Procurement Annual Report

1 April 2024 to 31 March 2025.

IMAGE: The Orkney Islands Council crest and logo appear above the title “Procurement Annual Report” and the date “1 April 2024 to 31 March 2025.”

Contents

• Introduction — 5
• Section 1 – Summary of Regulated Procurements Completed — 7
• Section 2 – Review of Regulated Procurement Compliance — 8
  • Procurement and Commercial Improvement Programme (PCIP) — 8
  • Internal Audit — 9
  • Contract Standing Orders — 10
  • Procurement Strategy — 10
• Section 3 – Community Benefit Summary — 11
  • Procurements that have included Community Benefits — 11
  • Other considerations — 13
• Section 4 – Supported Businesses Summary — 15
• Section 5 – Future Regulated Procurements Summary — 16
• Section 6 – Other Information — 17
  • Supplier Development — 17
  • Collaboration and Partnering Opportunities — 17
  • Procurement Annual Spend Data — 21
  • Climate Change Duties — 23
  • Biodiversity Duty — 24
  • Scotland’s Public Procurement Reporting Requirements for 2024-25 — 24
• Appendix 1 – Summary of Regulated Procurements 1 April 2024 to 31 March 2025 — 25
• Appendix 2 – Procurement Strategy Targets/Indicators 2023 to 2028 — 32
• Appendix 3 - Forward Plan for Regulated and Unregulated Procurements April 2025 to March 2027 — 36
• Future Capital Projects — 42

Definition of Key Terms

Introduction

Orkney Islands Council (‘the Council’), provides a range of facilities and services to a community with a population estimated as 22,020 in mid-2024 by the Office of National Statistics. The Council is also the Harbour Authority with a port estate of 29 piers and harbours, a Roads Authority for the islands and operates a network of inter-island air and ferry services.

The Council provides procurement and related services for a wide range of works, supplies and services with an annual spend, for the financial year 2024 to 2025, of over £67 million.

The Council operates a devolved model of procurement across four directorates including Orkney Health and Care. The central Procurement Services Team is based within Corporate Governance and consists of 4.7 full-time equivalent staff: a Service Manager (Procurement), three Procurement Officers and an Assistant Procurement Officer post.

The Service Manager’s responsibilities include the development of a network of 16 trained and experienced officers across the Council who are assigned delegated responsibility for the procurement of supplies, services and works.

The Council published its updated Procurement Strategy 2023-2028, as required by the Procurement Reform (Scotland) Act 2014 (“the Act”), in December 2023. To report compliance with its Procurement Strategy and the Act itself, the Council must publish an annual report.

There are 11 key priorities identified in the Procurement Strategy as follows:

• Sustainability, Climate Change and Net Zero Targets.
• Working with local suppliers.
• Value for money.
• Collaboration and partnering.
• Governance.
• Contract management.
• Communication.
• E-Procurement.
• Monitoring and measurement.
• Guidance.
• Training.

There are six key priority areas where targets and indicators have been identified and are attributable for the Procurement Strategy reporting period ending 31 March 2024 and are as follows:

• Sustainability.
• Working with local suppliers.
• Value for money.
• Collaboration and partnering.
• Contract management.
• E-Procurement.

The guidance and template issued by the Scottish Government has been used for this eighth Procurement Annual Report. The reporting period for this eighth annual report is from 1 April 2024 to 31 March 2025.

In addition to the required information set out in the Act, this report includes performance against several strategic indicators as detailed in the Council’s Procurement Strategy 2023 to 2028.

To evidence our progress against our strategic targets and the new duties introduced by the Act, the published Annual Report details the form of measurements taken. The statistics presented in this report provide the evidence which should, over time, show how the Council is progressing against both the national and local objectives. Targets were set in the Council’s Procurement Strategy and progress towards these has been noted in this eighth Procurement Annual Report.

Section 1 – Summary of Regulated Procurements Completed

Section 18(2) of the Act requires organisations to include ‘a summary of the regulated procurements that have been completed during the year covered by the report’.

