Public procurement and equality:steps towards a standard tendering framework

A report for the Equality and Diversity Forum

November 2008

Clare Cozens

The Equality and Diversity Forum (EDF) is a network of national organisationscommitted to equal opportunities, social justice, good community relations, respect forhuman rights and an end to discrimination based on age, disability, gender andgender identity, race, religion or belief, and sexual orientation.

For details of EDF activities and membership, or to subscribe to EDF’s free electronicnewsletter, visit www.edf.org.uk.

Please contact the Equality and Diversity Forum (details below) if you would like toorder copies of this report or if you would like the report in a different format.

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email: info@edf.org.uk

website: www.edf.org.uk

Public procurement and equality:steps towards a standard tendering framework

A report for the Equality and Diversity Forumi

November 2008

Clare Cozens

i This paper was commissioned by the Equality and Diversity Forum in 2008. The views expressed inthe paper are those of the author and are not necessarily those of the Equality and Diversity Forumor its members.

Contents

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Executive summary and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

1: The existing legal framework and current proposals for change . . . . . . . . . . . . . . 11

2: What public bodies do now: time for a standard approach? . . . . . . . . . . . . . . . . . 21

3: The EDF draft Pre-Qualification Questions (PQQs) and Contract Terms . . . . . . 29

4: Testing the draft: private sector responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

5: Conclusions and recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

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Foreword by the Equality and Diversity Forum

Despite the progress made in recent years, there is still much to do to overcome thediscrimination and inequality that blight individuals’ lives and hold our economy andsociety back. To speed up progress, Parliament has given public bodies duties toconsider how they can eliminate discrimination and promote equality in all that theydo. That includes procurement.

Procurement matters because approximately one-third of public spending is oncontracts with private companies and voluntary organisations – where the majority ofUK workers are employed.

Although it is clear that public bodies must address equality when they buy goods andservices, and EU procurement law allows them to do so, many public bodies areconfused both about what they could do and what they must do. As a result, many donot use the tools available to them to ensure the things they buy meet the needs ofdiverse communities and reduce inequalities in employment. Suppliers are unclearabout what is required of them and companies with good equality practices may notget the chance to show what they can do.

While concerns about procurement are not new, the publication of the Equality Bill in2009 makes this a key moment to address them. While the Bill is yet to be published,the Government is committed to ‘develop[ing] ways of improving how public bodiesuse their purchasing power to support the delivery of equality outcomes’.

A national standard framework for equality in procurement would help buyers to get itright and enable contractors with good practices to reap the full benefit of them. TheEquality and Diversity Forum has developed a draft framework and asked ClareCozens to test it out with contractors and business organisations. We are delighted topublish Clare’s report and hope it will help take an important practical step forward.

The report finds that we haven’t got everything right yet, but confirms that a standardframework and clearer guidance would benefit public bodies, contractors andemployees alike. And the report also suggests that provided we get it right, contractorswould welcome a simple framework and clear guidance to help them develop goodpractice. The prize would be better public services, greater equality of opportunity foremployees and greater fairness in Britain.

We hope the Government Equalities Office and the Office for Government Commercewill consider Clare’s recommendations carefully.

Amanda Ariss, Chief Executive, Equality and Diversity Forum.

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Executive summary and recommendations

This report considers, by reference to a set of draft pre-qualification questions andcontract terms provided by the Equality and Diversity Forum (EDF), whether astandard framework for addressing equality in procurement would be acceptable tobusinesses undertaking public contracts. In doing so, it draws on the EDF’sexplanation of the law in the publication Public Procurement: A valuable tool forequality (November 2008) and on interviews with a number of private sectororganisations. It aims to inform the continuing debate on how equality considerationscan more effectively be built into public procurement processes, especially in thecontext of the Equality Bill, due to be published in the first quarter of 2009.

Introduction to executive summary

Public bodies of all sizes are spending more than £175 billion each year in contractswith the private and voluntary/charitable sectors for works, goods or services. Thisrepresents approximately one-third of total public expenditure. The criteria that publicbodies use to decide who is to supply them with goods and services or to undertakework on their behalf can have a significant impact on other organisations. Thesecriteria are now influenced by the race, disability and gender equality duties whichapply to all UK public bodies.

Equality can be taken into account in public procurement in five basic ways: duringplanning, in determining the subject of the contract, in setting out how the contract isto be performed, during the procurement process itself, and by monitoring andmanagement during performance of the contract.

1: The existing legal framework and currentproposals for change

Public procurement is controlled by a mixture of European and domestic law. The mostrecent European procurement directive in 2004 clarifies how social issues can betaken into account, as does earlier guidance from the European Commission. Thisincludes equality issues, many of the laws relating to which in any event also havetheir origin in the European Union.

The Office of Government Commerce (OGC) is an independent office of HM Treasurywhich offers guidance on procurement-related matters. The OGC has producedguidance on the relationship between procurement and equality, but public bodies stilllack confidence in applying the equality duties to their procurement processes.

However, as part of its June 2008 announcement on the Equality Bill, the Governmenthas said it will work with the Office for Government Commerce to develop ways ofimproving how public bodies use their purchasing power to support the delivery ofequality outcomes.

2: What public bodies do now: time for a standardapproach?

In the absence of a single framework for building equality considerations intoprocurement, different public bodies such as the NHS, higher education institutions,local authorities, the Greater London Authority, and the Welsh Assembly Governmenthave taken different approaches.

Organisations such as the West Midlands Forum and Constructionline are trying topromote a standard framework for equality considerations and other aspects ofprocurement. However, so far no one organisation has taken the lead, and companies arestill faced with having to respond to a multiplicity of questions and approaches.

3: The EDF draft Pre-Qualification Questions(PQQs) and Contract Terms

In putting forward its draft PQQs and contract terms, the EDF proposes thatagreement should be reached as to the minimum standard that contractingorganisations should be asked to meet in relation to equality when tendering for publicsector contracts. This standard could then be used by every public body. This oughtto save companies the time, effort and money required to produce the same answersand evidence many times in slightly different formats. The present situation, wheretenderers have to provide similar information in different ways for different potentialclients, may lead businesses, especially SMEs, to see equality considerations asprimarily a bureaucratic burden and discourage them from tendering for public sectorwork. Procurement then only attracts those businesses that already have goodequality practices and does not have a significant impact in spreading good practicemore widely.

A single equality-related framework would have benefits for procurers as well, offeringthem answers to a standard set of questions which they would soon become adept atassessing and distinguishing between.

In drafting the PQQs and contract terms, Gay Moon, Joseph Rowntree CharitableTrust Fellow and Special Legal Adviser to the Equality and Diversity Forum,considered many of the existing frameworks public bodies are using.

4: Testing the draft: private sector responses

The draft was shared with representatives of business organisations and privatesector companies, and face-to-face or telephone interviews were carried out. All thecompanies approached had experience of tendering for public sector contracts andtheir good equality practice has in the past been highlighted, for example, throughwinning awards or being used as case studies.

There was broad support for a standard equality-related framework, provided the rightone can be found. However, the EDF draft was felt to require more work to make it the

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right one. In some ways it does not demand enough, while appearing long andcomplex. It does not offer innovative companies enough opportunity to show what theyare doing over and above legal compliance. The main requests were for a draft in lesslegal language, accompanied by practical guidance.

5: Conclusions and recommendations

It seems clear that European and domestic law both allow considerable scope forpublic bodies to ensure that, when commissioning private or voluntary sectororganisations to carry out work on their behalf, those organisations are acting inaccord with the public sector duty to promote equality and good relations and toeliminate unlawful discrimination. Companies can be excluded from tendering if theyhave committed a serious breach of equality law and done nothing to rectify it.

Further, pre-qualification questions about a company’s positive track record onequality and diversity can legitimately be used to provide an authority withreassurance that the organisation has the capacity to deliver the contract in a way thataccords with the equality duties.

There remains the question of when equality considerations are relevant to the subjectmatter of the contract. A normal equality impact assessment, carried out at an earlystage, and as a matter of course, under the public sector duties should tell procurementstaff what weight to give to the answers to the PQQs on equality matters.

EU guidance specifically states that contracting authorities can require successfultenderers to implement, during the execution of the contract, measures that aredesigned to promote equality. This clearly allows public bodies to ensure that contractsare carried out in a way that fits with the equality duties.

Given the multiplicity of approaches to applying the equality duties to procurement, thevariety in questions asked, and the unnecessary complexity this adds for both tenderersand procurement staff in public bodies, there is a strong case for finding a standardequality-related framework that can be applied to all procurement processes.

Recommendations

1. There should be a concerted effort by the OGC, The Department for Business,Enterprise & Regulatory Reform (BERR) and the Government Equalities Office,working with business organisations, equality organisations, and thoserepresenting procurers and public bodies, to establish a standard equality-relatedframework that everyone uses.

2. The existence of a standard equality-related framework should not preventdifferent weight being given to the PQQ answers or to the importance of theequality terms in the individual contract, if, for example, a procurement officer hadconcluded from an equality impact assessment that the subject matter of thecontract offered little scope for the promotion of equality and good relations orelimination of unlawful discrimination.

3. The PQQs should include some open questions to give those companies that gobeyond mere compliance to promote equality, diversity and inclusion anopportunity to demonstrate this.

4. The PQQs and contract terms should be drafted in plain English.

5. The PQQs and contract terms should be sufficiently detailed to enable companiesto understand exactly what will be involved in carrying out the equality aspects ofthe contract, e.g. what training should be provided to staff, what should be doneto communicate equality standards to suppliers.

6. While still promoting equality, contract terms should not require companies to actextraordinarily differently from the majority of businesses of their size.

7. The demands that are placed on businesses on equality matters should be setalongside those that relate to other social issues.

8. When implemented, the PQQs and contract terms should be underpinned bypractical guidance and explanation, and a support service for businesses.

9. Staff with responsibility for procurement processes should be trained andsupported in relation to equality and other social issues.

10. Rather than a separate equality kitemark for businesses, consideration should begiven to encouraging procurers and companies themselves to place moreemphasis on the equality and diversity aspects of the Investors in People (IiP)standard, and to use these as part of the evidence supplied under the PQQs.

11. The Government should seize the opportunity offered by the Equality Bill toprovide clarification of the relationship between procurement and equality.

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Introduction

All public bodies – from small local authorities to the largest government department,from NHS health authorities and hospitals to colleges and universities – spendsignificant parts of their budgets on buying goods, works and services from externalcontractors. This includes contracts for major construction projects such as schools,railways, roads or office buildings; for equipment or supplies; to bring in specialistservices, such as IT support; or ‘contracting-out’ services which the public body itselfpreviously carried out, such as school dinners, hospital cleaning, housingmanagement, rubbish collection, or management of a prison.

Public procurement is the term used to describe how public bodies undertakethese purchases including planning and drafting contracts, selectingtenderers, awarding the contracts and monitoring and managing contractperformance.

Commissioning is a term which may be used to describe this process, forexample, in relation to health or social care services, often at a strategic level.Commissioning, which may itself be contracted-out, can result in the award ofcontracts to a number of different private or voluntary and charitable sector orin-house providers.

Pre-qualification questions or questionnaire (PQQ) can be used for somecontracts to draw up a shortlist of a small number of suppliers, who will thenbe invited to tender for the contract, especially where there is likely to be a lotof interest from contractors to compete for the work. Answers to the PQQs aretypically used to assess a company’s suitability in terms of financial stability,company history and activities, and number and qualifications of relevantstaff, compliance with legislation relating to (for example) health and safety orequalities, and references from organisations for whom a company has donesimilar work.

