Procurement Reform (Scotland) Bill: Stage 1

– in the Scottish Parliament at on 20 February 2014.

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Photo of John Scott John Scott Conservative

The next item of business is a debate on motion S4M-09051, in the name of Nicola Sturgeon, on stage 1 of the Procurement Reform (Scotland) Bill.

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

I am pleased to open this afternoon’s debate on the general principles of the Procurement Reform (Scotland) Bill. I begin by thanking all those who gave evidence to the Infrastructure and Capital Investment Committee. I am particularly grateful to Maureen Watt, the committee’s convener, and to all the members of the committee for their detailed scrutiny of the bill at stage 1.

I am pleased that the committee has recognised the efforts that have been made to consult on the bill from its conception and throughout its development, and I welcome the committee’s clear recommendation to Parliament that the general principles of the Procurement Reform (Scotland) Bill be agreed to. As members would expect, the Government is of course giving serious consideration to the detail of the committee’s report. I will respond to its key points in due course, in the light of today’s debate and the points that will be, I have no doubt, made throughout this afternoon.

As we all know, and as was commented on at length when Parliament last had the opportunity to debate public procurement, public bodies in Scotland spend approximately £10 billion every year on buying things. It therefore stands to reason that the decisions that public bodies make when they spend that money are of enormous importance to businesses, to third sector organisations, and to the health of our economy as a whole. That is why the Procurement Reform (Scotland) Bill is necessary and important.

Before I go on to say a bit more about the content and main provisions of the bill, it is also important to stress that the bill does not sit in isolation; it is not the be-all and end-all of the work that we are doing, and that we require to do, on procurement. The bill forms part of the bigger programme of reform that was embarked on in Scotland following the publication in 2006 of John McClelland’s “Review of Public Procurement in Scotland Report and Recommendations”. That programme has led to the development of what is being increasingly referred to as the Scottish model of procurement, which seeks to maximise the contribution that public procurement can make to Scotland’s economic prosperity.

That approach views procurement as an integral part of the whole process of policy development and service delivery, and not as something that sits to the side of it. Through looking at outcomes and not outputs, it uses the power of public spend to deliver genuine public value in purchasing. The value-for-money triangle—cost, quality and sustainability—is central to the Scottish model of procurement, and economic, social and environmental sustainability must be at the heart of all that we do around procurement.

Sustainability is certainly at the heart of the Procurement Reform (Scotland) Bill. As members—especially those on the lead committee—will be well aware, the aim of the bill is to set a framework for public procurement that is both business friendly and socially responsible. It will be business friendly by standardising process, streamlining bureaucracy, increasing transparency and encouraging innovation—which the committee commented on at length—and it will be socially responsible by looking at the broader economic and social implications of procurement decisions. I will come back to some of that later in my speech.

Photo of Tavish Scott Tavish Scott Liberal Democrat

I think that the cabinet secretary mentioned transparency as part of her triangle of best value. Does she agree that, in implementing the bill, the hubco structure that is such an essential part of delivering new projects should be included in the bill in order to ensure the transparency that I am sure all members seek?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

We all want transparency. I will talk later about the scope of the bill in terms of the bodies that it covers. Hubs are an increasingly important part of the landscape of capital infrastructure and development, so it is important that they comply with the principles that are important to ensuring that we have a transparent framework around what we do.

I will talk a little about building in considerations such as community and environmental benefits at the start of the procurement process, rather than as last-minute considerations. It is also very important that we set clear standards for conduct of public procurement and clear standards of business ethics. The bill will help us to accelerate improvements in the procurement system and it will help to ensure, especially on major contracts, that we maximise the contribution from our procurement spending, whether that is for economic, social or environmental value.

The bill will place some general duties on public bodies and their procurement activities. Those duties are about acting without discrimination and in a transparent manner, and in a way that is best designed to improve the economic, social and environmental wellbeing of the area in which the body operates, and to promote innovation.

The bill will also require bodies to consider how they can facilitate the involvement in their procurement activities of small and medium-sized enterprises, the third sector and supported businesses. Those duties are particularly important because it is at the pre-procurement stage that public bodies have the greatest scope to ensure that procurement is accessible, in particular to smaller businesses, and that they deliver maximum social, environmental and economic value.

Supporting those general duties are a number of specific duties, one of which will require public bodies to consider including community benefit clauses in all new major public sector contracts and, where such clauses are not appropriate, to explain why in the contract notice. That will help to maximise the benefits from public procurement and it will build on our already good track record in recent years of delivering training and employment through contracts.

The bill will help to tackle unnecessary inconsistencies for suppliers in relation to doing business with the public sector, and it will ensure that that can be simple, transparent and more accessible to suppliers—again, I specifically mention SMEs in that regard. For example, the bill includes a requirement on public bodies to advertise contracts using a single online portal. That will improve the visibility and transparency of contracts and ensure that there is a one-stop shop for suppliers that seek to do business with the public sector.

The bill will place a requirement on contracting authorities that have a high level of spend to prepare and publish corporate procurement strategies and annual reports. By standardising the approach to the principles we will help to support better information and increased transparency and visibility, provide a better basis for engagement and, I hope, remove unnecessary inconsistencies.

There will also be a requirement on contracting authorities to maintain a contracts register and to make it publicly available. Again, that is about transparency, but it is also about helping businesses to assess current spend areas and to identify potential future opportunities.

Photo of Malcolm Chisholm Malcolm Chisholm Labour

Greater transparency is obviously welcome, but will the cabinet secretary do something about the fundamental problem of the size of contracts, which in many cases exclude SMEs from bidding in the first place?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

Malcolm Chisholm will be aware that there are provisions in the bill—in section 24, I think—on issuing guidance, which will help in relation to selection of tenderers. We are clear that the bill should be part of a process of removing unnecessary barriers that prevent businesses from bidding for and trying to access public contracts. For example, there is a specific provision on charging for tender documents. These are key issues in the bill, and as we go into stage 2, the Government will be open—as we always are—to considering amendments that would improve the provisions.

I was about to talk about charging for tender documents, but I mentioned it in response to Malcolm Chisholm, so I do not need to do that. The provision will help to eradicate a poor practice that acts as a serious barrier and which disproportionately affects smaller firms and third sector bodies.

The bill also sets standards for provision of debrief information. That is an important part of procurement activity because it helps suppliers to understand where they have weaknesses and to consider where they can improve. Using the bill to promote such standardisation and improved procedures will help to improve value for money and reduce costs for businesses.

High-quality public procurement is dependent on good practice not only by contracting authorities and their purchasers, but by suppliers to the public sector, which need to play their part by delivering high-quality, cost-effective goods and services and by maintaining the highest possible business ethics and standards.

Photo of James Kelly James Kelly Labour

On business ethics, does the cabinet secretary acknowledge that it is an omission from the bill that there is no reference to the living wage, which would give an opportunity to lift many low-paid workers out of the lower wage brackets?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

I will talk about the living wage. I do not accept that that is an omission from the bill, in which we have gone as far as we can within the confines of European law. However, we will continue to have this debate as we go through subsequent stages of the bill.

I will talk about issues in general. The bill allows us to set rules, where they do not currently exist within the overarching European legislation, regarding both the selection and the exclusion of companies as part of tendering exercises. The practice of blacklisting, failure to comply with obligations on tax and other acts of professional misconduct could in the future result in a company being judged to be unsuitable to bid, and rightly so. I put on the record again the Scottish Government’s—and, I know, the whole Parliament’s—view that the practice of blacklisting is completely and utterly unacceptable.

In the context of the bill, there has also been discussion, which James Kelly alluded to, about the living wage—something to which this Government is absolutely committed, and on which it is leading by example. As I have explained before, European Union law—specifically the law on posted workers, rather on procurement—does not allow us to make payment of the living wage an absolute requirement in contracts. However, the bill will allow us to issue guidance on workforce-related issues that will mean that we can ensure—

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

I will, if James Kelly will just let me finish.

The bill will mean that we can ensure that issues such as how much a company pays its staff or whether it makes inappropriate use of zero-hours contracts can be taken into account where they would be relevant to delivery and performance of the contract. We are determined to use the bill to the maximum. We will discuss such issues at stage 2, although I am sure that all members will accept that we have to remain within the confines of European law.

I will take a brief intervention, and then I have to make some progress because I have been generous.

Photo of James Kelly James Kelly Labour

If I am an employer who does not want to pay the living wage, what is to prevent me from ignoring the guidance and putting it in the bin?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

The bill will provide a statutory underpinning for guidance. We have not only led by example as a Government, and through the public sector, in paying the living wage, but are currently funding work by the Poverty Alliance to raise awareness of and to promote the living wage in the private sector. I hope that James Kelly can accept that we are, whatever else divides us, on the same side on this issue. We want the living wage to be paid, and we can discuss how best we can do that through the bill while accepting that there is a wide range of other things that we need to do that cannot be done through the bill. I hope that we can work constructively together on the issue rather than making it a point of division.

I have mentioned European law on several occasions. We need to maintain consistency with existing legislation where there is commonality, and we do not want to give rise to confusion or unnecessary complexity, so we have chosen to mirror the Public Contracts (Scotland) Regulations 2012 while limiting the bill’s application to Scottish public bodies. Application of the 2012 regulations is well understood, and the approach that we have taken means that, if a Scottish contracting authority is already within the scope of the regulations, it will also be within the scope of the bill.

We recognise that special circumstances apply to some types of contract, such as health and social care contracts and the contracts that universities and colleges need to award in support of research and development. As I said previously, we intend to lodge amendments at stage 2 to respond to some concerns that have been expressed in that regard

I, like the committee and many members, have heard a lot of discussion about the types of issues that the bill should address and how it should address them. I have already commented on some of the constraints within which we operate. As members recognised during the stage 1 debate in the chamber and at stage 2, the bill cannot be a panacea for all procurement ills, but we want to use it to the maximum in order to make as much progress as possible.

I believe that, taken together, the package of measures in the bill strikes an appropriate balance in responding to the views that have been expressed, while retaining the flexibility to cover the diverse range of goods, services and works that are procured by the public sector.

The bill should not be viewed in isolation in Scotland or in the European Union. Just last week the Council of the European Union adopted three new public procurement directives, which we intend to implement by summer next year—well ahead of the deadline for transposition that the directives set out.

Making procurement spending work better has enormous potential for our economic, social and environmental wellbeing. Although the bill is not the panacea that some have thought it might be, it is an important part of the overall package because it can help to ensure that we remain in the vanguard of innovative public procurement and get the best outcomes for Scotland. I hope that the Parliament agrees to the general principles of the bill today, but I remain happy to work with members as we progress to stage 2, and I will look favourably on amendments that are lodged.

I move,

That the Parliament agrees to the general principles of the Procurement Reform (Scotland) Bill.

Photo of Maureen Watt Maureen Watt Scottish National Party

I welcome the opportunity to contribute to the stage 1 debate on the Procurement Reform (Scotland) Bill on behalf of the Infrastructure and Capital Investment Committee. I thank all those who provided written and oral evidence to the committee, and all the people from business, the public sector and third sector organisations who gave of their time to attend informal events or to meet the committee informally as well as those who gave evidence formally to the committee.

I would also like to thank the committee clerks, who had to put in a tremendous amount of work in order to ensure that everyone had the chance to have a say. I also thank fellow committee workers for their input, and members of other committees that considered the bill at stage 1.

The Infrastructure and Capital Investment Committee supports the general principles of the bill. It considers that legislation is required to improve the situation of those who are attempting to access public contracts and, as it stated in its report, the committee considers that the national procurement framework for Scotland, which will be established by the bill, will improve consistency and transparency.

