The local government efficiency debate tends to focus on services. But construction and property remain a hugely important potential source of savings, points out Hampshire County Council chief executive Andrew Smith.
On a sweltering summer’s day, LGC went to find out more from Mr Smith about the new National Efficiency and Improvement Partnership for Construction. He is chairing the partnership, which will be the first body of its kind to operate on a national basis when it officially launches next week.
“Construction itself is still the biggest area of spend in local government,” says the softly spoken Scot, pointing out that what he describes as a “very modest” 3% saving would translate into a “significant” figure.
Nationally, a 3% improvement in local government spend on construction would be about £400m per annum.
The Treasury, where the partnership held its first informal get-together, identified construction and property as one of the public sector’s key cost-saving drivers in its Operational Efficiency Programme report, published alongside the Budget.
But the OEP report provided no concrete targets for helping local government achieve its share of the public sector’s wider goal.
What price do you put on having a school delivered on time?
Andrew Smith, Chief executive, Hampshire County Council
Mr Smith says that his group will aim to place flesh on the OEP’s bones by developing a set of key performance indicators for local government on issues such as supplychain management.
“The construction industry supply chain is where most of the costs are. If they manage their supply chain better, we get the efficiencies out of that in terms of lower cost. If you get projects on time and on cost you invariably spend less on professional time.”
As an example of what can be achieved, he points to the work of the south east’s construction framework for the region’s 74 local authorities, which delivered 10% savings on professional time.
The framework supplied the 10 contractors which signed up to it with access to more than £1bn worth of contracts. The scale of economies on offer benefits councils as well as contractors, insists Mr Smith, whose authority leads the south-east framework.
“The one thing the industry wants is better certainty over when projects will be available — contractors were prepared to pass discounts on to us because they weregetting more work.”
Smaller authorities in particular benefit from aggregating contracts in this way, he insists. “If you are doing a £10m project and then six months later you are doing a second £10m project, you get no aggregation at all. Decisions will remain local but they [the council] will be able to access an aggregated market.”
And the framework can deliver not only cash savings but also harder-to-quantify benefits, argues Mr Smith, who was in charge of Hampshire’s property before takingthe top job at England’s third largestshire authority in 2007.
“What price do you put on customer satisfaction? What price do you put on having a school delivered ontime and not having the disruption to the school when the contractor comes back a second or third time because it worked first time?” he asks.
“Some of the costs are hard costs from aggregation, some of them are a lot softer because schools aren’t building sites and you get the benefit of starting and finishing projects in the political cycle.”
Mr Smith also sees the partnership as a good forum for local government to engage with the construction industry on efforts to cut carbon emissions.
On a different tack, the south-east regional improvement and efficiency partnership has been investigating the scope for establishing a common framework that would enable the same contractor to carry out both private finance initiative and more traditional contracting jobs.
It’s the kind of innovative thinking he hopes the national partnership will spread.
Parts of local government may harbour a ‘not invented here’ mentality, Mr Smith acknowledges, but the partnership’s establishment is an illustration of the sector’s
increasingly mature approach.
“This is testing local government’s capacity to collaborate. That collaboration could be one of the key tools to surviving the recession and indeed the public spendingpressures that are going to be with us for some time to come.”