Procurement Reform (Scotland) Act 2014 thresholds: consultation analysis

4. Findings

4.1 Demographics

The consultation included a section where respondents provided information about themselves and their experience of public procurement.

Respondents were asked on whose behalf were they responding. Table A, below, includes the options which respondents were asked to choose from alongside the number of respondents who selected each response.

The consultation asked, if the respondent was part of a public body, which sector they worked in. There were a total of 148 respondents who reported to be a part of a public body. Table B, below, provides a breakdown of the responses.

There were a total of 74 respondents who reported to be a supplier or business. These respondents were asked approximately how many people worked in their organisation. Table C, below, provides a breakdown of respondents’ answers. This report uses the term SME which refers to small and medium-sized enterprises. The Scottish Government’s definition of an SME encompasses micro (fewer than 10 employees), small (fewer than 50 employees) and medium-sized (not more than 250 employee) businesses. To protect data privacy some responses have been grouped together. There were a total of 51 respondents who reported being associated with an SME.

Respondents were asked whether they, or their organisation, had ever bid for a Scottish public contract. Table D, below, outlines the responses to this question.

Respondents were asked whether they, or their organisation, had ever been invited to bid for a Quick Quote opportunity. Table E, below, provides a breakdown of responses to this question. Quick Quote is an online quotation facility on the Public Contracts Scotland (PCS) portal which allows public bodies to obtain competitive quotes electronically for low value, unregulated requirements. Quick Quote opportunities are created on PCS and distributed to selected suppliers, rather than being published as an opportunity for all. For more information on Quick Quotes, please see the PCS Quick Quote guide.

Respondents were asked whether they, or their organisation, had ever been asked to deliver community benefits as part of a contract. Table F, below, provides a breakdown of responses to this question.

4.2 Question 1: Which is your preferred option in relation to the Act’s goods, services and works thresholds?

Respondents were asked to select their preferred option for amending the goods, services and works thresholds. There were 223 responses to question one. The option most commonly selected by respondents was option 3 (103, 46%, n=223). An equal number of respondents chose the lower thresholds of options 1 (19, 9%) or 2 (84, 38%), as chose the higher threshold option 3. Table G, below, provides a breakdown of these results.

Of those responding on behalf of a private company, the majority preferred option 3 (16, n=29). Of those responding on behalf of a public body, options 2 and 3 each attracted the support of roughly two-fifths of respondents (30 each, n=72). Of those responding on behalf of a voluntary, charity or third sector organisation, the majority preferred option 3 (14, n=20). Of those respondents who were not responding on behalf of an organisation roughly two-fifths preferred option 2 (33, n=77).

Of the respondents who reported that they had bid for a Scottish public contract, just under half preferred option 3 (23, n=50). Of those who reported that they had not bid for a Scottish public contract, the majority preferred option 3 (17, n=21). Finally, around two-fifths of those who reported that they were not a supplier or business preferred option 2 (62, n=142).

Should the goods, services and works thresholds be increased from their current levels then this would be likely to increase the number of procurements which are awarded via the Quick Quote process. Option 3 was preferred by a majority of those who reported that they had bid for a Quick Quote opportunity (20, n=36) as well as those who had never (19, n=29). Around two-fifths of those who reported that they were not a supplier or business preferred option 2 (61, n=142).

Finally, table H, below, compares respondents’ answers to question one to whether they reported to be an individual or organisation.

4.3 Question 2: Optional. What are the reason(s) for your answer to question one?

There were 206 responses to question two. The responses were coded into overall themes.

4.3.1 Benefits of increasing the goods, services and works thresholds

The benefits of increasing the goods, services and works thresholds was the most common theme for this question. The most commonly cited benefit was to SMEs. One respondent noted that increasing the thresholds will “allow increased spend with SME and local businesses” while another commented that it will “… make it easier for SMEs to access attractive opportunities with less red tape…”.

