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Agenda item

Ethical Procurement

Report of the Executive Director of Resources



The Committee received a report of the Executive Director, Resources, containing an update on the Council’s Ethical Procurement Policy, the aim of which was to enable the Council to conduct business ethically, effectively and efficiently for the benefit of Sheffield.  The report contained details of the background to the Policy, a Policy summary, Policy outcomes, operational changes and progress, success so far, which included Real Living Wage, Early Payments Scheme, Social Value, Sourcing Team and Local Spend, and Code of Conduct, and Measurement and Performance.  The report also attached, as appendices, details of various measures, including the Employment and Skills Social-Value Dashboard, Sourcing Team Savings and the Stonewall Submission Score Summary and Overview, together with details of the City Council Social Value Evaluation.




In attendance for this item were Mark Ellis (Senior Procurement and Supply Chain Manager), Jill Smith (Procurement and Supply Chain Manager), Kerry Moon (Investment Support Manager) and Adam Piotrowski (Category Manager).




Mark Ellis introduced the report and Jill Smith and Kerry Moon reported on the social value aspects of the Policy.




Members of the Committee raised questions, and the following responses were provided:-




·                Information on new suppliers was obtained through a variety of means.  In terms of the Real Living Wage (RLW), data was being collated across the supply chain, including the toolkit set up in conjunction with the University of Sheffield.




·                The Authority worked extensively to encourage the payment of the Real Living Wage across its supply chain.  Procurement officers carried out reviews at the commissioning, tender and contract stage to ensure that the RLW was considered in every procurement strategy.  All new suppliers were asked to meet the standards of the Authority’s Ethical Charter.




·                The primary focus of the Policy had been its impact in Sheffield.  Filip Leonard (Head of Procurement and Supply Chain) had been working with the Progressive Procurement Group, and this work was being shared with Sheffield City Region (SCR), as well as other anchor organisations in Sheffield. 




·                The Authority had amended the Standard Selection Questionnaire, used at tender stage, to allow for suppliers to be deselected on negative ethical performance, such as professional grave misconduct, blacklisting and misuse of migrant labour.




·                Officers continued to work closely with care commissioners and those Trade Unions having signed up to the Unison Ethical Care Charter.




·                A considerable amount of work had continued to be undertaken in connection with the Early Payment Scheme (Sheffield Pay Plus).  All officers responsible for raising orders were being actively encouraged to receipt orders in a timely manner to ensure suppliers received payment within 30 days and in accordance with agreed payment terms. 




·                Use of the Social Value Portal, to measure Social Value benefits, was being implemented across the Authority.   Appendix 2 to the report was a snapshot of the initial tender using this method to evaluate Social Value benefits. Officers were still evaluating and seeking clarification of figures and variation of evidence.  The final outcome of this and the future tenders would be included across a final suite of Key Performance Indicators (KPIs).




·                The Authority does not currently go down to the level regarding apprenticeships for people with profound disabilities or learning difficulties.  However, it does work with construction companies in connection with the employment of such people.




·                There was a process in place for suppliers to self-declare, and checks were also made for tax compliance.




·                Local spend was defined as spend in the ‘S’ postcode, within the Sheffield Ward boundaries.




·                The figures supplied in relation to local spend excluded Amey, where the invoice was paid from their head office, in Birmingham.  In reality, the Authority’s spend had a positive impact on the local economy as staff working on the contract were likely to live and work in Sheffield.




·                The proxy values in Appendix 2 to the report, which were measures of Social Value contribution, had not been defined by the Authority.  There figures had been established by the Social Value portal, and were used nationally.  There were 35 measures, some of which had been determined through the Local Government Association (LGA) Green Book.  These proxy values could not be changed.  However, the Authority could adapt how it asked the question or provide further explanation on how bidders should respond.  Currently, the Authority did not specify which measures a supplier needed to respond against as this approach mitigated against the bidders, including costs to deliver Social Value in their tender price.




·                The monitoring of organisations was being undertaken as part of the submission to the Authority, and as part of the contract agreement.  Companies were also expected to provide evidence to the Social Value Portal in order to allow for the target social value element of the contract to be monitored.  Companies would be provided with dashboards showing their progress and, as part of contract management, they would be held to account if they did not deliver on Social Value commitment. 




