Bill Jamieson: Shovel-ready projects may dig us into a hole

Shovel-ready projects are as popular as Adele, but as the charts show, they are not the panacea they are sometimes made out to be
Shovel-ready projects are as popular as Adele, but as the charts show, they are not the panacea they are sometimes made out to be
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SHOVEL-ready projects: when it comes to popularity these days they are up there with Adele, supermarket ready-meals and designer stubble.

The Scottish Government, wishing to be at least as popular, claims to have 31 such projects on its launch pad. The list of projects, submitted back in March includes £13 million for the Centre for Virology Research, University of Glasgow; work on Inverness Campus, worth £6m; and £37m for Clyde Gateway developments at Bridgeton Cross, Dalmarnock Cross, Rutherglen and Shawfield.

So today I’d like to submit these projects to scrutiny, not least to see if they are as shovel-ready as St Andrew’s House assures us they are. I ask, because almost everyone I know in the construction industry never loses an opportunity to stress how long it takes for projects to grind though all the planning and regulatory protocols.

A project may take just a year in physical building. But prior planning protocols can take as long – six months is typical; a year not uncommon; two or more years a real possibility. Doubtless there are honourable exceptions to this rule. Some local authorities do move faster than others. But “shovel-ready” may be giving a false impression of the reality we can expect.

Then, we need to know more about how quickly a shovel-ready project once agreed can make a contribution to overall activity and growth.

How have the projects been appraised and what is the criteria by which they have been chosen? Or is it just a handy wishlist of projects that came to hand?

How well targeted are they? Do we know much about how effective they will be in delivering the macro economic benefits expected of them?

I would like to be more certain than I currently am over whether such infrastructure projects really do deliver the smooth macro-economic uplift that is almost automatically expected of them. Not all economists share confidence that the Keynesian uplift benefits really do come through.

For the best part of a year, the Scottish Government has been kicking up about its 31 shovel-ready projects that would uplift Scotland’s economy if only the mean Westminster government loosened up and wafted through the money to make them happen.

That means, of course, pinching someone else’s budget or more taxation or more borrowing, the direct and indirect economic costs of which ought to be set against the shovel-ready benefits. But let’s put this awkward calculation aside for now.

I was intrigued to hear that Taxpayer Scotland earlier this year sent a Freedom of Information request to the Scottish Government asking three questions about the 31 “shovel-ready” projects deemed desirable to generate “growth and jobs”.

The questions were: (1) the proposed duration of each of the projects in weeks from first ground works to handover to the client; (2) whether each project has been formally put through a tendering process leading to the selection of a specific project contractor; and (3) whether a Whole Life Costing Analysis (WLCA) has been done for any of the proposed projects.

The startling –and somewhat disturbing – reply was that “the specific information you require relating to this list of projects is not held by the Scottish Government.”

Now it does seem rather bold of the administration to claim it has 31 shovel-ready construction projects while its civil servants are unable to provide that basic information. Are the projects really as shovel-ready as ministers claim? Or are they simply dumping the blame on Westminster?

But, as Eben Wilson of Taxpayer Scotland points out, without a WLCA, the Scottish Government could be in breach of its own environmental audit rules and best practice in public tendering procedures – as well as lumbering our children and grandchildren with a further unknown tax burden. WLCA is a big issue these days after the debacles on PFI and other lousy procurement deals done by the public sector, plus extraordinary facilities management cost increases across government. It is now part of best practice.

There does seem to be good public interest reasons to pursue these questions. Civil engineering contract processing can be a complex business. And MSPs would only be doing their jobs in assuring themselves that the stimulus envisaged would indeed be timely, targeted and its costs temporary.

Taxpayer Scotland is working on a paper, “The State of Scotland – State of Infrastructure Investment”, as a contribution to public policy debate.

Included in the research undertaken are believed to be two intriguing charts. They are based on an analysis by a small group of civil engineers who were asked to estimate both the likely length of the proposed projects and the early tendering and contract preparation period. The spends are then adjusted to emulate a normal distribution of stage payments through the life of the projects.

The two charts are replicated here. The first “slow ramp up” shows that the “shovel-ready” projects are likely to take up to 150 weeks to complete. There is almost no spending for the first ten weeks, it then takes half a year to get to £50m and after one year £100m might have been spent.

Now look at chart two. This illustrates the uneven “spikiness” in the cumulative totals due to two projects – the Clyde Gateway and the motorway upgrades proportionately more expensive in the mix of proposed spends.

The civil engineers say they have been generous on the early period required to set tenders, review tenders, get a decision and then issue contracts. The general average for those preparations was around 25 per cent of the contract period. It is not unknown for these early negotiations to take as long as, or longer, than the contracted works period, especially in complex projects with technical systems installation.

That of course would push the whole graph to the right – well beyond anything that could be regarded as timely. Says Eben Wilson, “Two years from now, we might well see a rapid climb in growth rates. That raises the spectre of these projects actually being inflationary stimuli rather than anything else – helping to raise interest rates and slowing the economy down!”

The Taxpayer Scotland report should be out in the next few weeks. It promises to make a welcome contribution to the definition of “shovel-ready” and a more realistic analysis of the benefits to expect.