The ability to create greater flexibility in the procurement process was the second most commonly cited benefit. One respondent remarked that “While many recognise that national procurement policy and the guidance underpinning it are progressive, raising the thresholds to the higher level would yield greater opportunity and flexibility for innovative commissioning approaches, more scope for lower value Quick Quotes and lessen the time and resource burdens on both buyers and suppliers given the volume of regulated contracts in scope would be less.”

Many respondents mentioned the benefits to local suppliers and community wealth building^[2] from increasing the thresholds. One respondent said that increasing the thresholds would “…enable increased opportunity for locally based bidders” and would “… make it much easier for councils to meet their Community Wealth Building targets for local spend.”

In addition, many respondents said that increasing the thresholds would enable more contracts to be awarded via quicker and simpler processes, meaning that fewer contracts would need to be awarded via the formal processes outlined within the Act. Similarly many respondents felt that increasing the thresholds would enable more contracts to be awarded via the Quick Quote process, which was praised by one respondent as “… more accessible to local SMEs...”. Another respondent said “Public procurement faces many pressures in terms of staffing, time and increasing the threshold would allow shorter quick quote processes to be run to ensure we still meet competitive outcomes, but can work in a less regulated manner.”

Many respondents mentioned that increasing the thresholds would free up or save time and resources while some also noted that it would allow public bodies to focus more time and resource on larger value contracts. Increasing the thresholds would also reflect the rise in contract costs, as noted by several respondents.

4.3.2 The current goods, services and works thresholds are outdated

The second most common theme was that respondents felt that the thresholds are outdated. The most commonly mentioned reason for this was inflation with one respondent noting that “Inflation and cost increases have caused significant cost and thus price increases…”. Similarly, many respondents also felt that the thresholds were outdated because they have not changed in since 2014.

4.3.3 Views expressed on the options presented

The consultation offered respondents three options for how the goods, services and works thresholds could be amended. In response to question two, many explained why they preferred the option they had chosen. The most commonly cited reason for preferring the option they had selected was that the respondent felt like it reflected inflation. Some respondents who preferred option two also expressed the view that this option is future-proofed.

Respondents who expressed a view that their preferred option would reduce burden and bureaucracy, including for buyers and suppliers, predominantly selected option three.

4.3.4 Opinions on having a mechanism to regularly review the thresholds

Only option two included a mechanism whereby the thresholds would be reviewed every regularly (every two years) to reflect inflation. Many respondents expressed a view on this mechanism with the majority being in favour of it. Many of the respondents who commented in favour of the review mechanism selected option two as their preferred option. Some respondents who were in favour of option three also expressed a view that they were in favour of a review mechanism. One such respondent said “I also believe this option should have annual reviews and consider inflation growth as well so we are not in this position in 11 years that like the current thresholds, not be fit for purpose and practice.”

Of those who expressed a view on the review mechanism only some were opposed to it. Reasons given for not supporting the mechanism included “… a one off change with no regular change is easier to communicate…” and “Reviewing every 2 years while worthwhile would be an additional administrative burden.”

4.3.5 Concerns expressed regarding increasing the goods, services and works thresholds

Several respondents were concerned that increasing the thresholds would have a negative impact on transparency and several expressed concerns that it would have a negative impact on reporting requirements. One respondent commented that “…consideration needs to be given around still having data on sub £100,000 spend and not advertising awards below this threshold on PCS may hinder good data and potentially good news about contracts going to SMEs.”

Some respondents expressed concerns around a potential reduction in the visibility of contracts notices and award notices. Some also expressed concerns around a reduction in bidder feedback. Similarly, some expressed concerns that increasing the thresholds would be bad for SMEs while a few noted it would be bad for third sector organisations and new suppliers. One respondent commented that “… there are already limitations for SMEs at present. Raising these thresholds will only limit SME opportunities further, as they rely on structured and transparent processes to allow them to compete fairly against their larger competitors. In addition, this will lead to reduced transparency... This also means that there is an increased risk of subjective ‘decision making’ which will add to concerns around fair competition and best value.”

