Public Private Partnerships Staffing
Protocol Index | Appendix
Public Private Partnerships in Scotland - Protocol and Guidance
Concerning Employment Issues
- The Scottish Executive and the STUC are committed to the elimination
of the two-tier workforce. In making this commitment, the Minister
for Finance and Public Services undertook to review issues of
employment practice arising from Public Private Partnership
(PPP) contracts across the public services in Scotland. Within
the context of the Memorandum of Understanding between Scottish
Executive (SE) and the Scottish Trades Union Congress (STUC)
he established a joint, SE/STUC short-life working group to
undertake such a review and to draft a protocol and guidance
concerning employment issues that would apply to all public
sector organisations (PSO's) in Scotland where they contract
for facilities and services from 'service providers' under a
- PPP is one of several procurement options available to PSOs:
it is not the only, or preferred, option. It constitutes a relatively
small proportion of public investment in Scotland. No PPP can
proceed unless it is demonstrated to offer better value for
money than provision by the public sector through rigorous application
of the appropriate criteria.
- This protocol seeks to ensure that sound and fair processes
are applied by PSO's and potential private sector partners as
the decision-making and procurement processes proceed, including
consultation with relevant trades unions. In this protocol,
"trades unions" is deemed to mean recognised trades
unions and, where there is no recognised trades union, other
representatives of the workforces which are affected under a
- The recommendations of the Joint Working Group have been approved
by Scottish Ministers and this document sets out the agreed
protocol. It supplements existing PPP guidance in Scotland.
Accordingly, compliance with the Protocol should be a condition
of service specifications and subsequent contracts for PPP projects
in order to support the use of funding agreements between the
Scottish Executive and PSOs as an enforcement mechanism. It
covers the interests of PSO's, PPP consortia, and sub-contractors
and is seen as an important measure in removing the scope for
2.1 The aims of this protocol and guidance are:
- to emphasise the need for effective communication and consultation
between PSO's and the relevant trades unions when considering
prospective PPP schemes
- to make clear the expectation upon prospective and actual
private sector service providers to demonstrate a constructive
approach to employee relations, including recognition of appropriate
- to ensure consistency of good practice in the handling of
employment issues as a consequence of PPP contracts in Scotland.
- to safeguard the employment terms and conditions of individual
public sector employees who transfer to private sector 'service
providers' as a consequence of PPP's
- to provide guidance on how PSOs should ensure that the terms
and conditions of service of new employees appointed by contractors
to PPP workforces post-transfer, should be such as to eliminate
the scope for the creation of so-called "two–tier"
- To provide guidance on the pension provisions that should
be offered to transferred employees and new appointees in PPP
The following principles underpin the more detailed guidance
provided in this protocol
4. Overview of the Protocol
- Procurement decisions should reflect quality criteria as well
as other value for money factors. The procurement process should
promote improvements in efficiency, effectiveness, and delivery
of service. Procurement decisions should not be dependent upon
dilution of employees' pay and conditions of employment, and
sub-paragraphs e), f) and g) below are intended to safeguard
that outcome in local negotiations.
- Where a public sector organisation decides that a PPP should
include services which are currently being provided by directly-employed
staff, the PPP process is, in principle and in practice,
open to bids incorporating the use of such staff, for
example DSO/DLO. Such bids would be considered on the same value
for money criteria as other bids and overall the PPP would have
to meet all the requirements of extant PPP guidance and any
Scottish Executive funding conditions.
- The quality of public services is enhanced by fair employment
practices. All potential service providers should be required
to demonstrate commitment to fair employment practices and a
constructive employee relations ethos, including positive attitudes
to trades union recognition and demonstration of best practice
in health and safety and equal opportunities.
- In all potential PPP situations the employees and trades unions
affected should be fully informed and consulted in advance of,
and throughout, the process.
- The terms and conditions of transferred employees shall be
safeguarded by application of the principles and accepted practice
of TUPE. Changes to the terms and conditions of transferred
employees should only be achieved by agreement
between employer and trades unions.
- Public sector organisations are expected to ensure no two-tier
workforce in PPPs. The terms and conditions for any new appointee
to the workforce should therefore be no less favourable overall
than for transferred employees.
