A guide for suppliers to the public sector in Scotland

By Sarah Stone, April 2019

The public sector in Scotland spends around £11 billion each year buying all the things that it needs to run the country. Things like wheelie bins, medicines, fire alarms for buildings, paper for schools, hospital equipment, medicines and stationery. A glance at Public Contracts Scotland, where all public sector contracts are advertised, shows the thousands of goods and services that are bought each day.

That's a lot of spending power. What would happen if the public sector harnessed some of that power and used it to persuade its suppliers to commit to using their resources to improving the lives of the communities and customers their products serve?

This is exactly the question that policy makers in Scotland asked themselves, and it resulted in new procurement legislation which is changing the way public sector procurement works and helping to harness the buying power of public sector spending and turn it into a force for social good.

Procurement Reform Act (Scotland) 2014

The Procurement Reform Act (Scotland) is the legislation which changed things and it came into effect in April 2016. Amongst others things the Act introduced a Sustainable Procurement Duty which placed a legal duty on procuring organisations to consider how everything they purchase can bring enhanced social, environmental and innovation as well as economic benefits. Think of it as the legislative equivalent of the Scottish public sector saying to its suppliers:

"From now on we’re not going to be basing our purchasing decisions solely on the price you quote us, we’re also going to look at how much social value you can offer us.

If you want our business you need to show us that you care about the community and customers your products and services are being bought for."
In other words, although value for money remains important, the public sector in Scotland is now able to choose its suppliers based on those who also offer the best value for society.

Which is pretty seismic when you think about it.

What are community benefit clauses?

Community Benefit clauses are one of the key mechanisms by which procuring authorities can meet their new sustainable procurement duty. When the procurement team sits down with their internal client at the beginning of the procurement process to decide what they want from the contract they will be asking themselves:

"Are there any relevant community benefits that the supplier of this product (or service) could offer us?"
If they think the answer is yes then they may decide to include a community benefit clause in the contract.

If as a supplier you see one in a tender, think of it as the buyer asking you ‘if you are awarded the contract, as well as providing the goods or services we are asking for, what other benefits can you offer the community these goods or services are being procured for?’

More information on Community Benefits is available from the Scottish Government and also here.

When are you likely to see them?

At the moment procurers are only legally required to consider including community benefits for all regulated procurement where the estimated value of the contract is equal to or greater than £4 million. Every procuring organisation is different and some do stick rigidly to £4 million limit but increasingly many now consider it best practice to consider whether community benefits could be achieved in contracts worth as little as £50,000.
If you are a supplier bidding for public sector contracts in Scotland and you haven’t come across a Community Benefit Clause yet you can expect to see more and more of them as contracts that were let prior to 2016 are renewed and procurers begin to appreciate their potential.

Scottish Government policy makers are also considering lowering the contract value limit and given how many procurers already include community benefits for contracts of much lower value it is highly likely that it will be dropped at some point in the future.

What kind of community benefits can they ask for?

Even though the legislation came into force three years ago it is still relatively early days. The vast majority of benefits which are being asked for (and offered) are still mainly limited to things like employment related benefits such as training and apprenticeships, job creation and delivering workshops in schools. The key thing to remember is that Community Benefits must be related to the contract, and should not have a negative impact on the delivery of value for money. So you shouldn't be asked to provide things which are going to cost you huge amounts or increase the cost price of the item that’s being procured.

Every procurer does it slightly differently – some ask for specific things in their community benefit clauses but many don’t, preferring to leave it up to bidders to come up with ideas. Procuring organisations are still embedding these clauses into their procurement processes and systems which offers an opportunity for suppliers who are prepared to innovate and think outside the box. Community benefits are a real opportunity to show added value. If you see a community benefit clause in a tender document it means you are being given a chance to to differentiate your bid from your competitors, without impacting on cost or reducing your price.

The private sector has a wealth of resources available to it and there are an enormous number of third sector organisations operating in communities, supporting those most in need, that would be worthy recipients of some of these resources. For example a paint supplier to the NHS could support a mental health charity that delivers art therapy classes; an IT company could offer digital skills training to young people; and a groundworks contractor could help prepare the ground for a community garden. Defence contractors could support military spouses into employment; a financial services company could offer support to a social enterprise which offers debt advice to those most in need; an energy provider could help a fuel poverty charity; and a large employer could focus its staff volunteer days at specific local charities and third sector organisations.

The potential is huge but the key thing they all have in common is that it's about the private sector offering benefits to communities and creating social value rather than offering cash. I have seen some procurers asking for cash benefits but this is less common and, personally, I believe community benefit clauses should not be asking for cash (not least because it will just drive up costs if they do). They are about asking suppliers to deliver value for society, and there are so many ways the private sector can do that.

How are they scored?

That depends. Every procurers takes a different approach and every contract is different. Some are scored, others aren’t. Some are mandatory, others are optional. Right at the beginning when you sit down with the tender document and you look at the evaluation criteria, if you see that it’s scored then that’s when you need to pay attention. Because getting a high score on the community benefit clause could give your bid an edge.
If a community benefit clause is optional but isn’t scored what that means is that your offer won't have any impact on your bid but if you are awarded the contract you will be expected to provide any benefits you have committed to delivering.

