Scottish Futures Trust 2016/17 Business Plan
Carefully targeted investment in public infrastructure is good for Scotland’s economy, both during its construction and for many years after completion. Construction supports thousands of jobs and creates training opportunities both directly and indirectly across communities and is one of the highest economic multipliers of any government expenditure. When roads, schools, houses, hospitals and bridges are operational or when 4G connectivity is available, they make an enormous contribution to the economy – people move into areas where they want to live and work; trade is made easier through improved transport links and businesses thrive by having access to fast and reliable digital communications.
For Scotland to keep growing its economy and attract and retain a skilled workforce, sustained investment and management of its infrastructure is essential. Only by improving and upgrading Scotland’s transport networks, making future-proofed investment in digital connectivity as well as targeted investments in its towns, villages and cities can Scotland reach its full potential.
However, public infrastructure comes at a price - it needs to be paid for. So with public sector budgets across the UK being squeezed more than ever before there is a need to deliver cost-effective and efficient infrastructure programmes in Scotland that meet tomorrow’s needs.
These value-for-money infrastructure programmes are undertaken and delivered by us, the Scottish Futures Trust, our work being underpinned by the following mission:
‘To improve the efficiency and effectiveness of infrastructure investment and use in Scotland by working collaboratively with public bodies and industry, leading to better value for money and ultimately improved public services.’
Scottish Futures Trust
As an arm’s length company owned by Scottish Government, our focus is to achieve the very best value when money is spent on building public infrastructure such as homes, schools, roads and hospitals and on services for improved digital communications.
We secure best value in many ways – by obtaining low-cost finance to allow construction start on a major road or hospital; expanding the use of a new school and its facilities for the benefit of the community; deploying innovative tools to allow public bodies assess the investment required for energy efficient street lighting, or by pioneering a new approach to building design that can be shared across local authorities.
For the delivery and funding of our programmes, innovation is key. With continued constraints on capital budgets across the UK, it is vital that alternative sources of investment are secured to support sustainable economic growth. On one innovative project with The City of Edinburgh Council, our Growth Accelerator initiative is allowing £60m of public money to be invested which is attracting £850m of private sector investment. As a result, this initiative is being rolled out with the potential to unlock substantial additional investment across Scotland.
Our success is recognised through our expanding programmes of work:
- over £1.9bn of community based infrastructure is either under construction, open or in development;
- work is underway to develop an infrastructure plan to support an increase in early learning and childcare provision;
- across our revenue funded programme two colleges have opened and two additional college campuses, three hospitals and two major road improvement projects are under construction;
- established programmes to build 3,000 affordable rent homes, of which nearly 1,200 are already occupied;
- over 12,000 pupils are benefitting from being taught in state-of-the-art schools; and
- thanks to our Street Lighting Toolkit, investment to-date in energy-efficient street lighting has reached £82m, helping save 24,500 tonnes of CO2.
Further success can be measured by the impact on peoples’ lives. Our work is securing employment, opening up new training and apprenticeship positions, delivering more affordable-rent housing, expanding access to superfast broadband and is improving working environments by having flexible, energy-efficient and well-designed buildings. Great design has the power to deliver improved working and living environments which benefit us all. We continue to push design boundaries and challenge architects and builders to consider and implement new ways to design world class infrastructure.
With 2016 being Scotland’s Year of Innovation, Architecture and Design, we are supporting the Royal Incorporation of Architects in Scotland (RIAS) mark its centenary with the RIAS Festival of Architecture. This event celebrates the wealth of architectural design and creativity taking place across Scotland and will allow us to showcase many of our ground breaking and award winning projects the architects we work with have designed.
Importantly, we recognise that our success is not achieved by us alone. The progress being made relies on joint working with our many public and private sector partners. Our commercial approach combined with successful ongoing collaboration means we are well on our way to achieve our corporate objective of securing £500-750m of benefits and savings between 2014 and 2019.
Across the Scottish public sector, priorities for investment will continue to be driven by economic, social and environmental goals. Wherever priorities emerge and evolve, we will focus the talents of our people to where they can make the most difference which for this Business Plan year will be on:
Innovation to accelerate investment in digital connectivity and housing
Leverage of infrastructure investment to accelerate and enhance public service reform
Targeted investment to support economic growth and sustainability
Influencing a step change in the effective delivery and management of public assets
- Innovation to accelerate investment in digital connectivity and housing
- Leverage of infrastructure investment to accelerate and enhance public service reform
- Targeted investment to support economic growth and sustainability
- Influencing a step change in the effective delivery and management of public assets
With our vision of ‘World class infrastructure for the people of Scotland’, this plan sets out this year’s ambitious and challenging objectives across our 10 work streams, which are grouped as follows:
To deliver our objectives our key resource is our first class team of some 70 people, drawn from public and private sector backgrounds, with a wide range of technical, commercial and financial skills. We do all we can to retain them by taking pride in making a difference and by creating a stimulating environment for everyone to reach their potential and fulfil their ambitions. We supplement this team with targeted secondments and advisory support.