- There can be flexibility for negotiation between employers
and trades unions to agree local adjustments to working practices
and terms and conditions for transferred employees and new appointees
to provide an overall package which is better suited to the
needs of the service.
- Transferred employees and new appointees to a PPP workforce
should have access to the same or broadly comparable pension
arrangements to those currently available to employees. Where
possible, this shall be achieved through admitted body status.
- The Protocol shall be applied to all PPP contracts. Its implementation
will be jointly monitored and enforced.
- PPP is one of a number of procurement methods available to
the public sector. It is a method which invites private sector
finance and service provision of a specified service over a
long-term contract. It is defined in a series of 'Treasury Taskforce'
guidance notes issued by HM Treasury, supplemented in Scotland
by various guidance notes issued by the Scottish Executive.
- The Protocol provides the following:
5. Valuing the Workforce
- The Scottish Executive and STUC are clear about the positive
link between high quality services and good employment practices.
Quality and good value will not be provided by organisations
which do not manage workforce issues well. PSOs should therefore
select only those service providers who offer employees a package
of terms and conditions which will secure high quality service
delivery throughout the life of the contract. These must be
sufficient to recruit and motivate high quality employees to
work on the contract, and designed to integrate those employees
within the workforce transferred from the PSO.
- When considering a reorganisation of services that may involve
a PPP project, the PSO should review the options for an existing
in-house workforce in relation to future service requirements
and procurement options.
- Notwithstanding the commitment within this Protocol to ongoing
good employment practices being established and maintained within
all PPP contracts, it is also recognised that the levels of
individual pay and conditions of service within a contract are
not the only determinant of total labour costs. It is expected
therefore that where scope exists to improve productivity and
secure service improvements through more effective, high quality
management of a workforce, this will continue to be a key feature
of evaluation in the competitive processes leading to the award
of PPP contracts.
- If it appears that a scheme may involve a transfer of undertaking
as determined by TUPE regulations, and employees may be required
to transfer to another employer, then the PSO should ensure
that there is a level playing field and that the in-house team
is provided with appropriate support to prepare an in-house
6. Principles of Staff and Trades Union Involvement and Consultation
- At the earliest stage, employees and trades unions should
be consulted about options for providing services through procurement
where this is being considered by a PSO. Full, effective and
continuous communication is key to managing a PPP process well.
PSO's should consult their employees and trades unions throughout
the process, with full disclosure of information on all matters
affecting the workforce.
- Employees who are directly affected by a PPP scheme have
an interest in potential bidders, as they may become their future
employees. PSOs should be pro-active in keeping employees and
trades unions informed, and respect the workforce's position
– for example by ensuring that they hear of developments before
these are reported in the media.
- Public services should ensure they follow the Treasury Taskforce
Policy Statement No 4 - Disclosure of Information
and Consultation with Staff and other Interested parties.
The Treasury guidance makes clear those legal requirements and
value for money criteria which all public sector procuring bodies
should observe and take into account when awarding a PPP contract.
- Openness should be the default approach, with restrictions
confined only to details which are agreed with contractors as
genuinely related to their commercial interests or otherwise
necessary to ensure a successful procurement. The term "Commercial
Confidentiality" must not be used as an excuse to withhold
legitimate information from employees and trades unions. It
is part of the process of managing a competitive procurement
that the Project Team must remain in control of the nature and
timing of how specification and bid information is made available,
internally and externally.
- Employee and trades union involvement and consultation should
be handled by PSO's with care and be conducted in good faith.
The role of trades unions is important in informing the decision-making
of PSO's. The PSO should ensure that a strategy is agreed with
employees and trades unions from the outset on exactly what
information will be made available to them, and when, and how
the discussions and reporting requirements will be handled.
This strategy should form the most important part of the internal
communications strategy which the PSO will adopt for a PPP scheme.
- Contractors selected to provide services to PSO's and to take
on public service employees should also have policies that ensure
good communication and consultation with the workforce and their
trades unions on key issues following a transfer.
- The process of involvement and consultation must be transparent
and fair. Any representations which employees and trades unions
wish to make about particular bidders during the process must
be formally communicated in writing or at a minuted meeting.
There should be someone present from the PSO to make an official
record of any such meeting. One of the objectives of this exercise
is improving the quality of contractors working in the public
sector. Therefore, for the market to respond to trades unions'
concerns, these must be communicated back to individual bidders
by the PSO.