As the cabinet secretary mentioned in her opening remarks, the committee is aware that the bill was drafted in the context of current European legislation, and in advance of new directives on procurement. The committee recognises the need for a level of flexibility in the bill, so that it can react to those directives. On balance, the committee is supportive of the drive for procurement reform in Scotland at this time, but it will monitor how the bill ultimately sits with the forthcoming directives.

Part 1 of the bill sets out the contracting authorities to which the bill’s provisions must apply and the type of contracts that it will regulate. The committee was generally content with the approach that was taken, but heard in evidence the arguments for the inclusion of Scottish Water. The committee understands the logic of Scottish Water sitting, as it does, with existing utilities legislation on procurement rather than with this bill. However, the committee asked the Scottish Government to respond to the argument that there would be benefit to bringing Scottish Water within the scope of the bill for its smaller contracts.

The committee also considered the issue of arm’s-length external organisations—or ALEOs, as they are more commonly known. The committee asked the Scottish Government to consider how it might ensure that all ALEOs are covered by the bill’s provisions. I ask the cabinet secretary to comment on that during her closing speech.

The committee heard extensive evidence on the sustainable procurement duty. The inclusion of that duty has been welcomed in evidence. Any criticism that the committee heard centred on the duty’s not being onerous enough, or its being not sufficiently extensive to cover specific policy areas.

The committee highlighted the need for extensive and robust guidance on the procurement strategies and annual procurement reports to support the sustainable procurement duty. The committee also sought information on how the Scottish Government might use the procurement strategies and annual reports to assess application of the sustainable procurement duty. Obviously, that will be taken forward in future stages.

The sustainable procurement duty applies to contracts of £50,000 or more for goods and services, and £2 million or more for public works. The lowering of the current thresholds was broadly supported in evidence. In advance of the operation of those thresholds, it was difficult for the committee to reach a view based on evidence. In that light, the committee agreed to support the approach that was taken by the Scottish Government to balance the threshold amounts with proportionality. It welcomed the cabinet secretary’s undertaking to

“keep the matter under review”—[Official Report, Infrastructure and Capital Investment Committee, 11 December 2013, Col 2361.]

and welcomes the power at section 3(3) of the bill that will allow the threshold amounts to be amended in line with experience, if necessary.

Contracting authorities will also have to consider community benefit provisions for contracts worth £4 million and above. That provision has been broadly welcomed by business organisations, the third sector, public authorities and individuals. In a similar vein to the sustainable procurement duty, the committee considered that the monitoring the community benefit requirement will be of substantial importance.

It was brought to the committee’s attention that although procurement strategies must include community benefit information, there is no requirement for that to feature in annual procurement reports. The committee would therefore like the bill to ensure that annual procurement reports include contracts that have community benefit provisions, so that outcomes can be assessed. The opportunity to include provisions on supported businesses and social enterprises in the community benefit requirement was also raised in evidence and was highlighted by the committee.

The success of the community benefit requirement rests heavily on guidance. The committee requested further information on some of the detail that is to be included in that guidance. I would welcome the cabinet secretary’s comments on that.

The living wage was explored throughout the committee’s evidence taking. We were advised that correspondence between the European Commission and the Scottish Government indicates that a provision on the living wage would be likely to conflict with the European directive on posting of workers. The Scottish Government takes the view that it is unable to include a mandatory requirement on the living wage because of the views of the European Commission. The committee noted the Scottish Government’s position on that, but given the extent to which encouragement of the living wage will rest within guidance, we sought clarification on how that would be addressed.

The bill includes provisions covering guidance on exclusion of tenderers. It is the committee’s understanding that those provisions will allow the Scottish Government to address some of the issues around blacklisting via regulations that will be made under the bill. That was an important issue that was raised in evidence and the committee welcomed the Scottish Government’s on-going dialogue with the trade unions on the subject.

Photo of Neil Findlay Neil Findlay Labour

What would happen if an employer were to ignore the guidance?

Photo of Maureen Watt Maureen Watt Scottish National Party

That will be dealt with under secondary legislation, as Neil Findlay well knows.

The committee heard repeatedly of the need for transparency in public contracts. It therefore welcomes the requirement for contract notices and award notices to be published on the public contracts Scotland website. The committee considers that that provision is essential in order to improve access and transparency.

The committee supports the establishment of a remedies regime under the bill. However, we heard evidence to support the establishment of an ombudsman or tribunal system to accompany that. We understand that although the bill does not deal with that directly, there will be an opportunity for the Scottish Government to consider the issue when new European directives are adopted. The committee intends to monitor the Scottish Government’s considerations in that area.

The committee also heard in evidence about the importance of developing the skills of procurement professionals and the contribution that that could make to delivering improvements in public procurement. Evidence from the Accounts Commission and the Auditor General for Scotland pointed out that

“Public bodies will be required to demonstrate how their procurement will promote or improve the economic, social and environmental well-being of their areas.”

They considered that

“This and other aspects will require fresh thinking and may require training in new approaches to managing procurement.”

The committee invited the Scottish Government to consider and respond to the recommendation that the training and development of staff be included as a requirement in the procurement strategy and annual procurement report guidance.

Informal discussions with the third sector and SMEs indicated that awareness raising and support for them is important. The committee asked for a response from the Scottish Government on that issue.

The committee welcomed the commitment by the Scottish Government to pursue opportunities to drive greener public procurement and to expand the market for recycled and recyclable materials. We support the provisions in section 31 of the bill.

We also welcomed undertakings to take forward freedom of information matters in discussion with the Scottish Information Commissioner. Perhaps the cabinet secretary can give an update on that.

Two other important concerns with the bill were brought to the committee’s attention; the cabinet secretary mentioned them in her speech. First, the committee was alerted to issues surrounding procurement of health and social care services. The second area of concern was higher and further education. I listened to what the cabinet secretary said in relation to those concerns.

The committee agrees that the bill is required in order to improve the situation of those who are attempting to access public sector contracts. It is content that the bill will establish a national procurement framework for Scotland that will improve consistency and transparency. Therefore, on behalf of the committee, I recommend that the general principles of the bill be agreed to.

Photo of James Kelly James Kelly Labour

I welcome the opportunity to open the debate on behalf of the Labour Party and to indicate that we will support the general principles of the bill at 5 o’clock.

I echo members’ recognition of the work that has been carried out by the convener of the Infrastructure and Capital Investment Committee, Maureen Watt, the other members of that committee and the clerks in scrutinising the bill and producing the report.

There is no doubt that, given the £10 billion of public sector spend in procurement, the bill is a key piece of legislation. This is an opportunity to have an impact on economic growth and to send a key signal about how we operate in Scotland in relation to the fairness agenda.

There can be no clearer example of that than the living wage. In the past 43 months, inflation has risen more than wages have, and that has hit the low paid hardest. It has hit call centre staff, cleaners and labourers. There is no doubt that, if the bill could ensure that contracts included a commitment to the living wage, that would mean an additional £2,200 a year to those who are currently paid the minimum wage.

Photo of Kevin Stewart Kevin Stewart Scottish National Party

I do not think that anyone in the chamber would not agree that the living wage would be a good thing to include, but Mr Kelly will be aware of the Rüffert v Niedersachsen case. Will he comment on that? Beyond that, does he not think that it would be best if the Parliament had control over the minimum wage so that we could deal with matters appropriately?

Photo of James Kelly James Kelly Labour

I will come to the legal position in a minute and address that point.

It is no accident that the calls for the living wage are widely endorsed in submissions on the bill by the enough food for everyone if campaign, the Scottish Council for Voluntary Organisations, the Scottish Trades Union Congress and Stop Climate Chaos, and there is no doubt that many people throughout Scotland see the bill as an opportunity. I agree with Nicola Sturgeon that Labour and the Scottish National Party agree on the living wage. We should be working together to ensure that the bill contains stringent provisions to deliver it.

Alternative legal advice is available, which Unison has provided. The Government will need to look beyond the legal advice that it has. It is about how the question is asked of the European Union; it is also about linking the issue to the performance of contracts. The Government has to engage more on the issue rather than simply stand behind the legal advice that it currently has.

Photo of Kevin Stewart Kevin Stewart Scottish National Party

My experience in life has been that we can get different legal advice from the same lawyer. However, Rüffert v Niedersachsen is case law rather than just legal advice. Would it not be best if we were at the top table in Europe so that we could try to change the situation?

Photo of James Kelly James Kelly Labour

It is about how the legislation is constructed. As I said, there is a way forward if the issue is linked to performance. Rather than simply repeat one piece of case law, the Government needs to interact with the alternative legal opinions that are available and with those who want the bill to deliver a living wage.

It would send out a powerful signal if the Parliament ensured that, with the £10 billion of public sector spend that the bill covers, the living wage was paid. That would be welcomed by workers in communities across Scotland, and I ask the Government to examine that issue again.

The community benefit provisions in the bill are to be welcomed. With so much money being allocated, there is an opportunity for companies to work closely with communities to look at the wider social and economic benefits that the spend can achieve, as the Jimmy Reid Foundation has said. In its submission, the Construction Industry Training Board gives the practical example of including provisions around apprentices and training, which can not only benefit the delivery of the contract, but make a real difference to local economies.

The Federation of Small Businesses makes some strong points about the small business impact in its submission. It is worth taking on board the fact that for every £1 of spend by small companies there can be 63p in additional impact for communities, compared with 40p from spend by large companies.

We should examine closely the point that Malcolm Chisholm made about the size of the contracts and the need to de-bundle them. There is no doubt that we need to ensure that the £10 billion of spend is spread throughout Scotland and not concentrated on one or two areas of economic impact. To get the most from it, we must move it throughout the country.

Along with SNP politicians such as George Adam, who is the co-convener of the cross-party group on fair trade, I campaigned for and supported Scotland’s bid to get Fairtrade nation status, and I welcome our gaining that status. Nevertheless, the Scottish Fair Trade Forum makes a fair point when it says that it is not enough for the bill to ask companies to consider fair trade issues. The bill must contain a more serious commitment and an explicit recognition of Scotland’s Fairtrade nation status if we are to make the most of it. Labour will return to that issue at stage 2.

On the important issue of tax avoidance, when we have influence over so many contracts it is right to expect fair and ethical business practices. As the Scottish Catholic International Aid Fund acknowledges in its submission, we are not comfortable with aggressive tax avoidance, which takes money out of the public purse. Through the bill process, we must look closely at the scrutiny of company taxation policies to ensure that business practices are ethical.

Although we support the general principles of the bill, there are a couple of problems with it as it stands. The Government looks to be laying too great an emphasis on guidelines. As I said in relation to the living wage, and as Neil Findlay pointed out on blacklisting, it is all very well to say warm words and make all the right statements, but the point of legislation should be to make a difference. The worry is that we will put so much emphasis on guidelines that the bill will not achieve the objectives that the Government and the Labour Opposition want it to achieve.

Another problem relates to exemptions. Tavish Scott was correct to point out that the Scottish Futures Trust and the hubcos that operate under it are exempt, which seems a peculiar decision given the millions of pounds in contracts that flow through the hubcos. It seems logical and correct that they should be covered by the bill if we are serious about its making a difference.

We will support the general principles of the bill at 5 o’clock, but if the Government is to translate Nicola Sturgeon’s speech into real action on issues such as the living wage, we will need to see some real commitments at stage 2. The Labour Party will submit a raft of amendments on a number of issues in order to strengthen the bill, and we look forward that engagement at stage 2.

Photo of Alex Johnstone Alex Johnstone Conservative

Procurement is an important part of what Government and its agencies do. It is an active and developing field. We have come a long way since the days when a construction contract in the Western Isles was issued on the basis of the cheapest bid, only for the job to be done by a company from outside Scotland that employed no local labour and which, after completing the job, left local firms unpaid and debts that were never dealt with.

