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Quangos deny excluding SMEs from public sector opportunities

Scotland's £1 billion infrastructure quangos have rebuffed complaints about their transparency and the exclusion of Scotland's SME sector from a growing proportion of public sector investment opportunities.

The five 'hubcos' building schools and health centres around Scotland have awarded 77 per cent of their £1bn contract value to SMEs, according to the Scottish Futures Trust (SFT).

In May, launching our SME-SOS campaign to coincide with the final stages of the Procurement Reform Bill, The Herald highlighted concerns at the exemption of hubcos from reforms that aim to give small local businesses a bigger share of public spending investment opportunities.

The SFT, in a briefing about the new legislation, says: "KPIs [key performance indicators] focussing on community benefits have been developed to cover both recruitment and training as well as opportunities to tender for work for SME and third sector companies." Its "small" businesses can have up to 50 employees, £6.5 million turnover or a £3.25m balance sheet.

Now Glasgow-based HubWest has said it believes the hubcos already adopt the "best practice that underpins the bill".

In Shetland last year a political row blew up over the award of a school project to Miller Group, one of the partners in Hub North, rather than local contractors, while the Federation of Small Businesses has said the FSB is "increasingly concerned about the hubco model".

Responding for the hubs, Debbie McNamara, a director at Hub West in Glasgow, said schools were usually revenue-funded PFI-type projects with a 20 or 30 year support contract, therefore not appropriate for an SME contractor. She said: "Underneath that we have a commitment across all of the hubcos that we will tender out the work and opportunity to SMEs and generally councils are very hot on this - in the west hub area some councils say we want you to identify businesses within the local authority area, or if not widen it out to the west of Scotland."

The former Bovis Lendlease and Clyde Gateway executive added: "We have also got capital projects being 100 per cent delivered by SMEs, though sometimes matching the right project with the right contractor can be challenging. "We held 'meet the buyer' events' in each local authority area and from that we have identified over 220 companies."

The new legislation cannot cover the hubcos because "we are not public procurement authorities we are limited companies with shareholders", Ms McNamara said. "The best practice that underpins the bill is what we should be adopting anyway."

The five hubs went through a European-approved competitive process to select their 'tier 1' contractors - Hub North for instance has four construction firms, three facilities management companies, four architects, six engineering practices, three consultants and four legal firms.

Hub East Central has seven tier 1 firms and Hub West works with eight which are "everything from large scale down to the smaller", it says.

Hub Southeast has only two building contractors, Morrison and Graham, both of whom also appear in Hub South-West hub's list of four.

In its latest report Hub Southeast said: "There has always been a particular sensitivity around local employment and support of SMEs, and in recognition of these concerns the new Lauder Health Centre...was actually built by a local firm Borders Construction as JV partner to Morrison Construction. We continue to seek opportunities to extend the supply chain below tier 1 level, wherever we see advantages in terms of cost and innovation - without losing the benefits of experience as similar projects come through the pipeline."

Ms McNamara said: "We are also delivering a pipeline of primary schools that are capital-funded, where local authorities absolutely have a choice whether to use hub or not."

The stability of the system helps underpin community benefits notably apprenticeships, Ms McNamara added: "It is all very well saying we want two or three apprentices but the trick is to get them out at the other end.

"You can only ask for retention if you give people a pipeline of work and some certainty."

Scottish Water, meanwhile, which uses similar framework agreements, has said it has devised "one of the most comprehensive-ever SME frameworks, covering capital maintenance spend in rural communities".

However Neil Baxter at the Royal Incorporation of Scottish Architects is unconvinced.

He said: "Using a hubco as opposed to being dealt with at local level squeezes out Scottish-based local skilled suppliers from the supply chain".

Stewart Nicol at Inverness Chamber of Commerce said: "Lawyers we work with say winning consortia position their tenders in such a way as promising benefit to the local economy so they can be approved without falling foul of the legal framework, but it can lead to shipping carrots from Kent to the Highlands."

Alan Watt chief executive of the Civil Engineering Contractors Association Scotland said indigenous contractors should get "recognition for their commitment to communities" in jobs and training in order to maintain the skills base and employment levels over the next 20 years.

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