Contract terms and conditions are binding on both parties to a legalagreement (contract) and can be used to govern not just what is delivered,when and by whom, but how this is to be done.

Overall, excluding major defence contracts, public bodies are spending more than£175 billion each year1 in contracts for works, goods or services. This representsapproximately one-third of total public expenditure. The size, length and security ofpayment offered by public contracts makes them especially attractive. Public bodiescan be vital customers for private businesses of all sizes, including small and mediumsized enterprises (SMEs), employing up to 250 people. In total, a third of private sectorcompanies do business with public bodies. In addition, contracts may be awarded tovoluntary sector bodies or charities. This means that many public bodies have

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relationships with, and can influence, a wide range of organisations beyond the publicsector.

In turn, the criteria that public bodies use to decide who is to supply them with goodsand services or to undertake work on their behalf, and the way in which they managethe contractual relationships they have with the organisations they choose, can havea significant impact on a large number of people. This includes both the frontline usersof services or recipients of supplies and those involved in carrying out the contract asemployees or sub-contractors or suppliers of the organisation which tenderedsuccessfully.

Among the factors that will affect those criteria are the race, disability and genderequality duties that public bodies are now subject to: all public bodies in Great Britainmust have due regard in all that they do – including procurement – to the need toeliminate unlawful discrimination and to promote equality and good relations betweendifferent groups on these grounds.2 To meet its equality duties, a public body shouldensure that when it spends money it is not supporting unlawful discrimination, but isencouraging and supporting the promotion of race, disability and gender equality. Thiswas made clear by all three of the then statutory equality commissions (theCommission for Racial Equality, the Disability Rights Commission and the EqualOpportunities Commission) in guidance published at the time of introduction of eachpublic sector duty.

There is no equivalent obligation on private and voluntary sector organisations whenthey enter into contracts for the provision of goods, works and services, althoughobviously they are required by law to avoid discrimination in their employmentpractices on the grounds of race/ethnicity, sex, gender identity, disability, age, sexualorientation and religious or other belief or non-belief, and in the provision of goods,facilities and services on all these grounds except age. They must avoid payingwomen and men different rates for the same job or for work of equal value.

Many companies go beyond mere compliance with the law to promote equality,diversity and inclusion in the way they operate, not least because they recognise thereare business benefits in doing so (such as recruiting and retaining talented and skilledworkers, understanding customers better and accessing new markets), benefits whichare of even greater importance in difficult economic circumstances. However, otherbusinesses give these issues a lower priority. They may want to do the right thing butstruggle to understand how they can put in place better equality practices; this canespecially apply to smaller companies without dedicated human resources staff.However, the continuing annual increase in the number of employment tribunal claimsfor various types of discrimination suggests some employers, including those in theprivate sector, still disregard the law.3

Public procurement offers a significant opportunity for more consistent and effectiveprogress towards equality in the private and voluntary sectors alongside the progressthat has been made in the public sector. It represents a means by which oneorganisation that is committed to equality (and, by virtue of the equality duties,

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required to take action to promote equality) can seek to ensure that the organisationswhich it employs to do its work are also committed to equality in the way that theydeliver services and employ workers. Experience in the UK and abroad has shownthat state purchasing power can be an effective tool in influencing the private sector,a practice endorsed by the Business Commission on Equality in the WorkplaceNational Employment Panel Report (‘the Business Commission’) in relation to raceequality, which recommended that:

‘Government, through its position as the UK’s major purchaser, use its leverageover, and relationships with, private sector companies to motivate the privatesector to promote race equality.’4

The UK’s leading employers’ organisation, the Confederation of British Industry (CBI)said in its evidence to the Government’s Equalities Review:

‘... public procurement is a highly effective lever for increasing diversity and[employers] share the position of the National Employment Panel that theremust be more systematic use of public purchasing power. The lever should beused more effectively by the public sector to further spread good practice in theprivate sector.’5

Equality can be taken into account in public procurement in five basic ways:

a) Planning – how should equality be reflected in the contract, and what should thecontract look like?

This is when a public body decides what it wants to ‘buy’. It is an opportunity toconsult users or potential users and to review equality outcomes under an existingor previous contract. At this stage the public body will also decide the best way tomeet the needs it has identified, for example, the size or length of the contract, sothat in some cases contracts will be particularly suited for SMEs (including SMEsled by people from ethnic minorities, women or disabled people).

b) The subject of the contract – what is the public body asking the contractor to do inrelation to equality: what equality outcomes is the public body seeking?

Equality will be more relevant in some contracts (for example, a contract to providehealth services to the public or a section of the public) than others (for example, acontract for the supply of sterilised surgical instruments).

Following from the planning stage, a public body can incorporate into the contractspecification the equality requirements that need to form part of the subject of thecontract; for example:

� to ensure IT equipment to be supplied is suitable for use by disabled people,

� to meet the needs of women and men, including those from different ethnicgroups, and of disabled people when providing services such as informationservices or sports and leisure services.

c) How the contract is to be performed – conditions to ensure good equality practiceby the contractor in carrying out the contract.

Every public body with statutory duties to eliminate discrimination and to promoteequality will want to use contract conditions to make sure that the contractor doesnot discriminate unlawfully and that the workforce the contractor uses to carry outworks or provide services on the public body’s behalf is recruited and managed inways that are consistent with the public body’s equality duties.

In addition, in some cases the subject of the contract may itself impose equalityrequirements, for example, the specification for the provision of sexual healthcounselling services for young people could require the contractor to try to employboth men and women as counsellors.

d) The procurement process – how the public body builds equality into each stage inways that are compatible with EU rules.

In selecting tenderers, a public body can take account of any findings ofdiscrimination against a contractor by a court or tribunal and, for works or servicescontracts, their past record on workforce equality or, where relevant, their pastrecord in meeting equality service requirements in previous contracts.

Where equality forms part of the subject matter of the contract so that there areexplicit equality requirements or equality outcomes in the contract specification,then a public body can use as one of the criteria for contract award how welltenderers are able to meet those requirements or outcomes, provided this is statedin the contract documents.

e) Monitoring and management – ensuring equality requirements are being met bythe contractor.

Critically, to meet its equality duties, a public body will need to monitor how well thecontractor is complying with the equality requirements in the specification andcontract conditions.

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1: The existing legal framework and currentproposals for change

The interaction between procurement and equality, both areas governed by acombination of European Union and domestic legislation, can appear very complex.This is not least because the law is contained in a multiplicity of treaties, statutes,directives and regulations, and is supported by guidance and codes of practice from avariety of sources.

European rules on procurement and social considerations

In carrying out public procurement, public bodies in all parts of the European Union(EU) must comply with EU rules, which include European Commission (EC) Treatyprinciples of non-discrimination (i.e. between contractors from different memberstates), equal treatment of individuals, proportionality and transparency, ECprocurement and equality directives and relevant decisions of the European Court ofJustice (ECJ).

The most recent EC procurement directive (2004)6 clarifies the scope for social issues,including equality in employment and service provision, to be taken into account. Itbuilds on and codifies the developing ECJ case law including the case of Beentjes7 inwhich the ECJ stated that according to the Public Procurement Directives ‘thesuitability of contractors is to be checked by the authorities awarding contracts inaccordance with the criteria of economic and financial standing and of technicalknowledge or ability’ but that properly applied social considerations could be includedin public procurement.

Recital 1 of the Directive states:

‘This Directive is based on Court of Justice case law, in particular case law onaward criteria, which clarifies the possibilities for the contracting authorities tomeet the needs of the public concerned, including in the environmental and/orsocial area, provided that such criteria are linked to the subject matter of thecontract, do not confer an unrestricted freedom of choice on the contractingauthority, are expressly mentioned and comply with the fundamental principlesmentioned in recital 2.’

Recital 2 continues:

‘The award of contracts concluded in the Member States on behalf of the State,regional or local authorities and other bodies governed by public law entities, issubject to the respect of the of the principles of the Treaty and in particular tothe principle of freedom of movement of goods, the principle of freedom ofestablishment and the principle of freedom to provide services and to theprinciples deriving therefrom, such as the principle of equal treatment, theprinciple of non-discrimination, the principle of mutual recognition, the principleof proportionality and the principle of transparency...’

Recital 33 explicitly lists some of the social considerations that can be included incontract performance conditions, such as employment of long-term unemployedpeople and environmental considerations.

Articles 26 to 35 of the Directive contain a number of more specific provisionsincluding, at Article 26, the provision that ‘contracting authorities may lay down specialconditions relating to the performance of a contract provided that these are compatiblewith Community Law and are indicated in the Contract Notice or in the specifications.The conditions governing the performance of a contract may in particular concernsocial and environmental considerations’.

UK regulations8 passed in 2006 have been used to bring the EC Directive intodomestic law, specifying procedures to be followed by UK public bodies for contractsabove certain total cost thresholds, with a less rigorous regime for contracts for certainservices including health and welfare, education, recreation and catering.

Alongside EC procurement directives are the EC equality directives, which require theUK and all other member states to have national laws that prohibit discrimination in allaspects of employment on grounds of racial or ethnic origin, sex, disability, religion orbelief, sexual orientation and age and outside the field of employment on grounds ofracial or ethnic origin and sex. The existence of these common standards across theEU makes it possible for UK public bodies to expect prospective contractors from allmember states to have a good record of compliance with their local equality lawswhich put into effect the EU equality directives.

European guidance

Pre-dating the 2004 Directive, but still applicable, is guidance from the EuropeanCommission. The Commission clarified the range of possibilities under the existingCommunity legal framework for integrating social considerations into publicprocurement in its Interpretative Communication on Community Law applicable toPublic Procurement and the possibility for it to integrate social considerations intoPublic Procurement (15 October 2001).9 This confirms that, in the Commission’s view,social considerations (which are normally taken to include issues relating toemployment and workplace matters, and measures aimed at promoting the interestsof disadvantaged or excluded persons) may within certain constraints, legitimately bepursued through public procurement. While not binding in the same way as theDirective, the Communication provides a useful indication of how the Commissionenvisages the procurement framework operating in relation to other EU legislation,including that on equal treatment, and when it is likely to regard action by public bodiesin member states as infringing the EU rules.

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The Interpretative Communication on integrating social considerations intopublic procurement is accompanied by a set of ‘frequently asked questions’.These include:

Is it possible to adequately take into account social considerations under thepublic procurement Directives? Yes. The Communication makes clear thatthere are numerous possibilities for taking account of social considerations inpublic procurement under the Directives, provided that the principles of non-discrimination and transparency are respected. Guidance is given aboutwhere in the tender process social considerations should be taken intoaccount.

When is it most appropriate to take social considerations into account in theprocurement procedure? It is especially during the execution of the contract,that is, once the contract has been awarded, that public procurement can beused by contracting authorities as a means of encouraging the pursuit ofsocial objectives. Contracting authorities can require the successful tendererto comply with contractual clauses relating to the manner in which thecontract is to be performed, which may include clauses in favour of certaincategories of persons and positive actions in the field of employment.

Can a contracting authority take account of the needs of the disabled in itspurchasing policy? Yes. In deciding what you want to purchase, contractingauthorities can specify their requirements regarding access for the disabledto certain buildings or public transport (for example, accessibility standards onthe width of corridors and doors, adapted toilets, access ramps), or access tocertain products or services (for example, in the field of informationtechnology for the visually impaired). In addition, contracting authorities canimpose an obligation on a successful tenderer to recruit, for the execution ofthe contract, a number of disabled persons over and above the minimumnumber laid down by national legislation.

Can a contracting authority use its procurement policy as a tool to combatunemployment? Yes. Contracting authorities can require successfultenderers to recruit unemployed persons, and in particular long-termunemployed persons, or to set up training programmes for the unemployedor for young people during the performance of the contract.

