Finance Committee, 24 Jan 2006

Meeting date: Tuesday, January 24, 2006

Official Report 312KB pdf

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Subordinate Legislation

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Public Contracts (Scotland) Regulations 2006 (SSI 2006/1)<br />Utilities Contracts (Scotland) Regulations 2006 (SSI 2006/2)

I am sorry that we overran a bit on the first evidence session. The second item on our agenda is evidence on two pieces of subordinate legislation that have been referred to the committee. They are the Public Contracts (Scotland) Regulations 2006 and the Utilities Contracts (Scotland) Regulations 2006.

As the note from the clerk states, we will consider the regulations formally at our meeting next week, but the Scottish Trades Union Congress has written to me outlining its concerns about the regulations. I thought that it might be useful for members to take evidence from the STUC and from Executive officials in advance of our dealing formally with the regulations next week. Members have a note from the clerk, a copy of the instruments, a copy of the correspondence from the STUC and correspondence from the Equal Opportunities Committee.

I welcome our first panel of witnesses. Stephen Boyd is from the STUC, Tim Page is from the Trades Union Congress and Dave Watson is from Unison Scotland. I apologise for keeping you waiting, although I am sure that Dave Watson, at least, will have been interested in what has been said.

Perhaps you could make a brief opening statement, and then we will proceed to questions.

The UK public sector spends £125 billion each year on goods and services. I have had trouble in obtaining the relevant figure for Scotland, but I believe that it is about £5 billion. How that money is spent—whether it goes to companies that develop skills and inclusivity or to companies that seek simply to provide goods and services at the lowest cost—can have a major impact on our ability to meet profound economic and social challenges.

Procurement is not a panacea for all our economic and social ills, but it can be an effective lever in promoting and supporting employment, manufacturing industry and inclusiveness, and in setting best practice in employment conditions and ethical contracting. Trade unions want the Scottish Executive to set positive standards in that way. The Executive must move away from the blinkered viewpoint that such considerations constitute burdens on business and must instead start to acknowledge the clear benefits that are gained in productivity and in the quality and reliability of goods, works and services when workers are treated fairly and with respect.

The STUC has been closely involved in the consultation processes on transposition of the public sector and utilities procurement directives. As a result of campaigning by trade unions, charities and equality bodies, the directives contain important rights to promote the social, environmental and employment agendas. For example, the definition of the most economically advantageous tender is now from the point of view of the contracting authority. In addition, one of our main arguments is that the regulations that implement the public sector directive should refer to recital 33, which outlines the social, economic and environmental issues that procuring authorities can legally pursue.

The STUC is frustrated by the Scottish Executive's unwillingness to use its devolved powers to implement the regulations separately and distinctly from the Treasury's Office of Government Commerce and is disappointed that the regulations will not give full force to the new directives' positive aspects.

Only minor changes have been made to the regulations in the light of consultation responses. It is interesting that those changes appear to be identical in the OGC and Scottish Executive-drafted regulations. There is no substantive difference between the Scottish and English regulations, which raises the question why the Executive bothered to use its devolved powers to implement the provisions separately.

I will quickly run through some of our detailed concerns. The following points were made in written submissions to the consultation. In regulation 30 of the Public Contracts (Scotland) Regulations 2006, which is on the criteria for the award of a public contract, we welcome the correct transposition of the wording

"most economically advantageous from the point of view of the contracting authority".

However, the text should be amended to make it clear that social factors can constitute permissible award criteria.

Regulation 45 will implement article 25 of the public sector directive, which is on subcontracting. We are deeply concerned that this important article will be implemented as being optional rather than mandatory, because that will weaken considerably the potential for contracting authorities to monitor the quality and best value of a contract. It also appears to contradict the Scottish Executive's professed commitments.

You are going over your submission, which we have. Do you need to read that into the record, or are you happy to accept that we have had the chance to read it?

I will be much briefer than the submission—I am nearly at the end.