As defined by the Act and referred to as the Reform Act ‘slice’ a regulated procurement is for Goods or Services Contracts with a value of £50,000 or above and for Works Contracts over £2,000,000 and less than the relevant Thresholds.

A Regulated Procurement is completed when the award notice is published or where the procurement process otherwise comes to an end. This includes contracts and framework agreements.

Appendix 1 provides the breakdown of the Regulated Procurements completed for the reporting period of 1 April 2024 to 31 March 2025.

Section 2 – Review of Regulated Procurement Compliance

All procurement exercises carried out by the Council are required to be carried out in accordance with the Council’s Contract Standing Orders (CSOs) and these are regularly updated to take account of changes in legislation and best practice in procurement. The CSOs were last reviewed and updated in February 2024.

Prior to the point of contract award, all recommendation reports are required to include a statement that the CSOs have been complied with, therefore full compliance is anticipated. Examples of internal and external review of the Council’s processes and compliance with these processes are detailed in the audit / improvement capability outcomes as follows:

Procurement and Commercial Improvement Programme (PCIP)

The Council first completed Scotland Excel’s PCIP in July 2017. The PCIP is generally undertaken every two years, the most recent undertaken on 19 March 2024. Outcomes and recommendations from this exercise are incorporated into the Procurement Team Service Improvement Plan as a process of ongoing improvement.

The objective of the PCIP is to assist the Council to improve its structure, capability, processes and ultimately performance by attaining a level of procurement performance that is appropriate to the scale and complexity of its business. As part of the PCIP the Council is required to demonstrate a prudent and well-planned approach to defining its supply needs. Assessment of the Council’s procurement improvement capability is carried out by Scotland’s Centre of Expertise, Scotland Excel, and covers procurement activities carried out by the Council’s Officers with Delegated Authority in the Procurement, Capital Projects, Facilities and Engineering Teams.

The PCIP identified the following Key Opportunities for further improvement, all of which have been incorporated into the Procurement Service Improvement Plan with work ongoing to complete these tasks.

Internal Audit

The following three internal audits were undertaken within the reporting period of 1 April 2024 to 31 March 2025.

Works, Inspection, Repairs and Maintenance

An Internal Audit of Works, Inspection, Repairs and Maintenance was completed during the reporting period 2024/25. The findings of this report were presented to the Monitoring and Audit Committee on 26 September 2024 and provided adequate assurance around the framework of governance, risk management and control relating to Works, Inspection, Repairs and Maintenance. The Audit Report is available here.

Insurance Processes

An Internal Audit of Insurance Processes was completed during the reporting period 2024/25. The findings of this report were presented to the Monitoring and Audit Committee on 13 February 2025 and provided substantial assurance around the framework of governance, risk management and control relating to Insurance Processes. The Audit Report is available here.

Orkney Health and Care Payment Processes

An Internal Audit of Orkney Health and Care (OHAC) Payment Processes was completed during the reporting period 2024/25. The findings of this report were presented to the Monitoring and Audit Committee on 13 February 2025 and provided unsatisfactory assurance around the framework of governance, risk management and control relating to OHAC Payment Processes. The Audit Report was heard in private as there was exempt information contained within the report.

Chair of the Monitoring and Audit Committee Councillor Lindsay Hall said: “This was undoubtedly a report which gave Councillors significant concern. The issues raised were given a good going over by the members of the committee, with many difficult and uncomfortable questions asked of the staff team present.

“We were reassured that, in most cases, the issues it raised had been identified and taken forward for action before the report came before us – with some actions already completed.

“It was clear to elected members that this was not about any individual wrongdoing but a lack of clear processes and policies - and that significant steps are already underway to make improvements in this regard.”

A follow up report is due to come back to the Monitoring and Audit Committee in February 2026.

Contract Standing Orders

The Council’s Contract Standing Orders are regularly updated to take account of changes in legislation. The latest update of the Council’s Contract Standing Orders was undertaken in February 2024 to take account of the Threshold changes which took effect in January 2024, and the requirement to undertake financial assessments for contracts put in place using the Non Competitive Action procedure, as a result of an internal audit recommendation.

