demonstrate an economic operator’s economic and financial standing for assessment purposes.
A contracting authority must consider what level of insurance is required of potential economic operators to perform the contract on a case-by-case basis. The type and level of insurance required must be proportionate and commensurate with the needs of the contract. It is a legal requirement that all companies hold Employer’s (Compulsory) Liability Insurance of £5 million as a minimum, apart from sole traders.
Where relevant to the contract, a contracting authority may require an economic operator to have an appropriate level of professional risk indemnity insurance in place which is proportionate to the value of the contract and the level of risk attached to the effective delivery of the contract. It is unlikely that a contracting authority would need to expect an economic operator to have unlimited levels of insurance.
An economic operator is not required to have the relevant insurance in place at the time of bidding but should be asked to confirm that it either has the required level or would be willing to obtain the required level if successful. If at the selection stage an economic operator cannot provide the level of cover required, an undertaking to secure the insurance on the award of contract would be necessary.
5.5.4. Technical and professional ability
A contracting authority may request evidence of the technical and professional ability of an economic operator to meet the quality standards required for the effective delivery of the contract. See regulation 59(16) to 59(20) of The Public Contracts (Scotland) Regulations 2015 and regulation 10(15) to 10(19) of The Procurement (Scotland) Regulations 2016. This can include its skills, efficiency, experience and reliability.
In respect of award criteria, if relevant, and where the quality of the staff assigned can have a significant impact on the level of performance of the contract, the organisation, qualification and experience of those staff can be assessed at the award stage.
In establishing selection criteria to assess technical and professional ability, a contracting authority should be careful not to exclude an economic operator which can demonstrate that it has the capacity and capability to deliver the contract, but which may not have delivered exactly the same goods, works or services previously. This will ensure opportunities are provided to economic operators to access new markets or provide innovative solutions, no matter their size or status.
Use of references
One way that suitable experience can be evidenced is through the use of references from contracts performed within the previous three years for goods and services and within the last five years for works contracts.
Other legislation and policy or procedures
As further evidence of an economic operator’s technical and professional ability, a contracting authority should set out in the contract notice the relevant minimum requirements and ask economic operators to self-certify that they comply with all relevant legislation and that their organisation has policies and procedures in place to support their application in practice. Where evidence is provided of breaches of legislation, a contracting authority must take into consideration any remedial action that has been taken by an economic operator in order to address these breaches.
These in particular will include:
- Environmental management legislation/policy
An economic operator must self-certify that it has any necessary formal third party environmental management requirements and corporate social responsibility policies which set out the responsibilities that are in place throughout the organisation, which are relevant to the nature and scale necessary when performing the contract. This can include an economic operator’s environmental emergency response procedures.
- Health and safety legislation/policy
Health and safety requirements will vary according to the goods, works or services being purchased, and must be considered on a case-by-case basis. For example, specific legislation relating to risk reduction in construction is contained in the The Construction (Design and Management) Regulations 2015.
A contracting authority with significant procurement expenditure must ensure that its approach to selection in respect of health and safety matters in individual procurement processes supports its policy set out in its procurement strategy. Section 2.5.9 of Chapter 2 on procurement strategies and annual procurement reports provides further information on setting out a policy for promoting compliance by contractors and sub-contractors with health and safety legislation.
An economic operator must self-certify that it complies with any relevant health and safety legislation and that it actively promotes and manages good health and safety policies, procedures and practices, for example, through training and the communication of relevant information for staff.
- Quality management procedures
Quality management procedures can include requiring an economic operator to self-certify that it will manage communication with its clients to ensure continued delivery of a service or product that meets its needs.
5.6 EUROPEAN SINGLE PROCUREMENT DOCUMENT
Under regulation 60 of The Public Contracts (Scotland) Regulations 2015, the European Single Procurement Document ( ESPD) must be used by contracting authorities for EU-regulated procurements. The ESPD must be accepted as a self-declaration by an economic operator that it has not breached any of the mandatory or discretionary exclusions grounds (or, if it does, it can demonstrate in the ESPD that it has taken self-cleansing measures) and that it meets the relevant selection criteria.
