Equality and Diversity Forum Seminar Series

Can procurement be used to promote equality?

Lessons from experiences at home and abroad

Linkage Concept of “linkage” “Participating in the market as

purchaser, and at the same time regulating it through the use of purchasing power to advance equality”

Some distinctions Can, effectively; and can, legally? Public and private procurement Non-discrimination and promoting

equality Which grounds/groups? Equality of what? Employment and

beyond Equality, where?

How is linkage done? Specification of what is being purchased Specification of the processes by which the

contract must be delivered Regulating who can tender for the contract Attempting to influence supply chain by

including provisions on sub-contractors Denial of ability to tender as a sanction for

breach of social law

How is linkage done? Including social and ethical issues as

considerations to be taken into account at the award stage

Granting price preferences to selected tenderers

Enabling selected tenderers to match lowest offers

Conditions regulating post-award delivery of the contract

Method of policyimplementationNo.

Description

Remarks

#1 Product/servicespecification

Contracting authorities can often give effect to social andeconomic policies through appropriate specification of theproduct or service that is to be procured, e.g. to promoteemployment by specifying construction methods that involveintensive use of labour rather than construction plants.

#2 Set-asides Contracting authorities can attain policy objectives by settingaside a certain proportion of their procurement requirementsand allow only defined enterprises or individuals to competefor the work so reserved.

#3 Qualificationcriteria

Contracting authorities can attain policy objectives byexcluding firms that cannot meet a specified requirement, ornorm relating to the policy objective, from participation incontracts. Firms are typically excluded from participationthrough an inability to attain a legal requirement (e.g. not todiscriminate on the basis of gender, race or disability), or toattain a norm enforced in the public sector (e.g. a requirementto implement an affirmative action programme), or to respondto contractual conditions regarding the composition of thetendering entity. In some instances, firms are excluded as asanction for their failure to comply with policy in the past or toenjoy good standing in respect of their taxes.

#4 Preferences attheshortlistingstage

A contracting authority may decide to limit the number ofqualified suppliers or service providers who may participate incontract award procedures to reduce costs relating toprocurement and to avoid wasted expenditure by suppliers orservice providers. Criteria relating to policy objectives may betaken into account in deciding which of the qualified suppliersshould be invited to tender.

#5 Awardcriteria(tenderadjudicationcriteria)

Contracting authorities give a weighting to policy objectivesalong with the usual commercial criteria, such as price andquality, at the award stage, i.e. a preference in the form oftender adjudication points is provided.

#6 Offering back Contracting authorities may achieve their policy objectives bygiving targeted enterprises a second chance to make theirtenders successful, e.g. the most competitive ÒpreferredÓcontractor can be given an opportunity to undertake part of thecontract if that contractor is prepared to match the price andquality of the best tender received.

#7 Contractualconditions

Contracting authorities may achieve their policy objectives bymaking such objectives a contractual condition. Conditions,typically, may concern the subject matter of the contract, or theway in which it is delivered, or may relate to the contractorÕsbusiness as a whole.

#8 Design ofspecifications,contractconditionsandprocurementprocesses forthe benefit ofparticularsuppliers

Contracting authorities can design specifications and/or setcontract terms to facilitate participation by targeted groups ofsuppliers. For example, work can be packaged into a number ofseparate, small contracts rather than one large contract to makeit more likely that the work will be attractive to small firmsand, possibly, less likely that it will be attractive to largercompetitors. They may also conduct the procurement processitself in a way that assists participation by the targeted groups,e.g. by simplifying procedures and setting longer deadlines toenable small firms to participate more easily.

#9 Generalassistance

Contracting authorities can provide support for targeted groupsto compete for business, without giving these parties anyfavourable treatment in the actual procurement. This may bedone, for example, by providing these groups with informationon tender opportunities; by actively seeking them out toencourage them to register on lists from which suppliers arechosen; or by providing training on procurement rules andsystems.

Source: SABS 0396 (draft).

Examples from abroad Affirmative action in employment: United States:

Executive Order 11,246 Employment equity: Canadian Federal Contractors

Programme Set-asides for minority and women-owned

businesses in the United States Canadian Procurement Strategy for Aboriginal

Business South African Targeted Procurement: Preferential

Procurement Policy Framework Act, 2000

Empirical assessments from abroad US contract compliance: Gunderson:

“affirmative action under the federal contract compliance program appears to have improved the labor market position of those groups to which it is directed, with stricter enforcement enhancing effectiveness.”