All Contracts awarded by the Council, regardless of value, are subject to an obligation to seek best value and to demonstrate transparency, equal treatment, non-discrimination, and proportionality.

Contracts awarded by the Council must comply with the CSOs.

Officers are required to comply with the CSOs, the Scheme of Delegation to Officers, the Scheme of Administration, and the Financial Regulations.

Procurement Strategy

The Council’s Procurement Strategy was first published in December 2016.

The Strategy was updated in January 2019, again for the period 2021 to 2023 and a further revised Strategy approved in December 2023 for the period 2023-2028 following a public consultation undertaken in the Summer of 2023.

Appendix 2 attached to this report includes the revised Procurement Strategy targets set out in the latest Strategy for 2023 to 2028 and records the progress made over the last financial year.

Section 3 – Community Benefit Summary

The Council has a Sustainable Procurement Policy. This Policy sets out the general principles that the Council will follow across all its procurement and commissioning activities to ensure that these are undertaken in a sustainable manner.

This Policy also sets out how the Council will plan and manage its procurement activities to meet the Council’s corporate aims and objectives and comply with regulatory and legislative requirements. Finally, the Policy supports the Council’s commitment to sustainable procurement which is set out in the Council’s Corporate Procurement Strategy 2023-2028.

The Procurement Strategy is intended for all of those who are involved in, or affected by, the Council’s procurement activities throughout our community and beyond. The Council spends tens of millions of pounds each year on a diverse range of goods, services and works from third parties. It is important therefore that this spending power is used to support key Council objectives. The Sustainable Procurement Policy has been developed to help the Council to meet its legal duties and to deliver its key strategic objectives. The Sustainable Procurement Policy was updated and approved by Council in March 2022.

Due to the Council’s fast developing policy to meet its Climate Change Duties and progress to Net Zero, the Sustainable Procurement Policy was further reviewed following a public consultation in 2024 to align with the Council Plan and Procurement Strategy.

Sustainable procurement supports the Council’s values, as outlined in the Council Plan 2023-2028 and the Council Delivery Plan 2023-2028 which cover the reporting period of this Procurement Annual Report.

This Procurement Annual Report will report on the Procurement Strategy 2023 to 2028 which is aligned to the new Council Plan 2023-2028, which has the following strategic priorities:

• Growing our Economy.
• Strengthening our Communities.
• Developing our Infrastructure.
• Transforming our Council.

It is a statutory requirement that Community Benefits must be considered for all procurement processes at or above £4 million in value to meet the Council’s requirement to meet the sustainable procurement duty.

For each individual Regulated Procurement exercise, Officers with Delegated Procurement Authority must complete a ‘Commodity Strategy for all Regulated Procurements’ which includes a section on Community Benefits to be considered where applicable.

Procurements that have included Community Benefits

There have been five procurements carried out by the Council, where Community Benefits for procurements with a contract value over the £4,000,000 threshold, have been included.

For procurement of Category C (local contract / framework including local collaborative framework agreements) Contracts which are undertaken by the Council, Community Benefits are included without exception as part of the award criteria where the value of the Action Plan is over £4 million. These are recorded in the Procurement Strategy Targets/Indicators, attached at Appendix 2.

These contracts are as follows, and have either been completed or have ongoing spend within the reporting period for this annual report:

Where the Council can access Category A (national collaborative) contracts or Category B (sectoral collaborative) contracts via Framework Agreements the overall anticipated value of the Framework is inevitably of a high value and likely to be over the £4 million threshold for the inclusion of community benefits.

Contracts awarded under Framework Agreements are required to achieve Community Benefits as mandatory. However, for contracts awarded via a Framework Agreement it is more difficult to identify Community Benefits which will be realised locally, except where the local supply chain is involved in the delivery of the Contract.

Monitoring of Community Benefits for exercises before this year have continued as planned.

