Changes to the Public Procurement Rules in Scotland Consultation - Analysis of the Responses

Selection criteria and grounds for exclusion

Selection criteria

The Directives set out selection criteria; the things public bodies can ask businesses to have or to provide that demonstrate they are reputable and able to deliver the contract. The Scottish Government feels it would be sensible to also include these in the rules for lower value regulated contracts.

Q16 Do you think that the same rules on selection criteria should apply to lower value regulated contracts as to higher value EU regulated public contracts? In particular, should the same rules apply on:

• The use of turnover as a selection criterion?
• The right of a public body to assume that a business does not have the professional ability needed for the performance of a specific contract, if that business has a conflict of interest which might mean that it is less able to deliver the contract?

Please explain your answer.

Most respondents (60) who addressed this question agreed that the same criteria should apply to lower value regulated contracts as to higher value EU regulated public contracts, 17 (across most respondent groups) did not agree. A further 21 respondents commented without giving a 'yes' or 'no' response.

Ninety-three respondents commented further, and this included 12 of those who answered 'yes' at this question making general supportive comments.

The key theme to emerge, amongst those that said 'yes', those that said 'no' and those who did not specify, related to the use of turnover as a selection criteria.

Around a third of respondents to this question, from across most respondent groups, commented on turnover with many voicing support for the use of turnover as a criterion or commenting that the requirement for a cap on the minimum level of turnover a public body can require, of no more than two times the value of the contract, is welcome.

Several respondents, particularly from local authorities, commented that turnover must not be the only means used to assess financial ability, supported a move to minimise the use of turnover or commented that turnover is not a good measure of ability. There were also comments, from private businesses and various other groups, that turnover criteria must be coupled with, or is less important than, ability to deliver.

A number of respondents, particularly from the local authority and representative body for professionals groups, said that the rules regarding turnover will make it easier for smaller or new businesses to bid for public contracts.

There were also requests, from various groups, for set criteria or guidance on assessing financial fitness, vulnerability and ability. The need for clear guidance, including standards and accreditations, was also mentioned.

Looking at those respondents who answered 'no' to the question, two (one NHS and an individual) disagreed with the use of turnover with a further seven, from various groups, saying that public bodies should have discretion over whether to use turnover as a criteria.

Another theme to emerge at this question, in responses from those who answered 'yes', related to conflict of interest. While a small number welcomed the approach set out in the consultation document, several others, from various groups, asked how a conflict of interest is to be measured, defined or treated. One local authority suggested that companies should have to demonstrate how they would manage any conflict of interest. A respondent from the executive agency / NDPB group suggested: "Conflict of interest should be scored and allowed to exclude if the organisation can't demonstrate that it could manage it properly."

Around half of those who said 'yes' at this question specifically welcomed the proposed approach of applying the same rules to lower value contracts; the following comment from a local authority is typical of those made on the subject of consistency: "This provides a consistent, transparent approach and helps ensure Best Value".

Eight respondents who answered 'no', including four private organisations, said that the criteria should not be applied to lower value contracts; the main reason given was that this could exclude some able, but small, organisations.

A further 21 respondents commented without giving a 'yes' or 'no' response and many of these respondents indicated that different options could have been provided in relation to turnover and conflict of interest as they could not give a yes / no answer to the combined question.

Various permutations were suggested: the main answer, from eight respondents from a range of respondent groups, was support for the turnover criteria but opposition (or requests for clarification or guidance) in relation to conflict of interest. A small number disagreed with the proposed turnover criteria with some saying this will rule out some small, new or social organisations. There were again comments that ability to deliver the contract is of prime importance.

Groups of businesses

For some contracts, various businesses will come together as a group to bid and the Directives state that the Scottish Government may legislate national standards of tests (of economic and financial standing and technical and professional ability) that such groups of businesses need to meet. However the Scottish Government feels that setting standards would introduce complexity.

Q17 Do you agree or disagree that public bodies should retain the flexibility to decide for themselves the basis upon which groups of businesses will be able to meet tests of economic and financial standing and technical and professional ability that will be necessary to perform a particular contract or should there be national standards? Please explain your answer.

Seventy-four of those who replied said they agreed, 12 disagreed and five made other comments.

The key theme amongst the 68 respondents who agreed and went on to give their reasons, was that flexibility is required to ensure that differing joint delivery models can be considered to ensure the best fit for each particular contract. Many of these respondents commented that the public body will be best placed to assess the risks and requirements involved. There were also many comments that it would be very difficult to produce standards to cover every situation, and especially difficult for assessing technical and professional ability. Respondents also felt that such a move could discourage or restrict innovation. One local authority said: "Each situation is different and cannot be regulated; flexibility is essential." A number of respondents commented that guidance, rather than standards, would be of most use.