Additional information about us and our work can be found on our website.
SFT - build
In 2010 the Scotland-wide ‘hub’ initiative was established to deliver community infrastructure through an innovative partnership between the public and private sectors. The hub concept brings together numerous public organisations who have appointed a private sector development partner to work with them to develop and build new community facilities, such as schools and health centres.
In the short period of time in which all five hub companies have become operational, huge progress has been made. In total, 70 community-based projects have been completed, a further 51 are being built and during this Business Plan period over 28 separate projects are due to start construction.
During 2015 we developed innovative proposals to address revised European national accounting rules and allow design, build, finance and maintain (DBFM) projects to go ahead. In the last three months of the 2015/16 financial year, the hub companies have lost no time in getting their projects into construction, with 10 schools and one health project newly underway.
Our investment arm, SFTi, invests in all DBFM projects. With nine hub DBFM projects planned to reach financial close in the 2016/17 financial year, SFTi’s overall level of investment is anticipated to grow by more than £3m to circa £16m.
Delivering community benefits is embedded within the ethos of the hub programme. Our March 2016 hub dashboard shows that 80% of all contracts have been awarded to SMEs; 110 new graduate places along with almost 500 apprenticeship and trainee positions have been created and many thousands of young people have visited construction sites as part of the hub’s educational support programme.
For the year ahead, we will continue to work closely with the hub companies and participants to build on existing best practice to ensure that the hub programme plays a key role in efficiently delivering essential facilities for communities. We will seek to enhance opportunities across the programme and in particular with our Asset Management, Operational PPP and Education work streams.
2016/17 business objectives
- Reach financial close on nine DBFM projects
- Achieve the start on site of 28 projects across the hub programme
- Deliver £350m of projects into operation within 2% of contracted time and budget
- Progress 95% of projects from New Project Request to Stage 1 within three months
- Continue to monitor value-for-money reporting to the National hub Programme Board
- Implement the new cost benchmarking approach and publish on the programme portal
- In collaboration with the Youth Employment Unit achieve an increase of 10% in graduate placements and 15% in established apprenticeships across the hub programme
- Invest in nine new hub DBFM projects scheduled to close in the year with a minimum of 10% sub-debt investment in each project totalling more than £3m
- Manage the investment portfolio to secure the delivery of the target returns
The past 12 months has seen unprecedented levels of activity across the SFT-managed Scotland’s Schools for the Future programme. Of the 112 schools in the programme, in the last year alone construction started on 31 and eight were completed, many of which were developed and built by the hub companies. Across the programme, 26 schools are now open providing over 12,000 pupils with improved, first-class facilities with many thousands more to benefit in future years. In addition we are pleased to see further benefits being achieved where local authorities have widened out the use of their new schools and facilities for local communities to use and enjoy.
A milestone was reached in April 2015 when a new primary school opened in East Dunbartonshire. Lairdsland Primary School was designated by us as the first ‘Reference Primary School’ and is helping revolutionise how primary schools across Scotland are designed and used. In recognition of its innovative design, in March 2016 Lairdsland Primary received the ‘Development of the Year - Public Buildings’ award at the highly coveted Scottish Property Awards.
The innovative design was developed collaboratively by the Council, our own in-house experts and other stakeholders to provide all local authorities with an exemplar of cost-effective, highly efficient and flexible design that is suited for modern teaching. As a result, many more schools are either being built or are in the development stages using elements of the design.
Continuing the innovation theme, this coming year will see us work to deliver a number of smaller-scale Inspiring Learning Spaces projects. Working with our partners, we have championed the development of high-impact, creative and innovative projects which demonstrate ambition, promote change and offer new and different approaches from which others can learn.
Building on the success of the Scotland’s Schools for the Future programme, we have started work with our partners to develop an infrastructure plan to support an increase in early learning and childcare provision. This early work has the potential to become a large-scale investment programme for the coming five years and further value will be maximised by building on existing work carried out by through our Asset Management and Low Carbon work streams.