·                In terms of the social value evaluation, companies bidding for contracts only have to input a target figure, and not a specific value.  The Authority was represented on the Social Value National Taskforce, which was the responsible body for reviewing the application of all elements of Social Value.  Any revisions required to either the measures or associated values would be undertaken at this level. 




·                The fact that companies bidding for contracts set their own social value targets did not appear to have any financial detriment to the Authority.  This was on the basis that Social Value was always the added benefit over and above what was part of the core contract.




·                The work on ethical procurement that the Authority had undertaken and delivered to date was being recognised.  For example, the Real Living Wage Foundation  had asked the Authority to draft a case study which it could use as a means of sharing good practice.  The Authority had recently been awarded the 2019 Chartered Institute of Procurement and Supply (CIPS) Award for Ethical Procurement and following this, had received a number of enquiries from other local authorities for advice. 




·                Sheffield was represented on the Strategic Procurement Group,  which comprised representatives from local authorities in Yorkshire and the Humber, and at which good practice was shared.




·                Local spend in terms of contracts currently stood at 47%, or £330 million, for the first six months of 2019/20. 




·                As the programme was rolled out, Social Value would represent as a minimum 10% weighting.  All potential bidders were aware of this at tender stage, as well as what the Authority’s expectations were.  As part of lower value spend (below £150,000 contract value), there was a requirement to source, where possible, at least one local quote.  However, the Authority was not permitted to award a contract simply based on whether or not the company was based in the ‘S’ postcode area.




·                Monitoring of suppliers and KPIs could take considerable time but, where possible, there were systems to reduce this.  For example, establishing the RLW suppliers had been resource intensive.  However, moving forward, plans were in place to capture and report on this type of information, and capturing information on the finance system. 




·                The Authority was required to publish details of payments it had made to suppliers.  However, this had not been broken down to “S” postcode or local economy level.  This information could be circulated to Members of the Committee.  The Authority spent approximately £700 million on works, goods or services, with local spend currently being around 47%. 




·                The officers present could not confirm whether the ethical performance outputs were included on the Corporate Performance Framework, but would inform Members of this. 




·                It was not envisaged that there would be any major changes to the Authority’s tendering processes following Brexit, mainly on the basis that, under UK law, there would still be a requirement on Authorities to be fair, equal, open and transparent in terms of its tendering processes. 




·                The standard settlement time for paying suppliers was 30 days. 




·                Discounts were made in terms of early payments and these varied dependent on a number of factors.  Reference was made to Social Enterprises paying a discount in order to receive early payment. The Sheffield Pay Plus programme was not mandatory and the City Council standard terms were 30 days.




·                The 50% local spend, as part of the submission to the Chartered Institute of Procurement and Supply, was at a previous point in time in respect of the financial year 2018/19. The 47% stated in the scrutiny report was only a measure of the first six months of 2019/20.




·                The Procurement Team was working hard to improve the figure in terms of local spend.  This measure formed part of monthly reporting which allowed the Team to consider gaps and potential opportunities.  This was an ongoing piece of work and there would always be a variance depending on the category of what was being bought and which suppliers were actually based in, and operating out of, Sheffield.




·                Whilst issues with regard to the steps companies took to reduce their carbon footprint was included as part of the social value assessment criteria, it was not applicable, at the current time, to all contracts.




RESOLVED: That the Committee:-




(a)       notes the contents of the report now submitted, together with the information now reported and the responses to the questions raised;




(b)       thanks Mark Ellis, Jill Smith, Kerry Moon and Adam Piotrowski for attending the meeting and responding to the questions raised;




(c)        extends it congratulations to the Procurement Team for the  progress made;




(d)       requests the Executive Director, Resources, to:-




(i)            look into whether all contractors should be assessed, as part of the social value assessment criteria, with regard to their carbon footprint;


(ii)          try to get the issue of ethical procurement on other organisations’ agendas, such as the Universities, NHS and Sheffield City Region, and specifically on the agendas of the Sheffield City Partnership,   Sheffield Health and Wellbeing and Sheffield City Region Boards; and


(iii)         find a system to measure the number of people with disabilities employed by companies contracted with the Authority; and




 (e)   requests that ethical procurement is included as part of the Council’s Performance Management Framework.




Supporting documents: