Blog: Procurement reform – seven steps to developing a strategy

Stephen Herriot
Stephen Herriot

With the impending December 31 deadline looming, Stephen Herriot outlines seven steps which social landlords can take to develop an effective procurement strategy.

The end of the year is fast approaching and with it an important deadline for many social landlords. Under the Procurement Reform (Scotland) Act, which came into force on April 18, landlords that spend more than £5m must have a procurement strategy in place by December 31.

These strategies are the backbone of the Scottish Government’s goal to maximise the impact of public sector spend, as outlined in my last blog.

They should be reviewed annually and must demonstrate how the organisation’s approach to procurement will take into account the wider economic, social and environmental objectives required under the Act’s sustainable procurement duty.

Before we look at the steps to take to create a strong procurement strategy, let’s clarify who needs to produce one.

The £5m figure relates to regulated spend – i.e. all procurement activity for goods and services worth £50,000 or more and for works of over £2m. If the combined total is £5m or more, you will need a procurement strategy.

Some landlords may find themselves in a situation where they have not prepared a strategy but during the course of the year expenditure is higher than expected and in excess of £5m. If that is the case they should prepare a strategy that covers the remainder of the financial year and the whole of the following 12 months.

But even those who fall under the threshold ought to consider producing a strategy from a best practice point of view.

Developing your strategy

  1. The Act places strong emphasis on consultation and engagement during the process of developing a procurement strategy. Think about who will be affected by regulated procurement activity - who are the key stakeholder groups? Then consider the most effective ways to communicate with these groups and gather their feedback.
  2. Now, to the content. The strategy should outline how the landlord will deliver its corporate objectives while ensuring compliance with the Act. It should clearly and concisely set out how regulated procurement activity is aligned to those objectives and used to achieve them. That would include, for example, details of contract and supplier management arrangements and how they ensure successful delivery. Also, outline how engagement with the community and other key stakeholders is embedded in the procurement process.
  3. One of the most important elements of the strategy concerns how procurement will deliver value for money. This is about identifying, for your organisation, the line between spending money well and not and then proving how your teams have spent less, spent well and spent wisely. Remember to base your approach on cost, quality and sustainability and to set out, in clear terms, how you are consistently and transparently delivering value.
  4. The same clarity must be applied to how a landlord will ensure all suppliers – and potential contractors – are treated equally. Government guidance recommends early market engagement prior to formal publication of a contract notice – and breaking contracts down into smaller lots – to create a more level playing field.
  5. Guidance also stipulates that statements should be included about your organisation’s policy on paying the living wage, use of community benefits requirements and how it is procuring goods and services that have been fairly and ethically traded.
  6. Once the strategy has been drafted it must be approved – by the board in the case of housing associations – to demonstrate the organisation’s buy-in and commitment.
  7. Finally, the Act stipulates that the strategy must be published by landlords ‘in a way that it considers appropriate’. As a minimum this should include publishing the strategy online and Scottish ministers must also be notified.
    • Stephen Herriot is head of operations for PfH Scotland
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