Action on Procurement: Open letter to Minister

Should the basis for deciding whether a private company should get a public-sector contract be based solely on cost effectiveness, or is other criteria such as how they treat their workers and their compliance with tax laws important? Common Weal has signed a open letter to the Minister by Action On Procurement, reported on in The Herald today , advocating the latter option as new procurement legislation goes through Holyrood. We re-publish the full letter letter here.

Dear Mr Brown,


Action on Procurement is a cross-party group of activists who have come together regarding concerns over decisions being made by the Scottish Government in relation to public procurement law.

In particular, along with the individuals and organisation named below, we would like to highlight two decisions which EU Public Procurement law allows us to make here in Scotland and we call on the Scottish Government to ensure any company which has engaged in practices such as tax-dodging or blacklisting is excluded from bidding for public contracts.

We are confident that you will agree with our view that the regulations on public procurement must include criteria other than best value. We believe it is beyond doubt that those criteria should cover respect for both tax obligations and environmental, social and labour law.

Tax-dodging:

Giving tax-payers' money to a company that does not pay its tax is frankly unconscionable. Such companies not only cheat the public out of money, they also create unfair competition by unnaturally inflating their own profits. We must avoid situations where ethical companies which pay the taxes they owe, lose to companies which engage in tax-dodging. Surely any ethical company would support the Scottish Government taking measures to ensure this does not happen?

Blacklisting:

Freedom of association and the right to organise are fundamental principles and rights at work. These are human rights; legally binding standards recognised in international treaties as ratified by the United Kingdom1. Companies which interfere with these rights and breach environmental, social and labour law through practices such as blacklisting have no place winning public contracts.

Decisions:

With the forthcoming implementation of the latest EU Public Procurement Directives, the Scottish Government now has some clear decisions to make. Under Article 57 of the 2014 Directive the Scottish Government could choose to make exclusion of companies which have not met their tax obligations and/or breached environmental, social and labour law mandatory. This would prevent any company engaging in these practices from winning public contracts.

We are very concerned that Article 58 of the legislation laid before the Scottish Parliament on 18 December 2015 (SSI 2015/446) currently leaves exclusion of companies which have not met their tax obligations as a discretionary ground for exclusion leaving it up to the public body to decide whether or not to exclude companies that engage in these practices. It is clear from the responses2 to the recent Consultation on Changes to the Public Procurement Rules in Scotland3that there is enough concern over these grounds of exclusion (and in particular the ambiguous term "any appropriate means"), that if they are left as discretionary grounds, they will not be used. As I'm sure you'll be aware, this means that, unless the Scottish Government makes this a mandatory exclusion, companies which engage in these unethical practices will continue to bid for and win public contracts.

Furthermore, whilst we welcome the Scottish Government's intention to make breaches of the Employment Relations Act 1999 (Blacklist) Regulations 2010 a mandatory ground for exclusion we must query why, given the importance of the rights in question, this narrow approach has been chosen rather than the broader approach that was open to Scottish Government to make any breach of environmental, social and labour law a mandatory ground for exclusion. As such, we call on the Scottish Government to send back the current legislation and do all it can to ensure that any company which has engaged in practices such as tax-dodging or blacklisting is excluded from bidding for public contracts.

Guidance:

The concerns that public bodies have expressed are certainly not groundless however and these concerns would presumably become more acute in the event that the relevant exclusions did become mandatory. In particular, we understand many are concerned about the possibility of legal challenge on the basis that the means that were used to demonstrate that a company has not met its tax obligations were in some way not "appropriate". We would suggest that given that public bodies are already skilled in interpreting subjective terminology such as "transparent", "proportionate" and "discrimination", another subjective term is not an impossible hurdle to overcome and we would also note that the burden of proof to show that means were not "appropriate" would lie with the challenger. We believe this should offer some level of comfort. However, we would also call on the Scottish Government to publish illustrative guidance on what it believes "appropriate means" might look like to help address the concerns that have been expressed.

Finally, we would like to request that, at your earliest convenience, you arrange a meeting with representatives of our campaign to listen to our concerns and discuss these issues further.

Yours sincerely

Action On Procurement
Common Weal
Poverty Alliance
Lesley Riddoch, author & broadcaster
Andy Wightman, author & land rights campaigner
Stephen Paton, Left:Scotland
Peter McColl, former University of Edinburgh Rector
Mike Danson, Professor of Enterprise Policy at Heriot-Watt University
UNISON
Senscot
Nourish Scotland