M. Gunderson, Male-Female Wage Differentials and Policy Responses, XXVII Journal of Economic Literature (1989), p. 46 at 53.

Empirical assessments from abroad US contract compliance: Donohue and Heckman find

“a positive correlation between black employment growth and contractor status. [T]he presence of a governmental effect has been confirmed, although its precise nature is still uncertain.”

J.J. Donohue III and J. Heckman, Continuous versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks, XXIX Journal of Economic Literature (1991), 1603 at 1635.

Empirical assessments from abroad Canadian Procurement Strategy for Aboriginal

Business: Department of Indian and Northern Affairs’ Audit and Evaluation Branch reported that “overall, the PSAB has been successful in meeting its stated objectives, and that a sound rationale for the strategy continues to exist.”

Department of Indian Affairs and Northern

Development Corporate Services, Departmental Audit and Evaluation branch, Evaluation of the Procurement Strategy for Aboriginal Business, August 2002

Empirical assessments from abroad South African Targeted Procurement:ILO-

sponsored study of the operation of the programme concluded: “On balance, targeted procurement has been effective in attaining the goals set out in the Reconstruction and Development Programme ….”

Targeted Procurement in the Republic of South Africa: An Independent Assessment (ILO)

Unintended consequences? Protectionism: does linkage increase the

opportunity for, or have the effect of, excluding competitors?

Competition between social policies: does linkage make it more difficult for SMEs to tender successfully?

Linkages as a method of promoting “bad” social or ethical policies: is linkage a two-edged sword?

Unintended consequences? Cost concerns in context of tighter budgets:

does linkage increase costs? Transparency issues: does linkage lead to a

reduction in transparency of the procurement process?

Good governance issues: Does linkage lead to greater bureaucratization of procurement process?

Corruption: does linkage increase the opportunities for corruption?

Other questions Why use procurement, rather than other

policy instruments? Partial coverage, only relating to those

companies in government procurement market?

Evasion of democratic and constitutional controls?

Are policies on linkage serious or mere window-dressing?

Developments in UK Government Policy In Race Relations White Paper 1975, but dropped Conservative governments and Local Government

Act 1988 Contracting-out and CCT After election of Labour: more neutral approach,

and (partial) relaxation of the restrictions on local government and CCT

Rise of “sustainable procurement” Office of Government Commerce report, published

this month

Other recent GB policy drivers Cook and Macfarlane, Achieving Community Benefits Through

Contracts (Rowntree, 2002) Strategy Unit, Ethnic Minorities in the Labour Market (March,

2003) CRE Guidance on equality and procurement (July 2003) National Procurement Strategy for local government (October

2003) Office of Government Commerce (OGC)/DEFRA, Joint Note On

Environmental Issues (October, 2003) National Employment Panel Report to Chancellor (March 2005) Office of Deputy Prime Minister, Code of Practice on Workforce

Matters (September 2005) Women and Work Commission, Shaping a Fairer Future

(February 2006)

Recent initiatives

West Midlands Forum initiative Haringey SME Procurement Pilot,

Community Benefit Clauses Greater London Authority initiatives

What next? Government reaction to Women and Work

Commission Report NEP’s Minority Ethnic Group work with

JobCentre Plus and Department of Work and Pensions on race equality and procurement

New Disability and Gender equality duties come into effect

Why does linkage occur? Economic weight brought to bear on

problems where other regulatory techniques may be ineffective

Demonstrated success of some linkages in the past

Good ideas travel: growth in transnational discussions about social/ethical procurement

Why does linkage occur?

Growth of concept of “sustainable development”: growth of “green” purchasing stimulates interest in social and ethical procurement

Development of “corporate social responsibility” stimulates interest in procurement linkages, e.g. by utilities

Why does linkage occur? Controversy over the use of procurement in

contracting-out focuses attention on social issues in procurement (esp. PPPs/PFIs)

Development of concept of “mainstreaming” in gender equality, and more broadly

Different roles law plays Law explicitly limits certain uses of procurement Legislation explicitly permits public bodies to advance

certain equality policies, e.g preferences for sheltered employment

Legislation directly requires public bodies not to give contracts under certain circumstances, e,g. Fair empoyment legislation in Northern Ireland