Can a contracting authority promote equal opportunities through itspurchasing policy? Yes. Contracting authorities can require successfultenderers to implement, during the execution of the contract, measures thatare designed to promote equality between men and women or ethnic orracial diversity [this guidance pre-dates the expanded range of grounds forequal treatment in employment and in access to goods, facilities andservices].

How can a tenderer be sure that its competitors will not benefit fromsubmitting tenders that do not comply with applicable employment andsafety rules? Tenderers who have not complied with social legislation canbe excluded from public procurement procedures, where this is deemed toconstitute grave professional misconduct or an offence having a bearing ontheir professional conduct. In addition, elements relating to non-compliancewith rules on safety or employment can, under the current publicprocurement Directives, be taken into consideration to reject an abnormallylow tender.

Can a contracting authority take social considerations into account whenawarding a contract? Yes. Criteria involving social considerations may beused to determine the most economically advantageous tender where theyprovide an economic advantage for the contracting authority which is linkedto the product or service which is the subject-matter of the contract. Forexample, a criterion that makes it possible to evaluate the quality of aservice intended for a given category of disadvantaged persons may beused. In addition, it may also be possible to use a condition related to thecombating of unemployment as an additional criterion in respect of two ormore economically equivalent tenders, provided it complies with thefundamental principles of Community law.

It is clear from the Commission’s answers to these questions – which are drawn fromthe Communication – and from the Communication itself that the Commission seesthe use of both PQQs and contract terms in building social considerations intoprocurement processes as not only permissible but to be encouraged – although mostemphasis is on the contract terms. Under EU law, management of a supplier’sbehaviour through contract terms is not subject to the same strict test of relevance tothe subject of the contract.

UK policy and guidance: the role of the Office of Government Commerce (OGC)

Not unreasonably, given that they are spending money raised through taxation, publicbodies are expected to achieve ‘value for money’ in every procurement project. Thisdoes not equate to lowest price; it is the optimum combination of cost and quality (orfitness for purpose) to meet the requirement of the public body as purchaser. In everycontract, a public body’s requirement will include compliance with any relevant legalduties including, for example, health and safety, or its duties under equality laws. Inaddition, all public bodies have a fiduciary duty, that is, a duty to act responsibly whenthey spend public money.

The Office of Government Commerce (OGC) is an independent office of HM Treasury,established to help Government deliver best value from its spending. The OGCworks with central Government departments and other public sector organisations toensure the achievement of six key goals:

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1. Delivery of value for money from third party spend;

2. Delivery of projects to time, quality and cost, realising benefits;

3. Getting the best from the Government’s £30bn estate;

4. Improving the sustainability of the Government estate and operations, includingreducing carbon emissions by 12.5% by 2010-11, through stronger performancemanagement and guidance;

5. Helping achieve delivery of further Government policy goals, including innovation,equality, and support for small and medium enterprises (SMEs);

6. And driving forward the improvement of central Government capability inprocurement, project and programme management, and estates managementthrough the development of people skills, processes and tools.

The OGC has issued model contract terms for low and medium risk contracts andguidance to support its work on goal 5, the delivery of the Government policy goal ofgreater equality. The model contract terms for both goods and services10 contain aclause relating to the public sector equality duties:

‘D3 Discrimination

D3.1 The Contractor shall not unlawfully discriminate either directly or indirectly onsuch grounds as race, colour, ethnic or national origin, disability, sex orsexual orientation, religion or belief, or age and without prejudice to thegenerality of the foregoing the Contractor shall not unlawfully discriminatewithin the meaning and scope of the Sex Discrimination Act 1975, the RaceRelations Act 1976, the Equal Pay Act 1970, the Disability Discrimination Act1995, the Employment Equality (Sexual Orientation) Regulations 2003, theEmployment Equality (Religion or Belief) Regulations 2003, the EmploymentEquality (Age) Regulations 2006, the Equality Act 2006, the Human RightsAct 1998 or other relevant or equivalent legislation, or any statutorymodification or re-enactment thereof.

D3.2 The Contractor shall take all reasonable steps to secure the observance ofclause D3.1 by all Staff.’

The accompanying guidance explicitly – though briefly – refers to the public sectorequality duties.

In February 2006, the OGC published Social Issues in Purchasing,11 guidance on howa variety of social issues and objectives might legitimately be integrated into the publicprocurement undertaken by contracting authorities in England and Wales. Theguidance encourages procurement staff to think about social issues early on, and toconsider their relevance at every stage of the process: in identifying a need for aservice, etc, to be procured; in the contract specification; in selection of tenderers fora shortlist; in evaluating bids; and in performance of the contract. It suggests that

procurers should ‘ensure that obligations contained in social legislation, e.g. thoserelating to race, gender and disability, are considered at the outset of procurements,to enable an assessment of their impact and relevance to be undertaken’.

Identifying the relevance of equality considerations to a procurement process shouldflow naturally from an equality impact assessment by the public body in relation to theequality implications of a decision to procure the goods, services or works. Everypublic body should be doing this type of assessment as a matter of course at an earlystage of every decision-making process as part of its obligations under the publicsector duties.12 Once the impact assessment has been carried out, the extent to whichthe contract will need to be influenced by the equality duties and where equalityconsiderations can be built in to the different stages of the contracting process shouldbe clear.

The guidance also advises procurers to

‘consider developing a risk-based approach to cover high spend and otherhigh-risk areas. This might include an assessment of any social risks, e.g.effects on certain types of businesses, ethnic groups, or the wider community…as well as related risks of security of supply and Government reputation.Identifying how a Department will work with suppliers to minimise any of theseadverse effects may also be useful, e.g. putting in place mechanisms to collectdata, to monitor, to evaluate and to report performance on procurement activityrelated to products and services with high social risk. This will need to be on aco-operative basis if it is not directly relevant to the goods or services beingprocured.’

This advice appears to offer an opportunity to public bodies to make procurementdecisions based on information obtained by asking about a company’s equality anddiversity practices, as well as its overall capacity to deliver, its financial viability, itscompliance with health and safety law, and so on. What would be assessed is the riskto e.g. race equality if the delivery of the service, supply of goods, or otherprocurement project was undertaken by a company that did not have the requiredknowledge of, or commitment to, good equality practice.

Annex A of the OGC’s guidance sets out a number of steps for procurers to adopt inorder to take different social issues properly into consideration, including explicitlysuggesting that they should consider excluding tenderers at the selection stage forrelevant convictions or findings of grave misconduct, e.g. contravention of equalitylaws. In addition, it is suggested that contractors’ staff working with public sectoremployees on public sector premises should adhere to disability, gender and racecodes in line with the public body’s own rules ‘to ensure the smooth operation of [the]premises.’

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It also advises

‘at the selection stage, request evidence of relevant aspects of equality policieswhere related to the subject of the contract. Consider technicalskills/capabilities of tenderers that are relevant to the particular contract andlinked to [disability, gender or race] equality...However, bear in mind the issueof proportionality when asking for such information to prevent unnecessaryburdens on [SMEs, which may include ethnic minority owned, women-ownedand disabled-owned businesses]’.

In June 2008, the OGC published a pamphlet Buy and make a difference: how toaddress social issues in public procurement.13 This gave further practical examples ofthe steps public bodies could take at each stage of the procurement process: at thespecification stage; at the pre-qualification/selection stage; at the award stage; in theperformance of the contract; and through relationship management. It promisesfurther guidance in due course. Once again, it makes clear that candidates forcontracts can be rejected ‘on grounds of grave professional misconduct, which mightinclude, for example, a serious breach of equality legislation’, allowing publicauthorities to refuse to do business with firms that have been subject to a court ortribunal finding under equality legislation, unless it is clear that steps have been or arebeing taken to resolve the issue that brought them to court.

However, the OGC appears to rule out any approach that allows a public authorityto require tendering firms to meet criteria such as identifying and addressingimbalances among job applicants and employees according to gender, ethnicity anddisability, on the basis that, ‘as the criteria are unlikely to be relevant to everyprocurement, the standard should not be imposed in blanket fashion, which wouldrun the risk of legal challenge’.

The limitations in the guidance put forward by the OGC have been criticised by theEquality and Human Rights Commission (EHRC):

‘...there is still confusion about how far public authorities should apply theexisting equality duties to public procurement, what criteria they are allowed toapply, and at what stage, what information they are allowed to ask for, and howthey can legitimately make equality criteria relevant to the contracting process ina way that protects them from legal challenge’.14

How the law may change

In June 2008, the Government published Framework for a Fairer Future – TheEquality Bill15 which set out the broad principles of what it intends to include in thelegislation which is intended to consolidate, update and strengthen UK equality law.The Bill is expected to be introduced in the 2008-09 Parliamentary session. Thedocument deals specifically with public sector procurement:

‘The Equality Duty on the public sector applies to public bodies as purchasers ofgoods and services, so public bodies are already required to tackle discrimination

and promote equality through their procurement activity. The public sector spends£160 billion every year on purchasing goods and services from the private sector.30% of British companies are contracted by the public sector. The Governmentrecently set out [in Buy and make a difference, referred to above] how socialoutcomes can be delivered through public sector purchasing.

Under the existing public sector equality duties, public bodies already have toconsider how to promote race, disability and gender equality through theirprocurement functions. Some public bodies are already complying with the dutiesby, for example, asking potential contractors what percentage of their staff arefrom ethnic minority communities.

The new Equality Duty will clarify and strengthen the existing requirements andgive a greater focus on increasing transparency. We are looking at how to helppublic bodies comply with the duty more effectively, through legislative and non-legislative mechanisms, to encourage greater transparency among private sectorcontractors to contribute to the delivery of our equality targets.’

A further document was published in July 2008, The Equality Bill – Governmentresponse to the consultation (on the Discrimination Law Review consultation paperpublished in June 2007).16 This goes into more detail on the Government’s thinking:

‘Transparency and procurement

We will work with the Office for Government Commerce and others to develop waysof improving how public bodies use their purchasing power to support the delivery ofequality outcomes. Government will examine a range of options for taking forwardthis work and will consult with stakeholders in developing these options.

We will work with business, the Equality and Human Rights Commission andothers to develop a kite-mark scheme for employers who are transparent aboutreporting their progress on equality. The kite-mark will show which organisationshave demonstrated acceptable equality outcomes.

...We are looking at how to help public bodies comply with the new equality dutywhen they are purchasing goods and services. We are exploring how publicprocurement can be used to further equality outcomes, and will examine a rangeof both legislative and non-legislative options. We will also look at how we canencourage greater transparency on equality issues among private sectorcontractors, to contribute to the delivery of our equality targets.

The Equality Duty will help us deliver our equality targets by improvingtransparency in the public sector, but 80 per cent of people are employed in theprivate sector and the gender pay gap is double what it is in the public sector. Wecan drive progress in the private sector in a number of ways, including using thespending power of the public sector to deliver greater transparency in the privatesector and working with business to improve practice on equality issues.’

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In its response to the June announcement, the EHRC pointed out the problems with thecurrent law and urged the Government to use the Bill to strengthen and clarify the law:

‘...it is widely agreed that the current complicated legal and policy frameworkleaves many public sector bodies unclear about how to apply socialconsiderations to procurement decisions, or indeed whether they are able to doanything at all. In 2005, only 40 per cent of local authorities in England specificallyaddressed equality and diversity with examples or targets in their procurementstrategies [see The National Procurement Strategy for Local Government TwoYears On, Dept of Communities and Local Government]. However, some (suchas the Crown Prosecution Service) have used the existence of the public sectorduties to require potential contractors to demonstrate good equalities practicewhen tendering for public sector contracts.