How do you write a community benefit clause?

Whatever you do DON’T just think that you can insert your company’s CSR policy or talk in general terms. You should put together an offer that is specifically tailored for the contract you are bidding for.

Read the tender document. It’s procurement 101 but I can’t stress enough that what procurers tell me is that the biggest reason that people’s community benefits score badly is because they have just inserted a generic CSR statement.

It also depends how specific the tender is – if they’ve been very specific you are probably best just doing exactly what’s been asked for. If it's not so prescriptive then that’s where you have an opportunity to shine and differentiate yourselves from your competitors.

Identify the community you want to benefit

The first thing to think about is the community you could offer a benefit to but remember that the word ‘community’ can be a bit misleading. Don’t always think about it geographically (although geography does help). Think about service users – who as well as where are the goods or services being bought for? If you are bidding for a contract to supply medicines to the NHS for example, what illnesses are these drugs being used to treat? Is there a patient community you could benefit?

Then think laterally about:

What are the procuring organisations strategic aims and objectives? Which communities are going to be most important to them?
What do you know about the community – are there any specific issues that are facing it? Are there any third sector organisations already working to support it that you could deliver benefit to?

Identify the benefits you could offer

Once you've identified your community the second thing to do is think about the benefits you could offer them:

The question to ask yourself is what resources do you have available to you that are low value to you (ie. they don't cost you much to give) but would be high value (ie. worth a lot) to the receiver. Does your business have a corporate responsibility strategy or programme that you could tap into?
Engage with key stakeholders to identify the benefits they would most value – you can't find out what people want without talking to them. Procurement officers are a good place to start but remember that any information they give you they will also have to disclose to all the other bidders so if you want a commercial advantage you will need to look wider.
Look for local charities, social enterprises, community projects, co-operatives and other not for profit organisations and groups that are operating either within your sector or industry if the contract is nationwide or are specific to the location where the goods and services are being procured. Talk to local third sector organisations, community leaders, local newspaper editors, business owners, check out facebook groups. Once you find out what people need think about how your business could support or help them.
Think holistically about how your business operates. Involve your whole company. Think about whether there is anything you already do that could be considered value? Remember Community Benefit is all about getting social as well as economic value. So they’re looking for things that have a value but don’t have a price on them. You might find your HR practices are already pretty amazing or that your production team have developed an incredible way of recycling and reusing the waste products from your processes. All these things have a social value. What you need to show in the community benefit clause is how, if you win the contract, these practices will be used to benefit the community/people who are buying from you.
The supply chain you are going to use to deliver the contract – are there any social enterprises or third sector organisations providing services that you could incorporate? Are your employment practices fair? If this is a large contract that you’re going to be taking on staff for can you employ people from disadvantaged groups or those with barriers to employment?

Measuring the benefits you are offering

Procurers will be looking to monitor the contract deliverables and outcomes so it is essential that you can measure or put a value on the benefit you are offering. They will want to be able to compare the value of what you’re offering to what your competitors are so there’s no point doing it if you can’t measure it.

Start by asking yourself what is the value of the benefit you’re offering? Measuring value is incredibly difficult to do but one way would be start by thinking who is benefiting from it and what would it cost to obtain this benefit from scratch. The crucial thing here is not what it costs you (and if you get this right it should not be costing you very much at all) but what is the benefit worth to the person or people who are receiving it? What would the cost be to the procurer if they were to buy this benefit that you’re offering? Or how much money could the benefits you are delivering be saving them in other areas?

If the benefit you are offering is that if you are awarded an IT services contract you will offer support to a charity which delivers digital skills training to elderly people in the local community how do you put a value on that? Well once you’ve identified what the support you will be providing the charity is, you need to do is work out how much that service would have cost if it had been paid for. That’s the easy part. The hard part (but where you’re really going to win) is if you can also calculate the social value of the benefit you are offering. How much are you saving the local authority in other areas? What is the impact of this charity? How many of its service users can you help? How will your support benefit them? This is the tricky bit. But it’s also where, if you get it right, and your offer is good enough, you will give your bid the edge that will win you the contract.

Community Benefit is a key political priority in Scotland and public sector procurers are now required, by law, to submit annual reports to the Scottish Government on the community benefits they have obtained from all their contracts. The first reports were published in July 2018 and the fact that everyone can now see what benefits everyone else is getting is providing the impetus for procurers to ensure these clauses are embedded across more of their contracts.

If you are submitting a tender and they are asking for a community benefit think about what the aim of the contract is and tailor your community benefit offer to that.

Don’t be afraid to innovate and think outside the box.

Researching the procurers' strategic priorities will help you ensure you offer something that will be of high value to them. Put a bit of effort into it and it could make the difference between winning or losing the bid.

This article first appeared in the Social Value Files. To receive more content like this, sign up for the Social Value Files newsletter, a monthly round up of all things Social Value covering jobs, events, and original think pieces.

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