2016/17 business objectives
- Manage the £1.1bn Scottish Government budget within the £1.8bn Scotland’s Schools for the Future programme, achieving great design and delivering better value for money through increased collaboration
- See construction start on 19 more schools
- Complete construction of 21 more schools
- Work with local authorities to develop the 19 recently announced school projects in line with the programme objectives
- Deliver 15 Inspiring Learning Spaces projects
- Work with all local authorities and Scottish Government to develop an infrastructure plan to support an increase in early learning and childcare provision
- Develop and implement at least one pilot project to inform the Early Learning and Childcare investment programme
- Share best practice in the development and delivery of educational infrastructure
Following the publication of the report, ‘Review of Scottish Public Sector Procurement in Construction’, Scottish Government endorsed the implementation of 66 recommendations made by the review.
The recommendations centred on how efficiencies could be delivered within construction procurement through a collaborative, sustainable and outcome-focussed approach. The 66 recommendations were grouped into 21 work areas. We are leading on the implementation of 10 of the work areas, mainly those that are delivery-focused, and Scottish Government on the remainder.
Building Information Modelling (BIM) is one of the key work areas and is widely acknowledged as a key tool in driving efficient design, construction and commissioning of buildings in the future.
Good progress has been made with our team already having completed two of the 10 work areas with the rest to be implemented during 2016/17.
2016/17 business objectives
- Deliver SFT-led implementation measures to the agreed programme
- Complete the remaining eight work areas in line with approved strategy papers
- Produce guidance and a toolkit to improve the consideration of whole life costs at project inception and all business case stages. Secure adoption of this from public bodies such that a pipeline of projects of more than £750m will be committed to use the toolkit
- Secure adoption of the Building Information Modelling Decision Matrix by a minimum of 10 public bodies
Increasing the supply and improving the quality of housing across Scotland remains a key priority. Collaboration with the public and private sectors is fundamental in order to achieve a sustained increase in the number of homes being built in Scotland. To date such successful joint working has secured the building of 3,000 affordable rent homes.
One example of joint working is our highly successful and award winning National Housing Trust (NHT) initiative which continues to deliver, as nearly 1,200 NHT homes are now occupied providing quality, affordable-rent housing to thousands of people. In the last year alone, 307 homes were completed and contracts were signed to build a further 218 homes. To date, NHT has secured additional investment of circa £280 million into the house building industry in Scotland.
Building on our experience in this area we will develop and secure innovative structures to contract for a further 3,000 homes in the coming three years.
2016/17 business objectives
- Through NHT deliver at least 350 affordable homes in the year
- Continue to support 28 NHT Limited Liability Partnerships providing circa 1,200 affordable rent homes
- Progress formation of joint ventures with The City of Edinburgh Council for the delivery of mid-market and market rent properties
- Working with SFT’s Asset Management team, establish a pathfinder approach, unlocking value and accelerating delivery of housing on at least two surplus public sector sites
- Seek and develop opportunities with councils to establish mid-market rent vehicles building and improving on the already successful NHT Council Variant approach
- Work with public and private sector partners on opportunities for the use of government backed guarantees in the housing sector
Constrained public finances mean that public resources need to be applied innovatively to secure major additional economic investment.
Nowhere is this better illustrated than across our Growth Accelerator initiative. Our work, to design and develop a new infrastructure investment approach is seeing The City of Edinburgh Council invest £60m in the city-centre which is attracting £850m of private sector investment. Enabling work is now underway on the new development, named Edinburgh St James, which will see it transformed into a retail, leisure and residential destination.
In February 2016 it was announced that Dundee City Council would adopt the Growth Accelerator approach for use at the Waterfront area and other locations across the City.
Building on these recent achievements, we will continue to work with local authorities to develop strong business cases to allow the Growth Accelerator to be used to its full potential to unlock significant additional economic benefit across Scotland.
With the Growth Accelerator and the continuing development of Tax Incremental Financing (TIF) as a way of funding infrastructure investment, over £250m of public sector investment is planned to be made which in turn will unlock more than £1.5bn of private sector investment.
2016/17 business objectives
- On site activity to have commenced on the Growth Accelerator enabled £850m Edinburgh St James development
- Finalise the Dundee Growth Accelerator agreement and see activity commence on site
- Support authorities in delivering a combined TIF & Growth Accelerator cumulative construction activity of £35m
- Support development of two further innovative economic growth projects and engage on the development of regional partnership plan propositions
- Support three active TIF projects and promote a way forward to develop the next stages of TIF projects
- Provide support to partners on developing and delivering City Region Deals focussed around Aberdeen, Inverness and Edinburgh
The NPD programme continues to deliver, with strong competition and streamlined procurement processes having resulted in faster procurement times and lower costs of finance. Scottish Government’s share of the long-term revenue cost of these projects is well within initial estimates, driven by robust construction cost-capping processes and historically low costs of funds locked in at financial close. In construction, the projects are delivering a wide range of community benefits with, for example, the three College NPD projects bringing 128 jobs for new entrants to the workplace, 73 apprenticeships and 10 graduate jobs.