Contrary to what some believe, the European Union’s Procurement Directivesallow social issues to be taken into account in public procurement at, for example,the selection and award stage. This is provided that they are linked to the contractand do not otherwise exclude firms from other member states in accordance withthe EU’s requirements for non-discrimination. The Directives also confirm thatbreaching equalities legislation is a sufficient reason to disqualify a contractor fromselection. In the Commission’s view, the missing elements for UK publicauthorities are:

� sufficiently strong ways of ensuring that the possibilities for promotingequality through procurement are fully taken up,

� a better understanding by procurers of how the concept of value for moneyincludes social considerations, and in particular how equality can be seen asan essential component of quality, and

� effective training for those in authorities responsible for making procurementdecisions.

...It is essential that the Equality Bill clarifies [the scope for including equalitycriteria in procurement decisions] further, gives the guidelines statutory force, andis underpinned by detailed practical guidance on how procurers can build equalitycriteria into the entire contracting process. It is not sufficient that they are merelyused at the end as a tie-break, not least because it will be very rare for two bidsto be otherwise wholly identical.

The taxpayer rightly expects high standards from public authorities in acting fairly;it is not right that standards should be any lower when it comes to private sectorsuppliers carrying out work on behalf of the public sector. Making equality inprocurement an explicit statutory obligation would send a clear and unequivocalmessage to public authorities as purchasers; and to prospective private sectorsuppliers. It would also make compliance a matter that the public serviceinspectorates would automatically examine.’

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2: What public bodies do now: time for a standardapproach?

In the absence of a single framework for building equality considerations intoprocurement, different public bodies have taken different approaches. For example:

� National Health Service (NHS) purchasing of goods and services, includingmajor building projects and commissioning of health services – worth billions ofpounds a year – is carried out according to a methodology developed throughthe ‘Mosaic’ project in response to the introduction of the duty to promote raceequality. Having been piloted in 10 NHS bodies, it is now being rolled outnationally.17 The process is based on principle:

‘We, in the NHS, have legal responsibilities to meet equality and humanrights legislation. We also believe there is a strong business case for it.

The NHS has to build relevant equality considerations into itsprocurement process to ensure that all functions meet the requirementsof equality and human rights legislation. Broadly, this legislation aims tocreate a “minimum threshold standard” beneath which no public bodyshould fall’.

Since it was launched in 2004, Mosaic has undertaken a range of activities,including providing training for procurement staff; developing procurement andequality strategies which use good practice examples to illustrate what needs tobe done; providing diversity training for suppliers; creating contract monitoringtemplates; devising monitoring equality clauses in terms and conditions; anddesigning a balance scorecard to help NHS organisations identify and assessactivity areas where equality can be applied to procurement. It can be seen fromthis that the Mosaic methodology works with both the supply- and demand-sidesof the procurement process.

� Police forces follow the ACPO (Association of Chief Police Officers) NationalProcurement Strategy to 2011, one of whose aims is promoting sustainability andsupporting diversity in procurement.18 The targets it sets those responsible forimplementing the strategy within regions and individual forces are:

� To promote and share best practice, including a sustainable procurementstrategy.

� Training procurement staff in supplier diversity.

� Promotion of the service to a range of diverse suppliers including relevantmanagement information on monitoring the diverse nature of the supplybase.

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What individual forces have done within the strategy appears to vary, so, forexample, Cleveland Police ask suppliers a series of questions as part of theirequality scheme which form a procurement assessment template/matrix, whichleads to companies being graded according to a number of generic diversityrelated attributes,19 while Surrey Police request all suppliers working with thepolice authority to support And promote the following statement:

‘Surrey Police is committed to the equality of opportunity and respect forDiversity. The Force endeavours to not only comply with all aspects oflegislation relating to the six strands of diversity (i.e. Race, Disability,Gender, Age, Sexual Orientation and Faith), but also to recognise andmeet the demands of individuals and communities, to ensure that ourstaff and the public of Surrey are treated with dignity and respect at alltimes.’20

� There appears to be a wide variation in practice among higher educationinstitutions. Durham University uses the following statement:

‘We aim to comply with the general duty to promote race equality in ourrelevant procurement functions that are contracted out to a privatecompany or voluntary organisation. We aim to send a summary of ourdiversity and equality policies out with tender documentation and willreview whether existing arrangements meet the general and specificduties outlined in the Race Relations (Amendment) Act 2001, DisabilityDiscrimination Act 2005 and Equality Act 2006.’21

but overall few universities appear to publish a comprehensive statement of theirexpectations; worryingly, a number of apparently general policies only refer to therace equality duty, rather than all three public sector equality duties, suggestingthat they have not been updated since the disability and gender duties came intoforce in 2006 and 2007.

� The Greater London Authority (GLA) has a responsibility (set out in thelegislation establishing it) to promote equality which pre-dated the equalityduties, although it is now covered by the duties as well. This responsibilityextends to all the constituent bodies within London government, including theMetropolitan Police, Transport for London (TfL) and the London DevelopmentAgency, as well as the GLA itself – the ‘GLA Group’. Comprehensive equality anddiversity policies, including a sustainable procurement policy, have been used todeliver real changes in the way companies do business with these bodies. Forexample, the following case study is taken from the Mayor of London’s report onresponsible procurement (February 2008):22

‘The East London Line Project (ELLP) is being delivered in one of themost ethnically diverse areas of London and is the first major project touse GLA group responsible procurement requirements to encouragediverse suppliers. These were incorporated in the invitation to tender

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(ITT) and contract conditions for two procurements within the project: theprovision of main works (£500m) and the rolling stock and train servicingagreement (£350m). Both elements received a positive reaction fromsuppliers. There was close and early engagement with the bidders,supported by TfL acting as a broker with community stakeholders, suchas training institutions providing workers. This was seen as one of thekey reasons for the positive response. In fact, ELLP best practice hasbeen applied in the rollout of all subsequent supplier diversity initiatives.In the summer of 2006, Bombardier was awarded the contract for therolling stock and train services agreement; and in October 2006, aBalfour Beatty-Carillion Joint Venture (BB/C JV) was awarded the mainworks construction contract. Through a collaborative approach with TfL,the BB/C JV has established an employment and training taskforce toset up partnerships with local skills and regeneration programmes. Theinitiative is monitoring the diversity of the project’s workforce, so its fullbenefits can be measured.’

The GLA Group’s approach is now widely seen as best practice in drivingequality in the private sector through relationships with suppliers.

� The Improvement & Development Agency’s (I&DeA) Equality Standard for LocalGovernment23 was launched in 2001 and is now adopted by 90 per cent of alllocal authorities. It has been developed primarily as a tool to enable localauthorities to mainstream age, disability, gender, race, religion or belief andsexual orientation into council policy and practice at all levels. The EqualityStandard aims to deliver equal employment and service outcomes in publicservices whether they are delivered directly or through contracts, and drawsattention to the need for procurement practices to fully embrace the principles ofthe Standard and subject contracts to equality impact assessment, equalityobjective setting and monitoring. It suggests that contractors should understandthe aims of the Equality Standard and should agree to work within those terms,and that contract monitoring and management should be designed to secure thedelivery of equality objectives.

Working within the Standard, local authorities have developed a range ofmethods for taking account of equality considerations and informing/educatingsuppliers as to how this affects them. Many different templates are available, witha number of authorities who have made procurement a priority in complying withthe equality duties publishing their own guidelines. For instance, CalderdaleCouncil has a ‘passport to equality and diversity in procurement’ guide forsuppliers, which asks a series of questions and states requirements, requiringsuppliers to state their compliance with them (and provide evidence) if they areinterested in tendering for council business.24 Nottinghamshire County Councilhas published equality in procurement guidance for external providers ofservices to the council, which states:

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‘We take a proactive approach to our obligations arising from EqualOpportunities legislation. All organisations wishing to provide services onour behalf must be able to demonstrate that all reasonably practicablesteps are taken to allow equal access and equal treatment inemployment and service delivery for all.’25

Caerphilly County Borough Council has a short and simple document containingits policy, a standard contract clause requiring the contractor to comply with itsstatutory obligations not to discriminate, and a series of questions about thecompany’s policies on equality.26 Although similar, all three are different, andthere are dozens more variations across local government’s published policieson procurement.

Is it time for a standard approach?

It can be seen from this that some groups of similar bodies have already developed astandard approach to using equality considerations during the procurement process.This enables companies to use the same information in the same format to provideevidence in support of answers on equality, and it can also make it easier forprocurement staff in those public bodies to assess that evidence.

The West Midlands Forum: One group of six local authorities in the West Midlands,the West Midlands Forum, has gone further. Since 1998, they have developed andused a common approach (The Common Standard for Equalities in PublicProcurement) to Council contracts. This works as follows:

‘The aims of the standard include: helping contractors meet their obligations fornon-discrimination, encouraging and acknowledging firms who comply with thestandard, sharing good practice, and securing contracts that deliver equalitiesin public procurement.

Authorities can use the standard to assess whether or not contractors aremeeting their obligations under equality legislation at an early stage (pre-qualification) which is when the authority decides who they will invite to tenderor put on to their approved lists. Firms are asked to achieve up to ten criteria,depending on the number of staff they employ. These criteria include: providinga comprehensive equal opportunities policy; using open recruitment practices;identifying and addressing imbalances in job applicants and employeesaccording to gender ethnicity and disability; providing equality training formanagers; and reporting and consultation on equality in the workplace. Oncea contractor has been approved they need not resubmit equal opportunitiespolicies to any of the forum members within a three year review period.

The standard demands a proportionate response from firms as it allows for thesize of contractor in terms of the evidence it requires. For example, firms withless than 5 employees need only provide reassurance that they will meet thestandard if the number of employees increases. Benefits for contractors and

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local authorities include: reducing paperwork (saving time and money) andbetter implementation of equality in the workplace.

The West Midlands Forum was developed by Birmingham City Council,Coventry City Council, Sandwell MBC, Redditch BC, Walsall MBC andWolverhampton City Council.’27

Constructionline: The West Midlands Standard is not the only attempt to work withcontractors to produce a common equality-related framework and make the pre-qualification process both more efficient and more effective. In partnership with arange of other organisations, the Department for Business, Enterprise and RegulatoryReform (BERR) has established Constructionline, a self-financing service run onBERR’s behalf by Capita:

‘Constructionline is the UK’s register of pre-qualified local and nationalconstruction and construction-related contractors and consultants... We gatherand assess pre-qualification information on behalf of public and private sectorprocurers and provide them with access to over 15,500 fully accredited suppliersfree of charge. In addition, we also help contractors and consultants by reducingthe need for them to fill-in pre-qualification forms for every tender and providethem with access to over 1,700 buyers. Over 15,500 contractors and consultants,ranging from sole traders and small specialist firms to large multi-nationals, areregistered with Constructionline. Our 1,700 plus buyers across the UK rangefrom large central government departments and agencies to Local Authorities,Housing Associations, Universities and NHS Trusts.’28

Forms to be completed include information on areas of operation, financial viability, anenvironmental questionnaire, health and safety information and an equal opportunitiesquestionnaire. This last asks members to state an explicit recognition of the need tocomply with a full list of equality legislation, including the Equal Pay Act, as well asasking about adverse tribunal or other findings and rectification measures taken(making it clear that if rectification is satisfactory, then an adverse finding will not beused to reject a company) and (optionally) the ethnic origin of the owners of thebusiness. Businesses are encouraged to fill in an optional second section with thestatement:

‘To improve your chances of being invited to tender and so that you are betterprepared for contracts within the public sector, we strongly recommend that youfill it in. Buyers will take account of your responses in section B in line with theirown equal opportunities policies and practices.