As the ESPD is a generic form used across all Member States as part of the initial selection process, contracting authorities must set out the specific requirements and minimum standards that are relevant for each individual procurement exercise in the contract notice.
The ESPD should also be used for regulated procurements below the EU contract threshold values.
Where the capability and capacity of a sub-contractor, members of a consortia or any other body will be relied on to meet the selection criteria in respect of economic and financial standing under regulations 59(7) to 59(15) of The Public Contracts (Scotland) Regulations 2015, or the technical and professional ability under regulations 59(16) to 59(19) of The Public Contracts (Scotland) Regulations 2015, a contacting authority must request a separate ESPD from those economic operators. Where sub-contractors are to be used, but their capability and capacity is not to be relied on to meet the selection criteria, a contacting authority may decide to request a separate ESPD from those sub-contractors.
An economic operator is not required to produce supporting documentary evidence or certificates until specifically requested to do so by a contracting authority. A contracting authority must request this evidence before awarding the contract, as part of its due diligence process. If the preferred economic operator is unable to provide this evidence it should not be awarded the contract.
A contracting authority may also, where it is necessary to ensure the integrity and proper conduct of the procurement process, request, at any time, all or part of the supporting documents from an economic operator and any sub-contractors, consortia members or other bodies, whose capability and capacity will be relied on to perform the contract. Supporting documentary evidence should only be sought during the procurement process where a contracting authority has a genuine concern that there is a risk to the effective conduct of the procurement procedure or, in a two-stage process (e.g. restricted procedures, competitive procedures with negotiation, competitive dialogue and innovation partnerships), before moving from selection stage to award stage.
5.7. AWARD OF CONTRACTS
The Scottish Model of Procurement promotes value for money as being an appropriate balance between cost or price, quality and sustainability. In addition, a procurement strategy sets a framework in which a contracting authority will work to ensure that its procurement activities deliver value for money, how it plans to meet its procurement obligations and how these targets are subsequently met. Cost or price, quality, sustainability and value for money are all factors which can be taken into account when establishing contract award criteria.
Award criteria are used to determine which economic operator is best placed to deliver and who should be awarded the contract. A contracting authority has discretion to determine what award criteria to apply in relation to individual regulated procurements.
In all cases, award criteria must be linked to the subject matter of the goods, works or services to be provided, and should not include criteria which have formed part of the assessment at the selection stage. This is because the selection stage is intended to assess the economic operator’s suitability to tender, whereas the award stage is intended to assess the merits of the tender itself. For example, a contracting authority is able to evaluate an economic operator’s general staff qualifications and experience as part of assessing whether it possesses the necessary technical and professional capacity to perform the contract. Where the quality of staff designated in the tender (for example, as responsible for delivery of the contract) is likely to have an impact on technical quality and/or delivery of the contract, this may be assessed at award stage.
5.7.1. Most economically advantageous tender
Regulation 67 of The Public Contracts (Scotland) Regulations 2015 requires EU-regulated contracts to be awarded to the ‘most economically advantageous tender’, also known as MEAT. MEAT criteria must be made up of price or cost, and other criteria such as: quality; organisational factors, which can include the qualification and experience of staff who will work on the contract; and issues associated with after sales service, technical assistance, and delivery matters.
This means that EU-regulated contracts may not be awarded on the basis of lowest price or lowest cost only.
This approach should also be applied to any award criteria for regulated contracts below the EU contract threshold values. While it is not possible to award contracts on the basis of lowest price or lowest cost, a contracting authority can award the majority of available points to price or cost, if to do so would reflect its priority for the contract in question.
By making use of ‘cost’ rather than the ‘price’ when determining the value of the contract, a contracting authority can support wider economic, social and environmental impacts. The cost of the contract is the purchase price plus other economic costs and can also include the whole of life or life cycle cost of the goods, works or services.
