In October, further announcements were made setting out which local authorities are to benefit under Phase Four of the Schools for the Future Programme, including St Joseph's College in Dumfries and Waid Academy in Fife. Further funding allocations for new and refurbished schools are expected shortly.
In November, Nicola Sturgeon announced which health projects will benefit from the increased funding when she announced a £400m health package. The new projects include further redevelopment phases of the Royal Edinburgh hospital (£120m), the Aberdeen Women's Hospital (£90m) and a new Community Hospital in East Lothian (£65m).
The additional funding packages will provide a vital boost to jobs in the construction sector and the economy as a whole. It is estimated that for every £100m spent on construction activity an additional 1300 jobs are supported. It will also give confidence to those in the construction sector that there is a continuing pipeline of work which won't run out when the current planned projects come to an end in the next year or so. This confidence should not be underestimated, as it will allow contractors to invest in the training and development of staff to meet their future needs.
Non-Profit Distributing Model
The additional health projects will be administered by the Scottish Futures Trust and operated through the Non-Profit Distributing (NPD) model. This contract model has been the Scottish Government's preferred option for revenue financed projects since the traditional PFI model fell out of favour, following criticism that it allowed the private sector to make excessive levels of profit at the expense of the public purse.
In essence, the NPD contract allows the contractor to make a "normal" market rate of profit which is capped at a level set by a competitive procurement process. Any additional profit above the cap is then redistributed back to the public sector participant. The aim of the cap is not for the authority to make a profit, but to ensure that the level of unitary charge paid by the authority on an annual basis is as competitive as possible and not over-inflated to allow the contractor to make excessive profits.
NPD does have its critics - who say that it does not provide sufficient incentive for contractors to operate as efficiently as possible, given that they won't make any extra money at the end of the day.
To date, the NPD model has been used for the M8/M73/M74 improvements, the Aberdeen Western Peripheral Route, the Royal Hospital for Sick Children and colleges in Inverness, Kilmarnock and Glasgow. The Scottish Future's Trust will be working with the relevant authorities for the new projects into the development phase.
Hub procurement model
The Scottish Futures Trust also operates a stream of revenue funded projects through its hub procurement model which procures the Schools for the Future Programme and the development of community based healthcare projects.
Similar to the NPD model, the hub contract also limits the profits that contractors can secure by having public sector shareholders and allowing the public sector to invest in the project company should it wish to take up that opportunity.
Different approaches of Westminster and Holyrood to the downturn and recovery
What is, perhaps, worth further comment is the difference between the approaches of the Scottish and Westminster Governments in responding to the economic downturn and the continuing recovery.
South of the border, it has been a case of cutting Government spending as far as possible, including the well publicised cuts to the welfare budget and the pressure to make efficiency savings, not least through smarter procurement spend. As a result of this approach, coupled with the Cabinet Office's ban of the use of PFI (without a suitable alternative model being in place), infrastructure investment in England has faltered somewhat.
The Scottish Government, on the other hand, has looked to make large scale infrastructure investment despite the recession. Without the capital being in place to fund these developments, the only option has been to secure investment through revenue funded schemes - the rationale being that the economy will grow by job creation and skills development. With less projects being undertaken elsewhere in the UK, investors and contractors still see Scotland as a key market in which to operate.