Working closely with our Operational PPP contract management team, during 2016/17, we will focus on delivering four NPD projects into operation.
In addition, we will work on developing revised arrangements to align with emerging Eurostat national accounting rules to allow further projects to progress to procurement. This will be challenging and require collaboration with UK and European statistics authorities and the new advisory hub of the European Investment Bank to determine value-for-money arrangements in the context of the European and UK national accounting and budgeting framework. Building on the success of the large procurements delivered to date and taking into account Scottish Government’s wider borrowing powers, we will continue to consider new approaches for value-for-money infrastructure investment.
2016/17 business objectives
- Deliver financial close on the NHS Orkney hospital and healthcare facilities
- Support successful completion and occupation of Ayrshire College, main campus for City of Glasgow College, NHS Ayrshire and Arran (Woodland View) health project and the new Scottish National Blood Transfusion Service National Centre (combined capital value of around £300 million)
- Develop a revised funding structure in line with Eurostat rules to allow future NPD projects to progress to procurement
- Work with procuring authorities to use the SFT Community Benefits Toolkit on a large project
- Explore new approaches for infrastructure investment within the changing powers devolved to Scotland
- Maintain programme governance and transparency through 11 Public Interest Directorships on NPD companies
- Explore opportunities for delivering improved value for money on large infrastructure asset procurement based on transaction experience gained on the NPD programme
- Manage and report on the long term affordability consequences of the programme
We have taken the lead to develop an approach to implement the Scottish Government’s World-Class digital vision and the team’s focus is on developing a programme to enhance infrastructure investment and delivery in Scotland.
To illustrate the impact this would have, in 2015 we commissioned the following report, ‘The economic and social impacts of enhanced digitalisation in Scotland’. The report predicts that if Scotland were to become a digital world-leader its economic output would be boosted by up to £13bn and would create over 5,000 new businesses supporting an additional 30,000 jobs.
To deliver a world-class telecommunication infrastructure in a practical way, our team of experts work with industry to ensure the right mechanisms, partnerships and commercial approaches are developed, with much progress being made: Building on the 4G mast project on Coll and an initial TV Whitespace (TVWS) pilot in Glasgow, a further TVWS pathfinder project has been developed to assess if the technology can be utilised to extend connectivity into rural areas for community, tourism-related and other public services using the systems that were successfully demonstrated in the Glasgow TVWS pilot. The Public Wireless Programme has also supported and funded a more holistic approach to public building wireless provision, and targeted over 100 public buildings in some of Scotland’s deprived areas.
2016/17 business objectives
- Deliver three further mobile mast demonstrator projects
- Support the delivery of Home Office Emergency Services Mobile Communication Programme Extended Area Service procurement and mast deployment
- Develop the technical and commercial approach for the delivery of wider mobile coverage and capacity; the initial focus will be to develop a series of future interventions for the deployment of 4G infill
- Responding to the outcomes of Ofcom’s Digital Communications Review and working with industry, Ofcom and Scottish Government, identify key priorities for Scotland’s telecoms infrastructure to enable the delivery of the Scottish Government’s World-Class Digital Vision
- Building on the world class route map work with industry and government to deliver new technology research and development pilots and develop strategies for spectrum and internet exchange implementation
- Through the Public Wireless Programme, work with and support public bodies to develop capacity and capability to enable greater service delivery benefits from wireless technologies
Across the public sector, improvements are being made to how public buildings are used. This is supporting improvements to the delivery of public services and enabling efficiencies to be secured. Significant activity is focusing on offices and property disposals, subsequent financial efficiencies and carbon reduction. These are also contributing to wider benefits and bringing together related areas of work for greater impact.
We have been working with councils, NHS bodies and the emergency services to jointly raise their level of ambition and increase the pace of change. These organisations are well on their way to realising more than £500m savings by 2017. With our support, Scottish Government and the public bodies’ network have begun a change programme for their offices which aims to achieve savings of £28m per annum from 2017. We are also working with partners to explore alternative approaches to how their future buildings could be managed.
Collaboration across public bodies can bring real benefits but remains a challenge. To address this we have developed programmes with partners looking at the better use of all assets in any one place.