Regulation 38 will implement article 27, which is on obligations relating to taxes, environmental protection, employment protection and working conditions. Article 27 will also be implemented as optional rather than mandatory; the STUC believes that the article should be implemented as being mandatory and we reject the suggestion that that would add unnecessary burdens or bureaucracy.

Regulation 39, which will implement article 26 on the conditions of performance of contracts, inadequately reflects the content and spirit of the directive. Supporting recitals 33 and 34 provide significant detail on the scope and opportunities for consideration of social and employment issues and include references to International Labour Organisation conventions, skills and training provisions, support for unemployed people and respect for collective agreements. The regulations ignore that wording, so the STUC calls for the provisions to be fully and fairly reflected in the regulations. It will be unacceptable merely to pick that up in guidance.

We also have serious concerns about other regulations; they are listed in our submission. The STUC and our affiliated trade unions remain deeply concerned about the regulations. They fail to give due prominence to the additional scope in the directive to include employment, social and environmental criteria in the public procurement process and they fail to implement articles 25 and 27 as mandatory provisions. The directive gives member states a clear choice, but non-mandatory provisions will inevitably undermine good practice.

We had hoped that the amendments that we suggested, and other amendments, might have been accepted in the light of our consultation responses, but it appears that the OGC continues to drive the process. We therefore ask the Scottish Parliament, through the Finance Committee in your report, to consider raising our serious concerns.

I will ask first about a minor point. In relation to your point about regulation 7 implementing article 19, am I right that the more usual term is "social firm" rather than "sheltered workshop" and "sheltered employment"?

We are looking for the term "supported employment".

To be fair to the Executive, it has picked up that amendment and the terminology has been changed from "sheltered" to "supported".

My more substantive point is about regulation 30(2) and the list of criteria that will be judged to bring economic advantage. Do you have information about how other European countries have implemented the directive and whether they have broadened it out to include, for example, tackling long-term unemployment and skills training?

I do not have information about how other countries have implemented the directive in their domestic law, but one of the reasons for the new directives was to bring European law up to date with, among other things, recent case law.

The committee might be aware of one of the most prominent examples of case law—the Nord-Pas-de-Calais case. In that case, a contracting authority included an attempt to reduce local unemployment in a certain part of France as part of the reason for the award of a contract. The case sets important precedent in that it allows any contracting authority to bear in mind something as crucial as reducing local unemployment when it tenders for goods and services. It was to capture those legal developments that the new directive came about in the first place. We highlight it as an issue that we would like to be reflected in the regulations.

If the regulations are accepted, will there still be a possibility in Scotland of court cases to challenge the differences between the definition of the directive here, European case law and the implementation of the directive elsewhere?

I am not a lawyer, but I understand that Scottish courts would treat previous case law as precedent. The Nord-Pas-de-Calais case sets an interesting precedent.

I commend you for bringing the matter to the committee's attention. I am really taken by the phrase that refers to tenders that are

"the most economically advantageous from the point of view of the contracting authority".

We should issue tee-shirts with that phrase on them. What impact might that have had on earlier orders for a shipyard such as Ferguson Shipbuilders Limited?

If the regulations were in place and were mandatory, as we would like them to be, they would have an impact on some of the current and topical issues in relation to procurement. Obviously, the Ferguson situation is one such issue.

Members will notice that one of our differences with the Executive is about whether we make elements of the regulations mandatory or whether those elements should be covered by guidance. Our concern about not making the aforementioned elements mandatory is that although the best public sector organisations will probably follow the guidance, others might not.

An older example than Ferguson's shipyard, and one that is probably more relevant to the Finance Committee, is trunk roads. This committee and the Local Government and Transport Committee examined that matter in some detail. In that instance, the Scottish Executive had not followed guidance that had been issued by the Cabinet Office. That was a clear example of what happens when guidance is not mandatory—things fall through the net and the proper provision is not applied.

