£3.5m hub threshold brings more opportunities for local suppliers

The hub programme, the national initiative established by the Scottish Futures Trust to deliver public sector construction and maintenance projects,announced new threshold levels to improve access to public projects for local suppliers. The hub programme is divided into five geographical areas. Both the South East and North hub Territories have a hubco in place and East Central and West Territories are in procurement. The fifth, South West Territory, will commence procurement later in 2011.

The hub programme is evolving. In consultation with industry the approach to procuring projects with a contract value of £3.5m and below has been refined. Historically projects of this size and above have had to go through full EU procurement processes. The £3.5m threshold has been selected as the level at which local suppliers, main contractors and design practices will be given additional opportunities to build links with hub companies and potentially gain a place in the supply chain. This has also been reflected in how limits on exclusivity for health boards have been developed.

In the first two territories, the South East and North, an exclusivity threshold of £750,000 for new-build health projects was trialled. In practice, this means that an NHS health board should, where the value of a project is over £750,000, provide their local hubco with the first opportunity to demonstrate a value for money proposal. This level of threshold has also been incorporated in the East Central territory, which is currently in procurement.

In the remaining two territories, and having taken market soundings, the exclusivity threshold has now been raised from £750,000 to £3.5m. Raising the exclusivity threshold to £3.5m removes the automatic recourse to hub for projects below this amount and an NHS health board can choose the most appropriate means of procurement for them.

In the three areas where the threshold remains at £750,000, there is ongoing work with the hubcos and bidders to develop their supply chain model and create opportunities for local suppliers. Regardless of the exclusivity threshold it is important, as hub develops, that projects with a value of £3.5m and under provide an additional opportunity for local supplier engagement.

Barry White, Chief Executive of the Scottish Futures Trust, said: “Our goal is to enhance Scotland’s infrastructure by procuring capital projects in a cost effective way. We are also conscious that construction, particularly hard hit by the downturn of recent years, is a key creative industry. Enhancing opportunities for professional and small to medium-scale specialist and local contractors will bring real benefits.”

The Royal Incorporation of Architects in Scotland is one of a number of industry bodies in regular consultation with the Scottish Futures Trust. Its President, Sholto Humphries, added: “We believe that local skills and knowledge are crucially important towards creating a quality built environment. This new threshold agreement will generate local jobs and retain key talents within Scotland’s building industry.

“There is growing evidence that well designed and well made buildings can contribute substantially to people’s quality of life and sense of wellbeing. Ultimately that is good for the Scottish economy and all of Scotland’s people. I am delighted that local architects, their fellow professionals and locally based contractors are being given more opportunities through this new threshold.”

Michael Levack, Chief Executive of the Scottish Building Federation (SFB), said: “Many smaller construction firms are continuing to experience tough trading conditions. I therefore welcome this announcement as a significant step forward in giving smaller firms greater access to opportunities for new business through public procurement. It is a positive recognition of SBF’s long-term campaign to see the threshold for the bundling of these contracts significantly raised.

“Beyond hub, in the wider environment, further measures are still needed to give local construction firms fair and open access to the public procurement market. I would call on the Scottish Government to accelerate progress on introducing its promised Sustainable Procurement Bill. This would attach community benefit clauses to public contracts, making it a requirement for the successful contractor to create local apprenticeship and employment opportunities as a condition for carrying out the work. Such a measure would recognise the wider community benefits of engaging local firms with a local workforce to carry out publicly funded construction work.”