The truth is that we need to consider procurement quite seriously. The Scottish model of procurement that went before is a good foundation on which to base our progress.

The bill before us is wholesome, modest and functional and contains plenty of good intentions. Sometimes Governments are inclined to take a sledgehammer to crack a nut. At other times, they will herald a bill by suggesting that it will be a pantechnicon complete with bells and whistles, but what eventually comes along is pure, simple and functional. I prefer the latter approach, and I am delighted that that is the nature of the bill that we have in front of us. The cabinet secretary acknowledged in her opening speech that that is what has happened. She will receive no complaints from me for taking that approach.

I am giving away no secrets when I say that we will be happy to vote for the bill at stage 1. However, I have some concerns, which revolve around some things that are not in the bill and some things that I would not like to see in the bill.

I will start with some of the improvements that I would like to see. We have already heard a number of quotations from the Federation of Small Businesses, and I take the opportunity to quote it slightly more extensively. In the submission that was sent to members before the debate, the FSB states:

“the scope of the Bill needs to be extended to include HubCos and ALEOs to ensure that organisations purchasing on behalf of the public sector adhere to the same standards that we would expect of public sector purchasers”.

That is a perfectly reasonable request. It also states:

“while we agree that low-value, below threshold (sub £50k) contracts should not have the same conditions attached to them as high value contracts, commitments to improve procurement should apply to all public sector purchasing. For example, the duty to behave in a proportionate and transparent manner” is a reasonable expectation. I support those principles.

In ensuring that our procurement system is fair to all, it is important that we do not overegg the situation. It must be fair to all. I have heard some individuals suggest that we could have a procurement system in place that goes out of its way to favour third sector organisations, supported businesses or social enterprises. We need a system that is fair across the board, although I have to say that I was amazed to discover that the types of business with which we are concerned were disadvantaged in the previous system. There will be a great deal to be had for them when we take the bill forward.

I believe that community benefit clauses can be very valuable if they are handled in the right way. I will look closely at what emerges in that regard at stage 3.

There are some very interesting questions that still need to be answered, such as why the bill does not cover Scottish Water. I am not saying that it should; I am simply saying that there is a huge inconsistency, in that a large, apparently public sector, organisation appears to be exempt from the bill. Some would say that it should be included. Some in the chamber might say that there is another solution, which would be to remove Scottish Water from the public sector—but let us not go there today.

The thresholds were discussed at some length during stage 1. It has to be said that most of the witnesses believed that the thresholds are roughly right. However, some of them were unable to tell us why they thought that. The threshold issue did not seem to stimulate the amount of argument that it might have done.

We have heard about blacklisting, wage levels and zero-hours contracts. It is important that we take into account the fact that there are concerns about those issues, but I do not believe that the bill is the appropriate place for some of them to be covered.

Photo of Alex Johnstone Alex Johnstone Conservative

We have also heard about tax behaviour—I will get on to that after I have taken an intervention.

The Deputy Presiding Officer:

Mr Robertson, the member is in his last minute; he is not taking an intervention.

Photo of Alex Johnstone Alex Johnstone Conservative

My apologies.

It is appropriate that wage levels are not included in the bill and important that we deal with wages through the normal channels. We must not have one wage structure for public sector contracts and another for the rest of the economy. For that reason I am prepared to debate—whether in this place or in any other forum—wage structures to ensure that we have a standardised approach to them.

The Deputy Presiding Officer:

Draw to a close, please.

Photo of Alex Johnstone Alex Johnstone Conservative

When it comes to tax, it is important that we understand the difference between avoidance and evasion. Those who evade tax are criminals and should be prosecuted.

In closing—

Photo of Alex Johnstone Alex Johnstone Conservative

In the bill, fairness and transparency are essential. Value for money for the taxpayer is also a sound objective. I share what appear to be the Government’s objectives, so let us move forward and get the bill prepared.

The Deputy Presiding Officer:

Thank you very much. We are very tight for time; members have up to six minutes, including interventions.

Photo of Kevin Stewart Kevin Stewart Scottish National Party

I rise to support the bill at stage 1. I have told the chamber before that I am a little bit of a procurement anorak. However, as I have said in previous speeches—and as the cabinet secretary said today—legislation cannot be a panacea. Some common sense and gumption are often required. Instead of being rigid and risk averse, it is time for folk to put some common sense into practice. I think that the bill will help in a lot of ways.

Like many MSPs, I meet businesses very regularly indeed—for example, I recently met a coffee and beverage supplier and a vending machine supplier in my constituency. Quite often procurement comes up. On Monday, I met an Aberdeen builder, Mr Kenny Anderson of Anderson Construction, and, having told him that we were having the stage 1 debate today and that I was willing to take on board any comments that he had, I received rather a large email from him. Unfortunately, I will not be able to touch on all aspects of it, but some of the things that he pointed out show where common sense is required.

Mr Anderson said:

“Constructionline is a self funded organisation (paid for by contractors/consultants via subscription) membership of which is a prerequisite of many public authorities. They hold verified financial, health and safety, welfare, insurance, environmental and capability information on all members”.

The system

“is designed to prevent the need for public authorities to carry out endless bureaucratic checks” on all those things for pre-qualification in tender applications.

Mr Anderson said that, despite all that, a number of public bodies and local authorities continue to put in place bureaucratic and onerous processes that are already covered by the Constructionline agreement. That seems completely and utterly illogical. Such duplication of effort really gets on the wick of owners of small and medium-sized businesses. We cannot legislate for that, but we have to get the system right, either through guidance or by ensuring that gumption is put in place and that best practice is exported throughout.

Photo of Maureen Watt Maureen Watt Scottish National Party

Does Kevin Stewart agree that if more local authorities and other public bodies used the procurement portal, where the pre-qualification questionnaire is standardised, a lot of companies could avoid that situation?

Photo of Kevin Stewart Kevin Stewart Scottish National Party

I agree with Ms Watt. Uniformity is key. Consistency, which can be provided through the national procurement framework, is what is required.

Mr Anderson also talked about quality weighting scores, which is another issue that many business owners talk about all the time. The scores are not always explained to them properly and they do not understand what they mean. He said:

“The quality weighting score in some tender submissions is so subjective it can wildly distort the cost of executing some projects and discriminates against SMEs perfectly capable of doing the work.”

We must make the situation much better than it currently is.

I could refer to Mr Anderson’s other comments, but I had better move on—I will return to them later.

Another issue that came out in evidence at the Local Government and Regeneration Committee related to health and social care contracts, so I am glad that the cabinet secretary touched on that matter in her opening speech.

The Coalition of Care and Support Providers said:

“Evidence has shown that procurement processes for care and support services, and in particular competitive tendering, have tended to be driven primarily by cost, with major risks for the quality, continuity and stability of service provision; for workforce planning, development, pay, terms and conditions; and for the wellbeing of service users and their families.”

That in part relates to the rigidity of the weighting process at the PQQ stage. Local authorities in particular should look at the best practice that is taking place in various parts of the country in that regard. Best value is not always about cost. As my old granny used to say, “If you buy cheap, you buy dear.” The procurement process must be gone through again and again when something does not work. Dealing with the situation is about using gumption rather than legislation, and guidance can provide help in that regard.

I could go on at great length, but I am running out of time.

Photo of Kevin Stewart Kevin Stewart Scottish National Party

I urge the Parliament to support the bill at stage 1.

Photo of Mary Fee Mary Fee Labour

We on the Labour benches are committed to highlighting the positive benefits that procurement reform can bring. Although we support the bill’s general principles, the Government has a lot of work to do to ensure that the bill achieves its reform objectives. We have reservations that the changes that are required will not be implemented in issues such as community benefit clauses, the living wage and blacklisting.

We welcome the community benefit clauses for significant contracts. However, concerns were raised throughout the Infrastructure and Capital Investment Committee evidence sessions that the £4 million threshold is far too high. I agree. The committee has called on the Scottish Government to provide information on how the community benefit requirement can be encouraged in contracts of less than £4 million, and I await to find out how that can be done or whether the threshold can be lowered.

Section 20 shows that the threshold can be changed by order, but under what circumstance will orders be made? Will there be any period for evaluation before that takes place? Those questions need to be answered at stage 2 and, if not then, at stage 3.

James Kelly rightly pointed out the need for a living wage in procurement. Taking people out of in-work poverty can be achieved through procurement, and the bill is a missed opportunity for the introduction of a living wage.

Advice from trade unions and legal professionals shows that we can put in place legislation that will enforce a living wage. We often hear in the chamber that civic Scotland needs to be listened to, so when the enough food for everyone if campaign, the Scottish Council for Voluntary Organisations, the Scottish Fair Trade Forum, the Scottish Trades Union Congress and Stop Climate Chaos Scotland say that the living wage is a priority, I hope that their calls do not fall on deaf ears. As we often heard throughout the evidence sessions, the bill is an enabling piece of legislation, so let us use the legislation to enable people to get the living wage.

On blacklisting, I am concerned that guidance does not go far enough. Guidance can easily be ignored; if it is, what action can be taken against anyone found guilty of such a shameful and immoral practice?

The exclusion of bidders who are thought to have blacklisted workers is reasonable and welcome, but I find it odd that it is proposed that a firm can be awarded a contract as long as it takes “remedial action”. What would constitute remedial action? Some workers are still fighting for apologies and compensation; is that the action that would be expected of a company that wanted to take on a public contract?

Section 10 makes provision for more inclusion of supported businesses in the awarding of contracts. We want more information on how such businesses are engaged with and supported in the framework. The STUC suggested that every public authority should have at least one contract with a supported business. I imagine that it will be hard for anyone to argue against that, given the stark warning that Duncan Skinner from Glencraft gave the committee, when he said that most supported businesses fall outside the parameters of the bill, because many supported businesses do not have the resources to compete for contracts of more than £50,000. I hope that making certain contracts available only to supported businesses will go a long way to support such businesses and their employees, particularly in the context of the disgraceful handling of the Remploy business across Scotland.

The sustainable procurement duty can be enhanced if it is made more person centred so that it is about improving the wellbeing of the people who use the services that are being tendered. The Coalition of Care and Support Providers in Scotland made that point clearly, and I hope that at stage 2 we can improve the bill in that regard. All too often, the thoughts and wishes of service users are not taken into consideration. The bill can correct that.

RSPB Scotland has called for sustainable procurement to be clearly defined in section 9 and for the Scottish Government to clarify the bill’s overall aim in the context of socioeconomic and environmental outcomes.

If procurement is to be sustainable, we need to facilitate the involvement of small and medium-sized enterprises, supported businesses and the third sector. The committee heard that the definition of SMEs needs to incorporate microbusinesses, because workplaces with more staff appear to perform better in procurement rounds than businesses that have only a handful of staff.

The Federation of Small Businesses Scotland suggested that annual reports should contain a breakdown of micro, small, medium and large businesses. That is right, because we must ensure that as many types of company as possible can play a role in public contracts. We await the Government’s response to the suggestion, in advance of stage 2.

When committee members visited the Tayside procurement consortium in December, I was impressed to hear how authorities work with businesses to ensure that public money stays in the local area when possible. Replication of the approach could be crucial in improving communities throughout Scotland.

The Scottish Fair Trade Forum welcomed the principles of the bill, but it wants

“increased uptake of fairly traded goods in public sector procurement”.

If that is to be achieved, there must be more reporting of how fair trade organisations can get involved.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

I have not been involved in the committees that have considered the bill, but it seems to me as a back bencher that we have been talking for a long time about making procurement better.

