Talking Point
Building more for less
Reducing costs is now the biggest source of emerging pressure on procurement policies for built environment projects
With growing emphasis on reducing costs and demonstrating value for money in their procurement policies, there is no disguising that local authorities are struggling to achieve both quantity and quality on their built environment projects, as Mark Robinson, Chief Executive of Scape Group explains.
T
he growing debate over election priorities ahead of May 2015 is a reminder that the public purse is still far from replenished, even after five years of austerity measures. The economy is showing signs of improvement, but getting the most from every pound spent remains a pressing priority: not just for central government, but also for local authorities when it comes to maintaining and improving public services. Financial pressures continue to weigh heavily on built environment projects, as Scape Group recently found in our Value Added Spending Monitor. Our research – involving input from county, district, borough and city councils, unitary authorities and metropolitan boroughs – revealed more than nine in 10 local authorities feel the challenge of delivering project volumes and maintaining quality within their available budget is getting harder. Limited resources are pushing four in every five councils to adopt a more commercially driven approach to delivering public services. But there is a danger that in trying to get building projects off the ground, vital elements are being sacrificed or overlooked that could deliver greater benefits to local
18 Public Sector Build Journal
communities beyond the buildings themselves.
Budget availability The struggle to keep pace with rising demand for built environment work comes as little surprise when you uncover the scale of cutbacks local councils have faced recently. Our report revealed that 87% of local authorities have been coping with reduced revenue budgets for built environment projects in 2014, with average losses of 14%. Almost two thirds of local authorities have also felt a drop in their capital spend. The budget squeeze has come at a time when construction demand is rising and limited market capacity has pushed prices up. The knock-on effect is that suppliers are becoming more selective or charging premium prices that make projects even less affordable. Rural areas have been particularly affected: in fact, our partners report construction inflation is now approaching 15-20% as a result, far above the 1% rate of overall inflation. The few councils who have increased their capital spend on built environment projects have managed to do so through prudential borrowing, asset sales, capital investment, developer contributions and
Mark Robinson is Chief Executive Officer at Scape – a local authority controlled company which delivers cost and time savings for public sector construction schemes across the UK. successful grant bids. But these cases are the minority, and it is obvious that many more still need a new way to make their existing budgets stretch further.
Project pressures Reducing costs is now the biggest source of emerging pressure on procurement policies for built environment projects. At the same time, local authorities are increasingly having to demonstrate value for money and their contribution to local spend and labour deployment. While urban local authorities have dealt with larger reductions in their spending, rural areas are experiencing greater pressure to get the most from every pound spent.