Eleven of those who disagreed went on to comment further and the key theme from these responses, many of which came from the private sector, was the need for consistency.

Five other respondents commented without specifying whether they agreed or disagreed and most of these respondents, from various groups, felt that there could be national standards but with public bodies still retaining the flexibility required to address local needs.

Criminal convictions

As well as selection criteria there are also grounds for exclusion; things that could lead to a business not being allowed to bid for a contract. Some, such as a senior person in an organisation having some types of criminal conviction, are mandatory. In other cases, public bodies can decide whether to use specific criteria as grounds for exclusion. The Scottish Government feels it is important to make things as simple and as consistent as possible, and so plans to list the same offences as are listed in the Directives.

Q18 Should the list of criminal convictions which may result in exclusion from bidding be the same for all regulated contracts, regardless of value? Please explain your answer.

Eighty-seven respondents said 'yes' and 78 of these respondents went on to give their reasons. Two disagreed and five made other comments.

Two key themes emerged from responses from those who answered 'yes'.

The first was that using the same list, regardless of value, would be in the best interest of consistency, transparency and simplicity.

The second key theme to emerge was that if there has been a serious conviction then the contractor should be excluded; the value of a contract is irrelevant or immaterial.

Other comments included:

• The need for consideration as to when a conviction should become spent; particularly in order to support the rehabilitation of offenders.
• That public bodies should be allowed to consider other offences, for example those which would bar people from working with children or vulnerable adults under the Protecting Vulnerable Groups Scotland Act.
• The need for guidance and clarification on how public bodies can check this information, on information sharing and on how the rules will be implemented.
• The need for a maintained list of excluded businesses.
• Calls for police to be allowed to share relevant information with public bodies.
• Comments that the list is limited and somewhat arbitrary and the need for more offences to be included.

Two respondents said 'no'; one, from the private sector felt this should be decided by the buyer. The other, an individual, asked that public procurement be used to help in the prevention of domestic abuse and other violence against women and girls by individuals with a history of domestic violence being prevented from bidding.

Five other respondents commented without specifying a 'yes' or 'no' answer. One statutory organisation felt that the public body should have some discretion in the matter. Another, from the same group, wanted to see the exclusion widened to include any person with control over, or benefit from, the bidding firm. Two local authorities said that the conviction should be relevant to the contract. A representative body for professionals asked that the list of convictions be consistent between the Act and the Directive.

The Scottish Government also plans to make new rules that a public body must also exclude a business from bidding for lower value regulated contracts if it, or someone who holds a senior position in it, has been convicted of certain offences listed in the rules for lower value regulated procurement.

Q19 Should public bodies be required to exclude a business from bidding for lower value regulated contracts if it, or someone who holds a senior position in it, has been convicted of any of the offences on the list?

Eighty said 'yes' and eleven said 'no' (this included five statutory organisations).

Fifty-five of those who said 'yes' commented further and the key themes to emerge in these responses were as in the previous question: consistency, transparency and simplicity; and that, where there have been serious convictions, the value of the contract is irrelevant.

Other comments included:

• The need for clarification over what constitutes a senior position.
• Queries over how this can be checked or implemented; queries over what information will be available to public bodies.
• The need for clarification over spent convictions.
• That the list of offences is too restrictive and should be extended to include offences under child or vulnerable adult protection legislation.

All eleven of those who answered 'no' commented further; all five statutory organisations and two local authorities said that the public body should have discretion in the matter. Other comments included the need for guidance or clarification, particularly around when a conviction becomes spent.

Tax evasion

The Directives say that public bodies must exclude a business if a court, tribunal or administrative decision has found that it has breached its obligations to do with paying tax or social security. They also say a public body can exclude a business if it can demonstrate, by any 'appropriate means' that it has breached these obligations. While the Scottish Government does not believe that tax evaders should win public contracts, it does not propose to make this a mandatory ground for exclusion as there may be the risk of legal challenge for public bodies.

Q20 Should public bodies retain the discretion to decide whether or not to exclude a business from bidding for a contract where the body can demonstrate by appropriate means, short of a court, tribunal or administrative decision, that the business has breached its obligations to do with paying tax or social security contributions?

Seventy-six respondents said 'yes', 18 (mainly local authorities, private firms, NHS and union respondents) said 'no' and two made other comments.