As regards the future framing of contracts that are not directly or indirectly discriminatory, and where the conditions are indicated in the contract, would it be sensible for Government to take cognisance of the total economic impact—even in a devolved Scottish context—and the tax benefit that could accrue from, let us say, a £20 million order to the likes of a shipyard? Should the Government also have regard to the social security impact that would ensue from having more people in work who actually pay tax? Would it be sensible to include that in the thinking process?

We would be treading in some difficult legal areas. The difference between Unison and the Executive is not vast. Although we have some sympathy with the position that Jim Mather outlined, we are constrained by European law on that point. The Nord-Pas-de-Calais case and others suggest that there are still significant limitations in European law on what member states and devolved Administrations can do in this area. The important point about the regulations is that they will allow us for the first time to ask the right questions about procurement and the people who are bidding and they will allow us to set minimum standards. The process is not based purely on cost. That was the limitation prior to the Helsinki bus case, many other European cases and, importantly, the introduction of the new regulations, which will implement the new directive.

I understand that. In essence, the fight against unemployment is shining out here. I am well aware of the need to comply with European competition law. I am also well aware of the need for us to have as competitive an economy as possible. I suggest that we may be able to remove some of the scales from our eyes and to consider the total cost of ownership. I refer not just to the fiscal and social security implications, but to long-term maintenance costs—the potential downtime of sending a ship back to Poland to be repaired, for instance, and the service disruption that can ensue if the ship has problems. This is beginning to look like a new era in which enlightened national self-interest can apply to our contracts. In that climate, should we take all the issues into account?

Potentially, it is a new environment, but we need to take maximum advantage of the flexibility in the directive. Our concern is that the Scottish Executive is taking too narrow a view of the opportunities.

Most of the points that you make relate to areas in which you believe there should be a mandatory approach, rather than an approach based on guidance. We will ask the Executive witnesses afterwards why they have opted for the non-mandatory route. Are you concerned partly because guidance has not yet been published, so you do not know how strong it will be? If the guidance had been published, that might have gone some way towards satisfying you on some issues. Would you like to flag up where that may be the case?

The TUC in London has been in discussions with the OGC about the guidance, and it has made suggestions—with varying degrees of success—as to how it could be strengthened. In some cases, the OGC has taken our comments on board, but in others it has not.

We are concerned that, if the law is to be properly enforced, some of the main elements of the directives need to be incorporated into the regulations, rather than into guidance. There is often a feeling that guidance is in the second division and that people will ultimately follow the regulations. That is why a big part of our campaign was to get recital 33 included in the text of the regulations. We accept that there is no legal obligation on the Scottish Executive to do that, but that does not mean that it cannot do so. Recital 33 sets out clearly a number of areas: respect for equality, respect for training and respect for International Labour Organisation conventions among them. The best local authorities will seek to achieve value for money for the Scottish taxpayer, excellence in terms and conditions, training and development of the workforce and to give equal rights to men and women. We want them to push the boundaries in all those areas and to be first-class employers. We believe that including recital 33 in the regulations, rather than in guidance, would send the proper signal. That has not been done.

To be more precise, it has been done in some areas, but not in others. Is that a reasonable summary of the position?

Tim Page indicated agreement.

I also highlight that there is benefit to business in mandatory provision. I know that the Executive will put the counter-argument that it would create business burdens, but there is also an issue of business certainty. I have spoken to a number of large companies that take the view that, if they know what the rules are, there is a level playing field. If the regulations are non-mandatory, different bodies may apply them in different ways. Arguments can be made on both sides.

My question is on that very point. I am interested in the assumption that that is why the provisions have not been made mandatory. What would be the effect of having different procurement regimes north and south of the border? Would Scottish business be at any competitive disadvantage or might it be at a competitive advantage?

To be frank, I think that the effect would be neutral. There are many areas in which different regulations apply north and south of the border—after all, that is largely what devolution is about—but the important point about Scottish regulations is that they should always be tailored to Scottish circumstances. Particularly in rural areas of Scotland, there are specific procurement issues that need to be taken into account, both in the regulations and in the guidance, to reflect the fact that we have a more disparate range of potential bidders. I know that a number of business organisations have concerns about that. We need to tailor the regulations in that way.

