Procurement strategy: April 2021 to March 2023

2. Carrying out our functions and purpose

In this first part of our procurement strategy we describe our key strategic priorities

and describe how our procurements will contribute to the delivery of those priorities by reference to some examples.

The Scottish public sector spends over

£12 billion a year buying goods, services and works. We use this spend to achieve improvements to what we buy and how we buy it. For example, simplifications that can be made to improve supplier access to

public contracts can help to support economic growth.

The National Performance Framework sets an overall purpose and vision for Scotland focused on creating a more successful

country, with opportunities for all of Scotland to flourish, through increased wellbeing and sustainable and inclusive economic growth.

This is underpinned by Scotland's Economic Strategy and our annual Programme for Government which sets out our plan for policy delivery and legislation over the next year. The whole of the public sector in Scotland is expected to contribute to the purpose. Different organisations are working towards shared outcomes, which are defined in terms of benefits to the people of Scotland rather than simple efficient service delivery.

For example, we have set out procurement commitments in the current Programme for

Government and in the Economic Action Plan which include responding to the climate emergency, a continued focus on promoting Fair Work practices, supporting small businesses and local supply chains and mainstreaming sustainable procurement.

To meet our ambitions, the sustainable procurement duty has been aligned with the National Performance Framework which includes a set of National Outcomes and National Indicators. These are embedded

in the sustainable procurement duty tools which provide a structured approach to what we procure. They help to identify opportunities to include economic, social and environmental considerations in contracts and show how our procurement activity contributes to the National Outcomes. In consultation with buyers from across the public sector, the tools were updated and have been re-launched on a more accessible platform.

We have also published two Scottish Procurement Policy Notes to reinforce the outcomes-focused approach and to clarify policy relating to Measuring social impact in public procurement and Taking account of climate and circular economy considerations in public procurement.

Using the prioritisation methodology at an organisational and category level, and the sustainability test in our individual

procurement projects, we identify sustainable and inclusive outcomes covering a wide range of areas including those related to climate change, Fair Work, employability, equality and seeking opportunities for SMEs, the third sector and supported businesses to access procurement.

The prioritisation methodology allows us to see where there is the most scope to do things differently and where we have the most influence on the market so that we recognise the best opportunities in our procurement activity.

Compliance with the sustainable procurement duty is the recommended mechanism through which public procurement contributes to,

and tracks its contribution to, the overall purpose and vision for Scotland as set out in the National Performance Framework. Scotland's Economic Strategy has four key priorities:

• promoting inclusive growth and creating opportunity through a fair and inclusive jobs market and regional cohesion;
• investment in our people and our infrastructure in a sustainable way;
• fostering a culture of innovation and research and development; and
• promoting Scotland on the international stage to boost our trade and investment, influence and networks.

Our vision for Scotland is to create a wellbeing economy – that is, a society that is thriving across economic, social and environmental dimensions, and that delivers sustainable and inclusive growth for the people of Scotland. This means creating an economy that is environmentally sustainable, where businesses can thrive and innovate, and that supports all of our communities across Scotland to access opportunities that deliver local growth and wellbeing.

The COVID-19 pandemic has highlighted the interconnectedness of social, economic and environmental outcomes, and the need to think about a holistic approach to the recovery and policy development going forward. The recovery is an opportunity to actively shape the future of Scotland's economy in a way that supports and prioritises the economic, social and environmental prosperity of current and future generations. The scale of our ambition and the change required will require collaboration between national and local government, and between the public, private business and third sectors.

We are committed to maximising the contribution that public authorities make to the four capitals of People, Environment, Communities and Business, through strategic interpretation of procurement, continuing to play our part as one of the pillars of Community Wealth Building.

We design our contract and procurement processes to contribute to these priorities as far as is practical. We do so in a way that achieves value for money and makes contracts accessible to businesses, including SMEs, the third sector and supported businesses. This is in line with our ambition for a Just Transition to a net-zero society, recognising that this offers wide-ranging economic and social opportunities for workers, communities and places and
that we must leave no one behind.

Some examples of how we contribute to the priorities described in Scotland's Economic Strategy are described below.

Inclusive Growth

Inclusive growth is 'growth that combines increased prosperity with tackling inequality; that creates opportunities for all and distributes the dividends of increased prosperity fairly'. Inclusive growth incorporates the traditional growth policies of investment, innovation and internationalisation, while tackling inequalities in outcomes and inequalities in opportunity. Inclusive growth is multi-dimensional and includes social inclusion, wellbeing, participation, as well as the environment. It promotes growth in Scotland's cities, regions and rural areas recognising the importance of place and community to the delivery of inclusive growth across Scotland.

Scotland's Economic Strategy states that Scotland aims to be:

'a society that promotes inclusive growth and creates opportunity through a fair and inclusive jobs market and regional cohesion to provide economic opportunities across all of Scotland.'