- Trades union input into the appointment of a preferred bidder
by the PSO should comply with the relevant procurement regulations.
If not managed properly, this process may lay the organisation
open to legal challenge. Inappropriate use of information by
the organisation (including information which is not relevant
to the criteria adopted by the organisation for selection or
appointment), or use of information at the incorrect stage in
the procurement process, could be challenged under the procurement
regulations. The use of information supplied by the trades unions
that is not capable of being substantiated could also expose
- Each PPP scheme is required by the guidance to set up a project
board as the decision making group. Membership will include
advisors and other interested parties, subject to its size being
manageable. Trades union representation should be included on
PPP project boards unless there is conflict of interest which
breaches procurement regulations.
7. Access to Information and Evaluation of Shortlisted Bidders
7.1 Under European Public Procurement legislation, workforce
matters may come into consideration at the pre-qualification and
tender evaluation stages of the contractual process. Under the
EU rules the criteria for short-listing candidates are restricted
to technical capacity, economic and financial standing and, for
service contracts, ability.
7.2 Contract award criteria can be selected on the basis of
either 'most economically advantageous tender' or 'lowest price'.
PPP contracts should not be awarded only on the basis of 'lowest
price'. The best option will involve other factors such as whole-life
cost, quality, and good employment practices related to service
delivery. Contract award criteria therefore, should not simply
rely on price alone, unless the authority is satisfied that the
specification for the work incorporates all these matters. In
practice, these conditions are unlikely to be satisfied in all
but the simplest contracts. Choosing the 'most economically advantageous'
tender allows contracting authorities to consider more general
matters, provided that these matters relate to the performance
of the contract itself and do not result in discrimination between
contractors within the European Community. The general award criteria
to be used must also be clearly stated.
7.3 At the pre-qualification or selection stage, only workforce
matters that affect the suitability of a candidate, as determined
by those criteria, can be considered. As part of the qualitative
evaluation of bidders who respond to the Final Invitation to Negotiate
(ITN), the PSO should evaluate the bidders' proposals in relation
7.4 This information should be supplied by bidders as part of
their proposals in response to the Final ITN. These factors should
be evaluated by the PSO with the intention of establishing the quality
of service delivery implicit in bidders' proposals.
- the arrangements for managing the application of TUPE where
transfer of employees is involved
- the management arrangements for the workforce
- pay, terms and conditions of transferees and new appointees
to the workforce, including pension arrangements
- workforce training and development
- the framework for, and conduct of, employee relations including
their approach to trades union recognition and facilities, such
as the deduction of union subscriptions at source
- Health and Safety
- equal opportunities
- the principles contained within any human resources strategy
which applies to the PSO in question (eg the Human Resources
Strategy for NHSScotland).
- the identification and approach to use of subcontracted labour,
including being assured that there will be safeguards to prevent
individuals being wrongly classified as self-employed.
7.5 Trades union representatives should be invited to hold discussions,
through interviews for example, with all short-listed bidders.
The PSO should facilitate the discussion with the bidders and
agree with the trades unions who should attend from the PSO. Minutes
of any meetings/discussions should be formally agreed; In addition,
trades unions should be invited to provide a report to the PSO
of the outcome of the discussion. It would be reasonable for the
trades union representatives to discuss with bidders the PSO output
specifications, the bidders responses to the Final ITN (which
will contain the bidder's proposals for the scheme in respect
of the principles of human resources strategy, TUPE, staff management,
pay, terms and conditions and training and employee relations)
and their design proposals.
7.6 It should be made clear to employees and trades unions that
they should respect bidders' requests that other than the reports
to management of the PSO, their discussions remain confidential.
Bidders are not expected to have discussions with trades unions
representing employees who are not expected to transfer to the
private sector as a result of the PPP contract.
7.7 As part of the information and reporting requirements
referred to in paragraph 6.5 above, the PSO in conjunction
with its legal advisers, needs to have formulated a strategy for
dealing with a refusal by a bidder to participate in the process
of discussions with the trades unions or to provide particular
information (other than on bona fide grounds of commercial confidentiality).
