Cabinet Secretary for Finance and Sustainable Growth
John Swinney
National Procurement Conference, Glasgow
October 31, 2007
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It is a pleasure to be here today and to have the opportunity to address the third National Procurement conference. The new government was elected in May and with elections come changes, change of government, change of faces and change of policies.
What I want to do today is put in context where the new government thinks the procurement agenda is and how we intend to approach that as part of the government's vision of ensuring that Scotland has a more vibrant and more prosperous economy as a result of our actions.
Let me say at the outset that we regard procurement as a very high priority and we are determined to see this programme deliver results. In particular this morning I want to set out for you my personal commitment to public service reform, to the public sector working across institutional and sectoral boundaries in the interests of people in Scotland and the economic benefits that can quite clearly be achieved if we all work together.
My party's manifesto made a number of important commitments regarding the public sector aimed at building a wealthier and a more successful Scotland. We have been building on those themes in our work to date across the public sector and we will continue to do that throughout the remainder of our term in office.
We will aim to restructure and streamline the Scottish Government - the First Minister has appointed a small ministerial team, he has reduced the number of government portfolios and the number of government departments resulting in a more focused government that is determined to work much more effectively across the boundaries and the barriers that have often existed and been in the way of more cohesive policy making and the delivery of priorities.
I make that point expressly today because I have made that point on many occasions in the last month and the First Minister has done likewise, that we must succeed, must succeed, in making the cohesion of government and the joining up of different elements of policy much more effective than has been the case in the past and the structure of how the government is arranged around a purpose of increasing sustainable economic growth in Scotland and supporting that by five cross-cutting objectives that are equally owned by all members of the cabinet.
The guy that was responsible for the Welfare objective wrote: 'I've just as much interest in the healthier, the safer, the smarter and the greener Scotland as I do in the welfare of Scotland, as do my cabinet colleagues'. That is our way of ensuring that we join up government more effectively to serve the people of our communities.
Our manifesto commitments were not purely for the Scottish Government. We were determined to examine opportunities for improved organisation structures and services across the wider public sector and against this background I'm delighted there's already significant work on the way to deliver a structured approach to cross-sector collaboration on public procurement. The Scottish Government regards this as a high priority and I want to set out today how we're going to achieve that very high priority.
I don't expect I need to say it - but you would be kind of surprised if the Minister for Finance appeared before such a gathering and didn't say it - that we're entering a climate where there will be increasing pressures on public funding and demands for the public sector to do more and to deliver more in terms of financial cohesion.
We have the tightest financial settlement since devolution and in a couple of weeks, actually two weeks today, I will set out to Parliament the government's financial priorities and our budget, but we all have to understand within the public sector that money is going to be much tighter in the years to come. Our increase in the budget in the next plan is 0.5% compared to a few years ago of 11.5%. Now that requires us to be more disciplined and more effective and more creative and more adventurous and more imaginative in how we go about spending public money.
So, against that backdrop, I'm looking to everybody in the public sector to make the most effective use of existing resources. I'm looking to the various organisations that are involved in public procurement to improve that service and to improve collaboration across organisational and sectoral boundaries.
This is fundamental to the delivery of best value, improved efficiency and better service provision across the whole of the public sector. Whether you're working in health, in local authorities, central government, the new Scottish Government expects active participation in and full support for the drive for improved public procurement.
We're determined that those involved in buying for the public sector should strive for best value for the people of Scotland. This is not about penny pinching, although a bit of penny pinching never goes amiss in my experience, it's about finding new and smarter ways of doing and organising things and services and about working with others to share best practice and find opportunities for improvement.
As I said at the start, many of you were probably wondering whether the new Scottish Government would take a different approach to procurement reform. There are many things that you inherit as a government - some of them are good, and some of them are not so good - one of the good things that we inherited was the procurement reform programme that has been taken forward by the previous government, led and directed by the first class contribution of John McClelland who was asked as an independent expert to look at how we might do things better.
Having looked at John's recommendations, at the achievements that have been made to date and the direction the programme is taking; I have absolutely no hesitation in endorsing the programme that John has initiated as a result of the exercise he undertook on behalf of our predecessors. It is absolutely consistent with our manifesto commitments and with the direction we, as the Scottish Government, want the public sector to take.
I share John McClelland's vision of structured collaboration and increased professionalism in procurement and I would like to take this opportunity on behalf of the new Scottish Government to thank John enormously for the work he's done so far and to thank him indeed for the work that he has agreed to do in the future on behalf of the new government as part of a vision of structured collaboration that he has done so much to establish.
In another change in direction, I believe that the work that John has led is so important and has the potential to deliver so much that I want to affirm the Government's commitment to this direction of travel, to raise its profile and accelerate the pace of change.
