 Good morning, and welcome to the 7th meeting of the Economy, Energy and Fair Work Committee for 2019. May I ask everyone in the public gallery to turn off any electrical devices that might interfere with proceedings? The first item on the agenda is a decision by the committee to take items 9 and 10 in private. Are we agreed? Yes. Thank you. I now turn to subordinate legislation before the committee, which is the Insolvency EU exit Scotland amendment regulations 2019. I would welcome Jamie Hepburn, the minister for business, fair work and skills, and Alex Reid, David Farr and Victoria Morton, who are here with him. I invite the minister to make a one-minute opening statement on the instrument before inviting questions from members. I do my level best to make it within one minute, convener, but I thank you for having me here today to move the draft regulations, which you are considering in light of contingency in the event that the UK were to leave the EU without a deal in which circumstances the UK would cease to have its insolvency regime automatically recognised under the provisions of the EU insolvency regulation. I won't rehearse, given I only have a minute, the position of the Scottish Government in terms of our great concern about a no-deal Brexit, but it is, of course, necessary to plan for all eventualities, including a no-deal outcome, and this instrument deals with the situation that would be created by that outcome. Given of a minute, I'll leave it at that, convener. Thank you very much. I'll now move to the formal debate on the motion to approve the affirmative instrument, and I would invite the minister to formally move the motion. Now, I would ask members if they wish to speak in the debate on the motion. No one wishes to speak, so I will put the question to the committee. The question is that motion S5M-15528 be agreed to. Are we all agreed? Yes. Thank you. In that event, I think that I'll invite the committee to agree that I, as convener, and the clerk will produce a short factual report of the committee's decisions and range to have that published. Are we agreed? Yes. Excellent. I'll suspend the meeting to allow the minister and the officials to leave. Thank you very much. We'll now move to item 4 on the committee's agenda for this morning, and this is turning to our inquiry into construction and Scotland's economy. We're joined today by witnesses Robin Crawford, chair of the review of Scottish Public Sector Procurement in Construction, Gillian Cameron, programme manager supplier development programme, Alan Wilson, national executive officer, SEC Group Scotland, and Jeannette McIntyre, managing director of Indie Glass Ltd. Good morning. Welcome to all of you. Just by way of introduction, there's no need to press any buttons. The microphone system will be operated by the sound desk. There's no need to feel obliged to answer every single question, but we'll let the discussion develop as it were, and you may come in on one and not the other question, and so forth. I would also ask committee members to keep their questions short, and perhaps in answering as well, if you could try to cover the points that you think are important, but also be brief in doing so. If I might start with an opening question, you'll probably be, or at least some of you will be, familiar with the 2018 Audit Scotland report about procurement that says that the public sector does not always do procurement well, and comments that there are recent well-documented, publicly funded projects with serious failings. What would be your comments on that? Who would like to respond to that first? I think that there's a number of fundamental issues in relation to failures. The first thing is the whole model of procurement, the drive towards lowest cost tendering, the lack of expertise in a number of local authority and public sector bodies, and all of those contribute towards poor construction. If you start the premise of building something that the cheapest is going to be the one that wins, I don't think that necessarily you're always going to have the best outcome in any construction sector or any building whatsoever, and I think that there's a number of different examples all across the country that highlight that that is indeed the case. What we see in our industry and the specialist union contractors is late engagement, passing of risk, delays in payment, all of those cause issues in relation to the construction programme generally, so it's an endemic issue. Unfortunately, it cuts across almost every project that we see in our members and involves them. You refer to projects being awarded in the basis of lowest costs, and of course the procurement regulations don't require projects always to be awarded to the lowest bidder. Are there other factors that a public body can take into account? Do you feel that the difficulty is that they're looking too much to the price and not enough to the other factors that they're entitled to come to take into account? Yeah, I think there's definitely a pressure amongst public bodies to look for the lowest cost option, and of course what happens there is that when the contract is awarded to, for example, a tier one contractor who often is a management contractor, not a natural construction company, they then pass the risk and the cost savings. The term that's come into vogue in the last few years is valued engineering, which really is cost-cutting in another series of words. All that happens is down the line of that chain, the costs are cut, the risk is passed until the person at the end has most to lose in relation to the contract going wrong. If we go back up to the top where the actual work is procured, more often what we see now and certainly in local authorities is that you have a procuring team sitting above what we might term the industry professionals in terms of chronic surveyors determining what and how contracts are actually accepted. I think that I saw Jeanette McIntyre nodding your head there. Did you want to come in on that? I would second much of what's just been said, and I also feel that one of the key drivers in construction generally is to eliminate waste. This is a huge driver that many of the tier 1 contractors and every tier below that are challenged to improve. Many of the current procurement models at the moment that we are driven by encourage waste throughout the whole process with multiple companies pricing and multiple companies trying to design what those designs will actually be implemented. That comes right through the supply chain, and I think that we have agreed generally—this is all the tier 1 contractors all the way down the process—that establishing a procurement model that focuses on the whole life of the building as opposed to just how much it costs to put the building up is what's required. That expertise is currently lacking in most of the public procurement processes that we see. Ensuring that appropriate experience chartered construction specialists are engaged in the procurement process is an essential step forward. Is there too much short termism? Yes, that short termism is prevalent, and what are perceived to be construction stage savings can end up being extremely costly to the organisation that will inherit the building and every occupier of that building thereafter for its life. The contractor responsibility can end as little as 12 months beyond the construction of the building, the 12-month defects liability period. What's happening is that the risk is being cascaded down the supply chain for design and structure and fire rating and compartmentation. All the technical things that are essential to the building performing are being cascaded down the supply chain. My company is one of the latter trades. We are constantly now. Very few public buildings, including schools and hospitals, do not involve some sort of design, engineer, supply, install, maintain, service by companies like mine. The perception of that is very poorly appreciated at the procurement stage. I think that what is slightly depressing is that all issues were raised in the construction of the review report that we published in October 2013. It is disappointing that six years on so little progress has been made in tackling a number of those issues. To take the whole-of-life costing issue, that is an issue that has in fact been addressed by the Scottish Futures Trust in that a very good document has been prepared and is on the SFT website giving details as to how to carry out a whole-of-life cost. By that, we mean not just looking at the initial cost of the building or our infrastructure project but looking at the costs throughout the operation of that piece of infrastructure. Of course, the initial cost is very often only a fraction of what the total cost will be in operating the building. The disappointment is that I do not think that that tool has been taken up to any great extent or to a sufficient extent by public authorities. Looking at the issue of a risk transfer, again, that was one of the key recommendations in our report that that issue should be addressed. Looking at the issue of the race to the bottom and lowest cost tenders being the ones that inevitably tended to be the most successful. Clearly, the public sector has to look for value for money. That is a given, but quality is also important. What we believe was essential was that there should be a wider scoring on quality such that the quality scoring was given greater prominence and it did not just come down to the lowest price, but sadly that remains the case that the lowest price very often wins. Before I bring Gillian Cameron in, you have mentioned the 2013 procurement review, which Andy Wightman was wanting to take up a few questions about. I will pass over to Andy Wightman to develop that. Thank you very much, convener, and thanks for coming in today. I am just wondering why the review that you chaired in 2013 has not had the impact that you anticipated. I notice, for example, that some of the recommendations that you made you have won on what is called pain share or gain share. That is an interesting terminology. The construction industry has a background of confrontational attitudes between client and contractor when you talk about pain share or gain share arrangements that have been put in place in the health sector, for example, but not elsewhere. However, your recommendation on that is that specific guidance should be developed. You say that in a few places it is guidance. Would that be one reason why we have not made much progress? Guidance, which you have mentioned in a document, is useful, but at the end of the day, to implement any recommendations for changes in practice, you need laws or financial penalties or contractual obligations. There are three aspects to that. The first is getting the guidance in place, and the second is then ensuring that you have a correct level of skills in the procuring authorities. The third is then determining whether those persons who are responsible for construction procurement are following the guidance and have the correct level of skills to carry out the construction project. To my mind, those are the three essentials here. In terms of the guidance, a lot of the work that was done and following the review report, we had 66 recommendations in the review report, 65 of which were accepted by government, one was neither accepted nor rejected, it was put in limbo. A great deal of work was done immediately following the report. A construction review development group was formed. I attended a number of the meetings as a report author, and most of the large public authorities involved in spending attended that group, which made, on a monthly basis, some trying to drive progress. Lots of documentation. The first stage that was seen to be necessary was to say what should you do, because unless you tell people what you should do, you cannot really expect them to do it. A lot of effort has gone into that, and that process has by and large been quite successful. There are still a number of key gaps, but we now do have a construction procurement manual on the Scottish Government website. It is incomplete. There are further bits to be added to it. A number of construction procurement notices have been published, which give guidance on a number of the key areas in which we have made recommendations. That part is making good progress, but it is currently under resourced. A lot of resourcing was put in at the beginning, but that resourcing has gradually been whittled back. I do not think that there is enough resourced to take it to the critical next stage of completion and digitising the process so that you have a manual that is readily accessible and available to all public sector bodies involved in construction procurement. That is stage 1. Stage 2 is the skills issue, and reference has already been made by others in the panel to great concerns about sufficient skill base in procuring authorities. The third issue is saying that people with the correct skills are deployed, and are we following the guidance? That has, sadly, not really good off the ground yet. In my view, until you get a system of following up to ensure that the guidance is being followed and that proper procedures are being followed in construction procurement, it will be very difficult to address a number of the issues that were referred to at the outset. I was following up what Robin was saying, because there have been steps made to address the lack of knowledge that is in the public sector with the publication of the procurement manual, but it is the implementation and how that has been passed out to the various people who should be reading it, looking at it and then acting on it. I do not have as much construction experience as my colleagues here. Our programme supports all Scottish SMEs and how to tender, but construction is a huge area and a number of suppliers that come to us do feel that they do not get the early indication of projects that are coming up. The public sector remains very risk averse to looking at innovation, so I think that that stymies sometimes how that can be moved forward as well as taking on board the innovation that might be out in the marketplace to you. Can you point Mr Crawford to any procurement projects that have taken place in the last few years that have effectively reflected the improvements that you were seeking in 2013? Or is it still the case, as you say, that with the guidance being incomplete and a skills problem that was still quite some way from achieving the ambitions that you set out? I do not want to paint the picture that all construction procurement and infrastructure procurement in Scotland is procured poorly, because many of the very large authorities are already embracing best practice and have skilled people in procurement, and therefore quite a large number of major infrastructure procurements are done competently and well. I think that it can be seen that the number of problem cases that are referred to at the outset is not the larger portion of the infrastructure that has been procured in Scotland. A lot has been done well and indeed, in our report, we sought to draw upon a lot of the examples of good practice. The difficulty is in rolling it out across all the public sector bodies. We estimated that there was about £4 billion of spending on infrastructure in Scotland. It is a huge sum of money. In fact, there is no actual guidance. Nobody is pulling that figure together, so we had to estimate that figure. We have set out in the report how we did that. The problem, therefore, is where we have an authority that is responsible for a major procurement but is not following the guidance or the best practice that we have recommended. Perhaps a very under-resourced reference has been made to that already in terms of procurement capability and then goes ahead on the basis of what we will muddle through with what we have got. Rather than saying, I am sorry, we do not have the proper resources to carry out this procurement competently, so we need to buy in resources or share with some other public body that has those resources in order to make the thing work. That is a key observation going forward, because some of the evidence that we have had is for a more co-ordinated, in some cases, more centralised procurement model. Well, we certainly in our report recommended that authorities that lack the competence to do a big procurement, a big infrastructure procurement, should go to authorities that do have that competence and that there should be more collaboration in these circumstances. That relies on people's self-declaration that, hey, I have not got the capacity, and that is going to be difficult in some cases. Well, that is clearly an issue. Any other observations? I could add that some of the best examples of procurement and whole-life building analysis that I have seen recently have not been in the public sector. They tend to be buildings such as MAGI centres for healthcare, which are very, very key drivers in terms of what those buildings are expected to deliver, seem to come seamlessly straight through the procurement, design, engineer, construct and lots of post-value occupation surveys are done to see how the building performs for the end-user thereafter. Those are fantastic examples of good practice. I think that the best examples that we have had go back a little bit of time, but the Commonwealth Games construction in Glasgow was one of the best examples that we were given in relation to early engagement with contractors. I think that that is another key to this particular issue. Often, those that construct the building are bought in at the very end, having gone through a process of, as Jeunette mentioned, getting to the lowest cost and passing the risk on. Early engagement with the people who carry out the work and often undertake the design, who have surety of payment through the introduction of project bank accounts, which I would like to congratulate the Government on in reducing the thresholds from £4 million down to £2 million. That will make a difference now. I think that that is a positive step forward, and that was part of the recommendations within Robin's report. That has to be mentioned as a positive, but that Commonwealth Games was a good example of where there was early engagement and things worked and buildings were built on time and within budget and properly constructed. I have a few other things to fill up, but we are a bit tight for time, so I will come in later. I want to explore the whole question of frameworks and hubcodes as models of procurement. When I look at some of the work that has been done on this, we look at hubcodes, which are dominated by maybe five big companies. Those five big companies operate at tier 2 and at tier 3, so the relationship could be deemed to be quite incestuous. Four of the five companies are headquartered outwith Scotland. I also do not recognise many of the SMEs involved very much at the end of the food chain as being local. Some indeed come from the rest of the United Kingdom. Does the approach with the frameworks and the hubcodes work against SMEs? Start with Gillian. My experience with the hubcodes is certainly Hub South West being one of the larger ones. I do feel they are very proactive. We are hosted by South Lanarkshire Council, so we work quite closely with both the council and the hubco. They have set up initiatives to build Lanarkshire to try and encourage local businesses to get involved in the supply chain. My experience from that and the supplier development experience around that is that they are being proactive to do that. I cannot comment on some of the other ones. I have not seen that. Maybe I am not close enough to see that, but certainly I think that there always is a challenge where you have a large infrastructure project, which a risk averse public sector is going to always look for that larger contractor to be at the front face of it. There are steps in some areas that are being made to try to address that and bring the smaller contractors into the supply chain. However, I do not see that nationally across Scotland personally. To answer your question, it is an organisation that micro and SME businesses find difficult to break into if they are not part of what is already established. The hubcodes were meant to become centres of excellence, and there is some evidence that perhaps it is happening at the top level, but, from our perspective, we find from our members that they see a barrier for entry in relation to bidding for work in those particular areas. I am getting nods from everybody else. The hubco model is about to change, as I understand it. The Government announced that they were looking at the model used in Wales. Does that address those concerns, or are we just going to see more of the same, but with a different name? I fear that that could be the case. The endorsing what Gillian said there by far, Hub South West, having dealt with almost all of the hubs now in my scope of work, Hub South West, the cascade of key drivers is very clear, perhaps because of the involvement at the tier level by John Maclelland and the others who drive that team. We are very engaged with them, and they tend to maintain more responsibility through the procurement of buildings and attend meetings while the tier 2, 3 and 4 contractors are being appointed. There is definite evidence of more engagement with local employability, supported employment, and they are way above and beyond some of the other hubs in terms of that type of engagement. That said, they still minimise the tier 1 contractors to 4 or 5, as you say. Not all of those are based in Scotland. Not all of those have key drivers being local employment. We can still evidence, even on those projects, where I think that the current contractors on Hub South West are Morgan Sindle and Graham Construction, who are Irish-owned and Morrison Construction. We will still experience situations where the specification for the product will clearly identify the properties that the product has to achieve. We will engage with the main contractor and they will say, well, Jeanette, we know that you meet all the terms of the spec and our engagement, but we have a much cheaper price from a company based in Leeds or Birmingham, and that is the price that you will need to achieve to be engaged. So we lose out on local economic benefit? Lose big time. You say big time, but can you try and unpack that? I think that it is a real missed opportunity when we are spending billions of pounds in construction not to ensure that local companies get a slice of that action. You are quite right. All your fears are realised out there. We are really sacrificing local employment skills, training and development by not keeping control of procurement at that level. For example, we just employed North Lanarkshire's 100 supported placement. We are fully engaged. At the moment, I have more than eight apprentices at various different levels. None of those statistics or accreditations, if you like, are key at the point of being compared with a man in a van and an account with Travis Perkins, who happens to be based in Blackpool if his price is cheapest at certain levels. However, up south west, there is definitely more evidence of an interest in that level than in any other area. That is one out of five. The Scottish Government has done great work putting in the sustainable procurement duty, which is looking at local economic wealth building, etc. At the high level, that is put into place in the contracts. However, the minute you kick down into the tier one, it gets lost. You are right, there is this drive to almost the bottom line. That is where the smaller businesses that are investing a lot to do good, to take on the apprentices, are losing out. It is leaking into other parts of the UK as opposed to staying in Scotland. It is fine to have the duty, but the theory does not match the reality on the ground. I think that there is an opportunity here. The UK Government put out a procurement policy note that was all about putting into the contracts and the supply chain about maintaining that all the way down and looking at how you could keep the duty around that. The Scottish Government did not put out an actual policy note about that, but it is trying to encourage that. However, it is back to what Robin was saying. It is about that implementation. The guidance needed to go further to help to drive that. That would result in people saying that they cannot just award a contract and price going down the supply chain. You need to include those benefits within it. I think that HUB South West has tried. They are getting the pressure from the local authorities to do that, so they are trying to do it. It is going some of the way, I think. The feedback that I am getting is that there have been improvements in that, but it is not national. That is only one area. The hub codes are controlled by the Scottish Futures Trust, which is national. There is the national body that you would expect to drive all of that good practice, and they are not doing it themselves. We are not even beginning to look at whether local authorities are doing it or health boards. The Government, in effect, is not following its own guidance, which is most disturbing. I wonder if I could finish with a very quick question. I am very conscious that hub codes now have a greater involvement of the private sector following the changes with ESA 10, so they are now in a controlling position. I do not think that that is necessarily helpful to some of the objectives that you have outlined, but my concern is whether the hub codes lead to a further separation between local authorities and contractors, given that a lot of the expertise that Alan Wilson referred to earlier on has been stripped out of local authorities. I suspect that hub codes now rest at hubs. Is that a good thing or not? Can I start with Alan Wilson? Is it a good thing? I would say not. I think that there has to be a fair spread of expertise across all procuring bodies, and I think that if you overload one particular area at the expense of others, that cannot be right. Robin Crawford has not said anything at this point. Let me invite him to make a comment. Hub codes, when we did our review, were pretty much at their infancy. We were concerned about the issue of SMEs and access, and we spoke to all five hub codes about this issue and received assurances that they would be included in the frameworks, but others in the panel have spoken to the current experience of the hub codes. In terms of frameworks generally, there is no guidance on the Scottish Government website that sets out the importance of operating frameworks in a way that gives proper access to SMEs to the frameworks, not splitting the contract into bite-sized chunks, which SMEs are capable of bidding for, and a lot more guidance besides. Nonetheless, you get back to this problem of, is it being applied in practice? If the Government Agency is not applying that in practice, one wonders what hope we have for the rest of us. There you go, convener. Thank you very much. Colin Beattie. I would like to explore one or two of the comments that the panel has been making. I think that perhaps this one refers to something that Robin Crawford actually said, in connection with the skills that are available within local authorities. I think that the comment was made that the bigger local authorities appear to have a greater quality or quantity of skills to tackle those developments, whereas, by implication, the smaller ones did not have the same level of expertise. Can you perhaps comment on that? It is one of the pieces of evidence that we certainly made privy to in the conduct of the review, was that there had been a winnowing out within local authorities of construction expertise within procurement teams. Procurement teams were quite often quite well resourced, but not with those people who had the construction specialism. It was the loss of the diminution of that expertise within local authorities, which was giving rise to a lot of the issues of a construction procurement by local authorities. But do you feel that the bigger local authorities have retained a larger measure of those skills? I think that, clearly, the bigger authorities have more resourcing, but I think that, even in some of the bigger authorities, there has also been a reduction in terms of the skill base, which is why, in our report, we emphasised the need for any authority—we are not just talking about local authorities here, because, of course, there are very many public bodies involved with infrastructure procurement, but any public body involved with construction procurement is making sure that it does, in fact, have the correct skill base before taking part in that procurement. If it does not have it, we will recognise that and seek other means of achieving that skill base. In practical terms, what does that mean in terms of the impact on the projects? What it means is that you are not getting a proper brief at the start. You are not ensuring that the infrastructure is design-led, which we would have regarded following our review. Those are essential components. You get a proper brief, which really sets out what is it that the procuring authority is seeking to achieve. That might seem the statement of the blindingly obvious, but it is quite often the case that that has not been properly documented at the outset. You need a proper brief, then you need to look at the design and ensure that you have the best design taking account of pre-market engagement very often. Many authorities have been very nervous about pre-market engagement, because you have to get it right in order not to invalidate the procurement. Nonetheless, we were regarded as an essential element of a proper procurement, having pre-market engagement so that you can understand what is available out there and then getting the design right. There are a whole series of processes—I will not go through the entire process—but it is getting all of those steps right before you place the procurement. Then, of course, in the procurement itself, giving proper cognisance to quality and whole-of-life costing are essential elements in an ultimately successful bill project. If we look at the other side of the coin and look at the construction industry itself, do they have the skills within them to be part of that procurement process? In other words, I suppose what I am getting at is that it is similar to local councils that have bigger resources within bigger companies. Therefore, they tend to be favoured as opposed to smaller companies that perhaps struggle a little bit more on the resource level. There is no doubt that a lot of the SMEs have found it difficult to respond to many of the procurement requirements of the public sector, but training has been put in place to try to address some of those issues. Obviously, the very large contractors—the tier ones—have very largely become project management organisations and many of the actual trade skills that we would recognise and regard as part of building the electricians, plumbers and so forth, are driven down to tier 2 or tier 3, the subcontractors. Is that a good thing? I think that there are a lot of difficulties in that. If the contract is being placed with the tier 1—and it is a fairly small project—you are building in additional costs, whereas Scottish Water, for example, has developed a system whereby it tries to be more specific about giving the work to the body that will carry it out, in other words, addressing the issue. Given what you are saying, the whole system seems to favour the big boys, both on the private sector and with the local authorities, in terms of the quality outcome that might be anticipated, they seem to be becoming the market leaders. Is that the case? The big boys are clearly more capable of meeting the procurement tendering requirements, and that has been a big issue for SMEs in having the resources to compete in the public sector. It is very easy, if you are a very large tier 1, to have all the resources available to carry out the procurement exercise and to put in the bids and so forth. That is much harder when you are an SME. I think that that has been one of the big issues for SMEs. To add to that as well, your resources at public bodies have substantially reduced as well. If they have the opportunity to deal with one large firm, as opposed to 10 or 12 small firms, it is easier on their resources to manage that. Again, some areas are looking to step change that because they appreciate how they wish to grow the local economy and get more small businesses involved, but it is definitely an issue that the larger companies have the resources to bid. The tender documents can be quite onerous. The risk might be part of that as well. Another big area is the accreditation and health and safety. Some of the smaller businesses, when they wish to work with the tier 1 contractors, they will use an accreditation scheme. Different tier 1 contractors use different schemes. If you are a small business, you may have to sign up to more than one, which could be just a couple of hundred quid, but you might be dealing with two or three different schemes that you have to sign up to if you want to work with that organisation. That is a barrier for small businesses to get more involved. Our perception from some of the small businesses that I have spoken to is that they prefer to get in the supply chain in some instances because they do not have that process of having to go through a tender and all the documentation and all the risk that goes with that. It works in some instances and in other instances, but it does not work for them. I will add to that. I mean that Gillian has mentioned the word easier and risk. What is fair to say is that there are lots of businesses in the electrical plumbing and other mechanical engineering sector who would be quite capable of engaging directly at the point that Robin made about Scottish Water. Quite often, all that happens is that that risk, as I said earlier, is simply passed down the path anyway. Whether they are involved at the start or at the end of the process, the Tier 1 contractor, which has been acknowledged nowadays as a management contractor and not an actual contractor, is there to manage the project and they pass that design, they pass the risk, they pass the issues of late and delayed payment, retention, withheld, etc. all the way down the line to the businesses who actually do the work. I think that if there was more engagement with these firms at an early stage, because part of the problem in construction is, and this building is perhaps a good example of it, you have a building considered and then when people look at it you say, well, we want to change this. Now that's a natural progression in anyone's life. We've done it in our own homes, I'm sure. You get a contractor and you say, well, actually, instead of putting this there, I want to put it there. Now everyone can do that, but there's a cost and the cost in construction projects often results as a result of the change in design, the change of where things are placed. That happens at a late level. Now, if there was early engagement with the specialist contractors to say, this is the project, this is where we want to engage with you, you give us your expertise, they would be able to avoid some of these issues and that leads to the addition of cost and confusion and delays in payment because payment is often about disputes in relation to added cost. That early engagement with the specialist contractors is vital to avoid some of these big issues. We talked about risk there and there's been an issue in previous panels and discussions about transfer risk. Within the private sector, within the construction industry, there's a multiplicity of subcontractors and so forth involved. Is the question of risk actually properly addressed within that or does it get confused within that system? Risk was an issue that came up a lot in the review that we carried out and the concern particularly of subcontractors that risk was being passed down the chain. First of all, the public authority would try and pass the risk on to the main contractor and then the main contractor would try and pass it down the line. I think that it's already been said that quite often the risk ends up with the party at least able to bear it. That's a comment that we've made in our report. That has all sorts of implications because it means that it gives rise to the risk of insolvency if those risks do materialise. That, of course, can not just have an impact on the subcontractor involved but on the whole project because you then find that the critical path may be thrown out by that subcontractor going into insolvency. We believed and recommended the report that there was a need for a much better understanding of the allocation of risk at the outset of public sector contracts. It was not always appropriate for the public sector to body to pass as much risk as possible on to the main contractor. That might seem counterintuitive, but, in fact, a sensible grown-up in addressing the issue of risk then allows it to be priced accordingly. If the contractor has to carry a huge amount of risk, he's going to price accordingly, whereas if the risk can be more reasonably apportioned, then the pricing can be more realistic. Part of that, of course, is in the issue of painshare and gainshare, which has been referred to earlier. Many of those types of contracts have been used down south for some time, and there are now recommendations on the Scottish Government website as to how to use those painshare and gainshare contracts. Those sorts of contracts allow a more measured view of risk, but it remains, quite right, a significant problem. Jamie Halcro Johnston, at this point. I just wanted to go back to an area that has some very remote and rural communities, yet they still require public projects to be delivered to local schools, hospitals and the like, particularly in Orkney and the Northern Isles where I'm from. I was just going to confirm that those contracts are being delivered by large national companies rather than perhaps more regional operators. Do you think that the current procurement procedures and system is suitable or works for regional operators for small businesses such as some of the construction companies that you find within regions such as the Highlands and Islands? I can comment on that in that I am involved in supplying all the internal glass screens to the hospital in Orkney at the moment, engaged through Robertson construction, their main office in central region, I think, is dealing with that. We were specified through the design process by the lead design team who were Keppie design. However, even that experience is compromised in that the original intent from the health board for that building in that they wanted to achieve something quite special in terms of what the healing powers of light and fresh air could do, which is something that we probably go back to Victorian ages in terms of appreciating the importance of fresh air and daylight in healthcare and healing, has been sacrificed at the construction stage due to perceived cost drivers and that many of the originally intended, quite sophisticated and highly performing glass screens have come out of that building. On my last site visit there, there are quite significant journeys through corridors within the hospital where you think, when am I going to see the light of day? I think that those decisions have been made, they are ill-advised, and they are purely construction stage savings that will cost the wellbeing of the staff in that building, not just the people who are trying to get well, because there was some driver at some point in that journey through engagement with the tier 1 and cascading down through the subs to value engineer that package. That decision may not be made locally, it might have to be made by the construction company? It probably would have been made by the construction company, which is an example of the type of decisions that are being made by the tier 1 contractor that is not, in my opinion, in the interests of the health board or the end-user or the patient at the end of the day. There are hospitals and healthcare in buildings that are being built that are better exemplars in some ways, but we go back to Florence Nightingale in the appreciation of the importance of daylight and fresh air. We have gone all the way back to those values in the very recent building of the hospital at Alderhey, where those were key drivers that were appreciated by the client, appreciated by the health board and driven all the way through the process and not sacrificed at any point in the delivery of the building. You can suggest that this national procurement model might take away decision making from the local aspect to some extent. Just a little quickly, one of the issues raised by one of the respondeas was that they argued that it was unfair that the procurement process does not do more to incentivise the direct employment of apprentices. I was just wondering where the national procurement model could do better in encouraging more apprenticeships or more training and skills as part of that and where the barriers are. We know that small businesses have an issue in accessing apprenticeships, so I was wondering what your thoughts were on that. We currently have an apprentice scheme and we have been engaged with both CITB and Skills Development Scotland about the fact that many of the existing formalised and recognised qualifications for apprenticeships are based on what are deemed to be very traditional trades. For example, in my own company, I have no option but to bring my apprentice through a very traditional carpentry and joinery type apprenticeship and on completing that, I then have to almost start again from scratch with a completely different discipline of training, which is all to do with working with aluminium and glass. There is no apprenticeship in the industry that would give the apprentice a recognised qualification in that sector, and yet we internally, in buildings—this being a good exception—where glass is required to bring daylight through a building, it is less likely to be framed by timber, particularly in the healthcare because of infection control, than it is to be framed in either steel or aluminium. The specialist areas do not exist in a formalised SQA qualification, so we are engaging with CITB, Skills Development Scotland and some other bodies to try to address that. The problem being that the CITB is limited in the assistance that they can give SMEs with training because their remit is to cover work or skills that are actually happening on building sites. They cannot cover anything to do with pre-manufacturing or development of products coming from a supplier. They cannot cover a company like mine for anything that does not happen on a building site, so I have to self-fund a lot of the very specialist training that our apprentices require beyond the traditional apprenticeship. I do not want to get too much on too innovative for you, I think that my colleague is probably going to cover that. I want to add a little bit further to that. There is a requirement in procurement contracts to look at what is called community benefits. It is taken in the industry that that often means apprenticeships. It is probably fair to say that there has been a pretty poor view taken by procuring authorities about how community benefits should operate. If you look at the record of businesses in our sector, predominantly apprentices are recruited by micro and small businesses. In the electrical industry, we recruit approximately 1,000 apprentices each year. Not many of them are directly related to the community benefit aspect of that. That is a hefty investment for a business, probably costing the region of about £15,000 per year to recruit and train an apprentice, with little given back to the business after and certainly in the first year. That is a direct cost to those businesses. But year after year, those micro and small businesses see the benefits of recruiting apprentices and take them on, training the workforce of the future. Those businesses, who are at the furthest end of risk and delayed payment and late payment, are taking yet another level of pain in their mind quite rightly so because they are actually developing their business. However, taking two apprentices instead of one is stymied because of the fact that the procuring processes stop getting to them, stop the delays in payment, the procuring processes themselves are not conducive to engaging in developing and building these small businesses. A micro business of today, if I think in the electrical industry, FES, one of our largest members, has started a one-person business in the 1960s. That would be very difficult for a business these days to grow from 1 to 250 in a few years time because the procuring way in which it works, certainly in the public sector, and pressures on relation to payment in the private sector, would make it really difficult for a business to grow exponentially in that way. Until we flip that over and we actually realise that the people doing the work, the people doing the training, are these small and micro-sized businesses and not the tier one contractors, we are always going to be in this malaise of apprenticeship recruitment and payment. Can I just clarify before we move on to further questions? I mean, I don't know the detail of the contract in Orkney that was commented on. I mean, normally it wouldn't be just the contractor that decides to alter the design, but that would be a decision in conjunction with the design team, the employer, under whatever the terms of the contract for the contractor are. However, it may highlight a difficulty because a bid is made, a contract awarded on a certain design, a certain price and then a bit further down the road. The design is then, perhaps for want of a better expression, dumbed down. Is that something that is part of the problem in terms of the procurement process that there is not enough account taken of the realities of what will happen under a contract, so that a company can bid or a larger company can bid get the contract, but then ultimately what is going to happen is that the design will be pared down because of costs, whereas other companies might bid on a basis that they could actually deliver the design as originally envisaged? One of the areas in which this has been a concern is the so-called suicide bidding. People coming in at a very low bid and that bid being accepted has been an endemic problem and I think remains a problem. The difficulty there is that very often the contractor bidding at a very low price will then seek to make a lot of savings throughout the contract and there will also be a lot of claims. In part it is a procurement issue in terms of getting the design right at the start, but also a price that is actually deliverable. If a price is not deliverable you are going to see a lot of value engineering and you are going to see a lot of claims. I would like to ask a question about productivity and innovation in the sector. The committee has heard evidence that there are a number of factors having a negative impact on productivity and innovation. We have heard about limited investment in skills, limited adoption of technology and digital platforms and low margins in the sector. I would like to get your views on what is holding back productivity and innovation and what steps could be taken to try to improve levels in the sector. If I might start, this has been an issue since earlier reports on mine. Egan and Letham focus very much on the issue of innovation in the construction sector, which remains an industry wedded to boots on the ground in muddy sites. Innovation has been hard to achieve. The Scottish Funding Council has invested in the construction innovation centre. It is now making some progress in terms of empowering innovation in Scotland and looking at different methods that could be of increased efficiency. A lot of the issues in terms of prefabrication, particularly in the housing sector and social housing, are some very good pilot schemes in Scotland where innovative methods are being pioneered. There is no doubt that more can be done, particularly in the issue of sustainability, which is an issue that we refer to a lot in our report. Modern methods of building properly insulated buildings using greener methods of construction may cost a bit more at the absolute outset, but in terms of the whole-of-life cost of the building, they will prove to be very much the correct decision. The construction innovation centre is a great opportunity, but there is a lack of awareness about it. We often refer suppliers and say that there is an opportunity here, and it is not just about the big projects. They can go in and get guidance on smaller things as well, but I just do not think that general businesses are aware that that is there to support them. If we can split them into two areas just for a moment, if we talk about productivity, the time that is literally taken by small and micro businesses to prepare bids impacts hugely on businesses such as preparing bids and the issue of payment. One of our members recently told us that they spend on average 12 weeks of their life—this is the director—per year chasing payment. That is a proportion that is probably expanded in each single business. They are using productivity in the wrong ways. They are using it to chase money and debts and retention sums, and they are using it to formulate bids, which ultimately might not even be successful. If we look at innovation, I think that the industry is better. In our sector, in the engineering sector, particularly in the electrical industry, we are now undertaking training on electrical vehicle installation charging points, battery storage. We have done training in relation to other aspects of renewables, solar PV panels, etc., but often having that training is not enough. The client then has to lead that through their tender. In some local furries, they are quite good at that. They will put requirements in for minimal numbers of installations of certain things. To ask a tier 1 contractor to simply say, well, in our design, we feel it should be X, does not often happen that the client would say X. As Janet said earlier, often that X is valued and engineered out because of the cost of the budget overall. Yes, thank you. I am currently sitting on the governance board of the Construction Scotland Innovation Centre. In my short journey and our time there, I have been incredibly encouraged by the amount of SMEs who are engaging with the centre and coming up with all kinds of advanced technology and innovative ideas to drive either productivity or greater effectiveness in the sector that they are in. We currently have two products that are going through the centre, so I am aware of the cost to an SME of that type of engagement. That is certainly an area where we should look to assist in any way that the Government can because there is huge potential there, not only to invest in projects for Scotland but to invest in companies that have huge potential to then go on to export within Britain and abroad. If I could just show you one particular product, it is always good to have something that you should look at instead of— That is great. Please go ahead. Not that I am giving any trade secrets away, but this is an example of a product that we are developing for introduction into schools and education and particularly early learning centres. This is a sophisticated glass product. It is safety glass and it can be used to perform for acoustic sound and fire internally, but we are playing around with all sorts of graphic applications and interlayers within laminations of glass. For high-visual and sensory development in these early learning centres in schools, you can see the effect of what happens when I turn the glass. I like to give a challenge to committees like that. This is an example of something that we are working on. I have been told that I cannot get assistance in lots of even engaging with Scottish Enterprise. There are lots of parts of that journey that there are significant gaps and because of the nature of the types of things that can be supported and things that cannot, there are major gaps that I would be expected as a company to fund myself. That is just down to the profit levels that I can achieve in any one year, so we are stifling a lot of potential innovation within SMEs. Are there any simple steps that sector bodies or the Government could take to support best practice in the sector, highlight best practice and fund it where necessary? Yes, there are lots of ways that we could do that by asking the Construction Scotland Innovation Centre to perhaps prepare some examples of situations that companies are in right now, because they will differ. It is just so that we could get an idea of the steps on that journey that could be better supported, things like applying for a patent attorney. Those are all quite significant fees that slow down the progress of those innovations until you can afford it or spread it over five years, when perhaps with a little assistance it could be done and delivered to the industry much quicker. I have a few follow-up questions that I want to ask. In terms of early contractor involvement, we have heard a lot of evidence about the benefits, and I think that there was a suggestion that the Commonwealth village in Glasgow was part of that early engagement. Can you say why we are not making more use of those frameworks? To be honest with you, it is a cultural change that is required. The construction industry has been working off the procurement models and payment models and questions like retention for 100 plus years. To change that means a significant change in culture. Now there is the carrot and there is the stick, and I think that both have to be used together. I think that that is an exemplar project and that more could be made to highlight that to the industry. I would certainly suggest that the Government should be taking the lead, showing leadership and using that as an example for all of the projects that they directly fund. That would be a step in the right direction, and hopefully that will then effectively percolate its way down the rest of the contractual and construction industry. However, things have to be shown to work, and that was an example of where it did work. However, I do not think that we have made enough of that in the construction industry, and to include ourselves amongst that, we probably do not promote that enough. Should that be a question that we ask of the Scottish Futures Trust when we are in front of the committee about why they do not use that bearing in mind the delivery model for the hub codes, etc? I think that it would be useful to ask them that. I think that we all have to be engaged in that. It is not just the Scottish Futures Trust that is the industry as a whole. We have to become involved in that and give more information out, more details, more examples. We all have different ways of communicating both with our own businesses, members and the trade as a whole, and we need to take an opportunity to do that. In terms of innovation and improved productivity, much of the materials that are used on Scottish construction sites are imported. Is there a need to build into frameworks or contracts a standardisation of products that can be used or materials that can be used so that suppliers can become more efficient and build more productive methods of manufacturing, say door handles, or bricks, or breeze blocks, or whatever it happens to be, because they know that there is a pipeline of projects that are going to use those materials? Would that be beneficial? Yes, I think so. Some of the work that the supplier development programme has done has been working on things such as Citadel. When that was first announced, we worked on raising awareness about what the city deal was about. A lot of small suppliers said that this has got nothing to do with me. All the big contractors are going to get involved in that, but it was about opening up the supply chain and looking at how they go down that route towards it. I think that it is back to specification again. The earlier a small business can be brought in to understand what is being bought is definitely very beneficial. We worked on a programme with the Scottish Government that looked at spend data to understand where spend in Scotland was going. There was a good trial that we did that looked at a product that could identify where spend was going out of Scotland, and that can be drilled down by local authority area. It was really interesting to see how that could maybe beneficially help Scotland to identify what suppliers we have, because I think that there is a challenge there as well. We do not always know or the procurer does not always know what manufacturers, businesses that are in their local area or in the wider area that they could actually be connecting with to go out to tender on. The bigger companies are very aware that they have all the systems in place that they can find out about these opportunities. They have got teams of people, but there might be a small local business that could actually deliver your door handles, but how do you know about them? How do they connect with you? We recently ran an event with South Lanarkshire Council, which was a meet-the-real buyer. Not only did the small suppliers come in to meet the procurers, but they were meeting the actual commissioners. Within the authority, the actual people who were specifying and buying things raised awareness of what businesses were there locally. I believe that market awareness is really important and how the public sector finds out and engages to ensure that. That comes back to the sustainable procurement duty as well. That is built into the regulations when you are looking to try and find local contractors to find contractors. How can that be used more to go down the supply chain and not just at the first level? I have said about frameworks thus far. Of course, the development of specific Scottish frameworks contains a lot of potential for Scotland. If we had more frameworks available in Scotland, looking at Scottish supply chains, frameworks have a lot of advantages in terms of allowing synergies to write down the supply chain. Companies are starting to work together on a more regular basis, and they provide the opportunity for more innovation because companies are working together on a framework and perhaps identifying better local sourcing. It is clearly much better if you can locally source not just from the standpoint of the promotion of the local economy and the sustainability particularly of remote and rural parts of the economy, which we have regarded in our report. The construction sector is having a very important role in doing, but also in the whole area of getting cheaper products. If you are using local source, it should be cheaper than bringing stuff from a long distance away. Just on that last point, the Scottish Government has ambitious climate change targets should be building into procurement frameworks that there should be a waiting given to the carbon cost of producing and transporting products to site. Would that help the Scottish manufacturing industry, if we did that? It is one factor that has to be borne in mind. You have obviously got to make sure that the product is the correct product for the particular build, but it is important that you bear in mind all those elements of cost. Thank you. John Mason. Thank you very much, convener. We are heading now towards winding up, so I want to give you all a final question. We are focused on procurement, but I know a number of you are quite knowledgeable about the wider issues that are facing construction, as well as that. I just wanted to go through, if you could all give me one or just two things that you think we should also be looking at. Brexit is the obvious one, which is having an impact on the construction sector. We have kind of touched on things such as off-site construction. We visited an off-site construction site recently, and we were told that, for example, one council will give planning permission, but another council has said that it has got to be real brakes and that we are not accepting off-site construction as part of the planning process. Is planning an issue? I realise that there are a whole lot of things in there, but I want to give you each the opportunity to start with Mr Crawford. The one thing that I would say, moving away from the procurement exercise itself, is the issue of quality—a quality of build. We have seen a number of examples of poor quality builds where significant problems with the building have resulted. I think that there needs to be more work. I know that more work is in fact being done in studying this issue of quality and how public authorities control the quality during the build phase to ensure that we do not have a lot of those issues arising, which have been well publicised in Scotland in recent months. I do not know that I can comment on the construction site, but it is early from the training aspect. I think that there is a long way to go to make sure that SMEs are trained, especially in the procurement process. A lot of them are averse to even getting involved in it because I think that it is too onerous. There is no doubt that there is a step to go through and there is documentation to put in, but once they have learned that skill, they can reuse that many times with every public body. There is a benefit to that. We are constrained by the resources that we have. I have a team of four people who are very small and yet we cover the whole of Scotland. The construction centre, we were in the review. We were named in that, but we have not had any additional funding on the back of that review to grow and do more with the sector, which we would like to do. I think that training is a big part of that. I certainly get small businesses in my constituency who might benefit from me, so I will be sending them your way. I finish with a plea for the committee to