Legislation requires public bodies to consider use of procurement for equality purposes, under new equality duties

Concentrate on first and fourth

Legal limits Legal issues: does linkage run the risk

of exposure to domestic? EU? international (WTO) litigation? issue is whether these developments

restrict linkage at the national level

European Union developments Crucial role played by the European Court of Justice

in set of crucial cases Beentjes (1987), Nord-Pas-de-Calais, Concordia Bus

(2002), EVN (2003) Communication by the European Commission

(October 2001) Recent package of legislative reform measures Heavily negotiated on the social issues by Council,

Commission, Parliament Role of recitals

EU approach Equal treatment requirements Detailed regulation only above thresholds Transparency requirements Qualification criteria permitted, within limits Contractual conditions permitted, within limits Award stage possibilities (tie-break)

EU approach NB: Relationship between social/ethical

issues and the purpose of the contract Linkages progressively given greater

regulatory space preferably as a method of enforcement of EU social policy

Issues over “state aids” and disabled workshops preference

Issues over competition requirements

General UK legal and policy issues Procurement regulations Competition requirements Data protection and freedom of

information Other government policies: meaning of

value for money

Legal issues specific to local authorities Local Government Act 1999: best value Local Government Act 2000: powers to

improve social, economic and environmental conditions

Exclusion Order 2001: non-commercial considerations amended

Procurement and the equality duties

Relevance and role of “equality mainstreaming” requirements: race, disability, and gender

Devolved Government initiatives: Wales and Scotland

CRE Guidance on equality and procurement (July 2003)

Problem is how to operationalise the equality duty in the procurement context

Northern Ireland developments

Section 75, Northern Ireland Act 1998 (mainstreaming)

Review of Public Procurement Establishment of Procurement Board, and

publication of Guidance Incorporation of equality conditions in

contracts Initiation of unemployment pilot

Worked example: Northern Ireland Unemployment Pilot Contractors wishing to be considered for a

contract within the Pilot Study required to clearly demonstrate their commitment to the scheme

Tender documentation requires contractors to provide an Unemployed Utilization Plan (UUP) that sets out the firm's Social Policy and details specific proposals offered for the contract

Contractors also required to provide details of their experience, and their capacity to implement their proposals

Worked example: Northern Ireland Unemployment Pilot EU Tendering Procedures applied to all contracts Prior Indicative Notices (PIN) and the Procedural Notices

placed in the EU Official Journal incorporate the following provisions:

All tenders to include a project specific UUP Specific contract provisions will require the

implementation of the UUP The UUP to be considered during the award of contract,

where two (or more) tenders are considered equally economically most advantageous

Contracting Authority welcomes the opportunity to view the Firm's Social Policy Statement

Worked example: Northern Ireland Unemployment Pilot Tender documentation includes the following: Contractors required to set out their company's strategy

and procedures in relation to this objective in an Unemployment Utilization Plan

Successful contractor required to satisfy the Contracting Authority that any persons employed under the scheme comply with the qualification requirements

Successful contractor to use best endeavours to ensure that any persons employed under the scheme remain employed for the duration of the contract

Worked example: Northern Ireland Unemployment Pilot Contracting authorities required to monitor the

implementation of the Unemployed Utilization Plan

Any failure to fully implement the Unemployed Utilization Plan reflected in the contractor's performance evaluation at the end of the contract

Evaluation will be taken into account in assessment for future tender lists (where employment of the unemployed is a criterion)

Assessing the effect of the pilot Empirical research findings for the procurement

Board by University of Ulster No significant extra costs incurred No significant opposition by those who were

contracting with government No legal challenges Few administrative problems; problems mostly

arose from civil service unease Increase in employment of unemployed on pilot

schemes

What next in Northern Ireland? Report of Northern Ireland Working

Group on social issues in PPP/PFI Equality Commission Guidance on

equality considerations in public procurement

Single Equality Bill?

Implications for future government policy? Leadership by the Chancellor of the

Exchequer Treasury Green Book should be

amended PPP/PFI contracts should be addressed Treasury should take a lead in

establishing a mechanism of oversight and monitoring

Implications for equalities legislation?

Set out the circumstances where failure to comply with the legislation should lead to future disbarment from public contracts?

Primary legislation to authorise secondary legislation setting out what public bodies need to do regarding procurement to fulfil their obligations under positive equalities duties?