I have looked at the work of the Infrastructure and Capital Investment Committee, in particular, and I realise that procurement is a very complicated area. There is still a long way to go, because an awful lot of embedded practices need to be rooted out. Kevin Stewart talked about such practices.

A quotation in the committee’s report from the Federation of Small Businesses Scotland sums up what we want to achieve. The FSB said that the bill is

“an important step in changing how we view procurement in Scotland, recognising that public spending decisions can affect a number of other policy objectives and expecting our public bodies ... to consider this in a more strategic fashion.”

That is at the heart of what the Government and, I think, all members are trying to do. We want procurement to look at the whole picture instead of isolated bits of it. It is a matter of seeing how everything can work together for betterment. Perhaps that is what sustainability means; it is about betterment.

The intention is that the bill will improve the economic, social and environmental wellbeing of local authority areas and facilitate the involvement of small and medium-sized enterprises—like Mary Fee, I hope that microenterprises will be included—third sector bodies and supported businesses.

The final—and hugely important—intention of the bill is to promote innovation. Just in case anyone does not know, I represent East Kilbride, which was Scotland’s first and most successful new town. What did we achieve by and what was the worth and value of starting that new town? It was all about innovation and people working together for improvement. That sort of thing can be done; it was being done decades ago and can be done again. However, I think that we have lost some of the innovative spirit that allows us to work together to do these things.

Although innovation is hugely important, it is not always easy. When I last spoke about procurement, I mentioned a report from the Royal Incorporation of Architects in Scotland—and, at this point, I should declare my honorary fellowship of that organisation. A couple of years ago, a president’s commission on procurement was set up in light of real concerns, particularly in the construction industry, about how procurement was operating. There were concerns not only about EU regulations but about, as Kevin Stewart suggested, the lack of a level playing field for many people as a result of our public bodies not having a uniform approach to the matter.

Some of the issue comes down to a culture that we have created in which people are terrified to be innovative or frightened to take risks in case they get the blame for something. So many folk in our public bodies are terrified of getting lambasted and therefore cover their backs to such a degree that they are frightened to do things that would, in fact, benefit our communities.

Photo of Neil Findlay Neil Findlay Labour

Does the member agree that the Scottish Government should perhaps take the risk of a challenge and implement the living wage through procurement?

Photo of Linda Fabiani Linda Fabiani Scottish National Party

From my years of experience in this chamber, I know that when our Government tries to take a risk you are the first on your feet to have a go at it. It is therefore a bit rich for you to sit there and say such things.

Photo of Elaine Smith Elaine Smith Labour

Through the chair, please.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

I am terribly sorry, Presiding Officer.

We all want to be innovative and take risks—and that applies as much to the Government—but there are rules that have to be followed. I am absolutely confident that the cabinet secretary and the rest of our Government are committed to doing what they can to ensure that everyone in Scotland has a decent living wage and that everything will be done to try to achieve that through this bill, if not through the primary legislation.

The same applies to the fair trade element of the bill. For years now, we have been looking at this matter through the EU. Of course, there are issues to deal with, but it is something that we all want. My personal belief is that Scotland will not truly be a fair trade nation until we are able to say that we can procure fairly at home as well as overseas.

As I have said, there are issues to address in relation to that. We have been asking the EU and the UK nation state for years to look at how we can procure fairly; after all, it is something that other nation states have been able to do. Perhaps the cabinet secretary will enlighten me as to whether the UK Government has taken up that challenge directly with the EU.

Yes, I want things to be better, and I want better outcomes for everyone but the key is simplification, innovation and people working together in order to get, say, the living wage through procurement.

The Deputy Presiding Officer:

You must close, please.

Photo of Linda Fabiani Linda Fabiani Scottish National Party

We should not be trying to kick the Government on this. After all, it is the first in this country that has really tried to do something about the issue.

Photo of Neil Findlay Neil Findlay Labour

First of all, I declare an interest as a member of Unite the union.

Although, on the face of it, this seems a dry and somewhat humdrum piece of legislation, such an analysis would be completely and utterly wrong. This bill actually has the potential to use the current powers of the Parliament to transform the lives of thousands of Scots and their families. It is not constitutional change that will achieve that, but good old-fashioned political will and guts.

In short, what the Scottish Government puts in this bill will be a measure of its willingness to work for substantial and important political and economic change, whatever the constitutional settlement.

The bill will test the progressive claims of the Scottish Government. Let us see whether the progressive beacon rhetoric is turned into reality or whether it is a faint and rather dull flicker. The public sector in Scotland has an awful lot of money to spend, and we could use that spending power much better and more progressively to ensure that taxpayers’ money is spent in a more ethical and fairer way, with better social and economic outcomes for our society and people.

I want to focus on three specific areas. The first is blacklisting, which is now a well-documented human rights abuse whereby men and women have been victimised and have had their careers and livelihoods taken from them for having the temerity to join a trade union, be a trade union organiser or safety representative, or a political or environmental activist.

Who was involved in that organised conspiracy to destroy lives? It was some of our biggest construction companies: household names such as McAlpine, Balfour Beatty, Kier, Skanska, Amey and many others, including the Forth crossing bridge constructors joint venture. They are all companies that are today working on public contracts across Scotland and taking our money, yet they have still to apologise to the 400 Scottish workers affected, have still to admit what they did and have still to pay a penny in compensation. It is a human rights abuse on a grand scale, significantly financed by the taxpayer. We need to send a message out to the construction industry that the game is up on blacklisting.

The Government has moved on this issue, and I commend it for that. It has been achieved through the campaigning of people in this Parliament and through pressure from the Union of Construction, Allied Trades and Technicians, the GMB, Unite and others working with us. There is a commitment from the Government to introduce guidance, but I do not think that that is nearly enough. We need a section on blacklisting to be written into the bill; otherwise the sharks in the industry will find a way round the guidance and ignore it.

Photo of Jim Eadie Jim Eadie Scottish National Party

I pay tribute to Mr Findlay for leading the campaign on blacklisting. However, does he realise what the Deputy First Minister and Cabinet Secretary for Infrastructure, Investment and Cities said in response to a question from my colleague Mary Fee during the committee’s stage 1 consideration of the bill? She said that the Government is

“taking enabling powers ... in addition to the guidance that the First Minister launched a couple of weeks ago”.—[Official Report, Infrastructure and Capital Investment Committee, 11 December 2013; c 2352.]

There will be legislation; it is secondary legislation.

Photo of Neil Findlay Neil Findlay Labour

I appreciate Mr Eadie’s intervention. I hope that the cabinet secretary will perhaps elaborate on that in her winding up speech and say what it will mean in practice on the ground. It would be very welcome if she did that. There is much more that we can do on the subject, and I look forward to what the cabinet secretary will say in winding up.

I also believe that a section on taxation must be introduced into the bill. The bill suggests that there must be an “obligation to pay tax”. However, what does that actually mean? Does it mean that firms involved in tax avoidance and evasion will be excluded from public contracts? I hope so. After all, why should companies that have avoided or evaded paying the very tax that supports our public services be allowed to take money from the public purse but not contribute to it? Why should companies that benefit from our education system, roads network and communications systems be allowed to get away with not paying their fair share? Why should big business, with its clever accountants, get away with what small businesses cannot?

Photo of Kevin Stewart Kevin Stewart Scottish National Party

Mr Johnstone pointed out earlier that there is a difference between tax avoidance and tax evasion. Would it not be better if the Parliament here had powers over tax so that we could make some of the avoidance schemes illegal?

Photo of Neil Findlay Neil Findlay Labour

We have an example in this case of the Scottish Parliament having the power and ability to do something now. Are we going to take that opportunity or are we not? That is the question.

Maybe Mr Stewart can learn from his Scottish National Party colleagues at Westminster. Mike Weir and Angus Robertson both signed an early day motion calling on the Westminster Government to

“bring forward a set of legally binding procurement rules that subject companies delivering and bidding for the delivery of public service contracts to high ethical, environmental and anti-tax avoidance standards”.

Can the Scottish Government confirm whether it agrees with its Westminster colleagues and whether it will ensure that a similar section is introduced into the Procurement Reform (Scotland) Bill?

I welcome the Government’s commitment to lodge an amendment that will exempt health and care contracts from the advertising and competition requirement. That is an extremely important step, especially in light of the scandal that is social care in Scotland at the moment. However, I challenge the Government to use the bill to end poverty pay.

I will leave it at that, as I know that time is tight, but I would appreciate it if the cabinet secretary could address some of the issues that I have raised when she sums up.

Photo of Jim Eadie Jim Eadie Scottish National Party

I am delighted to have the opportunity to contribute to the debate as a member of the Infrastructure and Capital Investment Committee, which took evidence on the bill and is responsible for scrutinising it.

As Maureen Watt said in her speech on behalf of the committee, there are a number of areas in which the committee seeks clarification and assurances from the Government on behalf of the stakeholders who gave evidence during stage 1, and there will undoubtedly be other areas in which amendments will be lodged by the Government and by back benchers at stage 2 as we seek to strengthen the bill’s provisions.

However, as the cabinet secretary made clear, the bill should not be seen in isolation. It is part of a range of measures and Government-led initiatives to improve public procurement, and it should be seen in the context of the process of public sector reform that began under a previous Administration with the publication of John McClelland’s report in 2006.

Organisations across a range of sectors have indicated their support for the principles of the bill. As Linda Fabiani said, the Federation of Small Businesses in Scotland has welcomed the bill. It said that it was

“unlikely to solve all small business’ difficulties with procurement but it could be an important step in changing how we view procurement in Scotland”.

The Scottish Building Federation stated that the bill was

“an important contribution towards the objective of reducing the administrative and financial burden on industry of participating in public sector procurement—and delivering public procurement outcomes that are more sustainable”.

The Coalition of Care and Support Providers in Scotland said:

“The Bill contains a number of important provisions that are likely to result in significant improvements to procurement practice”.

There are areas in which the Government has already provided assurances that the bill will be strengthened. One of those relates to a constituency interest of mine—the University of Edinburgh. Initially, some concern was expressed by Advanced Procurement for Universities and Colleges that the bill could damage the sector’s activities in research excellence. I am glad that the Government has listened to and acted on those concerns, as is reflected in the cabinet secretary’s commitment that

“It is our intention to exempt contracts that are in pursuit of commercial activities, which would include research and development, from the requirement to advertise under the bill.”—[Official Report, Infrastructure and Capital Investment Committee, 11 December 2013; c 2374.]

I very much welcome that commitment.

Another issue is that of the unacceptable and illegal practice of blacklisting, which has already been discussed. I repeat my tribute to Neil Findlay for the assiduous way in which he has worked on the issue within and outwith the Parliament. Blacklisting has no place in modern employment practice and I am glad that the Government has made significant progress in tackling it.

In evidence to the committee on 11 December, the cabinet secretary made it clear that the issue would be dealt with through

“secondary legislation that is given anchorage in primary legislation through the bill”.

When I asked her whether the Government had gone as far as it was possible to go, the cabinet secretary stated:

“The on-going dialogue with the trade unions is important. We want to continue to talk to them to make it absolutely clear that anything that we can do to banish blacklisting will be done.”

It was a hero of Mr Findlay’s, Vladimir Ilyich, who once asked the question, “What is to be done?” The cabinet secretary has made it clear that blacklisting will be banished.

The cabinet secretary went on to emphasise that the bill and the regulations

“will make it possible to exclude a company from public contracts when there is evidence that it has been engaged in blacklisting and has not taken appropriate remedial action to put its house in order.”—[Official Report, Infrastructure and Capital Investment Committee, 11 December 2013; c 2352-3.]

Photo of Neil Findlay Neil Findlay Labour

I ask this genuinely: what does it mean that there will be secondary legislation? What will the impact of that be?