I do not think that our having a different procurement regime would make a great deal of difference to our competitiveness. A company that bids for a contract in Scotland must accept and understand the regulations and must bid on a level playing field. Businesses are concerned to know that when they put in a bid, they are doing so on a level playing field along with everyone else. If any favouritism was shown towards a Scottish company or a UK company, that would be unlawful under European Union law; nothing in the relevant directives allows that and that is not what we are arguing for. It is, however, clear that it is possible to reflect local circumstances, which are not the same in Scotland as in the south of England, for example. If that were not the case, there would be no point in having separate regulations in Scotland, as Stephen Boyd said earlier.

Is it right that trade unions in England and Wales have not applied similar pressure to have some of the options made mandatory? There has not been the same feeling there.

Yes there has.

The TUC has applied pressure down south just as the STUC has applied it up here.

I want to make a point about longer-term competitiveness. We could consider competitiveness from the point of view of whether a contract was awarded next week, but through the regulations we are trying to encourage the best public sector bodies to factor in issues such as skills training and to get into the habit of training their workforces more. We want contracts to stimulate that push. We hope that in 10 years a great deal more skills training will have been provided and that the workers in industries, and the industries themselves, will be more competitive because their skills bases will have increased.

As someone who does a great deal of work at the TUC on manufacturing industry, I know that our productivity is behind the productivity of our European competitors partly because they have for a long time been upskilling, while our skills capacity has reduced. We hope that a procurement regime that encourages skills training and which fosters respect for some of the wider social issues will make our economy more competitive in the longer term.

The UK Government has received a certain amount of criticism for the way in which it has sought to get more people who are on incapacity benefit or disability living allowance back into work, for example. Will the regulations provide solutions that will help people back into employment?

I think that they will help to promote a more inclusive and a more highly skilled economy, although I am not sure that they will be a major part of the Government's push on incapacity benefit, which has been in the news over the past few days. However, they might make a small contribution to that.

Time is pressing, but Andrew Arbuckle has a question.

Is there any reason why the STUC did not want locality to be taken into account? I am thinking of the food industry, in particular. If the companies that won hospital contracts had to source their meat in Scotland, that would benefit primary producers, processors and the food industry overall. Is there a case for making local sourcing a consideration, especially in the food industry?

Elements of that can be taken into account, but one must be imaginative in doing so. I understand that the legal framework would make it difficult to do some such things. Some such factors could be recognised if the issue was addressed slightly differently. Under current EU law—even with the more flexible regulations—one is walking a very fine legal tightrope. It is important to emphasise that although the regulations give us flexibility on social matters, they do not change the rules on competition between member states, which are the underpinning law in relation to European procurement.

Mark—are you desperate to ask another question or can we move on to the next set of witnesses?

We can move on.

I thank the witnesses.

Our next witnesses, from the Scottish Executive, are: Iain Moore, the head of the policy unit; Paul McNulty—no relation—the head of procurement policy in the best practice branch; and Josephine Mitchell, the senior procurement officer in the best practice branch.

We will give you the opportunity to make a brief statement before proceeding to questions.

Our regulations give effect to European Union procurement directives that are intended to clarify, simplify and modernise existing EU law on public and utility procurement. Included in the regulations for the first time are obligations deriving from European Court of Justice case law.

We are legally obliged to implement the regulations by 31 January at the latest and a failure to do so would leave the United Kingdom exposed to a challenge from the European Commission. We are satisfied that the regulations fulfil our obligation.

We have worked closely with colleagues from the Office of Government Commerce in London during the implementation phase and on drafting the regulations. In drafting the regulations, we believed that we had little scope to do anything significantly different about the substance, although the form could have been slightly different, by which I mean the manner in which the regulations are expressed. However, a great many public and private organisations that operate in Scotland and the UK will need to work with both sets of regulations and, consequently, we decided to retain the form and to avoid creating substantial differences.