It would be reasonable to request the bidder to give reasons for
its refusal. The PSO will then need to take legal advice on whether
those reasons are legitimate in the context of the EU procurement
regulations and the need for the PSO to verify the information
already provided or claims made by the bidder in support of its
7.8 The trades unions should be encouraged to discuss their
views with the PSO and its legal advisers first before any report
by the trades unions on the outcome of their discussions with
the bidders is submitted. Once such a report has been received
by the PSO, the relevant sections referring to a particular bidder
should be passed back to that bidder for comment. The PSO must,
having first obtained legal advice, inform both bidders and trades
unions whether, and if so what, elements of the report will be
disregarded for the purposes of the evaluation exercise. Bidders
must be allowed time to respond to any specific concerns raised
by the trades unions. It is not the intention that this process
should have the effect of allowing bidders to revise their bids,
which would be unacceptable. Its purpose is to ensure transparency
and equal treatment of bidders and to enable the PSO to verify
the information that it has been given before appointing the preferred
7.9 The PSO should take all the factors set out above: the
information received in response to the ITN, the minutes of the
discussions held with bidders, the possible report and the response
from bidders into consideration in the evaluation exercise for
quality and the assessment of best value for money. In so doing,
the PSO must observe the criteria which it has adopted for making
an award in accordance with the regulations. The PSO retains the
full and final responsibility for final selection of the preferred
bidder which will also need to take into account all the other
evaluation criteria for assessing best overall value for money.
7.10 In order to demonstrate that the process is meaningful,
the PSO must respond to the points raised in the trades unions'
discussions with bidders and any subsequent report, and must be
able to explain the reasons for any of its decisions which run
counter to any valid concerns raised.
8. Staff Transfers and TUPE (including Pensions)
8.1 PPP requires careful consideration to be given in each
case to the definition of service to be contracted, and the impact
on employees' interests. It is not an automatic requirement of
PPP to transfer employees, although the defined contracted service
will normally include some services currently carried out by public
sector employees. The circumstances of each case will vary. Where
there is a transfer of undertaking employees must be told immediately.
They must be advised in writing of the intention to transfer employees,
when such a transfer might take place and that TUPE (and other
guidance on pensions) will apply. When TUPE does not apply in
strict legal terms the principles of TUPE should be followed.
8.2 Bidders must have drawn to their attention, in writing,
the intention that employees will transfer, that TUPE (or the
principles of TUPE) should apply and that employees will be able
to maintain pensions broadly equivalent to those they currently
receive. So far as PPP is concerned this requires that:
- transferring employees should be offered a broadly comparable
pension by the new employer, both on initial transfer and at
second and subsequent contracting rounds
- the new employer's pension scheme should allow transferring
employees the option of moving their accrued credits into that
scheme on a fully protected basis
- instructions for the involvement of the Government Actuary's
Department in assessing broad comparability and bulk transfer
agreements should be followed.
- Where possible, transferred employees should continue to have
access to the PSO's pension scheme through admitted body status
8.3 Bidders should be also advised that they can, if they wish,
submit non-TUPE bids but that these will only be accepted if they
fall within an agreed set of genuinely exceptional circumstances
(as described in the Cabinet Office Statement of Practice).
8.4 These exceptional circumstances are broadly:
- where the activity is essentially new or a one-off scheme,
- where goods or services are essentially a commodity bought
"off the shelf" and no grouping of employees are specifically
and permanently assigned to a common task, or
- where the features of the service or function subject to the
contracting exercise are significantly different from the features
of the function previously performed within the public sector,
or by an existing contractor e.g. a. function to be delivered
electronically and in such a way that it requires radically
different skills, experience and equipment.
8.5 Bidders must be advised that employees and their representatives
will be involved in discussions about the transfer as early as
possible in the process in accordance with the provisions for
employee involvement and consultation set out above.
8.6 Contractors and recognised trades unions should work in
a spirit of partnership on the full range of staffing issues associated
with the transfer. All parties should agree to work reasonably.
To underpin this all parties should negotiate, with a commitment
to reaching agreement on a structured disputes procedure to enable
the effective resolution of differences.