Forty-six of those who said 'yes' gave their reasons; in half of these comments, respondents simply reiterated their support. The main themes to emerge in the remaining responses were:

• The need for definitions, clarification and guidance over the phrases 'can demonstrate' and 'appropriate means'.
• That flexibility is required for proportionality and for fairness.
• The need for some form of guidance to ensure public bodies act in a consistent manner; this is required to guard against the risk of legal challenge to decisions.
• That public bodies will have to be able to clearly demonstrate, without subjectivity, that the business has breached its obligations.

All 18 of those that said 'no' gave their reasons:

• That discretion may not be consistently applied; that there should not be discretion as decisions may be made subjectively or inconsistently.
• That while public bodies should retain discretion, there should still be a requirement for proof; that a court or tribunal decision is needed in order for safe decisions to be made; that decisions will be subject to challenge where there has been no court finding.
• That businesses who have breached their obligations should not receive public monies; that any contract should be able to be terminated should breaches be proven following the award of a contract.
• Support for the Fair Trade Mark; that this should be used to assess tax behaviour.
• That tax avoidance should be included in the list of reasons for exclusion.

Two third sector / equality organisations made other comments without giving a 'yes' or 'no' response. These respondents felt that public procurement should be used as part of the effort to tackle tax evasion and tax avoidance; this could include disclosure of company tax policies.

The consultation went on to explain that the Scottish Government can also choose to allow public bodies to decide not to exclude a business which has breached its tax obligations if it would be disproportionate to do so. The Scottish Government accepts that there will be times when it would not be proportionate to exclude businesses for tax offences.

Q21 Should public bodies be given the discretion not to exclude a business which has breached its obligations to do with paying tax or social security contributions, and where this has been established by a court, tribunal or administrative decision, if it would be disproportionate to do so?

Seventy-two respondents said 'yes', 19 (across most groups) said 'no' and four made other comments.

Looking at those respondents who answered 'yes', 48 went on to give their reasons; the majority of these respondents simply restated their agreement that public bodies should be given discretion. The main themes to emerge in the remaining (14) responses were:

• The need to ensure proportionality and also consistency; the need for a national approach to determining exclusions.
• The need to define what is proportionate or disproportionate.

• The need for a list of excluded businesses or of exclusion decisions, or other support for public bodies to identify such businesses.

Sixteen of those who answered 'no' also commented and the main theme in these responses was that businesses that evade tax should always be excluded. A small number were concerned about consistency of application or the potential for legal challenges.

Four respondents made other comments including: the need to use public procurement alongside other efforts to tackle tax avoidance or evasion; and that discretion could lead to discrimination.

For reasons of consistency, the Scottish Government plans to make regulations which say that a public body may also exclude a business from bidding for lower value regulated contracts if it has breached its obligations in relation to the payment of tax.

Q22 Should public bodies also have the discretion to exclude a business from bidding for lower value regulated contracts if it has breached its obligations in relation to the payment of tax?

Eighty-two respondents answered 'yes' to this question while ten (including four from the NHS) said 'no' and two made other comments.

The main themes to emerge in comments from the 48 respondents who answered 'yes' and commented further were as, in the previous questions, that this was supported for reasons of consistency, proportionality and fairness. Once again, respondents requested guidance and other assistance in identifying and obtaining relevant information. The need to ensure public bodies make decisions consistently and proportionately was again mentioned.

A small number suggested that there should also be a reference to social security as there was in previous questions.

All ten of those who answered 'no' commented on their answer and again, as at previous questions, many of these respondents were opposed to this suggestion as, they felt, any organisation evading or avoiding tax should not be awarded public contracts. NHS bodies wanted to see further guidance and detail on information sharing and stressed the need for consistency in decision making.

Bankrupt or insolvent businesses

The Directives say that if a business is bankrupt or is in insolvency proceedings, a public body can choose to exclude it. The Scottish Government believes that the best approach is to give public bodies as much discretion in this area as the Directives allow.

Q23 Should public bodies retain the discretion to decide whether or not to exclude a business which is bankrupt, or is in insolvency proceedings from bidding? Please explain your answer - in particular, if you think that public bodies should have discretion in these situations, do you think that discretion should apply in every circumstance?

Sixty-seven respondents said 'yes', 21 said 'no' and six made other comments.

Fifty-five of those who answered 'yes' gave reasons for their reply and most simply said that there should be discretion; that public bodies should be able to judge each case on its merits.

The main point made in the remaining responses was that, while the default in such cases should be to exclude, nevertheless there will be some exceptional circumstances where this would not be appropriate and so discretion should be retained.

There were also comments that this discretion would be particularly important in cases where businesses are in short term difficulties, or are in the process of being rescued. A small number also mentioned cases where a contract contained specific requirements or where community benefit considerations apply.

