Kickstarting economies through local spend
The government's 'New Deal' aims to put jobs and infrastructure at the core of its growth strategy. Jason Hallas explains why local spend should be at the core of construction projects.
Over the last few months, we’ve seen a realisation that we need to adapt to a ‘new normal’ following the arrival of Covid-19, rather than ‘wait it out’, hoping things will eventually get back to normal.
Unlike in films, we can’t change the past, and yet I keep thinking about the famous scene in Back to the Future when Doc Brown explains to Marty McFly how his presence in the past has skewed the timeline creating a new alternative future.
Without anyone jumping into a DeLorean – if we can find one - we see that Covid-19 has certainly skewed the timeline and changed the future for us all.
With the support of our customers, it has taken an outstanding effort, innovation, resilience, and adaptability to see us through the first few months of this challenge and we’ve kept nearly 100% of our projects across England and Wales open throughout.
However, we must never lose sight of what is on the horizon, and for our local authority customers, these perspective headwinds will inevitably bring cuts in Government grants.
Local spend is vital
Our office project for Gateshead Council, called Riga, generated over half a million pounds of spend within 20 miles during Covid-19 stricken March and April.
This is where the construction industry will have a crucial role to play in the future.
As well as delivering the social infrastructure our local communities need in the months and years to come, construction will be the powerhouse for driving new inward investment, supporting SMEs, creating local jobs and upskilling communities.
The immediate and positive response to Covid-19 from our customers has told us exactly that. As the public sector moves closer to a standalone model, local spend is vital to powering local businesses and employment.
Willmott Dixon is a purpose-driven company wants to leave positive lasting legacies in communities in which we work, delivering projects that have enhanced the lives of thousands of people across the UK.
Contractors need to show who their projects are enriching local economies. For example, during April and May 2020, £525,928 (66%) of the project spend on our office project for Gateshead Council was spent with businesses within 20 miles of the site.
In fact, across 11 projects for our partners Gateshead Council, we’ve invested more than £63.8m with local businesses within 20 miles of our projects.
Outside of the North East, as a business, our commitment to local spend is paramount. In 2019, we handed over 49 projects across England and Wales. Throughout this, over £489m was spent within 40 miles of the project, equating to 58% of overall project spend. This commitment significantly boosts the local economy, and as we recover from the impact of Covid-19, the drive for local spend to kickstart local business will never be more important.
Our £37m University of Warwick Sports and Wellness Hub saw 74% of the project's budget spent on companies based within 40 miles of the site.
The right procurement vehicle will play its part powering local economies
Financial and time pressures will continue to mount in the wake of this unprecedented public health crisis, making the choice of the right procurement vehicle all the more important to local authorities driving to continue to deliver projects.
In most cases, a race to the lowest price through a single-stage route doesn’t put local spend at the heart of the project and let’s not kid ourselves about the low levels of overhead and profit sometimes shown in tender documents to just win a project.
As leading author and motivational speaker Simon Sinek would suggest, this is not about winning the game now, it’s about the ‘infinite game’ and it has been heartening to have had so many positive conversations with customers over the last two months about how construction can play its part in protecting and powering local economies.
Without exception, a new building will create new jobs through its design and build stages but once ‘live’ the knock-on effect can be far-reaching; a new development may open up a previously underused building to be re-purposed, again creating new employment through its design and build stage, and the cycle starts again.
A shift in mindset and collaboration are key
Collaboration is the key and only by looking after each other and working together as an industry can we do the right thing together; a simple change in payment terms to twice weekly, for example, has already seen smaller sub-contractors paid more frequently keeping them more stable and able to keep local people employed.
We have seen customers and technical advisors working together with contractors, as partners, to overcome such issues as cash flow and programme without becoming slaves to contract terms and conditions and long may it continue.
We are emerging from a major disaster that forced massive leaps of innovation – that would have taken years beforehand - to happen virtually overnight, in an industry that has been long criticised for not being innovative enough.
Committing to put local spend top of every procurement agenda is another shift in mindset and a massive leap forward, that together we can make happen now, to help protect the future of our communities and economies.