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Live tendering and furloughing staff through the coronavirus job retention scheme

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On average, the Supplier Development Programme receives hundreds of enquiries each month from businesses in Scotland. Last week, SDP staff received questions regarding how furloughing staff affects live tendering. This blog aims to offer expert advice on public sector tendering and answer related questions on options for SMEs and supported businesses while staff are furloughed in Scotland.

SME Enquiry Summary

In line with advice from the Scottish Government, last week, the SME business instructed all staff to stay home and closed the office. All staff were furloughed, in compliance with business support guidelines. The terms and conditions state employees cannot work in any capacity, or it would be in breach of the furloughed rules.

The business wrote to four Scottish councils to suspend live current tenders that it had already recorded an interest in responding to, and so far, only one has suspended the tender, until the furlough scheme ends and businesses are all back to normal working. Another three local authorities changed the deadline dates, but did not suspend the tender opportunities.

The SME business decided that changing the return date is irrelevant, as furloughed staff cannot work, and contacted the Scottish Procurement Single Point of Enquiry (SPoE) for advice. However, it is the decision of each local authority how it responds.

What are the available options for buyers during the coronavirus crisis? What are the options for SMEs that want to respond to tender opportunities while staff are furloughed?

Background: Official Coronavirus Procurement Guidance

Firstly, on 20 March, the Scottish Government issued a policy note, Procurement Regulations during COVID-19 Outbreak for buying organisations, to raise awareness on handling some procurement related issues as a consequence of the current COVID-19 outbreak. In such exceptional circumstances, public bodies in Scotland may need to procure goods, services and works with extreme urgency, and the policy note provides information on options available to purchasers in these circumstances. On 26 March, the Scottish Government also issued a policy note on Coronavirus (COVID-19): supplier relief for buying organisations, to provide guidance on options for payment to their suppliers to ensure service continuity during the current coronavirus (COVID-19) outbreak. SDP addressed what supplier relief means for current contracts, and outlined what steps Scottish SMEs and supported businesses can take to request consideration be given to advance payment from buyers.

Around the same time that the second Scottish Government policy note was issued, the UK Government launched the Coronavirus Job Retention Scheme. This is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19). Under the Coronavirus Job Retention Scheme, employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period. On 4 April 2020, the UK Government updated the guidance for employers on claiming for employee wages through the new Coronavirus Job Retention Scheme, and issued separate guidance for employees.

In wider markets, the threat from the coronavirus outbreak has also resulted in the European Commission (EC), to issue guidance to public sector buyers on flexibilities in procurement rules.

The guidance focuses on procurements in “cases of extreme urgency” where public buyers may need to buy “within a matter of days, even hours, if necessary”. To address the needs of the crisis, the guidance highlights the choice of tendering procedures available to public buyers for the purchase of the supplies and services.

SDP Advice: furloughed staff and training

Gillian Cameron, SDP Programme Manager, said: “Though every business needs to make its own decisions at this extremely trying time, I do not believe that business advice is to furlough all staff if it is not required by the business’s needs. If bidding is a key business lead opportunity for your company, perhaps your business should consider identifying a member of staff(s) that can work (safely) on tenders while not on furlough, who could also identify new opportunities and perhaps manage existing contract requirements. Depending on the level of work you have, this staff member could also be tasked with doing market research through using PCS and reviewing the various local authorities published procurement reports that will have their forward plans in them, thus looking forward to when business will return to a semblance of normality and getting your business tender ready.

“According to the scheme’s details, employees cannot do any work for employers whilst they are on furlough. They can do volunteer work, or training if this does not provide services to or for the employer, or generate revenue for the employer. (Please note: the guidance points out that if workers are required to, for example, complete online training courses while they are furloughed, they must be paid at least the National Living Wage/National Minimum Wage for the time spent training, even if this is more than the subsidy.)

“The scheme isn’t clear on whether businesses can rotate employees on furlough or if they would have to choose some employees to be furloughed while others stayed at work. However, since employees can be placed on furlough more than once, it suggests that employers can rotate employees on furlough, so long as each employee spends a minimum of three weeks on furlough. This would mean, for example, that a business could select an initial group of employees for furlough while a second group remains at work. The first group could then come back to work while the second group takes a turn on furlough. So applied to a real life situation, an example for tendering could be that while on furlough, staff could potentially volunteer to attend SDP’s range of tender training courses to become “tender ready,” and when not on furlough, staff could work to find, win and keep public sector contracts. This is only an example, and SDP encourages all businesses to follow official advice as well as make your own decisions for the longevity of your business needs.”