The need for clear guidance was also raised; for example one housing / care respondent asked what could be taken into account in the decision-making process.

Twenty respondents who answered 'no' at this question commented further. The main reasons for this view were: that public bodies might not apply discretion consistently; that using insolvent businesses could have a knock-on effect on others in the supply chain; or that using a business involved in bankruptcy or insolvency proceedings would be a financial risk for a public body. A small number commented that insolvent companies should not be awarded contracts if they have outstanding debts to former employees.

There were six respondents, from various groups, who commented but did not give a 'yes' or 'no' answer. The main points from these responses were that: more information is required before an answer could be formulated; that any discretion allowed would need to be used with extreme caution or subject to specific requirements; or that while using a business going through insolvency may be appropriate, using a bankrupt business would not be.

The Scottish Government believes that, in order to make things as simple and as consistent as possible, the same rules should apply to the award, by public bodies, of public contracts, concession contracts, utilities contracts and to lower value regulated contracts.

Q24 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

Seventy-nine respondents answered 'yes', six said 'no' and five repeated other comments that they had made at previous questions in this section.

Sixty-two of those who answered 'yes' commented further. Around half of these respondents said they supported the same rules applying to EU regulated contracts and to lower value regulated contracts, for reasons of consistency. The main themes from others who answered 'yes' was that public bodies should have the discretion to assess each case on its merits. Once again, a small number commented that the rules should specify that public contracts should not be awarded to bankrupt or insolvent businesses.

All six who said 'no' commented and this included respondents from the third sector / equality groups who said they would prefer contracts under the EU threshold to be kept as simple as possible; this would help third sector and SMEs to participate. Several of the NHS respondents who addressed this question were concerned that discretion may not be consistently applied.

Exceptional circumstances

The consultation explained that there may occasionally be exceptional circumstances where businesses that would otherwise be excluded might be allowed to bid, for example contracts relating to public health or the protection of the environment. The Scottish Government plans to allow public bodies to decide not to exclude businesses in exceptional circumstances, when this would be in the overriding public interest.

Q25 Should a public body be allowed not to exclude a business with disqualifying criminal convictions, or which has breached its obligations to pay tax or social security, in exceptional circumstances? Please explain your answer.

As shown in the following table, 48 respondents said 'yes', 31 said 'no' and 12 made other comments.

Question 25: Should a public body be allowed not to exclude a business with disqualifying criminal convictions, or which has breached its obligations to pay tax or social security, in exceptional circumstances?

	Yes	No	Other	No reply
Local authority (27)	18	4	3	2
Executive Agencies and NDPBs (13)	4	1	2	6
NHS (6)	1	5	-	-
Other statutory organisation (11)	6	2	1	2
Third sector / equality organisation (20)	3	2	1	14
Private sector organisation (18)	8	5	-	5
Representative body for third sector / equality organisations (12)	1	3	1	7
Representative body for private sector organisations (9)	-	3	2	4
Representative body for professionals (6)	2	1	1	2
Union (5)	-	3	1	1
Housing / Care (4)	3	1	-	-
Other (2)	1	-	-	1
Individuals (7)	1	1	-	5
TOTAL (140)	48	31	12	49

Forty-one of the 48 who answered 'yes' commented on their support for this proposal and the main reasons given were: that flexibility may be required in some cases; or that this would be a proportionate approach.

Many respondents, however, asked for clear guidance or definition as to what exceptional circumstance might be or on what justification would be required before allowing an exception; any guidance should include examples. The phrase 'overriding public interest' was viewed as subjective, broad and potentially open to abuse. A small number said they felt exclusions should not be allowed for criminal convictions but should be allowed for tax issues.

Twenty-nine of those who answered 'no' commented; most of these respondents, from across groups, said that they could not envisage any circumstances that would make this option necessary. Other comments included that it would be wrong, or not in the public interest, to allow any exceptions. A small number asked for clarification or guidance on what might constitute an exceptional circumstance, as did many of the 12 respondents who commented without giving a 'yes' or 'no' answer. Other comments from this group of respondents included: the need for safeguards; the need for mandatory guidance or ministerial approval; or that there is no reason to change current obligations.

The consultation then asked about exceptional circumstances in relation to EU regulated contracts and to lower value regulated contracts.

Q26 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

Eighty-two said 'yes', four said 'no' and five made other comments.

The majority of the 70 respondents who said 'yes' and then commented further said they support applying the same rules to EU regulated contracts and to lower value regulated contracts for reasons of consistency and clarity. A small number, particularly those opposed to allowing exceptions, reiterated the views they had expressed at the previous questions, in particular that they could not envisage any circumstances that would make this option necessary.

