Public bodies in Scotland face new 'sustainable procurement duty'

The Procurement Reform (Scotland) Act, which received Royal Assent on 17 June, introduces a general obligation on Scottish public sector contracting authorities to consider how it can, throughout the procurement process, "improve the economic, social, and environmental wellbeing of the authority’s area, facilitate the involvement of small and medium enterprises, third sector bodies and supported businesses in the process, and promote innovation".

The authorities will have to "act with a view to securing such improvements identified" during procurements, although "only matters that are relevant to what is proposed to be procured" have to be taken into account in observing the new duty as well as those which are "proportionate in all the circumstances".

How to reduce inequality in their area is one example public authorities will be obliged to keep in mind when think of how procurements can improve 'wellbeing', according to the Act.

Under the Act, the obligation to comply with the sustainable procurement duty does not apply if adhering to the duty would conflict with the authorities' overriding duties to ensure they "treat relevant economic operators equally and without discrimination" and "act in a transparent and proportionate manner".

Most of the provisions contained under the Act, including in relation to the sustainable procurement duty, have not yet been brought into force. Members of the Scottish Parliament (MSPs) must first adopt an order specifying the date at which the new rules come into force before they take effect.

"If and when the new rules are brought into force, the Act has the potential to transform public procurement in Scotland," procurement expert Jamie McRorie of Pinsent Masons, the law firm behind Out-Law.com, said. "Not only will contracting authorities now be obliged to consider the social impact of their purchasing requirements, the Act also introduces a new lower threshold for the effective review and challenge of procurement decisions. Scottish contracting authorities will have far less of a 'safe harbour' when conducting below threshold procurements."

McRorie also highlighted a new "community benefit requirement" that public sector bodies and their suppliers could be subject to under the new Act.

Where the estimated value of a contract is at least £4 million, Scottish public authorities will be required to "consider whether to impose community benefit requirements" on suppliers as part of that procurement.

A 'community benefit requirement' is defined under the new Act as "a contractual requirement imposed by a contracting authority relating to training and recruitment, or the availability of sub-contracting opportunities". It may also refer to measures stipulated under contract that are "otherwise intended to improve the economic, social or environmental wellbeing of the authority’s area in a way additional to the main purpose of the contract in which the requirement is included".

Public sector bodies in Scotland must summarise the community benefit requirements it intends to set in contracts with suppliers or otherwise detail reasons for not imposing any such requirements, under the new rules. In addition, in cases whether community benefit requirements are imposed, the authorities must "include in the award notice a statement of the benefits it considers will be derived from those requirements".

The Act gives MSPs the power to change the threshold figure of £4m for public contracts subject to possible community benefit requirements as well as issue guidance on how those requirements may be used.

McRorie also said that it will be interesting to see how the new Procurement Reform (Scotland) Act will interact with new EU procurement rules that the Scottish government will have to implement into national laws.