John and I have been discussing for some time how to take forward the procurement agenda and to ensure that we have the greatest possible impetus behind this programme. John has kindly agreed to continue to be involved in the board of the Public Procurement Reform Board and to provide me with direct advice and to act on my behalf - I suppose you could call it a sort of "gentle enforcer", if that's not a contradiction in terms - to ensure there is greater impetus to the delivery of the public procurement agenda in the public sector within Scotland.
John will work on my behalf to identify good practice and new opportunities as well as opportunities for improvement and ways we can accelerate the pace of change. And he will work in advising me to take forward this agenda as I assume a responsibility which I think is appropriate for a Cabinet Minister to ensure that commitment is given by the highest level of government to this agenda. My assumption of the role of Chair of the Public Procurement Reform Board and I want to work with John and with members of the Board to provide the best possible impetus to ensure the public procurement agenda is taken forward with every available opportunity that we have.
With a tight fiscal climate ahead of us we must make every pound of public money work effectively. Procurement within the Scottish public sector must ensure value for money and deliver the highest quality goods, works and services on behalf of our citizens.
There can be absolutely no excuse for needless duplication of effort, for poor value, for money gone due to disconnected or inefficient contract arrangements or a lack of engagement with the Public Procurement Reform Programme. So organisations across Scotland must work together in a cohesive manner, John and I are determined to work together to see his recommendations fully implemented and we believe the changes that I'm announcing today will make sure this happens effectively in the interests of the citizens of Scotland.
The vision of John's report is one of collaboration across the public sector to maximise value for money and minimise duplication of effort. There are too many examples of public bodies placing contracts for the same goods or services with the same contractor where price variations and duplicated effort are indefensible. One of my priorities will be to identify and deal with situations where it appears that public resources may be wasted or put to poor use.
Our taxpayers have made a substantial investment in public funds to support the new procurement Centres of Expertise in each key sector. These Centres have a vital role to play in promoting best practice, delivering efficiencies and in maximising the use of limited resources through collaboration. The establishment of five sectoral centres of expertise marks a major milestone and I congratulate all those involved in those achievements. They're foundations on which we must build.
So let me make it absolutely clear that, in taking forward the work of the government on public procurement the Centres of Expertise have a central role to perform in cutting across the boundaries and barriers that have existed.
I want to send a clear message to everyone involved in the sector that we want to proceed in the spirit of true collaboration. Individuals or organisations that prefer not to collaborate on contracts, on e-procurement, on best practice and policy will have to be able to provide the strongest possible justification on objective business grounds. The burden of proof will have to rest on those who do not want to work in the collaborative fashion that I have set out in my comments already.
I also want to be able to work with Audit Scotland on how we can develop and implement appropriate measures of procurement performance to guarantee that our procurement programme is effective. As part of the procurement reform programme, a working group of professionals and other stakeholders has been set up to develop and agree key performance indicators for procurement and further work will be taken forward on that in due course.
The success of e-procurement Scotland has been recognised both nationally and internationally as a benchmark in e-government and procurement. I was saying to the very hard-working staff who are involved in this programme earlier on today that this government is determined that, in so many aspects of policy and intervention, Scotland is to be a global leader. What has been achieved by e-procurement Scotland is admired by countless communities and countries and we're very proud of what has been achieved and I want to intensify the work of e-procurement Scotland to the benefit of all within the public sector in Scotland.
The work that we take forward will of course be set within the context of our ambitions for the Scottish economy and the public procurement market in Scotland, worth at least £8 billion per annum, is of great significance to Scottish business and can play a significant role in Scotland's economic development.
It is vitally important that public procurement is both open to innovation and able to encourage innovation in business, helping to increase productivity, competitiveness and therefore to support sustainable economic growth. All public sector procurement activity reflects growing understanding of market capacity and capabilities and contracts should always be advertised using output based specifications.
We need to ensure that we give Scottish suppliers the best possible opportunity to compete for the £8 billion worth of public sector spending each year. We need to ensure there's a level playing field so that suppliers, particularly smaller companies, can quickly and conveniently find out more about business opportunities from the Scottish public sector.
Work is underway to deliver a new Scottish contract advertising portal which I believe is a major step in the right direction. That portal will be available in 2008 and I will expect all Scottish contracting organisations to advertise contracts using this facility. Again, I believe this is an issue which the Procurement Reform Board will need to monitor very carefully for its implementation.
It is also vital that we listen to business and make every effort to remove any potential barriers to suppliers. The industry led related reform group alerted us to a potential barrier related to the use of factoring and invoice discounting by suppliers to the public sector. Factoring and invoice discounting can be an important source of finance to businesses and to SMEs in particular.
An estimated 1600 businesses in Scotland use factoring or invoice discounting. The total value of invoices assigned by Scottish businesses in 2006 amounted to around £500 million however businesses have previously been limited in their ability to use factoring or invoice discounting in relation to public sector clients. This is because public contracts typically prohibit the assignment of debts to third parties without prior permission.