Other comments, from three of the respondents who answered 'no' and from those who did not specify agreement or disagreement, included: that no exceptions should be allowed; that lower value contracts should not have the same rules applied as this could lead to lengthier procurement timescales; the need for discretion; or the need for clarification and guidance as to what might constitute an exceptional circumstance.

Other grounds for exclusion

There are circumstances in which, under the Directives, public bodies can choose to exclude businesses and the consultation paper explains that the Scottish Government proposes to continue to allow public bodies the discretion to exclude or not.

Q27 Should the law allow public bodies the discretion to decide whether or not to exclude bidders in situations where there is evidence of a breach of environmental, social and labour law obligations, grave professional misconduct, distortion of competition, a conflict of interest, a significant failure to perform in an earlier contract, or a security risk (in the case of defence and security concessions)? Please explain your answer.

Eighty-one respondents said 'yes', 12 (from various groups) said 'no' and four made other comments.

Seventy-two of those who answered 'yes' gave their reasons; these are similar to comments made at other questions in this section and included:

• Reiteration of support for allowing discretion.
• That flexibility is required to allow public bodies to make decisions on a case by case basis.
• The need for guidance.
• That any decisions should be proportionate and evidence-based; there were calls for clarification as to what evidence would be appropriate.

The phrase 'significant failure' was seen as subjective and several respondents asked for clarification and guidance on this. Respondents also asked for clarification on what is meant by 'poor past performance', including what timeframes should be applied. There were also calls for some form of information, for example a database of exclusion decisions, to be made available to public bodies.

One key point, raised by respondents, was the need for contracts to be awarded in such cases only when the company is able to show that the issues have been addressed.

Once again, a number of respondents, across groups, felt that serious breaches should result in mandatory exclusion.

The 12 respondents who answered 'no' also commented. Most of these respondents (mainly private sector, unions and third sector / equality organisations) were in favour of automatic exclusion for breaches mentioned in the consultation.

Other respondents who commented called for clear guidance for public bodies.

The consultation then asked about exclusions in relation to EU regulated contracts and to lower value regulated contracts.

Q28 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

Eighty-six respondents said 'yes', four said 'no' and two made other comments.

Seventy-two of those who said 'yes' provided further comments, with the majority of these respondents commenting on the need for consistency.

Two other themes emerged (in small numbers of responses); both came from various respondent groups. The first, noted in responses from a variety of respondent groups, was the need for guidance and information to ensure a consistent approach across public bodies. The other was the need to exclude businesses that have breached their obligations; this comment was also noted in two responses where the respondents did not specify a 'yes' or 'no' answer. In particular, unions commented on the need to exclude those businesses that have breached labour law obligations, in order to protect workers.

Three of those who said 'no' also commented. Two felt discretion should not be allowed while a statutory organisation felt it should.

The length of time a business can be excluded

The consultation explained that, at present, grounds for exclusion last indefinitely. Businesses can take steps to put right any breach (known as self-cleansing) but, where this has not happened, the Scottish Government can specify in regulations the maximum length of time a business can be excluded from bidding for contracts. The Directives state that this can be up to five years for criminal offences and up to three years in other cases. The Scottish Government plans to make the maximum length of exclusion the longest allowed by the Directives.

Q29 Do you agree or disagree with our proposed maximum periods of exclusion? Please explain your answer.

Eighty-three respondents agreed, seven disagreed and two made other comments.

Sixty-six respondents who agreed gave their reasons for doing so and the main points made, across respondent groups, were that this length of exclusion would act as a deterrent to breaching requirements or illegal activity and that three years (or five years for criminal convictions) is a reasonable exclusion period given the seriousness of the offences listed. Several respondents, however, also asked for clarification as to which cases should attract the three year exclusion.

While there was also wide-spread support for businesses being given the opportunity to self-clean, there were also calls for strong rules around what would be acceptable. Respondents were keen to ensure that businesses would be required to prove they had taken steps to rectify any breaches or remove the cause of the breach or offence.

Smaller numbers made other comments including:

• That indefinite exclusion is disproportionate and is also at odds with the concept of criminal convictions being 'spent'.
• The need for public bodies to have some discretion in these cases and for clear guidance for public bodies on assessing risk.
• The need for clear guidance on all areas relating to self-cleaning and exclusions.

The seven respondents who disagreed also gave their reasons and comments included:

• The need for longer exclusion periods, including some indefinite exclusions, for certain offences.
• That having a maximum exclusion period is too restrictive and that public bodies should have discretion depending on the offence or breach.