If you have less than five employees you do not need to answer all thequestions but do answer question B2 and give as much information as you canin question B9. Use your answer in B9 to communicate informal policies andpractices which show your commitment to equal opportunities. If you will berecruiting more staff shortly please fill in all of this section.

If you have five or more employees you should answer all relevant questions.

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Please note, EHRC advice to authorities is not to expect the same level of detailin the equal opportunity programmes of small suppliers compared with biggerbusinesses.’

These questions ask about a written equal opportunities policy, recruitmentprocedures, career progression and staff treatment, communication of policies,monitoring of staff ethnicity, staff training in equal opportunities, and whethersubcontractors are asked for equal opportunities information, and requests evidencein all these categories. There is provision for non-UK based contractors to adapt thequestions to their circumstances. Telephone advice is provided to assist with theapplication process.

Contractors wishing to join pay a membership fee which is dependent on annualturnover, starting at £90 + VAT for turnover up to £249,999 and rising to £1,380 + VATfor businesses with annual turnover above £50 million.

Once all the forms are completed and the fee is paid, the contractor will be placed onthe database which can be accessed by procurement staff from the public body ‘buyer’members, who pay nothing to join. This means that if they tender for a contract, all thisinformation is already held and they do not have to supply it again.

buy4wales and sell2wales: The Welsh Assembly Government has establishedbuy4wales, as an online sourcing portal for the Welsh public sector, and sell2waleswhere businesses can register, receive information about tendering opportunities andwhere their details can be seen by public bodies looking for suppliers. Both sitescontain information on issues of equality in procurement, and businesses areencouraged to share their equality policies via their profile. Public bodies are providedwith guidance on how to incorporate equality considerations into procurementdecisions.

Private sector equality accreditation: Two organisations (Exor ManagementServices Ltd and C2E) offer equality accreditation and, in the case of Exor, financialand other accreditation, in return for a fee, with the intention that once accreditationhas been gained by a company, it provides procurers with sufficient information to beconfident in contracting with that business.

Exor says of its process as it relates to equal opportunities:

‘Exor approval for equal opportunities shows that a business is aware of currentemployment legislation, of their responsibilities as an employer, and of whatthey need to do to promote fair and equal treatment for all of their staff andpotential employees.’29

Of the accreditation process as a whole, the company states:

‘A business with Exor accreditation is known to be financially stable, compliantwith legislation relevant to the work carried out by the business, and reliable,with a trading history checked by the sourcing of independent references.’

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The company then helps public bodies who become its clients select contractors fromamong accredited companies.

C2E is a not-for-profit enterprise running a C2E ‘Committed to Equality’ programme tohelp businesses gain an accreditation having completed a review of their business’sequality policy and practice, and undertaken any necessary changes. C2E says of itsaccreditation that it is particularly useful for organisations ‘who wish to be subcontractsor work directly with Central and Local Government and need to comply with equalityand diversity requirements – e.g. 2012/GLA’.30

ACAS: Finally, ACAS (the arbitration and conciliation service) has been working withboth public and private sector organisations to improve the use of equalityconsiderations in procurement decisions. In its annual report 2007-08, ACAS gives anexample:

‘The embedding of [the] public duties has led government departments andlocal authorities to promote equality and diversity in the private sector throughtheir procurement process. During the year we provided assistance to publicbodies by helping to identify what they might want to ask of their suppliers topromote equality and diversity through the supply chain. Equally important, weprovided information and advice on the equality and diversity standardsrequired for private sector businesses seeking to provide goods and services tothe public sector.

For example, our equality adviser in Yorkshire and Humber offered specialistadvice and assistance to the Leeds Homes Construction Partnership (LHCP).This innovative initiative, sponsored by Leeds City Council, established anequality and diversity standard for local construction companies and theirsupply chains, where success is measured on a scale. The scale establishes acompany’s overall suitability, being over and above the required basic standard.The aim is for companies to continue to improve their equality and diversityperformance and progress up the scale, rather than simply complying with thelaw.’31

A single standard?

As noted in the introduction to this report, the Business Commission was in favour ofbetter public procurement (their report was in relation to race equality only). However,in their recommendations on countering race inequality, they observed that there wasa risk of inappropriate burdens on business:

‘Many businesses now face a plethora of equality provisions across a largeproportion of their public contracts...having to meet a range of standards thevariety of which made them burdensome.’

But the Commission did not consider that this meant a return to the approach in the1980s where the market was all important and progress to fairness irrelevant. Theyadded:

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‘Rather than deal with a range of ad hoc equality requirements, theCommission believes business would prefer a single regime covering the wholepublic sector.

We recommend that Government establish a public sector-wide procurementpolicy to use more robust pre-qualification questions and contract conditions topromote race equality in the workplace’.

While the focus of the Business Commission was on race equality, theserecommendations apply just as much to the other equality grounds. Indeed given thecrisis in equal pay it is obvious that they apply to gender quite as much as race.

It appears that a number of organisations have felt that it is time for a standardapproach and have taken up the Business Commission’s challenge; unfortunately,because no one body has taken the lead, companies are still faced with the dilemmawhether to sign up to more than one organisation, involving additional time andexpense. Meanwhile, many public bodies are still undertaking individual procurementexercises each requiring slight variations in documentation.

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3: The EDF draft Pre-Qualification Questions (PQQs)and Contract Terms

The preceding sections of this report provide the context for the EDF’s draft PQQs andcontract terms. In putting them forward, the EDF proposes that agreement should bereached as to the minimum standard that contracting organisations should be asked tomeet when tendering for public sector contracts. This standard would then be used byevery public body. This ought to save companies the time, effort and money required toproduce the same answers and evidence many times in slightly different formats – whichmay lead to businesses, especially SMEs, seeing equality considerations as primarily abureaucratic burden and discourage them from tendering for public sector work.Procurement then only attracts those businesses that already have good equalitypractices and does not have a significant impact in spreading good practice more widely.

A single framework would have benefits for procurers as well, offering them a singlestandard set of answers which they would soon become adept at assessing anddistinguishing between.

In drafting the PQQs and contract terms, Gay Moon, Joseph Rowntree CharitableTrust Fellow and special legal adviser to the Equality and Diversity Forum, consideredmany of the existing frameworks public bodies are using. The draft that was putforward for testing was as follows:

EQUALITY – PRE-QUALIFICATION QUESTIONS RELATING TOWORKFORCE MATTERS

1. Is it your policy as an employer to comply with your statutory obligationsunder the Sex Discrimination Act 1975, Race Relations Act 1976, theDisability Discrimination Act 1995, the Employment Equality (Religion orBelief) Regulations 2003, the Employment Equality (Sexual Orientation)Regulations 2003 and the Employment Equality (Age) Regulations and anysubsequent equivalent legislation that applies in Great Britain, or equivalentlegislation that applies in the countries in which your firm employs staff?

2. Accordingly, is it your practice not to discriminate directly or indirectly ongrounds of sex, race, disability, religion or belief, sexual orientation or agein relation to decisions to recruit, remunerate, train, transfer or promoteemployees? For example, do you:

a) Issue instructions on non-discrimination to those concerned withrecruitment, selection, remuneration, training and promotion?

b) Communicate your policy on equality to employees, recognised tradeunions or other representative groups of employees?

c) Advertise your commitment to equality in recruitment advertisementsand/or other literature?

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d) Train staff with managerial responsibilities on equal opportunities?

e) Have procedures in place to protect your employees from unlawfuldiscrimination (including harassment)?

Please provide evidence to support your answer.

3. In the last three years has any finding of unlawful discrimination on groundsof sex, race, disability, religion or belief, sexual orientation or age beenmade against your organisation by any UK court or tribunal, or incomparable proceedings in any other jurisdiction?

4. In the last three years, has your organisation been the subject of formalinvestigation by the EOC, CRE, DRC or the EHRC, or a comparableequality body or human rights commission in your jurisdiction which hasresulted in a finding of unlawful discrimination in the employment field?

5. If you have answered yes to questions 3 or 4, what remedial measureshave you taken as a result of such findings?

6. In the last three years have you been served with a Notice of Breach ofcontract conditions relating to workplace equality requirements by a UK publicbody which has not been withdrawn, or have you otherwise been notified bya UK public body that you have committed a breach of such conditions?

7. If you have answered yes to question 6, what remedial measures have youtaken following service of any such notification?

EQUALITY – CONTRACT CONDITIONS RELATING TO WORKFORCEMATTERS

The Equality (Workforce) Requirements

1. The Contractor shall not unlawfully discriminate on grounds of sex, race,disability, sexual orientation, gender identity, religion or belief or age withinthe meaning and scope of any anti-discrimination law, enactment, order orregulation relating to employment within the UK or the European Union.

2. The Contractor shall take all reasonable steps to ensure the observance ofclause 1 by all servants, employees or agents of the Contractor and allsuppliers and sub-contractors employed in the performance of the contract.

3. For the purpose of compliance with clause 1 in respect of all personsemployed by the Contractor for the performance of the contract, theContractor shall, so far as possible, observe the provisions of Codes ofPractice on Employment and Code of Practice on Equal Pay issued by theEquality and Human Rights Commission and/or the Equal OpportunitiesCommission, the Commission for Racial Equality and the Disability RightsCommission.

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4. Where in the performance of this contract, the Contractor, its servants,employees or agents are required to carry out work on the Authority’spremises or to work alongside the Authority’s employees on any otherpremises, the Contractor shall comply with the Authority’s own employmentpolicies including its policies on equality of opportunity and equal pay,copies of which are annexed.

5. With reference to the persons employed by the Contractor for theperformance of the contract, having regard to the overall capacity of theContractor, the Contractor shall:

a) Maintain or adopt appropriate measures to protect such persons fromunlawful discrimination or harassment on grounds of sex, race,disability, sexual orientation, gender identity, religion or belief or age;

e) Maintain or adopt appropriate measures in respect of such employmentto ensure equality of opportunity on grounds of sex, race, disability,sexual orientation, gender identity, religion or belief or age in access toemployment, access to training and working conditions including pay.

Where the total number of people working on the contract is in excess of[X], the following additional provisions shall apply to the workforce workingwithin the UK. [The Contractor shall, unless an SME employing fewer than250 people]:

c) Monitor the participation and rates of pay of persons of different racial orethnic origin, women and men and people with disabilities, in each typeof job and at each level of the organisation;

d) Where the monitoring in (c) shows under–representation of groupsdefined by racial or ethnic origin, sex or disability, take appropriatemeasures to improve the representation of persons of under-represented groups in each type of job, and at each level of theorganisation;

e) Where the monitoring in (c) shows inequality in pay between men andwomen contrary to the Equal Pay Act 1970 or any supersedinglegislation, take appropriate measures to secure and maintain equal payfor all relevant employees.

6. Within [ ] months of the commencement of the contract and each 12months thereafter , the Contractor shall provide to the Authority suchinformation as the Authority may reasonably require to assess theContractor’s compliance with clauses 1 – 6 above.

7. The Contractor shall impose obligations on any sub-contractor engaged inthe performance of this contract in terms substantially similar to thoseimposed on it under clauses 1 – 7 above.

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Effect of failure to comply

A. A failure to comply with clauses 1 – 7 above may be treated as a breach ofa condition of the contract and may lead to the issuing of a Notice of Breachof Equality Requirements.

B. This notice may be referred to by contracting authorities in the selection oftenderers for future work for a period of three years from the date of itsissue.

C. The Contractor may, within six months of the date of issue of a Notice ofBreach of Equality Requirements submit a request that the Notice bewithdrawn on the basis of an Equality Progress Report demonstrating theeffective implementation of the Equality Plan.

