Equality and Diversity Forum Seminar Series

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

2. 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”

3. 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?

4. 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

5. 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

9. 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

10. 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.

11. 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.

12. 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

13. 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)

14. 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?

15. 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?

16. 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?

17. 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

18. 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)

19. Recent initiatives • West Midlands Forum initiative • Haringey SME Procurement Pilot, Community Benefit Clauses • Greater London Authority initiatives

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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 EuropeanCommission (October 2001) • Recent package of legislative reform measures • Heavily negotiated on the social issues by Council, Commission, Parliament • Role of recitals

27. 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)

28. 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

29. General UK legal and policy issues • Procurement regulations • Competition requirements • Data protection and freedom of information • Other government policies: meaning of value for money

30. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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)

38. 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

39. 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?

40. 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

41. 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?