Scotland's Economic Strategy

Ways in which public procurement contributes to inclusive growth include:

• providing training and employment opportunities;
• driving Fair Work practices;
• promoting equality and tackling inequality; and
• contributing to the Just Transition to net-zero.

The second Fair Start Scotland Annual Report was published on 9 November 2020 and provided an update on the range of activities and initiatives undertaken by suppliers to continue to deliver sustainable procurement outcomes.

Investment

Procurement underpins our investment in people, infrastructure and assets. For example, our ambitious infrastructure plans will rely on a construction industry

that is both well positioned to deliver and understands the wider social and economic wellbeing priorities associated with that delivery. Our collaborative procurement team for construction is working to establish a portfolio of frameworks which will deliver

a range of construction activity across the Scottish public sector. In doing so we will consider the economic impact of the construction industry and the requirement for inclusive growth and climate change targets.

As outlined in previous Economic Action Plans, the Construction Leadership Forum was created in March 2019 with a membership comprising senior players from the government, the construction industry and the client side. There is a clear shared sense of ambition and vision with a desire to move away from the traditional transactional relationship to an increased collaborative enterprise between government and industry which will deliver a more sustainable, productive and innovative industry.

The Construction Leadership Forum is a conduit whereby issues of concern can be discussed and resolved. Some of the issues currently being progressed include sustainable pricing (where the introduction of a revised tender pricing assessment mechanism is under development); payment performance throughout the supply chain; and a review of the mechanism to identify abnormally low tender prices. We are also progressing a Scottish Government Civil Engineering Framework which will be tendered during summer 2021 and which
will encourage the use of local supply chains by providing regional lotting for smaller
value works.

Also, the Client Guide to Construction Projects consists of three handbooks: the Project Initiation and Business Case Handbook, the Construction Procurement Handbook and the Construction Phase Handbook. The guidance is primarily to help public sector clients better manage their construction projects but should also be of assistance to contractors and consultants in developing their understanding of how the public sector delivers construction projects.

Innovation

Public procurement has a key role to play in supporting and promoting innovation in the way public sector services are provided in Scotland. The sustainable procurement duty requires public bodies to consider innovation for regulated procurements. The procurement rules also encourage innovation in public procurement. For example, through the work of the Procurement Innovation

Leadership Group, established by the Scottish Government, two new innovative services have been created for cancer diagnostics. Colon Capsule Endoscopy is being used to diagnose bowel cancer in five health boards using a small pill camera. Cytosponge is currently being used in ten health boards across Scotland to diagnose oesophageal cancer using non-invasive technology. Both programmes are being expanded across NHS Scotland as part of its endoscopy recovery programme.

In addition, we continue to develop and implement our innovative and flexible approach to the procurement of Digital Services. Within our collaborative ICT team we have now established four Dynamic Purchasing Systems (DPS) covering Digital Technology Services, Telephony Services, Network Advice and Internet of Things.^[4]

With each iteration we are learning and improving on the process. This innovative and completely electronic approach encourages SME participation and drives wider competition for digital projects. Also, our More Powers Implementation Team has established the first DPS for the purchase of services which support the development of the benefits system used by Social Security Scotland.

Some other examples of how procurement can support innovation include our Non- Domestic Energy Efficiency Framework and also CivTech^® which are described in more detail below.

Non-Domestic Energy Efficiency Framework

In 2020, the Scottish Government launched second generation Non-Domestic Energy Efficiency (NDEE) frameworks, consisting of the NDEE over £1 million projects framework, the NDEE sub £1 million projects framework and an NDEE project support unit framework.

These frameworks will continue to support public and third sector bodies in Scotland to accelerate energy efficiency retrofit projects across their estates. The NDEE Frameworks are innovative in the way that they support a diverse range of energy efficiency and renewable energy solutions. The framework aims to cover environmental, community and Fair Work benefits as part of any energy efficiency projects supported. The approach to market also helped ensure that we encouraged and delivered an economic footprint in Scotland.

Benefits include:

• a direct contribution to the Scottish Government's target to reduce climate emissions;
• savings in energy and maintenance costs;
• reduced costs to the public and third sectors; and
• delivery of energy efficiency work to meet the Assessment of Non-Domestic Buildings (Scotland) Regulations 2016.

By using key performance indicators developed specifically for this framework, public organisations can track and report progress across a range of environmental and socio-economic outcomes. There are 11 contractors on the NDEE over £1 million projects framework and 5 suppliers on the NDEE sub £1 million projects framework, all of whom are able to deliver retrofit projects to meet the requirements of individual public bodies with an energy cost performance guarantee.

CivTech^®

Our CivTech^® programme also addresses public service challenges in innovative ways. The programme involves public organisations setting civic challenges which demand solutions. Anyone, any team or business may submit potential solutions and smaller businesses are particularly encouraged to apply with innovative solutions. It enables the rapid development of creative, cost-effective solutions delivered by businesses. CivTech^® is providing pathways for tech SMEs and start-up businesses to secure public sector contracts. It offers real opportunities to develop even better services for people and even better value for service providers. The CivTech^® approach is valued in procurement because of the innovative way it finds solutions to challenges.