2016/17 business objectives
- Support office transformation projects in councils, NHS bodies and the emergency services. This will enable new ways of working and integrated working between public bodies. Target over £50m total efficiency savings
- Ensure that targets are set and opportunities developed for the next phase of estate efficiency opportunities for Scottish Government and public bodies after 2017
- Work with partners to assemble and deliver surplus property programmes and the effective preparation and disposal of significant sites. Target over 15 assets brought to market, secure £30m in capital receipts thereby increasing housing supply and develop the potential for wider benefits
- Continue to support and challenge Police Scotland with their estate strategy to deliver transformational service change, cost efficiency savings and property disposals income
- Support the development and implementation of new estate management approaches for public sector property portfolios
- Support a collaborative approach to the delivery of public sector services and the use of buildings. Continue to work with multiple agencies in Dumfries and Galloway and East Lothian to realise a place based approach to asset management
Our Operational Public Private Partnerships (PPP) contract management team continues to build on the momentum it has generated and last year we carried out and completed 10 in-depth reviews across the health and education sectors each of which improved service delivery and value for money.
A key element of our work over the past 12 months has been to work as part of a joint Specialist Support Team to support Scotland’s NHS boards in improving contract management, sharing best practice and secure value on a consistent basis across the country.
During the year the team has established itself and increased its profile not only among health boards but within the private sector. We have also worked with various public bodies whose NPD and hub projects are reaching the operational stage and this will be an increasing part of our work in the coming year.
2016/17 business objectives
- Carry out appraisals of the contract management of 10 operational projects, and support the public sector authorities in improving contract management to secure efficiency benefits of £1m per annum
- Continue to collaborate with the NHS as part of the Specialist Support Team, to provide appraisals and support in health projects; build contract management capacity and capability within health boards; and share knowledge and lessons learnt across the sector
- Work with authorities whose NPD and hub projects are about to reach the operational phase to have strong public sector contract management from the outset
- Engage with the private sector, at a strategic level, to align the service delivery to meet expectations
Last year, we and Scottish Government established a Non-domestic Energy Efficiency Framework to support the delivery of low carbon public sector projects. We also supported a number of local authorities in assessing the benefits of Energy Savings Companies (ESCos) to deliver low carbon projects, as well as examine alternative approaches to financing heat projects.
Our work with local authorities continues by assisting them prepare robust business cases using our Street Lighting Toolkit to transform their street lighting estate to new energy efficient LEDs. During 2016/17 cumulative investment is set to reach £138m which will see 250,000 street lamps converted.
Across this Business Plan period the Scottish Government will develop its Energy Strategy for Scotland and pilot areas of the Scottish Energy Efficiency Programme. Our team will focus its efforts on supporting the development of this programme across the spectrum of energy efficiency and district heating, and lead the public sector element of the Low Carbon Infrastructure Transition Programme (LCITP). We will also support our wider programmes to capture the benefits of low carbon approaches including the development of a sustainable approach to procurement – an initiative being taken forward by us as part of the Construction Procurement Review.
Our objectives for 2016/17 build on these foundations with the objective of accelerating investment and delivery of Scotland's climate change targets.
2016/17 business objectives
- To lead the public sector work stream within the LCITP which aims to maximise low carbon impact, targeting funding to at least 13 projects, including one demonstrator, with planned investment of circa £15m
- Double the number of LED Street Lights to 250,000 by supporting councils’ implementation programmes and increasing the programme’s cumulative savings from £7m to £18m, resulting in a further reduction of 40,000t of CO2
- To explore innovative financial mechanisms and contractual structure solutions to support investment in the low carbon economy for energy efficiency, heat and other low carbon projects
- Provide support to strategic district heating initiatives, focussing on viable procurement strategies and financing structures, sharing work to date and developing tools and guidance for publication
- Support relevant projects to input into robust business cases and continue to share experience and best practice through the Heat Network Partnership
- Undertake an initial review of existing socio/economic impact models used for infrastructure projects to consider if replicable for district heating projects
- Undertake an assessment of the viability of regional ESCos and subject to agreement on viability, produce a toolkit on how to establish a regional ESCo
- Support the procurement of a Project Development Unit for the LCITP to promote and support public sector NDEE projects
- Support the development of a pipeline of NDEE projects focusing on progressing business cases for a college retrofit pathfinder project; four local authority projects; and one other energy efficiency project with at least two projects progressing into procurement
SFT's operational budget is £10.3m with income arising from the following sources:
|Income Source||(£ 000)|
|Scottish Government Funding||9,110|
|Forecast Investment Income||994|
|Public Interest Director & Other Income||194|
This equates to the following level of investment per work stream:
|Construction Procurement Review||507|
SFT’s operational budget is applied to major work streams in the following proportions:
|Construction Procurement Review||5%|