Two respondents who did not state agreement or disagreement made other comments:

• A query over how the use of exclusions would be applied consistently across public bodies (local authority).
• "We would suggest that public bodies should treat an applicant who was granted leniency by a relevant UK competition authority as having 'self-cleansed' in relation to that infringement" (statutory organisation).

The consultation then asked about maximum periods of exclusion in relation to EU regulated contracts and to lower value regulated contracts.

Q30 Should the same rules apply to EU regulated contracts and to lower value regulated contracts? Please explain your answer.

Eighty-eight respondents said 'yes' and two said 'no'.

Seventy-two of the respondents who said 'yes' commented further; most simply said that this was supported for reasons of consistency. One theme to emerge, amongst a small number across respondent groups, was that the same rules should apply regardless of contract value because of the serious nature of the offences listed.

A small number said that there should be longer or indefinite exclusions allowed.

The two respondents who said 'no' also commented: one said that there should not be a maximum exclusion period but this should be reviewed in relation to each tender, the other commented that the exclusion should apply until self-cleaning had been verified.

Excluding sub-contractors

At present, public bodies are only required to check that there are no grounds to exclude potential main contractors; however, the Directives allow for public bodies, where they choose, to also verify whether grounds exist to exclude sub-contractors. The Scottish Government feels that this would lead to a large amount of additional work for public bodies and also that main contractors should generally be responsible for managing their supply chain; the Scottish Government, therefore, does not feel public bodies should be required to check sub-contractors.

Q31 Should public bodies be required to check that sub-contractors do not fail any of the exclusion criteria?

Seventy-one respondents agreed with the position taken by the Scottish Government (answering 'no to the question) while 23 disagreed (answering 'yes'); a statutory organisation made another comment.

In almost all respondent groups, with the exception of the union group, more respondents said 'no' than said 'yes'.

Question 31: Should public bodies be required to check that sub-contractors do not fail any of the exclusion criteria?

	Yes	No	Other	No reply
Local authority (27)	2	23	-	2
Executive Agencies and NDPBs (13)	-	7	-	6
NHS (6)	-	6	-	-
Other statutory organisation (11)	1	7	1	2
Third sector / equality organisation (20)	3	3	-	14
Private sector organisation (18)	6	8	-	4
Representative body for third sector / equality organisations (12)	1	4	-	7
Representative body for private sector organisations (9)	3	4	-	2
Representative body for professionals (6)	2	3	-	1
Union (5)	4	-	-	1
Housing / Care (4)	-	4	-	-
Other (2)	-	1	-	1
Individuals (7)	1	1	-	5
TOTAL (140)	23	71	1	45

Twenty-one of those who answered 'yes' commented, these respondents came mainly from the private sector, third sector / equality organisations or unions. A number of themes emerged in these responses:

• That it would be incongruous to check contractors but not sub-contractors.
• That responsibility for checks on sub-contractors should not be abdicated to the contractor.
• That this should be the case for certain types of contracts (such as large tenders).
• That this will encourage contractors to take care in choosing sub-contractors.
• That any sub-contractors should be subject to the same checks, criteria (and, if relevant, exclusions) as the main contractor.
• The need for guidance on what checks public bodies should make.
• Guidance on what checks main contractors should be required to make (and what evidence should be produced).

Sixty-eight of those who said 'no' commented further, with most saying that responsibility for checking sub-contractors should be placed on the main contractor.

A key concern, from many respondents and across various respondent groups, was the administrative burden that would be placed on public bodies if they were required to make these checks. One housing / care organisation commented: "The number of sub contractors on any project can be significant. The workload against value in this task is not proportionate for an organisation. In many instances sub-contractors will not be identified at PQQ stage which would make the assessment of them at this stage of the process impossible".

Several respondents commented that the main contractor would have to be advised of their responsibilities, perhaps under the terms of the contract, with a small number suggesting that standards or good practice guidance be developed.

A small number suggested that public bodies could be given discretion to check sub-contractors if they wished to do so; some suggested this may depend on the potential risk or the type of contract.

One statutory organisation did not give a 'yes' or 'no' response but commented that sub-contractors should have to meet the same requirements as a main contractor.

Statutory guidance - Selection of tenderers and award of contracts

The Scottish Government proposes to include in Statutory Guidance a range of principles, standards and values which should be applied when considering a business's suitability to deliver a public contract.

Q32 What are your views about what should be included in this Statutory Guidance? Please explain your answer.

