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SMEs, third sector, social enterprises: sustainable procurement guidance

Guidance for public bodies covering procurements where there is an opportunity to involve SMEs, the third sector and supported businesses.

SMEs, third sector, social enterprises: sustainable procurement guidance

Employment: SMEs, social enterprises, supported businesses and third sector

This guidance is concerned with procurements where engagement of SMEs, the third sector, and supported businesses is considered to be relevant and proportionate.

It is part of a series of guides which support the sustainable procurement duty tools to help public sector organisations embed sustainability into their procurement processes.

Description of risk or opportunity

Is there an opportunity for SMEs, third sector social enterprises, or supported businesses to be involved in providing a related service, if they have the appropriate skills? 

For example, making sure SMEs, third sector organisations and social enterprises can compete for opportunities (directly or as a subcontractor) and, where relevant, reserving contracts for supported businesses or helping them to be involved in a supply chain.

Community benefit requirements

In relevant contracts, community benefit requirements should be reflected throughout the procurement process, including: 

  • in the contract notice
  • in technical specifications, (that can include the method of production or provision of the requested goods, works or services)
  • as part of supplier selection
  • in award criteria that can include social and environmental characteristics
  • in the contract award notice

This document will provides guidance on how to apply community benefits requirements at each stage of the procurement process. 

Contract suitability and market capacity to meet a specific requirement need to be addressed on a case-by-case basis. Preliminary market consultation is crucial to be able to determine whether the market is capable of delivering a specific community benefit or whether requiring such would place too large a burden on suppliers.    

SMEs, the third sector and supported businesses

There is potential for public procurement projects to positively impact on various sectors of the business community, either as direct contractors or as subcontractors. Beyond the structure of the individual tender, the procurement strategy will also play a large part in facilitating this. 

We are committed to developing an enterprising third sector. We aim to achieve this by including community benefits requirements in public sector procurement.  

We aim to deliver this through: 

  • making sure that the third sector (as representatives of service users) is given the opportunity to be involved in the design and delivery of services
  • maximising social benefit by including community benefit requirements in contracts where appropriate
  • ensuring that contracts are advertised in such a way that SMEs, third sector organisations and supported businesses are aware of the opportunities, for example by using the Public Contracts Scotland (PCS) portal
  • seserving contracts for supported businesses

Further to this, we have been working to make it as easy as possible for micro businesses and SMEs to compete for public sector contracts. This forms part of the wider strategic objective of making Scotland the most attractive place for doing business in Europe.

Since the new legislative framework in Scotland came into force on 18 April 2016, a number of specific measures have been introduced to improve SMEs’ access to public contracting opportunities, including: 

  • all regulated contracts must now be advertised through PCS, making it easier for SMEs to find and compete for contracts
  • a contracting authority must now consider whether a contract can be divided into smaller contracts (lots). If an authority decides not to do this, it must justify this decision
  • if a contracting authority decides to use turnover as a selection criterion, the maximum level of turnover required can only be two times the value of the contract, except in special cases where this would pose too large a risk in the delivery of the contract
  • contracting authorities may include a requirement in the contract which would allow it to pay sub-contractors directly at the sub-contractor’s request

Reserving contracts for supported businesses

A contracting authority may reserve the right to participate in a regulated procurement for the award of a public contract or framework agreement to supported businesses. 

Under the Public Contracts (Scotland) Regulations 2015 a 'supported business' means an economic operator whose main aim is the social and professional integration of disabled or disadvantaged persons and where at least 30% of the employees of the economic operator are disabled or disadvantaged persons.

Disclaimer: This guidance is provided to support the embedding of relevant and proportionate contract/framework requirements and the information and examples are provided in good faith. To the extent that this guidance contains any information concerning procurement law such information does not constitute advice to you.

The content of this guidance is not to be construed as legal advice or a substitute for such advice, which you should obtain from your own legal advisers if required. Scottish Government is not and shall not be held responsible for anything done or not done by you as a result of this guidance.