We have been criticised in a number of quarters on the basis that we should have allowed the Office of Government Commerce simply to implement the directives in Scotland, which would have meant that there would be one set of UK regulations, as is the case at present. Although we do not share that view, we agree with the underlying concern about the possibility that implementing regulations whose form is different might give rise to unnecessary complications for the people who have to interpret the rules. Therefore, we took the view that we should attempt to keep differences between our regulations and the Westminster regulations to a minimum and we publicly announced that in July 2004.

There are two key differences between these regulations and those going through Westminster. The first difference is the level of the court in which remedies may be sought. In the Scottish regulations, we are seeking to reduce that level from the Court of Session to the sheriff court. In England, Wales and Northern Ireland, the level will remain the High Court. The second difference is the principle of adequate publicity for contracts that are not covered by the detailed procedural rules in the directives.

We do not accept the proposition that our regulations fail to give full force to the directives. For example, the regulations expressly permit: the use of social clauses in contracts; the application of environmental issues in award decisions; the reservation of contracts for supported businesses; and the exclusion of companies that fail to comply with their legal obligations, including those relating to employment, health and safety and the payment of taxes.

When we were drafting the regulations, we could have made articles 25 and 27 mandatory obligations on every public sector body for every procurement exercise. Article 25 permits a public body to require a bidder to indicate in its tender any part of the contract that it proposes to subcontract and to identify the subcontractor. Article 27 allows for public bodies to include in their invitation-to-tender documents details of where bidders can obtain information on certain specified legal obligations and, where that information is provided, to require bidders to confirm that they have taken it into account.

During the consultation process on the wording of the regulations, we received three responses that favoured making that provision mandatory and two that favoured making it optional. The Executive's preference is to make it optional. Making it mandatory would mean that such information would have to be sought and provided on each and every occasion, whether or not it was appropriate to the contract at hand. The public sector has frequently been criticised for excessive bureaucracy and a lack of flexibility in procurement processes. Over the past 18 months or so, we have been working with a number of business groups to identify and reduce bureaucracy in procurement processes, and we believe that making the provision mandatory would have been counterproductive to the work that has taken place. Of course, that is not to say that it is not possible to ask for that information—the regulations allow people to ask for it. Making it optional just gives the flexibility to determine whether the information is relevant to the particular case in hand.

If it would be helpful to the STUC, we would be willing to discuss the details of the guidance on the circumstances in which the provision could be applied.

Thank you, Iain. If I understand the STUC's evidence, the two items that particularly concern it are the implementation of articles 25 and 27. The word "deeply" is used in the context of both articles, so we might wish to focus on those issues in particular. How close are you to being able to provide the proposed guidance in relation to both articles, so that it can be seen whether it might be adequate?

To date, we have focused principally on preparing the regulations. To some extent, the timing of when we could produce guidelines would depend on how easy or difficult it might be to reach agreement. We would need to consult a number of stakeholders apart from the STUC. However, I suspect that we ought to be able to make reasonably rapid progress. I would suggest that it ought to be possible to provide guidelines within a couple of months.

We are already committed to producing guidance on a number of different issues that arise as a result of the new regulations. Work on that is in hand; we would just need to produce another set of guidance.

If I take you right, what you are saying is that you would be willing to have further meetings with the trade union representatives on the guidance that you will produce on those issues.

That is correct.

If, at the end of that process of discussion with the trade unions, there was still a view on their part that regulations might be more desirable than guidance, would it be possible to introduce supplementary regulations to address those and perhaps any other issues? In other words, I am asking you whether the situation at the moment is all or nothing.

We would be happy to review the situation after a reasonable period in partnership with the STUC. If, at that point—in, say, 12 months' time, after the guidance is published—it is clear that the guidance is not working, we would gladly revisit whether the provision ought to be made mandatory.