New elements to the CivTech^® approach have been introduced as a response to the COVID-19 pandemic. CivTech^® Sprints are CivTech^® Challenges that go through the same multi-stage process that standard Challenges go through, but sit outside the normal timetable. This allows for independent start and finish dates that fit with the Challenge Sponsor requirements and which are essential in emergency situations.

The CivTech^® Alliance has been developed as a global network of public and private organisations at the leading edge of innovation. Its role is to empower innovation programmes around the world to deliver better outcomes for citizens by transforming governments through entrepreneurial collaboration. It now comprises 20 participant teams from North and South America, Europe, Middle East and Australia. This has opened up opportunities for collaboration, trade and shared best practice.

This activity builds on recommendations to enable international collaboration and benchmarking with similar programmes across the world. Working in partnership
with the Digital Commercial Service (DCS), and drawing on the experiences and results of the network, we will also create a series of best practice publications on the successful creation, development and implementation of innovative public services to support local practice across Scotland.

Our key aim is to deliver innovation in procurement to address public sector challenges and we will continue to work with our partners and use the flexibilities in the public procurement rules that enable us to do this. We will continue to support innovative and agile ways of working to deliver digital public services and public service reform with this commitment reflected in the Scottish Government's Digital Strategy.

This will be supported through the DCS which will maximise the spending power of the Scottish Government and its delivery bodies to allow organisations to benefit from new and innovative technologies.

It will implement a range of alternative commercial models based on a small number of key strategic alliances and an open inclusive approach to procurement which provides meaningful commercial opportunities for small businesses and
start-ups.

The DCS uses a "test and learn" approach to the implementation of different commercial models through the major, strategic digital procurements it carries out. The DCS will build on the success of the Covid-19 Digital Triage Service and continue to engage widely with the market to ensure that we are responsive to technology change and innovation.

The DCS will engage widely with the market and representative bodies on a range of topics, including specific programmes and procurements. This will:

• Increase the potential supplier pool for competition.
• Improve the quality of submissions received.
• Allow suppliers to better understand the requirements and outcomes for the engagements in order to make informed decisions.
• Provide suppliers with a feedback mechanism on our approaches and practices.

Internationalisation

We value Scotland's trading relationships with other nations and believe that fair competition supports economic growth. Our involvement with suppliers and supply chains is aimed at developing their potential to bid for public contracts whether these are advertised in Scotland, the UK or further afield. To achieve our vision of being 'world leaders in innovative public procurement', we work with UK, European and global networks to set standards and share best practice. Our innovative approaches continue to be cited in European and global case studies.

Scotland is a subnational pioneer country as part of an international initiative under the Open Government Partnership. This is aimed at government and civil society working together to develop and implement ambitious open government reforms, one of which is public procurement. In 2018, a second Open Government National Action Plan 2018-2020 was published with actions delivered.

We continue to publish even more coherent and consistent procurement information and in a format that is useful and easily understood. This information can be found in a new section of PCS under 'Transparency'.

We also take cyber security matters very seriously and have published a new Cyber Resilient Scotland Strategic Framework (February 2021) which further highlights the importance of the cyber security of our supply chains. On 15 January 2020 the Scottish Government published a Scottish Public Sector Supplier Cyber Security Guidance Note and released the cyber security decision making support tool, to help facilitate a consistent approach to cyber security, specifically in supply chains across the Scottish public sector. Information about the guidance and the support tool is signposted in our Scottish Procurement Policy Note SPPN 2/2020: Scottish public sector supplier cyber security guidance. Public bodies are encouraged to follow the key steps and principles in the guidance wherever possible. They are also encouraged to familiarise themselves with the guidance before making use of the optional support tool.

There are a number of other cyber-focused supports in place for use by public sector buyers and suppliers:

• the Procurement and Supplier Journeys have examples of model text and clauses focused on cyber security for use in tenders and contracts;
• we have also put in place a Digital Technology Services Dynamic Purchasing System which is a one-stop shop for use by purchasing bodies that are looking to buy cyber security services and resources;
• we continue to work with the Supplier Development Programme to provide training and support for suppliers including on cyber security matters; and
• more generally, we provide digital support through the Digital Development Loan which offers interest-free amounts from £5,000 to £100,000 to invest in digital capabilities, processes, skills and capacity.

Overall, we help to deliver our key priorities through what we buy and how we buy, which includes considerations of the wider economic and social impact of our contracts and how we manage our supply chains.

Our new Supply Chains Development Programme was announced in the September 2020 Programme for Government. It is a key part of our economic recovery approach and will support the work on the National Mission for Jobs by improving the capacity, capability and development of Scottish supply chains. The Programme brings together economic development and procurement. It will align strategic enterprise and innovation support with significant public sector procurement to build resilient strategic supply chains and deliver better economic outcomes.