One hundred and three respondents commented; 12 of these respondents simply voiced support for the proposals in the consultation document. The remaining respondents, from across all respondent groups, asked for clarification on some aspects of the proposed guidance and / or suggested additions. Many recurrent suggestions or queries emerged from these responses and these are summarised below.

The main theme to emerge from responses, across respondent groups, was the need for clear, unambiguous guidance and for clarification including: detail on implementation; how to test proportionality; the need for non-subjective wording; and the need for case studies or examples. For example, one housing / care respondent suggested: "Clarity on what can and cannot be taken into consideration and guidance would be helpful on how to practically consider the things that can".

There was some concern over the possibility of legal challenges; respondents stressed the need to ensure that any requirements placed on public bodies would be defended and a representative body for professionals commented: "We consider that the Scottish Ministers should reflect carefully on whether statutory guidance on this point is necessary or desirable. Our concern is legal certainty. Guidance requiring public bodies to have regard to various considerations is apt to promote legal challenges and hence uncertainty". One specific example came from a statutory organisation:

"The consultation refers to businesses behaving "dishonestly". We note that there is no concept in UK or EU competition law of whether a business has been "dishonest", and such a term does not form part of the test for whether a business has infringed competition law. We believe that introducing such a term here and / or in any future guidance is liable only to exacerbate challenges for public bodies in considering whether or not a business should be excluded under this ground of exclusion."

One main area where the possibility of legal challenge was raised was around the issue of pay and conditions. Several respondents wanted to see the guidance oblige contractors to pay the Living Wage and to prohibit the use of zero hours contracts but there were concerns that, under the terms of the Local Government Act 1988 (section 17 (1)), public bodies are unable to take non-commercial considerations such as rate of pay into account. Others, however, commented that this was not the case "Like Unison and others, we disagree with the Scottish Government in that we have seen Unison's legal advice which states that it is in fact possible to stipulate payment of the Living Wage as a condition for performance of the contract. We therefore believe that the procurement guidance should leave room for contracting authorities to choose to stipulate the payment of the Living Wage as a condition for performance" (representative body third sector).

Another area, discussed by two respondents from the third sector, who demonstrated opposing views, was on the issue of requirements in respect of illegal settlements and the legal position around this.

Respondents also asked for clarification as to what can and cannot be taken into account as selection and award criteria for above EU threshold contracts and on those below the EU threshold.

A number of respondents, from both the public and private sectors, stressed the need for some flexibility or discretion. One public sector respondent, for example, commented: "The statutory guidance in this area should be light touch to allow public bodies to determine what are priority issues for their own areas, and what can realistically be achieved in the particular market from which they are procuring." However, many respondents also wanted to see precise details of the extent of discretion available to public bodies in respect of each requirement (and how this should be applied in order to ensure consistency).

Other respondents commented that there needs to be clarity between what constitutes overarching standards and values that must be met and what are other selection requirements where discretion can be applied.

Amongst responses there were many specific requests for clarification and these included the need for detail on:

• Payment regimes.
• PQQs.
• Risk assessment.
• Proportionality.
• How value for money is to be assessed.
• Balancing exclusions with a need for rehabilitation.
• How to assess whether a business has self-cleansed.
• Grounds for exclusion and the level of evidence required.
• Detailed advice on the selection and rejection of contractors based on their financial and economic standing.
• Definitions for many of the words or phrases used, examples include "grave professional misconduct" and "community".

Respondents, from various sectors, also voiced concern over the amount of red-tape and potential cost burden that could be involved in compliance checking. For example, a private sector company commented: "that the burden of matters such as being forced to provide flexi-time or career breaks will fall heaviest on SMEs due to their size. The more exclusion criteria of this sort that are in the rules, the less likely SMEs are going to be able to bid (or participate in the supply chain, if these rules are required to be pushed through the supply chain of a main contractor)". Further, a respondent from the third / equality sector commented: "The guidance must be clear that contracting authorities have a major responsibility in this respect, and that they cannot introduce criteria for the selection of tenderers or award of contracts that they are not prepared to underwrite by applying adequate contract values".

Many respondents, especially those from the third sector, commented on payment of the Living Wage with several also voicing their opposition to zero hours contracts. While there was acknowledgement that current legislation means public bodies cannot require contractors to pay the Living Wage, one local authority respondent asked "that the statutory guidance stemming from the Procurement Reform (Scotland) Act on this matter goes as far as possible within the bounds of the law to allow procuring authorities to ensure payment of the living wage, and utilise ethical standards such as living wage employer status to strengthen the public sector's ability to make work pay".