4.4 Question 3: Which is your preferred option in relation amending the community benefit threshold?

Respondents were asked to select their preferred option for amending the community benefits thresholds. There were 220 responses to question three with the most common response, representing just under half of all responses, being that the community benefits threshold should remain unchanged. Table I, below, provides a breakdown of responses.

A slightly greater number, though still less than half, supported reducing the threshold to some degree, although opinions were divided on an exact figure. This conclusion was arrived at by comparing responses to option A against responses to options B, C and D. Table J, below, illustrates this comparison.

Of those responding on behalf of a private company, the majority preferred option A (20, n=29). Of those responding on behalf of a public body, just over half preferred option A (36 each, n=71). Of those responding on behalf of a voluntary, charity or third sector organisation, half preferred option A (10, n=20). Of those who were not responding on behalf of an organisation, roughly a third preferred option D (25, n=76).

Of the respondents who reported that they had bid for a Scottish public contract, just over half preferred option A (27, n=49). Of those who reported that they had not bid for a Scottish public contract, just over half preferred option A (12, n=21). Finally, around two-fifths of those who reported that they were not a supplier or business, preferred option A (56, n=140).

Should the community benefits threshold be lowered from its current level, then this would be likely to increase the number of procurements that are required to consider including a community benefits clause. Of the respondents who reported that they had been asked to delivery community benefits, over half preferred option A (19, n=34). Of those who reported that they had never been asked to deliver community benefits, again, half preferred option A (15, n=29). Finally, around two-fifths of those who reported that they were not a supplier or business preferred option A (56, n=139).

Finally, a comparison was done between responses to question three and whether respondents were responding as an individual or organisation. Option A was the most preferred option for those responding as an individual, with just over a third reporting that this was their preference (37, n=107). Just over half of respondents who were responding as an organisation also preferred option A (62, n=113).

4.5 Question 4: Optional. What are the reason(s) for your answer to question 3?

There were 185 responses to question four. Responses were coded into key themes.

4.5.1 Lowering the current community benefits threshold

The most common theme expressed by respondents was views on changing the threshold. Within this, more respondents expressed support for lowering the threshold than expressed support for not lowering the threshold. Several respondents expressed the view that lowering the threshold would be beneficial to communities and community wealth building. One respondent noted that reducing the threshold “…would support The Scottish Government, local authorities and public bodies in achieving, not just greater social and environmental impact through procurement, but wider outcomes around Fair Work and Community Wealth Building.” While another said “If we are serious about creating Community Wealth building this is an important first step.” A few respondents expressed the view that reducing the threshold would be good for local businesses, with one noting that community benefits are “… a key mechanism through which procurement delivers tangible social value, including fair and secure employment, apprenticeships, local supply-chain opportunities, and community reinvestment. Reducing the threshold would extend these benefits to a wider range of construction and major service contracts that have substantial local labour and supply-chain impacts.”

Some respondents said that reducing the threshold would be fairer to, or good for, SMEs. One response said “Applying community benefit requirements at lower contract values increases opportunities for a wider range of suppliers – particularly local SMEs, social enterprises and third sector organisations – to contribute to public procurement activity.” Furthermore some respondents expressed the view that lowering the threshold would be beneficial to third sector organisations.

In contrast, many respondents felt that the current community benefit threshold is fine as it is and fit for purpose. One response noted that “The current level is appropriate to the intended purpose and brings the right balance of application to potential value delivery. Within this approach, public buyers can, if appropriate, still consider CB on lower value contracts but it avoids the need for the added process work where it is less likely to be appropriate.” While another respondent commented that “…applying community benefit clauses to every contract, including smaller ones, could create unnecessary administrative burden for both buyers and suppliers. The £4 million threshold strikes a balance between impact and manageability… Buying Authorities can still include community benefits in contracts below £4 million if deemed appropriate, but the threshold ensures that mandatory consideration is focused where it is most likely to succeed.”