Photo of Jim Eadie Jim Eadie Scottish National Party

I do not think that it is possible for the cabinet secretary to be any clearer. It will mean that blacklisting is illegal and that any company that fails to take remedial action will be forced to put its house in order.

Photo of Jim Eadie Jim Eadie Scottish National Party

I will, but the guidance and legislation have been provided. I do not see what more it is possible for the Government to do.

Photo of Neil Findlay Neil Findlay Labour

Would it not be easier just to put provisions on blacklisting in the bill?

Photo of Jim Eadie Jim Eadie Scottish National Party

The enabling provisions of the bill are such that it will be possible to outlaw blacklisting. I am certain that, if that was not the case and further action was required, the Government would take further action. I have absolute confidence that we are doing all that we can. The cabinet secretary will elaborate further on that in her winding-up speech.

The cabinet secretary has given a commitment to lodge an amendment at stage 2—as other members have said—to exempt health and care contracts from the requirement to advertise and compete.

The Deputy Presiding Officer:

You are now in your final minute.

Photo of Jim Eadie Jim Eadie Scottish National Party

The committee called for that at paragraph 184 of its stage 1 report. That is important because, at present, many authorities consider themselves to be under a strict legal obligation to put contracts and frameworks out to tender routinely. Those include existing contracts on expiry, regardless of service user views and of whether there are any performance issues pertaining. That can lead to major disruption and discontinuity in the provision of services, as well as pressure on the pay, terms and conditions of the workforce. I very much welcome that commitment.

Other members have referred to fair trade. I look forward to a continuing dialogue with the Government on issues around human rights and fair trade, and I hope that further progress can be made during the passage of the bill in that regard.

The overriding challenge for Scotland, and the ultimate test of whether the bill is successful, is whether we can, as James Kelly suggested, drive economic and employment opportunities across the supply chain and across Scotland.

The Deputy Presiding Officer:

I am afraid that you must close.

Photo of Jim Eadie Jim Eadie Scottish National Party

I am confident that we can do that, and I look forward to further improvements to the proposed legislation.

The Deputy Presiding Officer:

I remind members that speeches should be of six minutes. I might have to reduce that time later in the debate.

Photo of Tavish Scott Tavish Scott Liberal Democrat

I endorse the principles of the bill, as outlined by the Deputy First Minister in her opening speech. I do so with one qualification, however, which James Kelly picked up on, following my earlier intervention: the use of the Scottish Futures Trust and the hubcos that now exist across Scotland. Hubcos spend hundreds of millions of pounds of taxpayers’ money building essential public buildings, one of which will soon—I hope—be under construction in my constituency, which is very welcome.

It is important that the hubco, a structure or body that was created by the current Government, is compelled to comply with exactly the same principles and guidance that have been fairly outlined this afternoon by many members, including the convener of the Infrastructure and Capital Investment Committee. It seems entirely appropriate that, when vast amounts of public money are spent—we are describing the £9 billion to £10 billion that is spent annually by Government at all levels across Scotland—that spend should be governed by a set of principles. Those principles have been fairly outlined by the Deputy First Minister and they should apply to every part of that spend.

The Federation of Small Businesses said just the other day that it is

“concerned about the hubco model. These are new institutions, spending significant sums of taxpayers’ money, who are signing up for contracts which will last for a generation or more but whose remit isn’t widely understood and who don’t seem accountable to anyone in particular.”

I share that concern. When I ask about the north hubco in relation to the building of the new Anderson high school in Lerwick, about how much money the company is earning from the contract, about what the contract looks like, about what maintenance payments will be made to Miller for the next 25 years—as that is the nature of the contract—and about whether that arrangement is similar to those for the other five schools that are being built in the north-east of Scotland by the hubco, I fail to get an answer. I am not absolutely sure who is responsible or accountable. The very fair test that the Deputy First Minister set out, that of transparency, is surely not being met. Surely it should be met by the bill in relation to Scottish Futures Trust spending and the hubcos in particular.

As Kevin Stewart did regarding a business in his constituency, I wish to highlight the concerns of the Shetland Architectural Society, which represents a range of architects in Shetland. The society wrote on this subject recently, and said:

“It is our understanding that the end result” of the hubco model

“for local architects, engineers and quantity surveyors is that small firms (less than 10 staff, which make up the majority of firms in Scotland) will not be able to tender for the work. In other words we will be squeezed out by several larger firms who can compete at that level.”

Those are legitimate concerns for what are, after all, the great majority of businesses that make up the Scottish economy. Such businesses have profound worries about the hubco model. My question for the Deputy First Minister is whether the bill can accommodate those concerns by including the Scottish Futures Trust and the hubco model in the bill. I believe that that is what the Government should do.

I will give the Deputy First Minister one further example. In fairness, it is not about the hubcos but about procurement more generally. The example is a small one, but it epitomises the argument that many small businesses are making. The bill is strong in its support for the small business sector, but there are challenges. My example is about the purchasing of books and why it is not appropriate to apply exactly the same procurement process to a small transaction, the nature of which means that the process is counterproductive in terms of price. In the case of book supply for Scottish libraries, the administration of the procurement process for one book is the same as that for a bulk order. It is little wonder that the Scottish Government book supply contracts that are worth in total more than £50 million per annum have reduced the number of Scottish-owned suppliers to three small businesses, two of which are almost certainly marginal in terms of supply volume. I hope that the bill and the procurement system will address that kind of issue.

I also ask the Deputy First Minister to clarify the scope of the bill in relation to Scotland Excel, which is very much a one-size-fits-all procurement system. It gives some cause for concern around the provision of food for our schools. The sourcing of, for example, frozen food for 28 of our 32 local authorities is organised through Brakes, which, as I understand it, is based in the home counties of England. The basic point is that, just as the Scottish Futures Trust and the hubco model should be included in the scope of the bill, so should Scotland Excel. That would ensure that the very principles that the Deputy First Minister rightly set out at the beginning of the debate are included and cover those organisations, given their enormous spend in Scotland.

Photo of Chic Brodie Chic Brodie Scottish National Party

I am delighted to participate in the debate. For several years, I have bought widgets and recruitment services and been involved in UK Government large product procurement. I was also part of last year’s successful and constructive visit to Brussels that was led by my colleague Maureen Watt, and I heard the explanations and clarity from Scotland Europa on the proposed EU procurement directives and their transposition into Scottish law.

I think that we all agree that the overriding objectives of the proposed reforms have to be openness and transparency, simplicity, competitiveness, efficiency, cost-effectiveness, and ensuring the absolute minimum of bureaucracy, and the bill goes a long way towards those objectives. However, I make no apologies for the fact that my emphasis today will be on SMEs, social enterprise and the third sector involvement in the public procurement landscape.

Karen Bowman of the University of Edinburgh made a key point to the Infrastructure and Capital Investment Committee when she said that she believes that the bill has

“missed an opportunity to place an obligation on public bodies to ensure that their procurement people are trained”—[Official Report, Infrastructure and Capital Investment Committee, 13 November 2013; c 2137.]

and trained effectively. I hope that we will discuss and encourage that as the process goes forward.

In that context, it is important that a meaningful and accredited contract organisation or organisations be engaged or constructed to support microbusinesses, SMEs and social enterprises. That might be done in partnership with, for example, organisations such as the FSB or Social Enterprise Scotland, which are two examples among many. From personal experience, I know that the investment that is made in training excellent contract managers is paid back in spades.

Another consideration must be the simplification of contracts and the securing, as best we can, of templates that reduce the fear of breaching EU directives, particularly by businesses of the size that I have mentioned. That said, I express some concern about the suggestion or possibility of contracts being divided into smaller lots. Although the intention behind that objective is laudable, the practicalities in terms of efficiency, costs and administration must be a consideration. The unbundling of such contracts will require a greater degree of management and management control, which could be fraught with costs and legal implications for interfaces and communities. I adhere to the committee’s suggestion that the Government provide clarification on the implementation of the appropriate European directives in this case.

The bill’s purpose is to develop a procurement framework that will deliver all the things that I mentioned at the beginning, but also deliver social and environmental benefits, encourage innovation and—I repeat—secure transparency, standardisation, fairness and business friendliness. Given that there is £9 billion or £10 billion plus of procurement, it is right that we establish and secure procurement strategies that form a part of public sector or local authority development plans.

Although I understand the committee report’s request for and recommendation of annual procurement reports, it might be that the energy should be diverted into random public audits of company compliance, finance and employee practices, rather than being put into the seeking of information and the production of reports that might not, at the end of the day, achieve the readability that we desire and the outcomes that we seek.

The STUC suggests that every public authority should have at least one contract with a supported business. Notwithstanding the requirement in section 8(1), I believe that our ambition should be to contract with supported businesses wherever they meet the criteria of being suitably qualified and registered and there is a basis for competition between several such businesses.

To help the third sector or social enterprises to participate fully, there will also be advance notification and registration of smaller contracts that are to be awarded. That will sit alongside notification of the larger contracts that is—or was—a characteristic of the Official Journal of the European Union.

The Deputy Presiding Officer:

You are in your final minute.

Photo of Chic Brodie Chic Brodie Scottish National Party

I will make two other brief points. First, as members have mentioned, we cannot legally compel suppliers to pay the living wage as a prerequisite or condition of contract. The appropriate paragraphs of the committee’s report—122 to 127—make that clear. However, an appropriate commercial due diligence on the relationship between customer service requirements, remuneration and profitability might be a condition of contract determination. We might well look at this place—the Parliament—as a start.

Secondly, successful procurement exists where ethics and transparency prevail. I abhor blacklisting—I hope that Neil Findlay hears that this time—just as I reject tax evasion and non-compliance with guidance and the law.

The Deputy Presiding Officer:

You must close, please.

Photo of Chic Brodie Chic Brodie Scottish National Party

I am just finishing, Presiding Officer.

It is incumbent on all directors, managers and employees of purchasers and contractors to display appropriate behaviour to secure both ethics and transparency.

The Deputy Presiding Officer:

I am afraid that members will have stick to six minutes, and even with that I may have to reduce the time.

Photo of Sarah Boyack Sarah Boyack Labour

The Procurement Reform (Scotland) Bill is one of the most important bills that we will debate in the current session. I thank the Infrastructure and Capital Investment Committee and all the witnesses for the work that they have done and the contributions that they have made to date.

The test will be whether we get the legislation that we need or whether it will become a tick-box exercise, so I welcome the cabinet secretary’s commitment to support amendments to the bill at stage 2. There have been some valuable suggestions from a range of interested parties on subjects such as fair trade, fresh and local food sourcing, the living wage, best practice in project management and training, but also supported employment and environmental standards.

The question is how we can get the maximum social, environmental and economic value from the £9 billion of public money that is spent on goods and services. As several colleagues have commented this afternoon, the bill has been a long time coming, so let us get it right.

The Jimmy Reid Foundation has correctly identified that the current system disproportionately benefits big companies and that contracts and the process currently drive down cost at the expense of quality.

I was disappointed that the threshold for community benefit clauses has been set at £4 million, and that there is no mechanism for de-bundling large contracts. If we are serious about supporting small businesses and local community businesses, it is vital that we include smaller contracts and that we act on the SCVO’s recommendations on care.

I have spoken before about what is happening in the care sector, as exemplified by the low-wage culture and the cuts throughout the country that are impacting on standards and quality. Those factors make it tough for staff to perform the vital job of caring for the most vulnerable in our society, as well as making the work unattractive and leading to high staff turnover.

Those developments are bad news not just for those who are tasked with the difficult job of delivering high-quality care but for our older and vulnerable people who depend on skilled and committed care staff for their quality of life. I very much welcome the launch of Unison’s time to care campaign yesterday, and the SCVO’s submission on health and care, which needs to be acted on when we shape the detail of the bill at stage 2. The living wage campaign is also important in that respect.

As many colleagues have said, not only is blacklisting unacceptable, it leads to a culture in which staff are afraid to raise health and safety concerns. It is not just an issue that affects employees’ own interests; we need to be concerned about the wider public interest.

The key test of the bill is that it should enable procurement to help in delivering higher environmental standards and in tackling and mitigating climate change. The bill was initially going to be a sustainable procurement bill, and we need to ensure that we hang on to that principle.

Yesterday, the Parliament passed a bill that will expand the delivery of free school meals throughout the country, which poses a major challenge. I hope that this bill will help us to deliver that policy and ensure that we have quality, fresh, locally sourced, fair-trade school dinners and food throughout the country.

We need to ensure that that happens right across the public sector, not just for school meals. We know from the pilots that have been carried out that it can be done, but delivery needs to be embedded in the bill so that local procurement processes make it happen. That trade is huge, and the bill will be transformative if it picks up those issues. We also need the right monitoring framework so that environmental and community benefits are delivered in practice rather than remaining as promises.

With regard to article 19 of the EU public procurement directive, I met a couple last week at my surgery whom I know very well as they previously lobbied me on the threat to Remploy. They have been hard-working employees for more than 50 years between them without even a pause, but since Remploy has gone under they have not worked, and they do not expect to find work. Their hopes have been dashed by the removal of Remploy jobs in the city, and by the fact that we lost Blindcraft too.

We must ensure through the bill that supported employment companies are given a fair chance to deliver, and that the staff who work for those companies are given a fair chance to work, and to have the dignity of work and the capacity to support themselves so that they are not dependent on benefits and caught up in the benefits system. They are capable of working, but they need the chance, and it is up to us to ensure that the bill delivers a solution in that regard.

The Scottish Government’s policy is to ensure that every public sector organisation has at least one supported employment contract, but that is a bare minimum—we need to do better. The bill will potentially deliver £9 billion of procurement contracts, so it needs to deliver environmental, social and economic benefits, and it needs to do so locally. We need to make that happen at stage 2.

The Deputy Presiding Officer:

I call Dennis Robertson, but after his speech I may have to reduce members’ time to five minutes.

Photo of Dennis Robertson Dennis Robertson Scottish National Party

I, too, support the principles of the bill. I was very taken by Sarah Boyack’s comments, and I support virtually everything that she said. James Kelly said that he accepts the bill in principle but that it has problems. I do not accept that it has problems; I prefer to say that it offers opportunities.

The bill presents us all with opportunities to progress in the way that we feel is right to achieve the objective of sustainable economic growth along with the environmental aspect that Sarah Boyack mentioned. I believe that we can do that. The challenge is how we do it. In order to do it, we must have engagement of the sort that the Convention of Scottish Local Authorities displayed in its submission, when it said that its leaders and senior members accepted the principle of the bill.

It is by working together that we can get this right. We are at stage 1, which provides us with the opportunity to take the bill forward.

Like Kevin Stewart, I met Kenny Anderson in Aberdeen earlier this week. The construction industry has an opportunity to develop. However, we need to ensure that there is infrastructure in place that allows our younger people the chance to gain the skills that will enable them to take up opportunities in that industry. We can do that through the apprenticeship model that is in place. We need about 6,000 people to come into the construction industry every year. Where we can see an opportunity, we must take it. It is incumbent on us as politicians in this Parliament to ensure that the opportunities that exist are taken in the best possible way.

As I was reading the report, a couple of questions came to mind, and I hope that the cabinet secretary will be able to answer them for me. On the issue of raising people’s awareness that they are able to make applications to the public contract process, I am not sure that the portal is used in the best way that it can be in that regard. How do we ensure that the opportunities are taken? I think that it is by raising awareness. We need to ensure that, when we are moving forward, the ambitions of the Government and the Parliament are heard in the wider community. I believe that the bill should allow us to think about how we address that and ensure that we achieve a much higher awareness in industry that will result in more people getting involved in the public contract sector.

We sometimes miss opportunities. I condemn many of the public authorities, especially the very large ones, for going big. We have innovative and skilled industries in Scotland. Among the information technology and database software people in Scotland there is an amazing array of talent. However, local authorities and health boards tend to go for the larger companies. Perhaps that is because they feel more comfortable with larger companies, but I suggest that organisations probably get a better deal and a much better outcome if they go for local enterprises, which could support them by going around to their office rather than handling matters from some distant portal—often, when people call up those distant companies to say, for example, that they cannot get access to the internet, they are told to go on the internet for an answer, as the person has not listened to their problem.

The issue is one of opportunity, which is what is at the centre of this bill. I believe that we should be taking that forward as best we can.

Sarah Boyack talked about supported business and social enterprise. That is an extremely important issue. I believe that, in closing Remploy, we did a disservice to our community of people with disabilities. That was not the fault of the Scottish Government; it was the fault of a Westminster Government that had no insight into the impact that its policies were having on people and the damage that they were doing to people’s attempts to take forward their skills jobs and livelihoods. Instead, it imposed a regime of welfare cuts that compounded the problems that people faced when they lost their jobs and did not provide an opportunity for them to get back into constructive and dignified employment.

I believe that the bill gives us an opportunity to right some of those wrongs. I sincerely hope that the cabinet secretary can find a way of ensuring that we have a much broader definition of supported business and social enterprise.

Photo of Alison Johnstone Alison Johnstone Green

Procurement is not a word that we are likely to hear in everyday conversation and yet, over the years that I have been involved in politics and green campaigning, issues around how and what the public sector buys have come up time and again. If asked, most people would express a desire for a commonsense approach to purchasing—“Let’s use public money to support local businesses and buy local goods where possible, and let’s not hand taxpayers’ money to companies that don’t comply with the taxation system.” At around £9 billion a year, the amount spent on public purchasing in Scotland is more than three times the entire gross domestic product of Malawi, so it can potentially transform what goes on at home and overseas.

SNP members will know that, as Sarah Boyack mentioned, the bill started life as a commitment to a sustainable procurement bill in the SNP manifesto. Three years on, and the sustainability aspect has been reduced to a fairly timid duty. I am concerned that the sustainability duty in section 9 conflicts with the general duty in section 8, which says that all bids must be treated “equally and without discrimination”.

The aim of the bill must be to shift the procurement culture in Scotland so that, rather than talking in negative terms about discrimination, we proactively use public procurement to implement public policy aims. We need to send an unambiguous message to procurement officers that gives them the certainty to make sustainable choices. However, the balance and weighting between the duties in sections 8 and 9 is confusing and unhelpful so I am pleased that the committee has called for that to be addressed.

The sustainability duty calls for consideration of impacts on the contracting authority’s area. That area is defined geographically, specifically

“disregarding any areas outside Scotland.”

I do not think that I need to explain to members why it makes no sense to have such a narrow definition in the context of national and global sustainability. That should be amended at stage 2. I also think that a further point should be added in section 9 to include a reference to duties under the Climate Change (Scotland) Act 2009.

I know that all MSPs will be very proud of the many groups and institutions in their areas that have collectively helped Scotland to achieve Fairtrade nation status. However, getting fair trade to scale through public procurement has always been the holy grail for fair-trade campaigners and it would bring huge benefits to producers in developing countries. With Fairtrade fortnight starting on Monday, would it not send a powerful message about this country if we became probably the first country in the world to put the words “fair trade” into a national procurement law? I hope that the cabinet secretary will recognise this opportunity to take the next step on our Fairtrade nation journey.

The principle that is introduced by section 31, which adds new powers to the Climate Change (Scotland) Act 2009, is one of the most interesting parts of the bill. I welcome the power that it creates to allow regulations that will specify proportions of recycled materials, but I question why that power should not be even more ambitious and applicable across a range of sectors to stimulate the development of sustainable industries and jobs in Scotland. I strongly support the submission from Nourish Scotland calling for such an approach, with a proportion of organic food to support moves towards a lower-carbon food system. Similarly, Transform Scotland has suggested that publicly bought vehicle fleets should be required to meet emissions standards. It is very clear that the design of guidelines, enforcement and reporting in relation to the new sustainability duty has to be right if we want to make an impact. It makes sense to give a greater role to Audit Scotland to oversee procurement reporting.

The regulations in section 23, which allow a company to be excluded from a procurement process on certain grounds, is welcome. I am very pleased to see that failure to pay tax is clearly included, but I strongly support the call from Unison and others for the wording in the bill to be strengthened to include aggressive tax avoidance. I hope that we can see a wider range of criteria so that companies with records of human rights abuses or poor safety standards can be excluded wherever in the world those abuses have occurred. I am sure that we all remember the devastating factory collapse in Bangladesh last summer.

We hear every week from ministers about their support for small businesses, yet the briefing that has been provided by the FSB states that almost 60 per cent of spend goes to businesses with more than 250 employees. I support the committee’s call to go further in procurement reporting to separate out micro and small businesses from medium and large ones so that we know whether we are really supporting diversity and innovation in our economy.

The Greens, like other parties, want the living wage to be paid as widely as possible—not just to the immediate contractors but to any employees who are taken on via subcontracts. I recognise the legal difficulties with that but urge the cabinet secretary to be as creative and bold as possible.

I very much want the bill to live up to its potential and am pleased that the Government has tried to address many of the issues that I have mentioned. However, the bill can do more to address many of the issues that have been raised, such as community benefit, zero hours, supported businesses and blacklisting. Let us work hard to change and improve it and make it one of the most transformative bills that we will pass this session.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

As I represent the biggest fishing-dependent constituency, I am very familiar with the concept of sustainability. I am also very encouraged that the bill’s provisions are likely to lead to improved opportunities for employment, particularly for young people, through the embedding of apprenticeship requirements. There is much in the bill to be encouraging about.

We have heard a bit of discussion—most recently from Alison Johnstone—about sustainability. Section 8 is rather confusingly constructed in that it places sustainable procurement as an equal consideration, but then says that it must not trump economic operators, for example, and goes on to exclude the economic operators from EU procurement, but leaves sustainable procurement in place for EU-governed procurement. Therefore, there is scope for the Government to have a careful look at the wording of section 8 to benefit the strength that there ought to be behind sustainable outcomes.

It is worth pointing to the certainty that is provided by section 3, which is on regulated contracts. Amounts are provided. When I was a member of the Local Government and Regeneration Committee and we were looking at regeneration, one thing that emerged was that many council officials appear to advise their councillors, and other officials further down the line, in restrictive terms in relation to amounts, so that councils could not really just give business to local businesses. The certainty that the bill provides may help on that. I look forward to that being the case and to the issue being further developed at stage 2.

Section 9 is on the sustainable procurement duty. I very much welcome the need to “promote innovation” in that section. We must signal absolutely clearly that we want people to be imaginative and to think of new ways of doing things. Innovation might often involve something quite small that would have a big benefit and impact on a local SME or company that employs people in single figures.

I turn to section 22 and section 23, on selection of tenderers. The matters that I will raise may be covered in secondary legislation; if they are not covered in the minister’s summing up, I hope that they will be considered. I want to mention novation—in other words, the general ability in contract law, once someone has been awarded a contract, to sell that contract on to someone else. In general, contracts will say that they can be sold on only to approved people, but there is a general danger that a rigorous sifting process to award the contract to people whom we think are decent enough to get it could be bypassed if they were to sell on the contract. The same issue arises in engagement of subcontractors, of course. I certainly want the secondary legislation to make it clear how those processes will happen when contracts are awarded, in order to ensure that we do not in the first place suborn the selection of tenderers.