D. Any decision by the Authority to withdraw a Notice shall be determined atits sole discretion, taking into account all evidence submitted by theContractor in support of its request.

Disputes

E. Disputes relating to the Equality Requirements and the Notice of Breachshall be dealt with through…

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4: Testing the draft: private sector responses

The draft was shared with representatives of business organisations and privatesector companies, and face-to-face or telephone interviews were carried out. All thecompanies approached had experience of tendering for public sector contracts andtheir good equality practice has in the past been highlighted, for example, throughwinning awards or being used as case studies.

Support for a standard template

There was broad support for a standard equality-related template, provided the rightone can be found.

‘The CBI can see the benefits of a standard template across differentprocurement processes; this could be extremely useful, provided its effect is tosimplify the process and that it works in terms of practical on-the-groundapplication. The more a clear common sense approach which everyone refersto (procurers in public bodies as well as companies) can be provided, thebetter. But the test of a particular standard template is what the template asksand what the reaction is to the information a company provides. “One size fitsall” would not be appropriate if a crude decision would be taken to include orexclude a company based solely on the answers, not on the quality of theremainder of the tender.’

Tom Moran, Principal Policy Adviser, CBI

‘A standard template would be fantastic – companies don’t want to keepduplicating – but it needs to recognise that there are shades of grey incompanies’ practices, they’re rarely all good or all bad. And any template needsto take account of situations where a public body has literally thousands ofsuppliers, like the NHS. The weighting that is given to answers needs to beclear, so a template cannot stand alone without guidance and training for bothbusinesses and procurement staff in public bodies.’

Sam Mercer, Workplace Director, Business in the Community (BITC)

‘A standard framework would make life easier, and I’m sure it would be possibleto do, but it needs to be practically based and not over-legalistic. We used torespond individually to PQQs when tendering to supply banking services topublic bodies, but now we send them a standard pack, and supplement it withany necessary additional information. Even that can be time-consuming, and itcan be difficult to fit what we’re doing into their categories, because we’realways trying to go further in our global policies and standards – equality is agiven in the way we operate, now we’re working on integrating diversity andinclusion in the same way.’

Mark Palmer-Edgecumbe, Global Head of Diversity, Barclays Bank plc

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‘Up until about 2 years ago, there was normally some form of questioningaround equality, but it was a standard tick box exercise about adverse tribunaldecisions and so on. The first major tender where we had to do a lot of workexplaining what we do was for TfL, to undertake maintenance works in London.The TfL document was in 4 parts – equality, quality, costings, price structures.Envelopes 2 and 3 weren’t even looked at unless the equalities envelope up toscratch. The equalities envelope itself had 4 sections, relating to that contractbut also looking ahead to what we expect to be doing over the next 5 years andwho is responsible. That’s for a multi-million pound contract over a long period;others haven’t yet gone as far, but they are beginning to get there, and I spenda lot of time copying and pasting from one tender document to another. It wouldbe much easier if there was a standard framework, and we could explain ourdiversity response once, as a whole business.’

Lindsey Turnbull, Business Improvement and Diversity Manager, Siemens Traffic Control

PQQ1: Is it your policy as an employer to comply with your statutory obligations underthe Sex Discrimination Act 1975, Race Relations Act 1976, the DisabilityDiscrimination Act 1995, the Employment Equality (Religion or Belief) Regulations2003, the Employment Equality (Sexual Orientation) Regulations 2003 and theEmployment Equality (Age) Regulations and any subsequent equivalent legislationthat applies in Great Britain, or equivalent legislation that applies in the countries inwhich your firm employs staff?

Opinions differed whether this question was appropriate:

‘It is reasonable to ask whether a company obeys the law’

Tom Moran, CBI

‘Why are companies being asked to sign up to say that they’re not breaking thelaw? It feels very legalistic, especially with the list of acts and regulations.’

Sam Mercer, BITC

‘We ask a similar question of our key suppliers, and have been asked what thepoint is of asking about a statutory obligation – but it ensures these issues arebeing thought about.’

Lindsey Turnbull, Siemens Traffic Control

‘More definitions on the areas of equality the contractor is expected to takeaccount of are needed, because they are still not understood by everyone.’

Kirsten Proctor, Stakeholder Manager for Balfour Beatty/Carillion JointVenture and consultant with FSquared Limited

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PQQ2: Accordingly, is it your practice not to discriminate directly or indirectly ongrounds of sex, race, disability, religion or belief, sexual orientation or age in relationto decisions to recruit, remunerate, train, transfer or promote employees? Forexample, do you:

a) Issue instructions on non-discrimination to those concerned withrecruitment, selection, remuneration, training and promotion?

b) Communicate your policy on equality to employees, recognised trade unionsor other representative groups of employees?

c) Advertise your commitment to equality in recruitment advertisements and/orother literature?

d) Train staff with managerial responsibilities on equal opportunities?

e) Have procedures in place to protect your employees from unlawfuldiscrimination (including harassment)?

Please provide evidence to support your answer.

There was some doubt whether this was the right list of questions. Some thought itwas unproblematic or even too easy (Siemens, Carillion Balfour Beatty, BITC), but theCBI thought some of the evidence might be difficult to produce, and wanted moreguidance on what sort of evidence would be accepted.

‘It would be better for the procurer to have a checklist of what should becovered, and require the company to submit its policies. On constructionprojects, which are often joint ventures, there will be people from lots ofcompanies and no common culture or common equality and diversity policy.We wrote one especially for the consortium on the East London Line. A policydoesn’t have to be long, it can be adopted from someone else, just as is oftendone with health and safety policies. Smaller companies might require support,guidance and model policies to use.’

Kirsten Proctor, Balfour Beatty/Carillion and FSquared

‘This is very similar to what we have done before. For organisations whoalready undertake public contracts, this is business as usual, but for others,there will be some work to do. For us, there would be no problem in producingevidence of what we’re doing.’

Lindsey Turnbull, Siemens Traffic Control

‘This feels like red tape – designed by someone who doesn’t know about smallbusiness, and would not achieve what they want to. There would be a mountainof paperwork.’

Tim Fenn, Chairman, Oakwood Builders and Joinery Limited

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PQQ3: In the last three years has any finding of unlawful discrimination on grounds ofsex, race, disability, religion or belief, sexual orientation or age been made againstyour organisation by any UK court or tribunal, or in comparable proceedings in anyother jurisdiction?

PQQ4: In the last three years, has your organisation been the subject of formalinvestigation by the EOC, CRE, DRC or the EHRC, or a comparable equality body orhuman rights commission in your jurisdiction which has resulted in a finding ofunlawful discrimination in the employment field?

PQQ5: If you have answered yes to questions 3 or 4, what remedial measures haveyou taken as a result of such findings?

PQQ6: In the last three years have you been served with a Notice of Breach ofcontract conditions relating to workplace equality requirements by a UK public bodywhich has not been withdrawn, or have you otherwise been notified by a UK publicbody that you have committed a breach of such conditions?

PQQ7: If you have answered yes to question 6, what remedial measures have youtaken following service of any such notification?

These questions were generally felt to be reasonable, although it was suggested thatthey should ask for more detail of the finding, rather than just its existence andremedial measures. However, on PQQ3, the two employers’ organisations (CBI andBITC) expressed doubts as to the quality of Employment Tribunal decision-making,which they felt might lead to an unfair finding against a company. At worst, adisgruntled employee could have an excessive influence on a company’s futureprospects of obtaining public sector work. On PQQ6, a question was raised why aprocurer should not also have to be told about a cleared breach of contractual equalityconditions, even if it could quickly be made clear how the breach had been fixed.

There was some discussion of the overall purpose of the PQQs:

‘The question about these is whether the EDF is proposing that a negativeanswer is a way of ruling a company out altogether. There will always be someadditional steps which a company involved in tendering for public sectorcontracts will have to take; an analogy is that a construction company would beasked whether it complies with health and safety law and good practice. Thepublic body’s job is to procure a service that delivers for the public. In doing so,they may have to check off a whole range of things – sound finance, health andsafety, engagement with local community groups, as well as equality. All thesewill be managed as an ongoing part of the contract: this is effective, value formoney procurement, but the CBI draws the line at public bodies determininginternal company procedures.’

Tom Moran, CBI

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‘From discussions with BITC members, the real issue is that equality is one ofa number of priorities in their business and in the tendering process. How is thebalance struck between the different priorities? If an employer goes throughhoops to meet the equality provisions, what weighting does that have in thedecision-making process, as against other factors such as price, environmentalpractices, etc?’

Sam Mercer, BITC

‘The issue is how the procurer evaluates and scores the questions, which maybe different in different places, so the weighting needs to be made clear. Butthere does need to be a concept of pass or fail on each question, and acompany that doesn’t pass shouldn’t get on the supplier list. Companies willcomply with the requirements because it’s what the client wants, though somesee this as the future anyway, and putting it into the contract benefits them.’

Kirsten Proctor, Balfour-Beatty/Carillion and FSquared

‘The big question is what they do with the information you provide. There’s adanger that you make it too complicated. For me, the evidence whether you’rea fair employer speaks for itself – do you have diversity in your workforce at alllevels including management, do you have long-serving employees, do youspend money on skills training?’

Tim Fenn, Oakwood Builders

Contract term 1: The Contractor shall not unlawfully discriminate on grounds of sex,race, disability, sexual orientation, gender identity, religion or belief or age within themeaning and scope of any anti-discrimination law, enactment, order or regulationrelating to employment within the UK or the European Union.

There was no problem with this contract term except that one interviewee questionedwhether it could have been expressed in less legal language, so as to be clearer.

Contract term 2: The Contractor shall take all reasonable steps to ensure theobservance of clause 1 by all servants, employees or agents of the Contractor and allsuppliers and sub-contractors employed in the performance of the contract.

This contract term was criticised for being vague – what steps are ‘reasonable’ for afirst tier contractor? Does this mean a meeting to tell them to do better, or would thefirst tier contractor be expected to remove them from the project? How would acompany know which was appropriate? And does it really mean every supplier,regardless of how far down the supply chain they are and how little they aresupplying? Is it reasonable to expect the main contractor to know about ‘all suppliersand sub-contractors employed in the performance of the contract’?

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‘Employers have different relationships with their suppliers; sometimes it’s apartnership towards achieving shared goals of sustainability, equality, and soon. But if you’re a main contractor on a big project working with thousands ofsuppliers, it’s impossible to have that relationship with them. There’s a dangerthat this would result in a safety first approach where businesses only workedwith others they know well, leading to very inflexible “approved supplier” lists,which no company ever moves onto or off. It’s also difficult to see how it wouldwork in the context of cross-border purchasing.’

Sam Mercer, BITC

Contract term 3: For the purpose of compliance with clause 1 in respect of all personsemployed by the Contractor for the performance of the contract, the Contractor shall,so far as possible, observe the provisions of Codes of Practice on Employment andCode of Practice on Equal Pay issued by the Equality and Human Rights Commissionand/or the Equal Opportunities Commission, the Commission for Racial Equality andthe Disability Rights Commission.

This term was also widely criticised for not being clear what businesses would besigning up to, largely because it is expressed by reference to other documents whichinterviewees felt it unlikely that contractors would go and find. If it means thatcontractors should have carried out an equal pay audit, it should say so clearly –although requiring a formal Equal Pay Audit would not be welcome.

‘Conditions 1-3 are fine, so far as they are requirements to comply with the law,but CBI members are firmly opposed to proposals that would result ininterference with the internal HR of a company, for example requiring equal payaudits.’