5.7.2. Life cycle costing
For EU-regulated procurements, where a contracting authority is determining the value of a contract on the basis of ‘cost’, the cost element can be calculated on the basis of the whole life cycle of the goods, works or services, as opposed to considering only the purchase price. See regulation 68 of The Public Contracts (Scotland) Regulations 2015.
The legislative provisions on life cycle costing do not extend to regulated procurements below the EU contract threshold values, however, the use of a life cycle approach, will support a contracting authority’s responsibility to consider how to support its sustainable procurement duty to improve the economic, social and environmental wellbeing of its area and help deliver value for money.
The use of life cycle costing enables a more rounded approach to assessing the wider impact of the goods, works or services and which reflect their true costs throughout their life.
Life cycle costs can represent any acquisition costs such as: research or development costs, for example, preparation of the site, transfer of assets or redeployment costs; any internal or operational costs, such as legal fees, consumption of energy and other resources, production and maintenance costs and training. It can also include end-of-life disposal costs such as decontamination, disposal or landfill tax.
Life cycle costs can also take into account environmental factors, such as pollution caused by extraction of raw materials used in the product or caused by the product itself or its manufacturing, this may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs.
Where a life cycle costing approach is to be used to assess the costs of the contract, a contracting authority must establish the method in advance and indicate in the procurement documents what method will be used, and what information is required of economic operators. The method being used must be objective, based on non-discriminatory criteria and accessible to all interested parties, i.e. not favour a particular economic operator. Where any common methods have been made mandatory by legislation, for example the Clean and Efficient Vehicles Directive (2009/33/EU), they must be used.
5.7.3. Fair work practices, including the Living Wage
Separate statutory guidance is available on Addressing Fair Work Practices, including the Living Wage, in Procurement.
5.7.4. Abnormally low tenderers
There may be situations where an economic operator’s tender could be regarded as abnormally low. This low cost or priced tender could be justifiable, for example because of a competitive advantage based on greater efficiency in production processes or place in the market, however it may not be a true indication of the costs associated with the contract and may therefore pose a risk to the effective delivery of the contract.
For EU-regulated procurements, under regulation 69 of The Public Contracts (Scotland) Regulations 2015, a contracting authority must require economic operators to explain any tender which, in its view, could be regarded as abnormally low. While this is not a requirement for regulated procurements below the EU contract threshold values, this approach is best practice.
In considering whether a tender is abnormally low a contracting authority must consider all factors which may affect the cost or price and the effective delivery of the contract. Additional information can be sought from an economic operator, which must be given careful and thorough consideration by the contracting authority. The bid can only be rejected where the contracting authority is not reassured that the evidence supplied explains the reason for the low level of costs or price proposed. Tenders must not be rejected solely on the basis of the low cost or price. In all instances any abnormally low bid must be rejected where it has been established that the tender is abnormally low because it does not comply with environmental, social or labour law. A tender may also be rejected if the economic operator has obtained State Aid and is unable to prove that the aid in question was compatible with EU rules on State Aid.
5.7.5. Food and animal welfare
When determining contract award criteria for EU-regulated procurements in respect of the provision of food, a contracting authority must ensure that it takes account of the policy position as provided in its procurement strategy, and ensure that these criteria do not discriminate against economic operators based on their size or status. This guidance is also best practice in respect of regulated procurements below the EU contract threshold values.
Contract award criteria in respect of the provision of food must consider how to promote the highest standards of animal welfare and can take into account a wide range of factors, and ensure that all aspects of sustainability and health are considered. This can include how to tackle quality and nutrition, specifying a requirement for fresh and seasonal produce, buying food which aims to help meet the Scottish Dietary Goals, taking into account how food has been produced and processed and also considering the distribution processes and thinking about animal welfare.
When determining what is meant by animal welfare, this can encompass a range of aspects such as health standards for farm livestock, how animals are protected during transportation, animal cruelty and how animals are treated at slaughter. These aspects must be given careful consideration as part of the wider procurement process.