Equality and Diversity Forum Seminar Series Can procurement

Equality and Diversity Forum Seminar Series Can procurement be used to promote equality? Lessons from experiences at home and abroad

Linkage n n 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 n n n 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? n n n 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? n n 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

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

Empirical assessments from abroad n 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. ” n 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 n 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. ” n 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 n South African Targeted Procurement: ILOsponsored 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 …. ” n Targeted Procurement in the Republic of South Africa: An Independent Assessment (ILO)

Unintended consequences? n n n 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 twoedged sword?

Unintended consequences? n n 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 n n 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 n n n 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 n n n n 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 n n n West Midlands Forum initiative Haringey SME Procurement Pilot, Community Benefit Clauses Greater London Authority initiatives

What next? n n n Government reaction to Women and Work Commission Report NEP’s Minority Ethnic Group work with Job. Centre 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? n n n 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? n n 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? n n 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 n n n 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 n n n 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 n n n 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 n n n 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 n n 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 n n Procurement regulations Competition requirements Data protection and freedom of information Other government policies: meaning of value for money

Legal issues specific to local authorities n n n 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 n n 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 n n n 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 q q q 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 q q q 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 q Tender documentation includes the following: q Contractors required to set out their company's strategy and procedures in relation to this objective in an Unemployment Utilization Plan q Successful contractor required to satisfy the Contracting Authority that any persons employed under the scheme comply with the qualification requirements q 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 q Contracting authorities required to monitor the implementation of the Unemployed Utilization Plan q Any failure to fully implement the Unemployed Utilization Plan reflected in the contractor's performance evaluation at the end of the contract q 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 n n n 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? n n n 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? n n 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? n n 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?