Tom Moran, CBI

‘Are people going to find the time to find all these documents and examinethem? The danger is it becomes a tick box exercise; instead the contractwording needs to list the salient points of what is being required. But if it doesmean an Equal Pay Audit, that is a big commitment, and public bodies won’tfind enough contractors if that is what is required.’

Lindsey Turnbull, Siemens Traffic Control

This was not the only objection:

‘Just asking people to comply with the law won’t help public bodies assesswhich company has the strongest record on inclusion and diversity – thisapproach won’t necessarily influence change.’

Sam Mercer, BITC

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Contract term 4: Where in the performance of this contract, the Contractor, itsservants, employees or agents are required to carry out work on the Authority’spremises or to work alongside the Authority’s employees on any other premises, theContractor shall comply with the Authority’s own employment policies including itspolicies on equality of opportunity and equal pay, copies of which are annexed.

This term caused significant problems, as interviewees did not find its meaningobvious. Does it require a contractor to change its employees’ terms and conditions tobring them in line with those of the public body? Does it mean that a contractingcompany has to comply with the public sector duty in exactly the same way as thebody with which it is contracting, and to have carried out a formal equal pay audit?Companies may have reasons for not carrying out an equal pay audit that are notsinister, for example, that they have confidence in their pay structures and havefocused on other, to them more pressing, equality issues first.

Contract term 5: With reference to the persons employed by the Contractor for theperformance of the contract, having regard to the overall capacity of the Contractor,the Contractor shall:

a. Maintain or adopt appropriate measures to protect such persons fromunlawful discrimination or harassment on grounds of sex, race, disability,sexual orientation, gender identity, religion or belief or age;

b. Maintain or adopt appropriate measures in respect of such employment toensure equality of opportunity on grounds of sex, race, disability, sexualorientation, gender identity, religion or belief or age in access to employment,access to training and working conditions including pay.

Where the total number of people working on the contract is in excess of [X], thefollowing additional provisions shall apply to the workforce working within the UK. [TheContractor shall, unless it is an SME employing fewer than 250 people]:

c. Monitor the participation and rates of pay of persons of different racial orethnic origin, women and men and people with disabilities, in each type ofjob and at each level of the organisation;

d. Where the monitoring in (c) shows under–representation of groups definedby racial or ethnic origin, sex or disability, take appropriate measures toimprove the representation of persons of under-represented groups in eachtype of job, and at each level of the organisation;

e. Where the monitoring in (c) shows inequality in pay between men andwomen contrary to the Equal Pay Act 1970 or any superseding legislation,take appropriate measures to secure and maintain equal pay for all relevantemployees.

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There was no difficulty for any interviewees with paragraphs (a) and (b), but (c) to (e)were felt to be problematic for a number of reasons:

‘What if the whole UK workforce is not involved in the contract, but only a partof it; would it all have to be audited? If a company does not operate wholly inthe public sector, would an equality audit be expected of the whole company?Is this an appropriate judgement or not? The Government’s intention from theEquality Bill announcement appears to be specifically to expect privatecompanies tendering for public contracts to have undertaken an Equal PayAudit and to publish data on the diversity of their workforce; if they fail in eitherrespect, a company that does take these steps will win the contract, regardlessof the relevance of diversity considerations to the effective fulfilment of thecontract, i.e. delivery of the service or supply of the goods.

The effect of the Government’s proposals would be to shift the aim of usingequality considerations in procurement from making sure that the service to bedelivered meets diverse needs to using procurement as an opportunity toextend the public sector duty to the private sector. Individual contractors mightsupport the approach but the CBI cannot, on behalf of all its members, acceptfurther regulation without proper scrutiny.’

Tom Moran, CBI

‘Some diversity figures do depend on where a business is located.’

Sam Mercer, BITC

‘This feels as if it is requiring companies to put in place quotas for particulargroups. And does (e) really mean an equal pay audit of the whole business?’

Mark Palmer-Edgecumbe, Barclays

‘What is meant by “appropriate measures” in (d)? Is it requiring positive action?’

Kirsten Proctor: Balfour Beatty/Carillion and FSquared

‘I’m in favour of some monitoring of the workforce. That’s the South Africanapproach – I worked there for a time post-apartheid – to ask what numbers youhave working for you from different groups, what’s their level and pay, are theyin management? On the other hand, I don’t want a public servant to monitor itfor me – delving into the business, marking people out. That’s doing theopposite of what you were trying to achieve in the first place, surely the aim isto see them as a person with a skill, who is part of a team, not as someonedifferent.’

Tim Fenn, Oakwood Builders

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Contract term 6: Within [ ] months of the commencement of the contract and each 12months thereafter , the Contractor shall provide to the Authority such information asthe Authority may reasonably require to assess the Contractor’s compliance withclauses 1 – 6 above.

This term attracted few comments, the only suggestions being that it should besupported by a standard format for the report by the contractor, with clear guidance onwhat should be included, such as action plans, key performance indicators, etc. Insome cases, more detail would be required, with audits built into clauses and a degreeof specificity about how soon agreed actions should take place and how they will bemonitored, e.g. through quarterly meetings.

Contract term 7: The Contractor shall impose obligations on any sub-contractorengaged in the performance of this contract in terms substantially similar to thoseimposed on it under clauses 1 – 7 above.

It was not clear to interviewees how this term added significantly to contract term 2. Italso raised questions about how the public body would monitor it, since it did notappear to be included in the report required in contract term 6.

‘This seems very broad; what size of supplier is being thought of here, and whatlevel of spend? Here at Siemens, we engage with our top 40 suppliers, thosewe spend most with, but this could be talking about the company that suppliesthe paperclips!’

Lindsey Turnbull, Siemens Traffic Control

Effect of failure to comply

A. A failure to comply with clauses 1 – 7 above may be treated as a breach of acondition of the contract and may lead to the issuing of a Notice of Breach ofEquality Requirements.

B. This notice may be referred to by contracting authorities in the selection oftenderers for future work for a period of three years from the date of its issue.

C. The Contractor may, within six months of the date of issue of a Notice of Breachof Equality Requirements submit a request that the Notice be withdrawn on thebasis of an Equality Progress Report demonstrating the effectiveimplementation of the Equality Plan.

D. Any decision by the Authority to withdraw a Notice shall be determined at itssole discretion, taking into account all evidence submitted by the Contractor insupport of its request.

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Disputes

E. Disputes relating to the Equality Requirements and the Notice of Breach shallbe dealt with through..........

This section of the draft contract appeared to interviewees to set up a formalprocedure specifically in relation to this part of the contract; this required moreexplanation. They considered that the logical outcome of a failure to rectify a breachwas that the public body would be expected to end the contractual relationship, andinterviewees questioned how realistic this is, given how many other measures ofperformance the contract is likely to contain. However, the EDF’s intention here wasto set in place a procedure to identify that an equality term had been breached so thatremedial action could be taken. The only sanction would lie in the fact that this Noticewould show up in the answers to future PQQs. The EDF accepts that it would not bepractical or proportionate for a breach of an equality provision in the performance of acontract to lead to the termination of the contract.

‘Currently, procurers don’t regard breach of equality requirements in a contractas make or break if a company is delivering well on the rest of contract. Theyare more likely to work with the company to resolve the issue unless the breachis central or extreme. Public bodies are unlikely to want to be made to sack acontractor just for breach of this clause.’

Tom Moran, CBI

‘It should be OK to try things out and work collaboratively with the awardingbody – even occasionally to get things wrong and improve them, learning frommistakes– but the contract needs to set timescales to allow for this.’

Kirsten Proctor, Balfour Beatty/Carillion and FSquared

Interviewees identified some important overarching points too:

Distinguishing achievement from compliance

Kirsten Proctor, Balfour Beatty/Carillion and FSquared: ‘Procurement should bebased on a collaborative way of working between public and private sectors,which means the spirit of the law is important as its letter. This draft is almosttoo minimalist in its expectations: raising the standard of equality and diversitypractice via a sustainable procurement policy should not be about basiccompliance. If the minimum standard is offered, then that becomes the norm.

When Balfour Beatty/Carillion tendered for the East London Line contract withTfL, that was the first time they had seen such rigorous requirements onequality, which is why they brought in external support. Now this approach isbecoming more usual.

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Making the questions more open ended would allow companies to say moreabout what they are doing. More could be done to demonstrate that this isabout positive benefits for the companies that take part, leading to themwinning more work, provided the public sector is robust in what it requires,and in following through to make sure that what is promised is delivered.Equality and diversity should not take away from the delivery timetable but theimpact of including them in the contracting process should be felt. Publicbodies should be selling the benefits of doing business in this way, introducingit as the right thing to do because they believe it is important.’

Sam Mercer, BITC: ‘We want companies to be hiring the best people, the besttalent – and that means good equality policies. If the framework could besimplified further, it would be possible to incorporate the more difficultquestion that separates those companies who are really doing somethingfrom those who know what to say. Possibly a question such as “Whatmeasures do you take to ensure diversity and inclusion in your workforce?”would be the only question you would need. That would enable a public bodyto see the difference very quickly between those who downloaded their equality policy from the web and those who really have something toshout about.’

Mark Palmer-Edgecumbe, Barclays: ‘What’s needed is flexibility, with differentexpectations for different sizes of company. For an SME, requirements couldbe very basic – do you comply with the law? – for a national company, 250people or more, you’d expect more, while a large global company should haveto do much more and be able to demonstrate what difference it’s making.Something like that would be much more useful. It would provide businesseswith an opportunity not just to demonstrate that they’ve grasped the basics,but to show off innovative practice.

Those pushing for a framework need to think why they want it. If it’s all aboutcomplying with the legislation and no more, then this is a very painful way todemonstrate compliance with law. But if it is trying to ensure that good equalitypractice makes the difference between winning a contract and not winning acontract, then what’s needed is a framework that gives companies anopportunity to demonstrate what they’re really doing.’

The role of buyers

Mark Palmer-Edgecumbe, Barclays: ‘The problem with procurers in the publicsector is that they expect business to operate in the same way they do. I find Ihave to explain and demonstrate that we are doing what they are looking for,quite possibly better than they are. Often what they want is everyone to be atthe minimum starting point, so if you can’t tick the boxes because yourapproach is different from theirs, you don’t get the contract.

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You don’t get innovation by having a rigid framework. Our baseline is that weare a meritocracy, we don’t discriminate, then we build on that. Now our focusis much more on diversity and inclusion. The problem with procurementprocesses is that they try to put a rigid structure in place on the assumption thatemployers want to discriminate – but generally employers don’t want to.’

Tim Fenn, Oakwood Builders: ‘The question is how to deliver the right culture,one where equal opportunities isn’t just something in a policy document whichmay not mean anything. If the people who wanted all this information werehelping a business to improve, then great, but I’m sceptical, I think they’d justbe trying to find something wrong.’

Linking equality with other frameworks

Tim Fenn, Oakwood Builders: ‘If it was up to me, the standard I’d choose isInvestors in People – you could incorporate equality issues into that. In a smallcompany, they interview all the staff, they look at your management systems,there are expectations about how you treat people.

A kitemark might work, but it’s better to put it all in one place. If it’s standalone,then again you’re going to get big companies whose policies are all on papergetting it, whereas Investors in People is very hard to fiddle.

I’d say “if you want a government contract, you must have Investors in People(IiP) at a certain level”. IiP contributes to the way a business is run, and coversworkforce development and training, whether you recognise a union and so on.There could be a small added equality component but you probably wouldn’thave to change much, it would come out if you weren’t treating people fairly. It’sa pretty rigorous process, and there are different levels, so that could be usedto push companies further.’

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5: Conclusions and recommendations

European and domestic law both allow considerable scope for public bodies to ensurethat, when commissioning private or voluntary sector organisations to carry out workon their behalf, those organisations are not acting in conflict with the public sector dutyto promote equality and eliminate unlawful discrimination. Companies can beexcluded from tendering if they have committed a serious breach of equality law anddone nothing to rectify it.

Further, pre-qualification questions about a company’s positive track record onequality and diversity can legitimately be used to provide an authority withreassurance that the organisation has the capacity to deliver the contract in a way thataccords with the equality duties.

There remains the question of when equality considerations are relevant to the subjectmatter of the contract. A normal equality impact assessment, carried out at an earlystage and as a matter of course under the public sector duties should tell procurementstaff what weight to give to the answers to the PQQs on equality matters.

EU guidance specifically states that contracting authorities can require successfultenderers to implement, during the execution of the contract, measures that aredesigned to promote equality. This clearly allows public bodies to ensure that contractsare carried out in a way that fits with the equality duties.

Given the multiplicity of approaches to applying the equality duties to procurement, thevariety in questions asked, and the unnecessary complexity this adds for bothtenderers and procurement staff in public bodies, there is a strong case for finding acommon framework that can be applied to all procurement processes.

The interviewees felt that a standard template is desirable, but for one reason andanother, this draft has not yet succeeded in providing one that would work in practice.While the interviewees only represent a small sample of business opinion, they workfor companies with extensive procurement experience and/or with a good track recordon equality or they represent business membership organisations. Further work andreflection will be needed to achieve the shared goal of a common approach.

Recommendations

1. There should be a concerted effort by the OGC, The Department for Business,Enterprise & Regulatory Reform (BERR) and the Government EqualitiesOffice, working with business organisations, equality organisations, andthose representing procurers and public bodies, to establish a standardequality-related framework that everyone uses. This could be supplemented byorganisations such as Constructionline which avoid the need for questions to beanswered over and over again, but the key issue is to have a single set of equality-related PQQs and contract terms that become as familiar to companies andprocurers as the questions about a company’s financial health and the requirementin many Government contracts to pay taxes as they fall due.

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2. The existence of a standard equality-related framework should not preventdifferent weight being given to the PQQ answers or to the importance ofequality terms in the individual contract, if, for example, a procurementofficer had concluded from an equality impact assessment that the subjectmatter of the contract offered little scope for the promotion of equality andgood relations or elimination of unlawful discrimination. This should enablethe relevance test to be met, by ensuring that each contract is individuallyconsidered, without losing the benefit of the standard framework.

3. The PQQs should include some open questions to give those companiesthat go beyond mere compliance to promote equality, diversity andinclusion an opportunity to demonstrate this. This would reward companieswho do more than is legally required of them, and help spread good equalitypractice.

4. The PQQs and contract terms should be drafted in plain English and notassume a familiarity with legal terms, the contents of legislation or equality jargon.

5. The PQQs and contract terms should be sufficiently detailed to enablecompanies to understand exactly what will be involved in carrying out theequality aspects of the contract, e.g. what training should be provided tostaff, what should be done to communicate equality standards to suppliers.Again, the focus should be on spelling out the practical steps required to achievethe requirements. Key performance indicators should be developed and theseshould take account of issues of geography, including the proportion of theworkforce of national and international companies affected by any equalityrequirements, e.g. monitoring.

6. While still promoting equality, contract terms should not require companiesto act extraordinarily differently from the majority of businesses of theirsize, so for example, formal equal pay audits should not be mandatory (given thatthe Government has decided not to impose them on the private sector) andmonitoring of the workforce should be optional for SMEs. There should beproportionality in relation to what is expected of different sizes of company, andcompanies should be assessed on their performance on equality in the round.

7. The demands that are placed on businesses on equality matters should beset alongside those that relate to other social issues such as environmentalissues and skills training to ensure that overall monitoring, reporting and trainingrequirements are reasonable in the context of the contract as a whole.

8. When implemented, the PQQs and contract terms should be underpinnedby practical guidance and explanation, and a support service forbusinesses seeking their first few public sector contracts and completing thePQQs/grasping the implications of the contract terms for the first time. This wouldhelp small businesses to compete against larger companies with a dedicatedhuman resources/contracting function.

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9. Staff with responsibility for procurement processes should be trained andsupported in relation to equality and other social issues, and in particular howto:

a. carry out an equality impact assessment and translate it into a scoringsystem for the PQQs and contract terms for a particular contract;

b. be fair in assessing evidence that is presented other than as a standardequal opportunities policy or formal equal pay audit, so they can work outwhether a business has good equality practices, not just well-draftedpolicies; and

c. work collaboratively with contractors to ensure that equality considerationsare not forgotten immediately the contract is signed.

10. Rather than a separate equality kitemark for businesses, considerationshould be given to encouraging procurers and companies themselves toplace more emphasis on the equality and diversity aspects of the Investorsin People (IiP) standard, and to use these as part of the evidence suppliedunder the PQQs. IiP states that its framework provides an excellent tool forhelping organisations understand the wider benefits to be gained ‘by anorganisation taking the issue of equality and diversity seriously and developing aclear strategy for its advancement. This goes beyond the obvious issues ofcomplying with the law (although of course important) and embraces thepossibility of enhancing recruitment, selection, retention, motivation,effectiveness, loyalty and the management of talent... given that the frameworkties together all aspects of people management practice and emphasises theneed to link these to organisational performance in real terms.’32 Using thisexisting framework would achieve much the same as a kitemark but avoid theneed for yet another set of standards, team of assessors and expense tobusiness.

11. The Government should seize the opportunity offered by the Equality Bill toprovide clarification of the relationship between procurement and equality.There is still considerable confusion about the difference between PQQs and contractterms and how each can be used, and the extent to which both EU and domesticlegislation permit public bodies to insist that contractors act in accordance with theequality duties at each stage of the procurement process. The Equality Bill couldmake this explicit, in the context of the single public sector duty.

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Acknowledgements

We would like to thank the individuals from companies and other businessorganisations who gave up their time to consider the draft and offer us their views:

Tim Fenn, chairman of family-run SME Oakwood Builders and Joinery;

Sam Mercer, Workplace Director, Business in the Community;

Tom Moran, until recently Principal Policy Adviser on procurement at theConfederation of British Industry;

Mark Palmer-Edgecumbe, Global Head of Diversity, Barclays Bank plc;

Kirsten Proctor, Stakeholder Manager for Balfour Beatty/Carillion Joint Venture andconsultant with FSquared Limited;

Lindsey Turnbull, Business Improvement and Diversity Manager, Siemens TrafficControl.

EDF thanks the DG for Employment, Social Affairs and Equal Opportunities of theEuropean Commission for providing funding for this report under the EuropeanCommunity Programme for Employment and Social Solidarity (2007-2013).

EDF also wishes to thank the Barrow Cadbury Trust and the Joseph RowntreeCharitable Trust for their support.

Clare Cozens, who was commissioned by the EDF to test the draft framework withprivate sector organisations, to set the responses in context and to makerecommendations for how the framework could be taken forward, is an equality andpolicy consultant; she is a qualified barrister, who has worked in a variety of roles,some of which have required close collaboration with the private sector, and apractical understanding of the needs of business, including working as special adviserto two Ministers for Women and Equality.

49

References1 Figures taken from the Office of Government Commerce (OGC) press release regarding the Government

Procurement Service Graduate recruitment scheme. See www.ogc.gov.uk/about_OGC_news_8620.asp.

2 The Government has indicated that the Equality Bill, expected in the 2008-09 Parliamentary session, willintroduce a single equality duty on public bodies covering race, disability, gender, gender reassignment, sexualorientation, religion or belief and age.

3 See, for example, http://www.employmenttribunals.gov.uk/Documents/Publications/AnnualStatictics0607.pdf.

4 The report of the Business Commission can be found at http://www.dwp.gov.uk/ndpb/nep-pdfs/BusCommissionReport.pdf.

5 Seehttp://www.cbi.org.uk/ndbs/positiondoc.nsf/1f08ec61711f29768025672a0055f7a8/6C542FC2A9CAA166802570F2004CFE9C/$file/equalitiesreview1205.pdf.

6 2004/18/EC, available at http://eur-lex.europa.eu.

7 Case 31/87.

8 Public Contracts Regulations 2006 and parallel regulations that apply in Scotland, seehttp://www.opsi.gov.uk/si/si2006/20060005.htm andhttp://www.opsi.gov.uk/legislation/scotland/ssi2006/20060001.htm.

9 (Com 2001) 566 final, available at http://www.europa.eu, together with the FAQs set out here.

10 Available at http://www.ogc.gov.uk/Model_terms_and_conditions_for_goods_and_services.asp.

11 See http://www.ogc.gov.uk/documents/Social_Issues_in_Purchasing.pdf.

12 See the judgment in The Queen on the application of Kaur & Shah v. London Borough of Ealing [2008] EWHC2062 (Admin), available athttp://www.publiclawproject.org.uk/documents/KaurandShahvLondonBoroughofEaling.pdf.

13 See http://www.ogc.gov.uk/documents/Social_Issues_in_Public_Procurement.pdf.

14 Fairness, a new contract with the public, the EHRC’s response to the Equality Bill announcement (July 2008), athttp://www.equalityhumanrights.com/Documents/DLRresponses/Fairness_Final.pdf.

15 Cm 7431, June 2008 (HMSO), athttp://www.equalities.gov.uk/publications/FRAMEWORK%20FAIRER%20FUTURE.pdf.

16 Cm 7454, July 2008 (HMSO) athttp://www.equalities.gov.uk/publications/Government_Response_to_the_consultation.pdf.

17 See http://www.mosaic.nhs.uk/.

18 See http://www.southyorks.gov.uk/embedded_object.asp?docid=6168&doclib.

19 See http://www.cleveland.police.uk/news_resources/equality/R_Procurement.htm.

20 Seehttps://www.bluelight.gov.uk/systems/surreypolicecms.nsf/vLiveDocs/16BDCF2D44CD92868025720D0030F6EE?OpenDocument.

21 See http://www.dur.ac.uk/diversity.equality/policy6/.

22 See http://www.london.gov.uk/gla/tenders/docs/responsibleprocurementreport.pdf.

23 Available at http://www.idea.gov.uk/idk/aio/6531086.

24 See http://www.calderdale.gov.uk/council/tenders/corporate-procurement/equality-procurement/passport-equality-procurement.pdf.

25 See http://www.nottinghamshire.gov.uk/environment-procure.pdf.

26 See http://www.caerphilly.gov.uk/pdf/Council_Democracy/ccbc-race-equality-appendix4.pdf.

27 See http://www.wolverhampton.gov.uk/business/opportunities/council/forum.

28 See http://www.constructionline.co.uk.

39 See http://www.exorgroup.co.uk/documents/public/Jun2007/ACF578F.pdf.

30 See http://www.c2e.co.uk/registration.htm.

31 Available at http://www.official-documents.gov.uk/document/hc0708/hc06/0696/0696.asp.

32 See http://www.investorsinpeople.co.uk/Documents/New%20Choices/Equality%20and%20Diversity%20-%20Assessment%20Guide.pdf.

Equality and Diversity Forum207-221 Pentonville Road, London N1 9UZ Tel: 020-7843 1597, Fax 020-7843 1599, email info@edf.org.uk, website www.edf.org.uk

Production of this publication was supported by the Directorate-Generale for Employment, Social Affairs andEqual Opportunities of the European Commission. Its funding was provided for under the European CommunityProgramme for Employment and Social Solidarity (2007-2013).

This programme was established to financially support the implementation of the objectives of the EuropeanUnion in the employment and social affairs area, as set out in the Social Agenda, and thereby contribute to theachievement of the Lisbon Strategy goals in these fields.