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Public spending cuts will bring opportunities

October’s public spending review will reveal more detail about the reductions announced by the chancellor back in June - and we must prepare for the worst.

However, it would be folly to devastate spending plans right across the board because the government would lose far more than it would gain.

The removal of Building Schools for the Future (BSF) funding has already hurt the building services sector. Yet with a little careful planning this perceived negative could become a positive and serve as a blueprint for other public spending reforms.

Huge amounts of taxpayer money were wasted in the BSF process and now we have an opportunity to reallocate a fraction of that money to far greater effect by focusing on small-scale refurbishment projects across thousands of schools.

October brings a chance to regroup and refocus public spending on more modest efforts to tackle perennial problems such as heat losses from poorly insulated building fabric and ageing boiler plants.

This kind of measured approach could go a long way to allaying the fears of businesses in our sector. Many HVCA members are worried that draconian cuts will lead to the dreaded ‘double dip’ recession.

John Miller, managing director of Yorkshire-based building services contractor J H Shouksmith & Sons, says it is “hard to be enthusiastic” about prospects for 2011.

“The industry is fortunate to have stable and known labour costs at the moment, and there is some optimism that this will carry through into 2011. However, we have seen significant material and equipment price rises. Perhaps more importantly, there have been significant variations in raw material prices: steel, copper and lead.”

The single “glimmer of hope”, according to Mr Miller, is if contractors can “get their heads around the opportunities available, especially in renewable technologies”.

The building services sector can play a crucial role in the government’s strategy for delivering a low carbon economy and reducing public spending, but only if it is able to keep up investment in skills and training. If the market dips again that investment will simply disappear completely.

The government must also take the opportunity to address reform of the project procurement process. The delivery of the low carbon agenda is threatened by the antiquated way in which tenders are managed. It was this that created the bulk of the waste in the ill-fated BSF programme.

Specialist contractors can be heartened that the HVCA continues to fight their corner on this. We will, through the offices of the Specialist Engineering Contractors’ (SEC) Group, push hard for these measures to be adopted across the sector and by the government in particular.

The National Audit Office (NAO) identified potential annual savings of £2.6 billion from reform of the procurement process back in 2005. The government now has an opportunity to completely rewrite the rules and save itself millions of pounds. Simply by adopting best practice as a client, ministers can achieve significant cost savings without harming their obligations for infrastructure delivery.

Robert Higgs OBE is chief executive of HVCA