All active SDP trainers on the SDP Training Framework were also asked to respond to this SME’s query.

Advice from Caughey Solutions Ltd

Julie Caughey, Caughey Solutions Ltd Director, said: “Most public sector bodies need to continue with their operations during difficult times like this; indeed, they often faced increased demands and need to buy in more goods and services. For that reason, engaging in procurement activity must carry on. Public sector contracts give many businesses a lifeline and can compensate for a reduction in private sector work. For these reasons, I would encourage you to find a way to respond to these tenders.

“You can participate in free webinars through the Supplier Development Programme to train your staff. Staff could potentially be “unfurloughed” and can work with the owners of the business on the tender responses. Tenders can be completed remotely, including from home, and collaboration is possible using Skype, Team, Lync and other such solutions. Even if the contract cannot be implemented right away, it will be implemented in due course and will give your business work to look forward when we are on the other side of this pandemic.”

Advice from Intend Business Development Ltd

Gill Joy, Director, and Owen Paterson, Procurement Adviser at Intend Business Development Ltd, said: “Intend would support the use of Dynamic Purchasing Systems from public sector buyers, where the required effort is minimal for suppliers as there is usually no pricing at the DPS stage to be approved at an initial stage. This would, for example, open up on-going supplier access to works/services/goods contracts and give buyers a pool of active suppliers at any one time that could in turn provide quotes for tenders via direct award or mini competitions. Four-year Frameworks could run alongside these and indeed, we’ve seen a few authorities publish Frameworks and DPS notices in parallel in the past.

“It is positive that the supplier contacted the SPoE. It is important to note that Scottish Procurement can only “encourage or suggest as good practice” that public sector buyers adopt a particular course of action. Local authorities are also facing challenges, not the least of which include staffing numbers, and so evaluation of tenders will likely be affected. It makes sense to suspend the process for procurement that are not immediately required, and we are seeing this already taking place.”

Advice from JI Management Ltd

John Clark, Procurement Consultant at JI Management Ltd, said: “I suppose the first thing to acknowledge is that the rules for furloughed staff are clear: ‘You cannot undertake work for your employer while on furlough.’ This leaves the company with two options:

  • Decide that continuing to tender for future opportunities is an essential function and undertake this using a combination of staff working from home and social distancing within the office.
  • Decide that the entire business function will be shut down for the duration, thus missing out on potential new work when the crisis recedes.

“Either of these is difficult. Under the first, the business will be expending cash on wages while having no income (other than potential rates related grants if eligible). However, the upside is that they will have undertaken positive steps to put additional work on the books for the future. There is a need to bear in mind that some of your current customers may not survive this difficult period, so the possibility exists that work you were counting on in the recovery might evaporate.

“Under the second, the possibility exists that a business may stagnate to some extent in these circumstances. Missing out on opportunities that continue to be tendered during the crisis period may add to future difficulties, should existing customers fall by the wayside.

“We do need to recognise that it is incumbent on public bodies to make adequate provision to continue their service delivery wherever possible. Tendering during this period, in order to select providers for future services can be recognised as a useful contingency measure.

“However, there is potentially an argument, under Article 19(2) of The Public Contracts (Scotland) Regulations 2015, that continuing to Tender while significant proportions of the industry are shut down through furlough constitutes artificially narrowing:

(2) A contracting authority must not design a procurement or design contest with the intention of excluding it from the application of these Regulations or of artificially narrowing competition.

“It would be incumbent upon the buyer to be satisfied that sufficient potential tenderers were still active in the market, such that a realistic competition exists. They should also ensure that actions taken are not in violation of the principles of non-discrimination and transparency.

“I have sympathies on both sides of the argument posed in the query. Lots of companies are continuing through home working, but clearly there are some services that can’t be delivered this way and furlough is the only option for the majority of the workforce. On the other hand, local authorities need to keep delivering services and if existing contracts are coming to an end, tenders still have to be processed.”

The Supplier Development Programme assists Scottish SMEs and supported businesses through a range of free tender training courses delivered via webinar. SDP is working with and on behalf of all 32 Scottish local authorities and various other public bodies to connect to the local supply base and support procurement staff during the challenges we all face in the current and longer term with regard to supplier awareness, availability and engagement.

If you have any questions, please email info@sdpscotland.co.uk.

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