There has been an increase of one contract over the value of £4 Million with Community Benefit Clauses over the past financial year. However, the inclusion of Community Benefit Clauses is now routinely considered where appropriate for all procurements.

Other considerations

The following factors are routinely taken into consideration in relevant procurements, especially in construction or social care procurement. However, these may not always be specifically labelled as Community Benefit Award Criteria:

• Climate change (carbon and energy consumption, carbon in production, adaption, carbon in vehicle emissions).
• Materials (scarcity, security).
• Waste (production, reuse / recondition / remanufacture).
• Hazardous materials / emissions.
• Biodiversity (protection and enhancement).
• Heritage (protection and enhancement).
• Water (consumption and production).
• Employment (skills and training, SMEs / social enterprises / supported businesses).
• Communities.
• Fair and ethical trading (working conditions, conflict materials).
• Equality (protected characteristics).

Following the legislative changes, and as recorded for the financial years covered by this report on the Council’s On-Contract Spend Register, Fair Work Practices are routinely included in the award criteria for all contracts. In addition, a Sustainable Procurement award criterion has been developed which can be adapted to use where relevant and proportionate for the procurement exercise undertaken. This is now included in contracts where there is an activity identified that would impact on climate change impact. There have been a total of 84 procurements undertaken including live ongoing contracts to the end of the March 2025 reporting period where Community Benefits / Sustainability Clauses have been part of the award criteria regardless of value.

The most notable significant procurement exercises which were undertaken during the current reporting period include one large infrastructure project and smaller contracts, for example, transport and haulage services or food supply where a direct impact is made on greenhouse gas emissions, consultancy services where maximum use is made of online meetings and services where delivery is part of the contract, for example.

In the main, responses to the sustainable procurement and community benefits sections for these contracts have been positive and ranged from a strong awareness of the principles of Fair Work Practice and a focus on offering work placements, employment opportunities for individuals experiencing long term unemployment, apprenticeships etc to supporting community events by providing free transport.

In accordance with the Council’s Sustainable Procurement Policy, the inclusion of sustainable procurement clauses in award criteria is considered for all contracts where this is appropriate.

All Category A, B and C1 contracts awarded under a framework, either at national or UK wide level, all now include both Community and/or Sustainable Procurement clauses in accordance with legislation.

A summary of the Community Benefits and Sustainable Procurement clauses as part of the award criteria for the procurements included within the reporting period are as follows:

• Employment (skills and training, small or medium-sized enterprises (SMEs) / social enterprises / supported businesses).
• Fair Work Practices.
• Transport and emissions.
• Employment opportunities for people who experience barriers to employment.

Included in the Sustainable Procurement Policy, a Sustainable Procurement Impact Assessment (SPiA) tool has been developed and is now in use. This approach assists Senior Officers and Officers with Delegated Procurement Authority to assess where a specific procurement exercise should consider these factors at the planning stage of the procurement as recorded in the procurement plan. For the 2024-25 reporting period, SPiAs have been undertaken at the planning stage of predominantly major capital projects and procurement exercises where the project or service operation is likely to have an impact, totals four. This process is now embedded, and numbers will increase once procurement exercises which are live or in the planning stage have reached the award stage of the procurement process.

Section 4 – Supported Businesses Summary

The Procurement Reform (Scotland) Act 2014 (“the Act”) includes a classification for supported business and defines a supported business as ‘an economic operator whose main aim is the social and professional integration of disabled or disadvantaged persons and where at least 30% of the employees of the economic operator are disabled or disadvantaged’.

Public organisations can restrict the right to participate in procurement for the award of a public contract / framework to supported businesses only.

This change expanded the potential for more businesses to be included in this category. The Council’s contract activity for the reporting year includes the Community Interest Company, Scottish Supported Business and Social Enterprise Company, Hey Girls period products, available in Council facilities and online through the Council’s online ordering process.