I am slightly worried about the phrase "not working", because to test that would imply a longer period than 12 months.

It could take longer than 12 months. It would depend on what issues arose. We would be happy to continue a dialogue with the STUC. If this is as big a problem as is being implied, we could identify issues in less than 12 months. The point is the stage at which we can take a rational view of what the right approach might be.

In his opening statement, Mr Moore talked about the fact that the regulations modernise and clarify public sector procurement. The STUC insists that the European Union directives extend the regulations' scope. Will you explain the difference between your view that the regulations modernise and clarify and the STUC's view that they extend the scope?

The directives extend the scope, particularly in connection with reserving contracts for supported businesses. In other respects, confusion has arisen over the fact that we do not propose to give effect to recitals in the directives. Text in the recitals of directives is not usually given effect in national implementing regulations. That is consistent with European Commission guidelines on good practice in implementing European Union law.

The regulations make it absolutely explicit that we can do many of the things that we have thought we could do for some time. We have been working with a range of public sector bodies for a couple of years to pilot the application of social clauses in contracts.

One of the STUC's concerns is that if we say that the regulations simply clarify the scope, that does not send people the message that they ought to be thinking positively about the possibilities. We would be happy to work with the STUC to address that concern and to ensure that the Scottish regulations make it crystal clear for the first time that wider social issues can be addressed in the context of public and utilities procurement.

So there is extension in some areas and clarity in others. Recital 33, which the STUC quotes, mentions contracts that favour on-site vocational training, the employment of people who experience particular difficulties in achieving integration, the fight against unemployment and the protection of the environment. The environment is mentioned in regulation 30(2), but I cannot see how issues around unemployment, social inclusion and training are covered in the list of criteria, which refers to

"quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales service, technical assistance, delivery date."

How does that cover the points in the recital about training, social inclusion and unemployment?

Recitals 33 and 34 refer to conditions that one might attach to a contract to address wider social and environmental issues. That is dealt with in regulation 39. The text that you quoted is the criteria against which a contract would be awarded.

Social and environmental considerations are mentioned in regulation 39 as conditions. The regulation states:

"A contracting authority may stipulate conditions".

Regulation 30 states:

"A contracting authority shall use criteria."

That is right. The text in regulation 39 addresses conditions of contract imposed on the successful bidder, whereas regulation 30 deals with the process by which someone arrives at a decision to award the contract. They are two subtly different things.

Could there be a difficulty if you brought in the criteria on social inclusion and unemployment only at a later stage, in regulation 39, rather than dealing with them upfront in the contract in regulation 30?

The two are not incompatible. We could have contract conditions aimed at tackling a wide range of social and environmental issues. Equally, where they are relevant to the contract in question, they can be taken into account in the decision to award the contract.

Why have you chosen to make regulation 38 non-mandatory again? Simply requiring that sources of information on taxes, environmental protection and so on be made clear does not seem too onerous. I do not understand why such a low-level requirement, which ensures that bidders take such information into account, should be an issue.

Part of the reasoning behind the regulations was to provide as much flexibility as possible. The case for making such provisions mandatory is stronger with exceptionally high-value and high-profile contracts; however, not all public contracts are of such high value and it might not be necessary for such information to form part of the process. As a result, we felt that it was right to give people the chance to determine the issue on a case-by-case basis.

That said, we routinely ask all potential bidders to provide details of any offences, which would include non-payment of taxes. Such convictions will be picked up during pre-qualification.

If we made article 27 mandatory for each and every public and utilities contract, any public or utility body that failed to provide all the information listed in the article—or that got the information wrong—could find itself facing a legal challenge. Our difficulty with such a requirement is that it would place a significant risk and burden on bodies right across the board. However, I can certainly envisage working with the STUC on guidance that puts the onus on public bodies either to provide information and assess bidders on it or to have a good reason for not doing so.