Tax avoidance has been the subject of discussion. Neil Findlay and other members used the word “avoidance”, and James Kelly and Alison Johnstone used the words “aggressive tax avoidance”. I absolutely agree with what was said. The trouble is that avoidance is something that we all do every day. I will give a very specific local example. When I pass a filling station that is selling diesel at £1.43 per litre and go to one that is selling it at £1.33 per litre, I am avoiding paying tax because in buying a cheaper product I am paying less tax. That is perfectly proper and to be expected.

We should look at what happens in the United States, where corporate taxation is based on the proportion of economic activity within the jurisdiction. If we can get our taxation on to that basis, many of the problems will disappear. We will not be able to do that terribly quickly, but it would be awfully nice to do it at all.

The principles in the bill are not new and are highly to be commended. I look forward to seeing the bill go through Parliament and hope that it gives more opportunities to small local businesses and improves the sustainability of the products that we buy.

Photo of Jackie Baillie Jackie Baillie Labour

Today is the world day of social justice and, in my view, the foundation for delivering social justice is the provision of a strong and inclusive economy in which there is decent employment coupled with social protection. That is about equality and fairness in our society and our economy. Although times are tough, that must not be an excuse for adopting an approach that allows finance to dominate all other considerations. We do not need a race to the bottom; we need the reverse. We need to drive up quality and inclusion, and the bill represents an opportunity to do that.

Other members have already—more eloquently than I will—made the case for the living wage. I simply observe that the cost of living crisis that is being experienced by many people in the communities that we represent is not confined to those who are unemployed. Many people who are in work are suffering from poverty; those are the people who are queueing at food banks, running up debt and struggling to pay their utility bills. Part of our approach must, therefore, be to make work pay, and the living wage is a powerful route to doing that.

We have witnessed the increasing casualisation of the workforce, zero-hours contracts, changes to terms and conditions and reductions in hours so that workers are now underoccupied. The most striking impact is on women, but I have no doubt that there will also be an adverse effect on people from ethnic minorities and those with disabilities.

We have an opportunity to extend the good practice of many public bodies throughout the country to the businesses that partner and contract with them in delivering services. After all, the services that are delivered are public services and we should expect the same ethos, consideration and approach from them. I quote Councillor Mike Holmes, who is currently the convener of Scotland Excel:

“I think that procurement should be used to drive up standards, to drive up terms and conditions, to create employment and opportunities for young people. We will not give public money if you engage in poor employment practices.”

So say all of us.

The STUC, the SCVO and others have called for the bill to ensure that there is full compliance with the public sector equality duty. I would be grateful to know from the cabinet secretary whether such a provision needs to be included in the bill or whether we can ensure that all contracts and contractors are covered.

What about a socioeconomic duty, so that we can actively promote and monitor action to reduce inequality? I am sure that we would all share that objective.

I am also keen to see initiatives such as equal pay audits being required, which would consider pay gaps by gender, ethnicity, disability and working pattern. The benefits for business are there to see and include improved productivity and improved performance. Such audits have also enabled businesses to retain and attract the very best staff.

Let me touch on community benefit clauses. I am not sure that setting the starting level at £4 million is right. When I read the committee’s report, the implication was that the provision would perhaps be focused more on capital contracts than on revenue. I believe that the threshold should be lower, although it is not the value of the contract that we should focus on but its purpose.

Community benefit clauses have been much promoted by the Scottish Government; Nicola Sturgeon may be surprised to hear that I totally agree with her. However, in the case of the Commonwealth games, we do not know the extent to which contracting with the games has improved women’s chances in industries in which they are underrepresented because no gender data are being collected. We need to set out in guidance, at the very start, the need for appropriate data collection. We have seen the difficulty in getting workforce data not just from the Commonwealth games but from some ALEOs. If we do not get that right, we cannot demonstrate equality of access to jobs nor can we pursue any positive action policies that would redress that imbalance. I see the cabinet secretary nodding, so I hope that she will take that on board.

I welcome the fact that health and social care services will be exempt from the provisions of the bill that relate to advertising and competition. However, we need to ensure that those organisations are funded so that they can operate the highest employment standards. Renfrewshire Council has taken the bold step of having all its social care contractors be paid the living wage. That might have cost it more money, but if we value care, we need to value the staff who provide it.

If we believe that public sector workers deserve the living wage, equal pay and good terms and conditions, and if we believe that zero-hours contracts and blacklisting are wrong, we must not allow workers who carry out the duties of the public sector to be treated any differently. I hope that the cabinet secretary is open to further improvement to the bill.

The Deputy Presiding Officer:

I call Fiona McLeod, who has five minutes.

Photo of Fiona McLeod Fiona McLeod Scottish National Party

Thank you, Presiding Officer, for finding the time for me to speak.

I will concentrate all my remarks on fair trade under the provisions on the sustainable procurement duty. In true librarian fashion, I was going to go through section 8 point by point, but there is not enough time. I refer members to paragraph 53 of the Infrastructure and Capital Investment Committee report, which summarises what I was going to talk about. Alison Johnstone also very helpfully covered a number of the points that I was going to make.

It has become clear to me that if we want to make sure that sustainable procurement helps to promote fair trade, which many members have mentioned, it will come down to guidance and monitoring. I asked the cabinet secretary questions on both those issues at the end of last year, and the answers made me more convinced about that.

The committee convener talked about how important guidance will be. I thought that James Kelly was rather dismissive of guidance by insisting that everything has to be stated in the bill, as was Neil Findlay, who asked what happens when people ignore guidance.

What I would say in favour of guidance is that it comes from the bill and so has a statutory underpinning, but it allows us to be more flexible. If we put something on the face of a bill, it is fixed. If we do it through guidance, we can be more flexible and adapt to the needs of different times.

The committee convener also talked about how important monitoring will be with regard to section 14, which is on the annual procurement reports. She talked about how important those reports would be for monitoring community benefit aspects. Monitoring will be crucial in finding out whether fair trade is part of the sustainable procurement duty. The annual reports will be incredibly important.

Alison Johnstone talked about putting the words “fair trade” on the face of the bill. I know that the Scottish Fair Trade Forum has talked about that. Initially, that was very appealing to me, especially given that I am a member of the cross-party group on fair trade. There are very active fair trade movements in my constituency. Lenzie is a Fairtrade nation—[Laughter.] Sorry—it is a Fairtrade town; Scotland is a Fairtrade nation. I do not have ambitions beyond independence for Scotland. I also have constituents who are working very hard on fair trade. Therefore, putting the words “fair trade” in the bill appeared to be quite appealing. However, when Alison Johnstone suggested it in her speech, I wondered whether that was too fixed and whether putting the words “fair trade” in the bill would tie us to the Fairtrade brand in sustainable procurement. How would we word such a provision in a bill?

Photo of Fiona McLeod Fiona McLeod Scottish National Party

I just want to finish this point. Could we say in the bill that, under the sustainable procurement duty, we must look to procurement practices that cover fairly traded products? If we talk about fair trade, we are limiting ourselves to the Fairtrade brand. I am sorry that I cannot give way to Ms Boyack because I am terribly short of time.

The other thing I worry about is whether it would fix us too much in time if we put it into statute. It was fantastic that Scotland achieved Fairtrade nation status last year, but what happens if that moves on and is no longer what we are trying to achieve?

For me, the issue is very much about using guidance to ensure that the sustainability duty also encompasses using procurement practices that ensure that we use fairly traded products. I will leave those thoughts with the cabinet secretary.

In my last few seconds I must address what Tavish Scott said. I cannot help it: as a librarian, I cannot ignore what he said. Libraries do not just buy a book and that is what it costs. The cost of purchasing library books is in the title and not the quantity of the books. He got that totally wrong; should I be surprised about that?

The Deputy Presiding Officer:

We now move to closing speeches and I remind all members who have participated in the debate that they must be in the chamber.

Photo of Gavin Brown Gavin Brown Conservative

We have had a useful and interesting debate.

The Procurement Reform (Scotland) Bill is only a piece in the jigsaw, but it is an important piece and it is an important piece of legislation. The bill will not do everything; guidance will follow afterwards and that will be important too. Even more important is what happens on the ground once the bill and all the regulations become law. The culture change in procuring authorities across Scotland will determine whether we have made a difference or not.

I want to pick up on a couple of issues that came through in the debate. The first is one that a number of members raised—I think Malcolm Chisholm raised it first in an intervention on the cabinet secretary—and is to do with the size of contracts. Can the contracts that we put out be unbundled in some way in order to give smaller businesses a greater prospect of getting a contract?

It would not be an easy thing to achieve—Chic Brodie made that point. Whether it can be achieved easily is an interesting question; whether it can be achieved through legislation is another one. I think that the committee reached the right conclusion: the issue ought to be looked at in greater detail, to see whether more can be done at stage 2 or 3.

The FSB once again put forward strong arguments about why it is so important that we look at the issue. Small businesses do not want special treatment and are not looking for favours; they want the ability to compete and bid for a contract with a reasonable prospect of getting it, if indeed they are the best company for that particular job.

In fairness to the cabinet secretary, in response to that she pointed out a couple of areas of the bill that try to address the issue for small businesses. She correctly referred to section 26, which will remove the ability to charge, and she also referred to section 24, which looks at guidance for tenderers and how they can be selected.

However, neither of those sections nor any other part of the bill refers specifically to the size of the contract. There is nothing that I can see in the bill that refers to unbundling or would even give the Government powers to look at guidance on how contracts might be broken down. It may be too difficult to achieve, but I urge the cabinet secretary to address the point in her closing speech and particularly in her written response to the committee, and for the Government to do all that it can to see whether something additional can be done to give smaller businesses the opportunity to compete.

The second point that I want to pick up on is who ought to be included in the scope of the bill—who ought to be deemed to be contracting authorities as far as the legislation is concerned. There is a list in the schedule to the bill of who is currently included. A number of interesting points were made about other possibilities.

One of the other possibilities was Scottish Water—a point that Alex Johnstone made and a conclusion that the committee reached without division. The committee did not say that Scottish Water must be included; I think that the exact phrase was “there is benefit” in looking at that option. I ask the cabinet secretary to refer specifically to that in her closing speech. Obviously, if the Government has any initial views on the suggestion, it will have to refer to them in any written response.

I was interested in Tavish Scott’s point—he made it initially during an intervention, but he also mentioned it during his speech—about the extent to which the hubco model could and should be included in the bill. Where does the Government sit on that matter? We would be very interested to hear whether it has an initial view before it expresses a final position.

Other members have talked about microbusinesses. The Federation of Small Businesses has strongly put forward a proposal on microbusinesses not only for today’s debate but over the past couple of months, if not years. Could a definition for microbusinesses be included in the bill?

Section 9 specifically mentions small and medium-sized enterprises. The bill says that contracting authorities must facilitate situations to allow SMEs the opportunity to take part in a procurement exercises. However, can we extend that duty further? The issue is often raised that the term “SME” includes just about every business in Scotland—I forget whether 95 or 99 per cent of businesses in Scotland are SMEs. The FSB makes the point that, by using that term, the bill will capture businesses that employ up to 250 employees, which is the vast majority of businesses in Scotland. If the bill referred instead to microbusinesses, we could track and monitor how those smaller businesses are genuinely fairing with regard to the legislation and the procurement contracts.

I want to pick up on one other minor issue. It is not something that I saw in the committee reports, I have not seen any evidence about it, and it is not something on which anyone has made representation to me. When we get to section 20 onwards—and particularly part 4, which covers remedies—are we making it too easy for somebody who has lost out on a contract to go to court? It seems as though, if someone does not get a response under section 28 that they like within 30 days, they have an automatic right to raise an action through the court, which ultimately could suspend the implementation of the contract. I am not saying that we have that wrong; I am just asking that the issue is looked at further to ensure that it is not too easy to go to court.

Photo of Mark Griffin Mark Griffin Labour

We will support the Procurement Reform (Scotland) Bill because we think that public sector procurement can achieve much more than the positive effect of an individual contract.

We spend more than £9 billion a year on procuring goods and services and we need to see the full economic, environmental and social benefits that that vast sum of money can bring. As Dennis Robertson said, the bill provides the opportunity to achieve those outcomes.

We support the introduction of a public contracts website that will improve access to contracts for smaller companies by introducing a single point of information. However, as other members, including Malcolm Chisholm, Sarah Boyack and Gavin Brown, have said, we want more work to be done on de-bundling contracts into smaller lots to allow smaller companies that are based in Scotland to benefit from the public spending that they are missing out on.

We also support the introduction of procurement strategies and annual procurement reports. Although those should help to improve public authorities’ procurement performance, the bill needs to go further. In line with the recommendations from the Project Management Institute and as mentioned by Chic Brodie, it must ensure that contracting authorities and contractors take project management best practice into account, providing job classification and career paths for project managers and procurement officers, so that public authorities start to build and retain procurement and project management skills.

Annual procurement reports that contain a summary of the regulated procurements that a public authority expects to commence in the next two years should help companies plan their tendering exercises more effectively.

The section on ensuring that payments to contractors and subcontractors are made within 30 days is also welcome, as it should give smaller firms more security and allow for better planning.

I have spoken about the positive aspects of procurement strategies and annual procurement reports, but an element is missing. Sarah Boyack spoke passionately about the fact that the bill does not require public authorities to say in their annual procurement reports whether contracts have been awarded to supported businesses. At the very least, there should be a stipulation that authorities must report on that.

In its foreword to “Supported Businesses in Scotland: Creating value in a socially responsible way”, the Scottish Government said:

“Supported factories and businesses have demonstrated that they can provide good value for money to the public sector, and public bodies are required by the Scottish Sustainable Procurement Action Plan to make the maximum possible use of reserved contracts for supported factories and businesses—at the very least, every public body should aim to have at least one such contract.”

The STUC echoed the Government’s aim, calling for a requirement for

“each public sector body to have at least one contract with a supported business”.

I look forward to hearing the cabinet secretary say how she intends to achieve that aim through the bill.

We welcome the inclusion of community benefit requirements but note that witnesses at the committee and the cabinet secretary herself said that the £4 million threshold should not mean that community benefit clauses are not included in contracts that fall below that threshold. We do not want companies to use the £4 million threshold to lobby against the inclusion of community benefit clauses in contracts below that level. We await further information from the Scottish Government on how the inclusion of community benefit clauses will be encouraged in lower-value contracts.

On exemptions, we welcome the cabinet secretary’s decision to lodge amendments at stage 2 in relation to health and social care contracts. As Kevin Stewart said eloquently, continuity of care is of the utmost importance in such contracts. I hope that the amendments will give authorities flexibility to take decisions that are based on what is best for service users, rather than authorities being required to retender and re-advertise.

Like the FSB and others, such as Tavish Scott and Alex Johnstone, we think that we must look again at the spending power of ALEOs and hubcos, which are not covered by the provisions in the bill. Again, we await further information on that.

The Scottish Government, under pressure from trade unions and MSPs, has come a long way on blacklisting. I welcome the publication of the recent Scottish procurement policy note, which adds new questions in that regard to the pre-qualification questionnaire. However, there should be a provision in section 23 that makes a firm declaration that blacklisting is unacceptable and will not be tolerated. I take Fiona McLeod’s point about flexibility, but in this case we need a cast-iron commitment in the bill that blacklisting is not acceptable in our public contracts.

Our main ask of the Scottish Government is on the living wage, which is a key measure to reduce in-work poverty. The arguments are well rehearsed. We know that payment of the living wage can lead to a healthier workforce, with lower sickness absence levels, lower turnover, reduced recruiting costs and increased productivity, as well as generating other benefits. Why has the Scottish Government failed to use the billions of pounds that the public sector spends every year to ensure that workers on public sector contracts are paid the living wage? We often hear the word “transformational” in the chamber; the introduction of a requirement for contractors to pay the living wage on public sector contracts would indeed be transformational.

The Scottish Government has worked to ensure that staff whom it employs directly are paid the living wage and local authorities have followed suit. However, the private sector has not kept up to speed, and the bill gives us the opportunity to push the private companies that bid for public contracts on the issue and ensure that such best practice spreads more widely because of the demand for increased wages. That is our key demand with regard to the Procurement Reform (Scotland) Bill as we move towards stage 2.

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

I thank everyone who has taken part in what, generally speaking, has been a very good debate. Given that I have only 10 minutes, I will not have time to respond to every comment that has been made or question that has been asked but we will carefully reflect on all of them as we consider our approach to stage 2.

At the outset, I want to say that I am going into stage 2 of the bill with a very open mind. I do not think that I have heard anything this afternoon that I would not be prepared to consider further, and I look forward to discussing those matters.

Before I go into detail on some of the key themes that have emerged from this afternoon’s debate, I will make two preliminary points. First, there is broad acceptance that it is important that we try to get this right. Procurement spend is one of our most important economic levers. However, a tension that will always run right through this agenda is that between efficiency and cost effectiveness on the one hand and, on the other, access, to opportunities, particularly for smaller enterprises and third sector organisations, and community benefits. It is really important that we try to get that balance right.

One particular point that is pertinent to striking that balance is, as Gavin Brown made clear in his summing up and Malcolm Chisholm, who is not in the chamber at the moment, highlighted in his speech, the size of contracts and the potential for unbundling. I am not sure whether we can do anything concrete about that in the bill but I certainly recognise the frustrations of small businesses, in particular, on this issue and I am very happy to work with others to find out whether we can do any more as we move into stage 2.

My second general point, which I and others have already made, is that the bill is not a panacea. It sits in the broad sweep of procurement reform. I very much agree with Kevin Stewart’s comment that much of what is wrong or perceived to be wrong in procurement can be fixed by a commonsense approach to how it is carried out. Mr Stewart also made an important point about best practice, and the bill is above all else about spreading best practice and making it consistent.

Maureen Watt was right to refer to the importance of using the public portal and standardised PQQs. Of course, the bill is about standardising those examples of best practice. Dennis Robertson was right about the need to raise awareness, and the publication of contract registers will be very important in ensuring that businesses have a clear line of sight to available contract opportunities.

With regard to more specific issues, I will try to run through as much detail as possible and apologise if I miss any particular point that was raised in the debate. First, the bill’s scope was highlighted by Maureen Watt, James Kelly, Alex Johnstone, Tavish Scott and others. I do not want to argue with anyone about that, but will simply try to explain our rationale for covering some bodies but not others.

In the interests of simplicity, understanding and avoiding confusion, we have tried to mirror the Public Contracts (Scotland) Regulations 2012. Scottish Water is not covered by the bill because, under EU legislation, it is covered by different directives. Indeed, utilities in general are covered by different directives. Hubcos are not covered because they are not public bodies but partnerships awarded after European-wide competition. Indeed, one of the benefits of hubcos is the flexibility that they then have in the awarding of further contracts.

Whether ALEOs are included or not will depend on the status of the ALEO. If it is a public body, it will be included; if it is more aligned with the hubco model, it will not be. As Scotland Excel is covered by the bill, it will be subject to the sustainability duty.

That is the rationale but, as I said, I am open to further discussion, whether that is about bringing into the bill bodies that are not currently in it or, more pertinently, encouraging bodies that are outside the bill to give a commitment to comply voluntarily with the bill’s principles.

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

Briefly, if the member does not mind, because I have a lot to get through.

Photo of Tavish Scott Tavish Scott Liberal Democrat

I very much agree with the answer that the cabinet secretary just provided. Does it mean that in that sense there is no legal impediment to hubcos being brought within the confines of the bill?

Photo of Nicola Sturgeon Nicola Sturgeon Scottish National Party

In general terms, that would be right, although different issues will be applied to different bodies.

I turn now to the living wage, which was mentioned by a number of members. This is not a debate—certainly not between the Labour and SNP benches—about the principle of the living wage, although some comments have made it sound as though it is. Under European law, we cannot make the living wage a requirement of contracts. That is not because we have not asked the right question—members have had the opportunity to see the letter from the relevant European commissioner. I hope that all members will welcome the fact that we on the Government benches are not prepared to accept that we cannot do anything about promoting the living wage through the bill. The bill will give us the power to issue guidance on the workforce matters that contracting authorities can take into account, which will include, where relevant to the performance of the contract, the living wage. Again, I hope that we can unite around what we can do through the bill while continuing to challenge ourselves to see whether we can do more, rather than appear to debate the principle, on which we actually agree. For those who have talked about what happens if the guidance is ignored, I refer them to section 24(3), which states:

“Contracting authorities must have regard to ... guidance issued under” the bill.

I turn quickly to the issue of blacklisting. I like a good argument as much as anybody, but I encourage Neil Findlay to recognise when people are trying to agree with him, as was the case on blacklisting, which section 23 enables us to deal with. The provision will enable us to make regulations that cover the circumstances in which a company could be excluded from bidding for contracts; for example, when they have avoided tax or committed grave professional misconduct. We would make it clear in the regulations that blacklisting would be an example of grave professional misconduct. Again, this is an area in which we build on the guidance that has already been issued and launched by the STUC and the First Minister. I put on record my thanks to the trade unions, with whom we continue to work to put into practice our joint determination to stamp out the abhorrent practice of blacklisting.

I turn to community benefit clauses. Mary Fee, Sarah Boyack, Jackie Baillie and others made points about the threshold. I will respond with a few comments on that. First, we arrived at the figure of £4 million because it broadly mirrors the level set in the EU regulations for public works contracts, and it is in recognition of the fact that the evidence says that larger contracts better lend themselves to meaningful and impactful community benefit clauses. However, I am not fixed on the figure of £4 million and am more than happy to have a debate about it at stage 2. Whether the figure is £2 million, £3 million, £4 million or £5 million is not an issue of principle; it is about where we think the level is best set.

My second point on the issue is probably the most important: wherever we set the level, we are not saying that contracts beneath that level should not have community benefit clauses; it is simply setting a level above which the bill mandates those clauses. We must never give the impression that contracts below that level are exempt from doing the right thing in terms of community benefit.

In the two minutes that I have left I will run through a number of small points. They are not smaller in the sense of importance, but in terms of the number of members who raised them. Linda Fabiani, Fiona McLeod and Alison Johnstone raised the very important issue of fair trade. I think that some disagreements emerged between Fiona McLeod and several others. There are some tricky legal issues involved in fair trade. There are also, as Fiona McLeod articulated very well, some practical issues involved. I have listened carefully to the points that were made today. We will continue to engage closely with the Scottish Fair Trade Forum to try to find the best ways possible of strengthening the bill in that regard.

Chic Brodie, Sarah Boyack and Mark Griffin suggested that every public authority should have at least one contract with a supported business. That is an aspiration that I support 100 per cent. Although its inclusion in the bill was not supported in the consultation that we did, I am happy to consider it further at stage 2. As members will know, we are already raising awareness of supported businesses through the framework agreement that we have in place and we are having some success. However, it is really important that we keep our foot on the pedal.

Some comments were made about the general duties and sections 8 and 9, in particular. Stewart Stevenson and Alison Johnstone made specific points about the wording of sections 8 and 9. I will be happy to consider those points in more detail and to come back to the issue at stage 2.

The debate has given us a lot of food for thought. I take heart from the fact that there is broad support for the bill and the balance that it strikes, but some of the more detailed and specific points that have been made will certainly merit further debate at stage 2.