8.7 Once final decisions have been taken on the way forward
regarding any transfer, employees and trades unions must be told
as soon as possible of the outcome. It is particularly important
to make clear what, if any, direct impact there will be on particular
staff groups and individuals. It is expected that project teams,
trades unions, and personnel departments will work closely and
constructively in these processes in the best interests of consultation,
communication, and employee welfare.
8.8 If there is to be an external contract, employees must
be advised as early as possible about proposed terms and conditions
and transfer date. These must be in line with the earlier statement
on complying with TUPE, pensions and other guidelines, including
8.9 Every effort will be made to minimise the disruption for
the employees involved who will be given written confirmation
of terms and conditions, transfer dates and all other relevant
information at the earliest opportunity.
8.10 The PSO will discuss and agree, at the earliest opportunity
and through local consultative and/or partnership machinery, what
options are available to employees who do not wish to transfer
to the new employer. This will be expected to include application
of redeployment policies and procedures.
9. Treatment of New Joiners to a PPP Workforce
9.1 Where the service provider recruits new staff to work
on a PPP contract alongside employees transferred from the PSO,
it will offer employment on fair and reasonable terms and conditions
which are no less favourable overall to those of transferred employees.
9.2 The basis of comparison to ensure that paragraph 9.1 is met
should be the package of terms and conditions which already applies
to transferred employees, or the terms and conditions which apply
for the same job in the public authority. These will be available
within the PSO, or set out in national agreements.
9.3 There can be flexibility for negotiation between service
providers and trades unions to agree local adjustments to working
practices and terms and conditions for transferred employees and
new appointees. The underpinning principle is to consider employees'
terms and conditions (other than pension arrangements which are
dealt with in paragraph 9.4 below) in the round - as a 'package'.
This Protocol does not therefore prevent service providers from
seeking to agree, through negotiation with the trades unions,
a package of terms and conditions for new recruits which differs
from that of transferred employees, so long as the overall impact
of the changes meets the conditions set out above. The aim is
to provide a flexible framework under which the provider can design
a package best suited to the delivery of the service, but which
will exclude changes that would undermine the integrated nature
or quality of the workforce.
9.4 The service provider will consult representatives of a
trades union where one is recognised, or other elected representatives
of the employees where there is no recognised trade union, on
the terms and conditions to be offered to new recruits. The arrangements
for consultation will involve a genuine dialogue. The intention
is that contractors and recognised trades unions should be able
to agree on a particular package of terms and conditions, in keeping
with the terms of this protocol, to be offered to new joiners.
9.5 The service provider will be required to offer new recruits
to a PPP workforce access to the same pension arrangements as
transferred employees. These arrangements must be the same as,
or broadly comparable to those currently available to PSO employees.
Where possible, this will be achieved by access to the PSO's scheme
through Admitted Body Status, with the new employer making the
9.6 In circumstances where paragraph 9.5 does not apply, one
of the following pension provision arrangements must be offered
- membership of a good quality employer pension scheme, either
being a contracted out, final-salary based defined benefit scheme,
or a defined contribution scheme. For defined contribution schemes
the employer must match employee contributions up to 6%, although
either could pay more if they wished, or
- a stakeholder pension scheme, under which the employer will
match employee contributions up to 6%, although either could
pay more if they wished.
10. Monitoring and Review
10.1 Throughout the length of the contract, the service provider
will provide the PSO with information as requested which is necessary
to allow the PSO to monitor compliance with the conditions set
out in this protocol. This information will include the terms
and conditions for transferred employees and the terms and conditions
for employees recruited to work on the contract after the transfer,
including sub-contracted areas of work.
10.2 Such requests for information will be restricted to that
required for the purpose of monitoring compliance, will be designed
to place the minimum burden on the service provider commensurate
with this, and will respect commercial confidentiality. The service
provider and the PSO will also support any Scottish Executive-sponsored
review and monitoring programme on the impact of the protocol
and will provide information as requested for this purpose. Such
requests will follow the same principles of proportionality and
11. Review of this Protocol
11.1 Consistent with its commitment to the Memorandum of Understanding,
the Scottish Executive will keep the operation of this protocol
under review with the STUC. It will also consult with representatives
of PSOs and service providers to assist in this process.
11.2 An initial review of the effectiveness of the protocol in
meeting its aims will be undertaken by the within the first year
of its introduction, with a view to early resolution of any difficulties
which emerge from that review.