There were calls for this aspect to be taken into consideration when looking at the cost of a bid in order that bids from those companies paying a Living Wage, with therefore higher employment costs, were not rejected in favour of those not paying the Living Wage (who could therefore submit a cheaper bid). Others commented: "It is absolutely imperative that if the Statutory Guidance says that businesses with public contracts should (for example) pay the Living Wage, then it must also say that contracting authorities need to offer contract values that will enable businesses to pay it".

There were some queries relating to the payment of a Living Wage:

• Whether this requirement would apply to the entire supply chain.
• What evidence will companies be required to produce.
• Whether broader remuneration arrangements such as employee share plans would be taken into account.

The other main requirements discussed by respondents were the need for companies to show how they manage their environmental impact and to show how they ensure that they, and their supply chain, respect human rights.

There were also calls for a range of specific requirements to be included, these included:

• Signing up to the 'Carers Positive' kite-mark.
• The use of the Fair Tax Mark.
• A general emphasis on family friendly policies and equalities.
• Ethical purchasing and the ethical principles that contractors apply in dealings with their supply chains.
• Consideration of the global impact of purchasing decisions and allowing the ability to prioritise fairly traded products.
• Excluding Contractors that have engaged in blacklisting or have been convicted of other employment infringements.
• Encouragement of joint-bidding and consortia bids.
• A positive approach to sub-contractors (e.g. payment of invoices within 30 days).

• That Scottish Procurement's standard PQQ should be used unless good reasons can be demonstrated for not using it.
• The need for a centralised database to store pre-qualification data supplied by economic operators and their sub-contractors.
• That the guidance could reference membership of self-regulatory schemes.

There were also calls for the guidance not to impose any requirements on contractors unless these were requirements already imposed on the public bodies themselves. In addition, a representative body for the private sector commented: "However we do not agree that law-abiding, responsible small businesses should be excluded for not meeting standards that much of the public sector is yet to achieve, for example in relation to flexible working or environmental performance. We must also emphasise that if extra requirements are to be placed on those bidding for work, then public bodies should be willing to pay more for the contract."

Other comments included:

• That companies involved in tax avoidance are excluded.
• That companies involved in anti-competitive practices are excluded.
• That companies involved in exploitative employment (including blacklisting, zero hours contracts or using umbrella companies to exploit workers) are excluded.

Summary : Selection criteria and grounds for exclusion

Most respondents:

• Agreed that the same criteria should apply to lower value regulated contracts as to higher value EU regulated public contracts.
• Agreed that public bodies should retain the flexibility to decide for themselves the basis upon which groups of businesses will be able to meet tests of economic and financial standing and technical and professional ability that will be necessary to perform a particular contract or should there be national standards.
• Said that the list of criminal convictions which may result in exclusion from bidding should be the same for all regulated contracts, regardless of value.
• Said public bodies should be required to exclude a business from bidding for lower value regulated contracts if it, or someone who holds a senior position in it, has been convicted of any of the offences on the list.
• Said public bodies should retain the discretion to decide whether or not to exclude a business from bidding for a contract where the body can demonstrate by appropriate means, short of a court, tribunal or administrative decision, that the business has breached its obligations to do with paying tax or social security contributions.
• Said public bodies should be given the discretion not to exclude a business which has breached its obligations to do with paying tax or social security contributions, and where this has been established by a court, tribunal or administrative decision, if it would be disproportionate to do so.
• Said public bodies should also have the discretion to exclude a business from bidding for lower value regulated contracts if it has breached its obligations in relation to the payment of tax.
• Said public bodies should retain the discretion to decide whether or not to exclude a business which is bankrupt, or is in insolvency proceedings from bidding.
• Said a public body should be allowed not to exclude a business with disqualifying criminal convictions, or which has breached its obligations to pay tax or social security, in exceptional circumstances. However, a fairly large number said they should not.
• Said the law should allow public bodies the discretion to decide whether or not to exclude bidders in situations where there is evidence of a breach of environmental, social and labour law obligations, grave professional misconduct, distortion of competition, a conflict of interest, a significant failure to perform in an earlier contract, or a security risk (in the case of defence and security concessions.
• Agreed with the proposed maximum periods of exclusion.

Across all of the proposals in this section, most respondents said the same rules should apply to EU regulated contracts and to lower value regulated contracts.

Most respondents said public bodies should NOT be required to check that sub-contractors do not fail any of the exclusion criteria.

When asked what should be contained in the Statutory Guidance, most respondents mentioned the need for clear, unambiguous guidance and for clarification including: detail on implementation; how to test proportionality; the need for non-subjective wording; and the need for case studies or examples.

Throughout this section, consistency, proportionality and flexibility emerged as key factors for respondents.