19 October 2017

Hub - A Scotland-wide initiative

We provide an overview of the hub initiative; a programme led by Scottish Futures Trust on behalf of the Scottish Government.

What is the hub initiative?

The hub initiative is being led by Scottish Futures Trust Limited on behalf of the Scottish Government, and is being implemented across five geographical territories in Scotland via five hub companies:

The initiative aims to provide a mechanism for delivering and managing assets more effectively, with continuous improvement leading to better value for money for the public purse.

Under the hub programme, public sector organisations across a hub territory work in partnership with each other as well as a private sector delivery partner (PSDP) as a joint venture delivery company, known as a hubCo. The initiative brings community planning partners, including health boards, local authorities, police, and fire and rescue services, together with a PSDP to increase joint working and deliver best value. Each hubCo will take a strategic, long-term planning approach to infrastructure in order to support the delivery of community services.

The hubCo will act as a conduit between the public and private sector, supporting the public sector participant through the project planning and development phase. If the project is given the go-ahead, the public sector organisation will then engage with the hubCo to undertake the project, with the construction carried out by the private sector.

What does the hub initiative aim to achieve?

  • Improve the efficiency of delivering community-based facilities;
  • Deliver economies of scale through shared facilities;
  • Make the best use of public resources; and
  • Provide continuous improvement, in both cost and quality, in public procurement.

What are the key objectives of the hub initiative?

  • Provide enhanced local services through increasing joint service working and integration between Community Planning Partnerships, including the third sector;
  • Deliver a sustained programme of joint asset management and investment into community-based facilities so that more services are provided locally in communities through multi-disciplinary teams working from single sites;
  • Establish a more efficient and sustainable procurement methodology for public sector bodies, principally NHS Boards and Local Authorities;
  • Deliver facilities that meet public sector policy objectives for design quality and sustainability;
  • Facilitate and improve the level of stakeholder engagement in the planning of services and development of community-based premises; and
  • Increase opportunities for local employment and training.

What are the key types of project undertaken?

Under hub, there are two main types of project:

Design and Build (DB) – this is where the cost of the project is funded from the capital budget of the public sector partner.

Design, Build, Finance and Maintain (DBFM) – this is where a special purpose vehicle (SPV) is set up. Funding is obtained from the private sector (e.g. bank, insurance company or pension fund) by the SPV and is used to fund the capital cost of the project. The SPV then enters into a service concession arrangement with the public sector partner, where the SPV effectively leases the asset to the public sector partner over a concession period, which is usually 25 years. At the end of the concession period, the public sector partner takes ownership of the asset.

How successful has this been to date?

The current value of the hub programme (as at September 2017) is £2.630 billion. This is broken down into:

  • £1.018 billion of projects that are complete and now operational;
  • £991m of projects that are currently under construction; and
  • £621m of projects that are currently in development.

The diagram below shows how this is split across the five hub companies:

The hub programme also creates a number of other benefits for Scottish people and their communities, including:

  • 86,300 people have been provided with an introduction to the construction sector;
  • 4,500 work placements;
  • 237 new graduate jobs; and
  • 1,206 new apprenticeships.

One of the fundamental aims of the hub initiative is to help SME businesses throughout Scotland, and so far it has been successful, with 76% of contracts awarded to Scottish SMEs, supporting over 6,500 jobs.

(the above data was obtained from Scottish Futures Trust Limited’s website: September 2017)

What’s our involvement?

At Scott-Moncrieff, we’re proud to say that we provide external audit and taxation services to Scottish Futures Trust Limited, hub South East Scotland Limited and hub South West Scotland Limited, as well as a number of SPVs set up to undertake the DBFM projects that fall within the hub programme.

We also provide accountancy, audit and tax services to a number of companies within the hub supply chain, as well as those within the wider property and construction industry.

As such, we’re well-placed to provide you with advice on many of the issues and developments currently facing the sector. If you have any questions on this initiative, or any of the services we provide, please do not hesitate to get in touch with James McBride.

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