How will you monitor the operation of the regulations? In particular, how will you monitor the aspects that Mark Ballard has highlighted against the Executive's cross-cutting objectives such as closing the opportunity gap, sustainability and so on?

We have been engaged for some time in a pilot project on social conditions in contracts and we are now working with the office of the chief researcher on examining how the various pilots have worked in practice.

We do not have a specific mechanism for monitoring how the wider public sector will adopt and use the regulations. To some extent, we are dependent on feedback from our networks and contacts in the procurement community. As a result, there is no central monitoring or enforcement role, because the regulations will be enforced not by the Executive but through the courts. We will rely on the empirical evidence from the pilot project to determine the extent to which we recommend this approach as viable and workable in particular circumstances and will then hope to receive information from our normal contacts in the public sector procurement community.

You said that you were willing to have an on-going dialogue with the trade unions on articles 25 and 27 and any other issues that might arise. Would it be possible to incorporate monitoring of the processes in those discussions to ensure that the trade unions are involved?

We would have no difficulty with that.

I am pleased to hear that you want to go the extra mile to address the STUC's concerns, because doing so could be very productive and constructive.

I was taken by the comment that the regulations simply make explicit what is already in place. Have the provisions already been in place in some pervasive way?

Are you referring to the comment that we are setting out in regulations for the first time provisions that have already been in place as a result of decisions made by the European Court of Justice?

Yes. I was referring to your earlier comment that, essentially, the regulations make explicit what you have already been doing—or tending towards doing—when framing contracts. It is for you to tell me to what extent you were moving in that direction.

Part of the remit of the Scottish procurement directorate is to disseminate information on changes to procurement policy or decisions of the European Court of Justice that have an impact on how public bodies conduct their procurement activities. We write to public bodies to draw such changes to their attention. As Paul McNulty said, we can disseminate information, but we do not have a monitoring or enforcement role.

The key thing is the effectiveness of the dissemination in the context of, say, the recent Ferguson orders or the Caledonian MacBrayne order that went to Poland, the Northern Lighthouse Board order that went to Poland and the case involving the Scottish Fisheries Protection Agency order. How did you manage to get the message on procurement through to our own Executive?

Dave Watson will correct me if I am wrong, but I believe that the STUC has recognised that there are difficulties in addressing the local economic impacts of procurement processes. It is fair to say that the added social issues might not have had an impact on any of the procurements to which you refer. The directive and the regulations allow us to write into contracts, for example, a requirement that the winning bidder must recruit a given number of the long-term unemployed. It would be wrong to view the regulations or the directives as potentially offering any—

I have a slight suspicion that if this conversation were taking place in French or Spanish, the answer might be slightly different, but I will leave the matter hanging.

Can we look forward to the regulations—perhaps with the invisible eye patch and the invisible cutlass that the French and Spanish seem to bring to the table—having a positive impact on the Scottish economy?

I think so, and I would like to explain why. Business representatives, the Federation of Small Businesses, the Confederation of British Industry Scotland and the Scottish Chambers of Commerce asked us to look at two key aspects. They saw two priorities for ensuring that Scottish small and medium-sized enterprises have a better chance of winning public contracts. One was the simplification and standardisation of procurement procedures, and the regulations certainly help in that respect. The other key recommendation was that we do more to publicise the lower-value contracts that are often not advertised. That is what the regulations do, and that is one of the key differences between our regulations and those of the Office of Government Commerce.

We have included a requirement that adequate publicity be given to lower-value contracts. Those are contracts that are unlikely to be of much interest to companies outside Scotland, so we are confident that that will have a very positive economic benefit.

As the procurement requirements become common practice and people start to adhere to them more fully, what impact will they have on the procurement savings on which the Executive is hanging a fairly material hat vis-à-vis efficient government?

We think that the regulations will support the simplification and modernisation that we talked about at the outset. They should help to support and underpin the efficient government targets.

I thank the witnesses for their evidence. We will take their statements in relation to future liaison with the STUC into account in moving the matter forward.