Section 5 – Future Regulated Procurements Summary

The Procurement team has worked with Directors across the Council to develop a forward procurement plan for their service areas. These plans identify the Council’s anticipated procurement activity for the coming year for Category C and C1 procurement (excluding Category A and B activity).

The Act has extended this timeframe to two years, and Appendix 3 includes information regarding anticipated Regulated Procurements for that period. As referenced in the introduction above, this report includes information on all procurement activity and this is included in the Forward Plan, i.e. it also covers ‘nonregulated’ procurement.

Section 6 – Other Information

Supplier Development

In the past an annual Meet the Buyer event was held annually for the years 2018 to 2020. Since the Covid-19 pandemic and with the increase in online events, there have been no overarching Meet the Buyer events organised. However, contract specific market engagement events are considered in consultation with the service area in a format compatible with the market at the time where required and on a case-by-case basis and include in person events now. These events are organised by the service area and in conjunction with the Council’s Procurement Team. A feature of all Meet the Buyer events is to signpost the support available via the Business Gateway Orkney Service and the Supplier Development Programme which both continue to be active in providing support to contractors and are actively involved in helping local firms do business better with the Council.

Meet the Buyer events, following the format of focused upcoming contract opportunities, will continue to be undertaken where this is deemed a suitable route for contract/sector specific market engagement for future procurement exercises.

Collaboration and Partnering Opportunities

In accordance with the Council’s Procurement Strategy there is a Council commitment regarding collaboration and partnering. It is recognised that greater efficiencies can be achieved by improved collaboration between different organisations within the public sector with similar requirements, whether within the local government sector or in other areas of the public sector, such as the Scottish Government, the Crown Commercial Service, Non-Departmental Public Bodies and the National Health Service (NHS).

Collaboration with Shetland Islands Council is to be actively explored to see if there are opportunities to work more closely together to identified potential economies of scale etc.

Collaboration maximises the value of procurement whether it be through aggregation of demand or through the sharing of resources to reduce administration. Framework Agreements are noted as either a Category A Contract or a Category B Contract or Category C1 for local collaborative contracts in place. The Council’s use of these is shown in the tables below.

The Council’s internal contract register lists all purchases for works, services and supplies known to have a contract in place. This register does not include ad hoc purchases for values typically under the £10,000 minimum threshold as noted in the Council’s CSOs. There are exceptions to this rule where the nature or complexity of the contract warrants having a contract in place regardless of being of low value (under £10k, for example, IT licensing agreements, cleaning contracts etc).

In total there are 464 live contracts listed in the Council’s contract register for the year 1 April 2024 to 31 March 2025.

Tables 1 to 5 below summarise all live contracts as recorded on the Council’s Contract Register by category for the previous five complete financial years and a corresponding split between Services, Supplies and Works.

Table 1 – 1 April 2020 to 31 March 2021

Table 2 – 1 April 2021 to 31 March 2022

Table 3 – 1 April 2022 to 31 March 2023

Table 4 – 1 April 2023 to 31 March 2024

Table 5 – 1 April 2024 to 31 March 2025

Procurement Annual Spend Data

The Council is required by the Scottish Government to input its annual spend data to the Procurement Hub which records all purchasing transactions made by the Council for each financial year. The information is processed and released back to the Council for the purposes of analysis and forward planning.

The following table provides a summary of key data for the Council spend data for the past five financial years.

Table 6

Key to categories in Procurement Annual Spend table:

• Total Spend – total amount of spend for the financial year.
• Input Suppliers – number of suppliers, before de-duplication.
• De-duplicated Total Suppliers – number of unique suppliers.
• Duplicate Suppliers – number of suppliers which are duplicates of another supplier.
• Transactions – total number of transactions.
• Avg. spend per supplier – average spend per unique supplier.
• Core Trade – sub-set of supply base that includes all Trade Suppliers and Social Care Provider with spend of £1,000 or more in the financial year.
• SME Supplier – Small and Medium sized businesses where the supplier has less than 249 employees or where the annual revenue is less than £22.8m.
• SME Spend – Spend with SME as a percentage of Core Trade Spend.
• Local Suppliers – Spend with suppliers within the same local authority area as the organisation (based on postcodes).
• Local Spend – Spend with local suppliers as a percentage of Core Trade Spend.