I'm therefore very pleased to announce today that the Scottish Government is changing its standard terms and conditions of contracts to allow suppliers to use factoring or invoice discounting without prior permission, should they wish to. We're also publishing guidance encouraging other public bodies to follow suit.
This change has been supported by members of our new Procurement Policy Forum on which each of the procurement Centres of Expertise is represented. I very much appreciate the suggestion that has been made in this respect, through the input of Professor Russel Griggs, Chairman of our Regulated Review Group, who is in the audience today. And I appreciate the fact that such a constructive effort, where the Government has been able to respond positively, can demonstrate our commitment to improving the way in which the procurement agenda is taken forward.
By listening, and responding, to business concerns on this and other issues we can greatly improve access to Scottish public procurement opportunities. Business must be in a position to respond positively to these changes and I would encourage larger firms to work with SMEs to realise the opportunities and their capacity to jointly deliver.
Now, one of the other key issues that John McClelland identified in his report was a shortage of professional procurement staff. If we are to deliver our objectives - and to generate the improvements in value in the way in which programmes are delivered - we must ensure we have the right people with the right skills, working in the right areas.
Objectives such as supporting innovation through procurement can only be achieved is we allocate the right level of priority and skills and resources to the procurement table. I regard it as an important governance issue for public sector managers to ensure they have the right mix of skills available in relation to procurement.
Work has already begun on identifying the skills gap across Scotland which will inform the development of strategies to fill these gaps in procurement. These could include be national training contracts, development programmes for staff - which could also include some cross-sector secondments - and various measures will be taken forward to improve the activities of recruitment of personnel who have the abilities and the talents to contribute to this area of activity.
One of the other elements that you'll focus on in the course of today will be the role of Scottish produce in the work that is taken forward in procurement. The Government sees this as very much part of our approach to the sustainability of the Scottish economy, the sustainability of our agricultural sector and also the contribution that is made to ensure the Government's wider sustainability objectives in relation to the agenda on climate change.
You'll be hearing later on today from Jim Fairlie who has a number of exciting ideas in relation to taking forward the whole area of local food procurement and what I'm very keen to encourage is that there is a rolling out of good procurement practices, well thought out specifications and procurement strategies that can help to ensure that we buy our products and our produce more sustainably. There's a wealth of things available on the subject but what we need to do now is to start putting that guidance into practice.
For example, there's no reason why purchasers and catering managers should not seek seasonally available produce or why catering menus should not specify Scottish lamb and beef when menus demand it.
The Scottish Procurement Directorate has published guidance on sustainable food procurement and I ask any of you involved in food procurement, or catering, to see what you can do to implement these guidelines.
There's another vital contribution that purchasers can make to sustainable development and one which will help us to become more efficient and that is to ensure that we reduce the resource consumption where possible in relation to procurement. Reduced consumption of resources is essential if we are to deliver sustainable economic growth and I believe one of the most fundamental roles of anyone involved in procurement is to challenge an organisation's use of resources to try to find out ways of using energy more efficiently and more wisely as part of the procurement agenda.
It's an issue that the First Minister has challenged public bodies about: to maximise energy use and energy efficiency and, as part of the Government's efforts to tackle climate change, we will look to every aspect of public policy to identify the contribution they can make to reducing energy use and to a positive impact on climate change.
The Government is determined that we take forward a balanced agenda of supporting sustainable economic growth and our efforts on climate change are central to that process.
I hope, colleagues, that I've been able to set out to you the determination that this Scottish Government has to ensure that we structure our public sector in an efficient and sustainable fashion, that we apply the pressure that is necessary to ensure we have an efficient approach to procurement that leverages out resources to be devoted on key priorities within public services.
We want to ensure that public procurement within the public sector is an essential part of the agenda of stimulating and encouraging the process of economic growth in Scotland which lies at the heart of the Government's agenda.
Collaboration is essential; I expect the fullest cooperation and compliance across the public sector with our excellent sectors of expertise. We can make a significant contribution to sustainable economic development and a more competitive supply base by reducing barriers to public contracts, by better understanding of markets and business capability and ensuring that we move very clearly at the outputs on which our approach is based.
By working very closely with John McClelland on pursuing the work and closing on the work that has started under the last administration. I'm determined to ensure that we put real impetus into the programme of public procurement within Scotland. It is essential to ensure that we have a vibrant, a sustainable, a successful and a prosperous Scottish economy working very closely with the work that goes on across the public sector.
That is the mission of the Government and that is what I look forward to working with you closely to deliver to ensure it is part of a programme of realising our vision of creating a more prosperous, more successful and a more ambitious Scotland which we all want to see. Thank you very much.
[This is a transcript of Mr Swinney's speech. It was posted on November 12 to replace the orginal summary version.]