There were many views expressing reasons why the community benefits threshold should not be changed. Several noted that changing the threshold would have an impact on costs and resources for buyers and suppliers. One response said that “Lowering the threshold would put a financial burden on the suppliers/contractors which in turn would be passed on the client resulting in higher costs for the contract.” Several raised the point that they believed that decreasing the threshold would be a burden or barrier for suppliers. On this point, some respondents specifically noted that changing the threshold would be a burden or barrier for SMEs; and two responses noted that it would be a burden for subcontractors. Some also said that lowering the threshold would create a burden for buyers. One respondent said that “…lowering the threshold would not have any effect beyond more administration for contracting authorities.” The risk of unintended consequences arising from reducing the threshold was also mentioned by a few respondents.

4.5.2 Views on current practice and experience of community benefits

The second most common theme was respondents expressing a view on the current practice, and their experience of, community benefits.

Just over half of respondents who expressed a view on the current practice of community benefits, or their experience of them, had a negative experience or perception. One response said that community benefits are “…an underhand way of getting extra work within a highly competitive environment and it is a one size fits all approach that makes no sense and doesn't benefit people properly.” Another noted “we still encounter suppliers who push back on community benefits and dig their heels in - some still think it's a bribe!”

Several respondents expressed the belief that community benefits are currently a burden for suppliers. In particular, several expressed the view that they are a disadvantage to SMEs, with one commenting “Our experience is that larger organisations are more adept at offering community benefit through tender processes than SMEs and by adopting a blanket approach of a lower threshold across all procurements a further barrier to SMEs is introduced.”

Similarly, some respondents expressed the view that community benefits are a burden to public bodies. One comment read “Community benefit essentially adds cost and admin and our budget is very tight.” A few respondents suggested that it is difficult to get suppliers to commit to, or deliver promised, community benefits.

In contrast, just under half of respondents who expressed a view on, or noted their experience of, the current practice of community benefits expressed a positive experience or perception. Some respondents noted that community benefits are an important and integral part of contracts. A few commented that the impact that community benefits have on communities is considerable. One respondent mentioned that community benefits are “…one of the best parts of the regulations, the impact they have is fantastic. My organisation has voluntarily implemented a lower threshold of £1m for many years now. Given our size, we never do £4m procurements but by bringing the threshold down we can ensure the promotion and delivery of community benefits in our local areas.”

Many respondents commented that they were either already aware that community benefits could be included in procurements valued less than £4 million, or noted that this practice was already being implemented. One respondent said “Most public authorities have much lower thresholds already.” While another commented that “My organisation already requests community benefits in all contracts above £100K, if more organisations did the same we would deliver much more needed community benefits in Scotland.” Similarly, some respondents noted that a legislative requirement or mechanism would help to encourage or promote the inclusion of community benefits. One respondent noted that “…community benefits are important and lowering this threshold gives more legal backing and therefore more power to hold suppliers accountable for providing community benefits.”

4.6 Question 5: Optional. Is there anything else you want to tell us about the goods, services, works or community benefit thresholds of the 2014 Act?

There were 112 responses to question five. The responses were analysed and sorted into themes.

4.6.1 General comments

Other than out of scope comments, which are covered in section 4.6.3, the most common response in this category was respondents expressing support for the views they had provided, or options they had selected, in the consultation.

Some respondents expressed concerns over the impact which changes to the thresholds could have for SMEs and third sector organisations. One respondent said “I think this is a good time to change however need to be aware of the impact on other policies for example SMEs, Micro organisations where these changes are going to hit hardest.” Some respondents expressed general views on community benefits and a few provided comments relating to the effectiveness or quality of community benefits. A few respondents provided comments relating to the Quick Quote process.

4.6.2 Guidance and best practice

Several respondents requested more, or improved, guidance and best practice. Within this, a few specifically requested more, or improved guidance and best practice for social value and community benefits, SMEs and unregulated procurements.

4.6.3 General comments - out of scope

The most common theme for question five related to comments which were out of scope of this consultation. The most common type of out of scope comment related to how procurement could be improved. One comment read “Although PCS support is good a live chat feature would be helpful so users can be assisted there and then when preparing procurements.” Several respondents also expressed their negative experiences and perceptions of public procurement. Although these comments were noted, they were out of scope of this consultation.