Procurement Spend – National Context

The proportion of the Council’s spend on local enterprises was 39.5% for the reporting period 2024– 2025 (figures accessed in November 2025). In comparison, the proportion of procurement spend on local enterprises across Scotland for the same period was 30.8% and, for similar* councils (family group), there was an overall average of 35% spend on local enterprises.

*Orkney is part of the Local Government Benchmarking Framework Group 1 which is grouped for the above indicator with similar Councils (East Renfrewshire, East Dunbartonshire, Aberdeenshire, Edinburgh City, Perth & Kinross, Aberdeen City and Shetland Islands).

Graph 1

ECON04 – Proportion of Procurement Spent on Local Enterprises

IMAGE: A line graph titled “ECON04 – Proportion of Procurement Spent on Local Enterprises” compares the proportion of procurement spend from 2010-11 to 2024-25. The 2024-25 figures are Orkney Islands Council 39.5%, the Family Group 35%, and All Scotland 30.8%. The graph shows the Orkney Islands Council line generally above the Family Group and All Scotland lines in 2024-25.

Key: 2024-25

• Red - Orkney Islands Council 39.5%
• Blue - Family Group 35%
• Black - All Scotland 30.8%

Ref: Local Government Benchmarking Framework

Orkney’s procurement spend on local SMEs is 8.7% above the ‘all Scotland’ national average of 30.8% for the 2024 to 2025 period.

Please note that the figures referred to in this section are the percentages of the Council’s spend on local Enterprises which is a different data set to the figures recorded for percentage of Enterprises Spend and percentage of Local Spend in Table 6. This information is sourced from the Local Government Benchmarking data sets and are the 2024 to 2025 figures. These are the most up to date statistics available to illustrate the national context.

Climate Change Duties

The Climate Change (Scotland) Act 2009 places duties on public bodies relating to climate change.

These duties require that the Council must, in exercising its functions, act to:

• Contribute to the delivery of emission reduction targets (mitigation).
• Help deliver any statutory climate change adaptation programme (adaptation).
• Do this in a way that it considers most sustainable (acting sustainably).

The Council is statutorily required to provide evidence of the above in annual reports from reporting year 2021/22 onwards, as part of The Climate Change (Duties of Public Bodies: Reporting Requirements) (Scotland) Order 2020.

The Council’s annual Climate Change Duties (CCD) report for 2024/25 will be considered by Council in November 2025. Copies of previous CCD reports may be accessed here.

Biodiversity Duty

Section 8.21 of the Sustainable Procurement Policy states that the Council will meet the duty to further the conservation of biodiversity arising from the Nature Conservation (Scotland) Act 2004. This will be done, where appropriate, by specifying through the procurement processes requirements that protect and enhance green spaces, habitats, species, sustainable farming practices and biodiversity both locally and globally.

Scotland’s Public Procurement Reporting Requirements for 2024-25

The Scottish Government produced a policy note SPPN 2/2025 on 12 June 2025 regarding future reporting requirement for the 2024/25 reporting periods.

To date there has been no change to the reporting requirements requested by the Scottish Government.

Appendix 1 – Summary of Regulated Procurements 1 April 2024 to 31 March 2025

Appendix 2 – Procurement Strategy Targets/Indicators 2023 to 2028

What will success look like?

The measures below are designed to stretch us as we strive to achieve our ambitions. Despite these uncertain times, we must be bold in what we aim to achieve and not just settle for simply maintaining the current position.

21.1. Sustainability, Climate Change and Net Zero Targets

21.2. Working with local suppliers

21.3. Value for Money

21.4. Collaboration and partnering

21.6. Contract Management

21.7. Communication

21.8. e-Procurement

21.11. Training

Appendix 3 - Forward Plan for Regulated and Unregulated Procurements April 2025 to March 2027

Future Capital Projects