The 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 communities beyond the buildings themselves.
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 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.
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.
Cost concerns are not only affecting whether projects go ahead. They are also impacting on how they are delivered, risking efforts such as waste reduction becoming sidelined as a result. Solo projects cannot negotiate the same contractual commitment from suppliers to reduce waste as frameworks can. It is little wonder therefore that the construction industry as a whole has failed to meet the Strategy for Sustainable Construction’s target to halve the amount of waste sent to landfill.
Barriers to success
Despite their budget constraints, local authorities are evidently keen to offer greater benefits to local communities through the projects they commission. It is greatly encouraging to see more apprentice training at the top of the agenda for adding value to construction efforts in 2015. Indeed, almost four in five local authorities want to offer a greater number of learning opportunities. But this can be a daunting task for anyone faced with turning these plans into reality while also achieving savings within their project spend.
Crucially, almost three quarters of the local authorities we questioned have had to cancel or postpone a planned project in the last two years. Not one said they felt the task of taking on more built environment projects and maintaining quality at the same time is becoming any easier.
The lengthy timescales to secure grant funding and suppliers’ inability to meet desired timeframes are both impeding the success of projects across the country. However, local authorities cited suppliers’ failure to deliver within their available budget as the most common reason for the postponement or cancellation of work.
These setbacks have clearly knocked local authorities’ confidence in hitting their 2015 savings targets. Though there is a strong desire to add value to local communities through the projects in their pipeline, 77% of local authorities doubt they will be able to meet their target savings for built environment work in the year ahead.
External procurement frameworks
A growing number of local authorities and other public sector organisations are seeking ways around these issues by drawing on the collective strength of our national procurement frameworks. Collating significant volumes of work and using national partners to identify local suppliers who measure up on both cost and quality make this the most practical way to get build environment projects off the ground, and also achieve the goal of supporting local businesses and communities.
Evidence gathered from Scape’s work with our project partners since 2006 highlights a collective annual saving of almost nine years of procurement time each year, with £125m of local spending annually being channelled to businesses within 40 miles of project sites. Over 1000 weeks of on-site apprenticeships have been created each year and over 62,000 tonnes of waste diverted from landfill sites – with no compromise on delivering projects on time and within budget.
The pressure on local authorities to cut costs and demonstrate value for money is a sure sign that this kind of approach needs adopting on a wider basis to deliver more for less. Budget pressures are here to stay and cutting corners in the short term will only store up sustainability issues for the future. Smarter methods of procurement and delivery can make the most of every pound invested in public buildings and ensure the greatest benefit for the local communities we are all there to support.