Review of Scottish public sector procurement in construction

11. Resource implications and potential savings

11.1 Resource implications

11.1.1 The recommendations which we set out in this report have resource implications. Although we recommend that existing resources be used to the extent possible, more expert leadership in construction procurement will have cost implications as will, in the shorter term, the need for a change management team. Resources will be needed:

• to strengthen the construction procurement policy function within the Scottish Government;
• to fund the appointment of a CCA; and
• to support the rollout of Building Information Modelling.

11.1.2 There may be a case for these costs to be shared by all the public bodies which should benefit from their introduction whether through cash, time and/or resource contributions.

11.2 Savings

11.2.1 However, we believe that the recommendations of this report, bring considerable potential for savings which should more than pay for the direct costs of their implementation, as indeed we understand that substantial savings have been realised from the earlier phase of procurement reform focussing on goods and services.

11.2.2 We believe that savings may arise from:

• More focus on an outcomes, design-led approach to the planning of the project and to whole of life cost;
• Streamlining of processes to reduce construction procurement to its essentials and to cut out the existing substantial unnecessary detail and bureaucracy, for example in pre-qualification questionnaire systems;
• "Self-delivery", as described in section 6.5;
• The "new models" of procurement being trialled by the UK Government, dealt with in section 6.6;
• The use of "painshare / gainshare" methods, outlined in section 6.7;
• Increasing the limits for the use of Quick Quote, described in section 7.3, allowing a more streamlined approach for smaller procurements;
• The introduction of Building Information Modelling, as described in section 8.6; and
• The sharing of data and best practice.

11.2.3 Audit Scotland attributed £327 million of savings, or four per cent of annual procurement spending ^[67] , to the first two years of the procurement reform programme following John McClelland's 2006 report. It may be reasonable to expect that a proportionately similar level of saving should be achievable from the implementation of our recommendations as were achieved, in the first stages of the wider Public Reform Programme, principally relating to goods and services. Assuming an identifiable annual construction spend of some £3.2 billion, as outlined in chapter 3, this would indicate savings of at least £120 million over the same timeframe.

11.2.4 Construction spending is different, however, and many of our recommendations also speak to consideration of whole life costs; as well as savings in the time and energy taken to procure; and the delivery of social and economic benefits.

11.2.5 Further work is needed to understand and gather information on current spending and therefore the precise scope for achieving and measuring savings. We recommend elsewhere that a baseline position be established for the current categories of spend and one of the early tasks should be to promote targets for savings following the gathering of this information.

11.2.6 Taking account of the opportunities for substantial savings in the initial capital spend set out in this report and the opportunities for savings over the whole life of the project, we hope that it will be possible to set targets for savings considerably in excess of the figure of £120 million, not just over the first stage of the construction procurement reform programme, but annually. We have considered whether we should ourselves set a target, but the evidential base is currently lacking.

11.2.7 Whatever targets are set, it will be important for contracting authorities to report their spending and savings in a consistent manner in order that progress can be accurately measured.

11.2.8 For industry also, we hope that the implementation of the recommendations of the report will lead to a better, more efficient approach, which should allow a reduction in the initial costs of procurement. An expert-led plan for a construction project which is clear from the outset will allow the reduction of much of the waste which is caused where plans have been insufficiently developed and need to be changed as the project proceeds. The greater involvement of industry at an earlier stage of the project will allow innovative ideas to be brought to bear which can save money for both public sector and industry.