look at four Ps. Those Ps are procurement to change the traditional model, which is not working. Payment to make more use of project bank accounts and to protect sums of retention and trust. Professionalism, to make sure—this is back to Robin's point quality—it is all too easy for businesses to enter the construction industry. There is no limit to businesses, and I think that there more has to be done in relation to that. We already have a very good Government scheme, the approved certifier of construction scheme, which sets down criteria for businesses and individuals in that regard, so I think that more should be made of that. Finally, policing. There are pieces of legislation there just now that are being mandated. The Procurement Reform Act places an obligation on public sector bodies, including local authorities, to check to see whether payment terms are being pushed down the procurement chain down to tier 2s and 3s. We have a research paper in front of which we just now suggest that only 25 per cent of any public body are taking any action in relation to chasing those. Where there is legislation in place, let's make sure that it is actually policed. The introduction of a procurement or construction regulator, in my opinion, would go some way towards that, so four keys from me. That's great. Ms McIntyre, better glass. Thank you. I would just like to conclude by reiterating the emphasis that has been placed on the importance of having expert knowledge at procurement stage and construction. I think that it is essential that we keep hold of the key drivers of any building and hold on to the responsibilities and a bit of the risk at that point, because there is far too much emphasis at the moment on the cost to build the building, i.e. simply the construction phase, and not enough emphasis being put on what the building is being asked to do thereafter through its whole life value. It takes considerable expertise at the outset to hold on to those key drivers all the way through. That's great. Thank you so much. That's super. Thank you very much to all of our witnesses for coming in today. I'll now suspend the meeting to allow us to change over to the next panel. We'll now move to the next item on the agenda for today, which is item number five, which is against subordinate legislation, the Inspire EU exit Scotland amendment regulations 2019. I'll welcome Kate Forbes, Minister for Public Finance and Digital Economy, and Shona Nicholl, who is with her. I'll invite the minister to make an opening statement of two minutes. Thank you, convener, and as this is quite a technical SSI, I will take the opportunity. The Inspire regulations implement an EU directive that establishes infrastructure for spatial information, because member states are required to operate national spatial data infrastructures using common standards that make spatial data easy to find, use and reuse. As a Government and as a Parliament, we want to make decisions and have policies that are based on high-quality data, and we want to use that data to create value for Scotland. The Inspire regulations ensure that there is a national spatial data infrastructure that uses common standards and that there is therefore consistency. Now, our understanding is that the Inspire legislation is currently functioning well. There are over 750 records online on the discovery portal, and those standards underpin a number of online public sector services such as Scotland's and Scotland's environment web. There are business impacts that the UK Government has estimated that there is about £6 billion to £11 billion per annum benefit of exploiting and using data more efficiently. For example, those standards will be used to report on the spatial elements of the UN's sustainability development goals to fulfil the First Minister's commitment. Our aim throughout Brexit is to keep delivering those benefits for the people of Scotland, and that is why I am proposing to make the amendments detailed in the SSI to correct deficiencies in the 2009 Scottish Inspire regulations that will come about as a result of Brexit, so that that framework continues to function effectively. I should say that that SSI builds on the changes that were made to the UK Government's equivalent Inspire regulations before Christmas. That statutory instrument corrects similar deficiencies, and I gave my consent with the Parliament's approval for Scottish matters to be included in that instrument. The UK Government has been consulted on the proposed amendments to the Inspire Scotland regulations 2009, and I have raised no concerns, but I would be happy to take any questions from the committee. Thank you very much, minister. Questions from members. Andy Wightman. Thanks very much, new committee convener. In your amendment regulation, section 10, you are substituting a whole new section of regulation 15 in the original regulations. Section 15 in the original regulations say that Scottish ministers have the following functions in forcing the requirements of regulations 7 and 8—7 is about metadata, 8 is about network services. That is your functions in relation to the existing directive. In the amended version, where you are substituting the whole of regulation 15, it says that Scottish ministers must, for the purpose of ensuring compliance, ensure that appropriate structures and mechanisms are put in place for coordinating the contributions of all persons, etc. You talk about co-ordination. There is nothing about the duties that were originally imposed by regulation 15, which is about enforcement. That strikes me as a weakening of the regulation, and yet my understanding is that the regulation is being brought forward to keep the statute book consistent with a pre-Brexit situation. I will ask Shona if she has anything technical to add to that, but my understanding is that in terms of the core duties of Scottish ministers, there are no specific changes. I agree with Ms Forbes. There is only one slight thing that I can point to, which is that there were changes inspired in 2012. There was amendment 12, which changed regulation 15 to be about ensuring compliance rather than enforcement. That changed from enforcement to ensuring compliance. I think that it came about in the 2012 regulations. Okay, thanks very much. This is a complicated area. I hadn't realised that there had been amendments there. You can assure me therefore that your section 10 here is amending the latest-inspired regulation to be consistent with it. In terms of the expectations on public bodies and the expectations when it comes to monitoring and the expectations on Scottish ministers, we do not deem that there are any significant changes. We are trying to replicate like for like with the SSI. The convener is, of course, nothing without the committee, Mr Wightman. Any further questions from committee members? If not, I will move to the formal debate on the motion to approve the affirmative instrument. I would invite the minister to formally move the motion. Does any member wish to speak in the debate on the motion? If not, I will put the question. The question is that the motion S5M-15750 be agreed to. Are we all agreed? Thank you. That is agreed. In the light of the timing, I will invite the committee again to agree that I, as convener and the clerk, should produce a short factual report of the committee's decision and arrange to have it published. Are we agreed with that? Yes. Your morning. You managed in under two minutes. Did I? Thank you. I will suspend the meeting now. We now turn to item 7 on our agenda for this morning. Returning to our construction in Scotland's economy inquiry, and we have a fresh panel of witnesses. In no particular order, we have Fiona Harper, director of BSE Skills Ltd, Ian Hughes, partnerships director Scotland construction industry training board, Fiona Stewart, head of national training programmes for skills development Scotland, Professor Sean Smith, director of sustainable construction at Napier University and Maureen Douglas, HR director for the Forrester Group. Welcome to all. Five of you, thank you for coming in this morning. I would like to start with some questions about a comment made by the institution of civil engineers that the construction sector in Scotland suffers from what they say is fragmented and unsustainable supply chain relationships, and also that there is a problem with limited investment in skills. Does that sound correct to any of you or do you have comment to make on that? Again, I should say don't feel that you have to answer every single question. We'll just move the discussion along as people come in and out and come to other questions from members of the committee and the sound desk will operate the sound system, so no need to press any buttons. Who would like to come in on that, Ian Hughes? Yes, in terms of the latter statements, limited investment in skills, I think that this is interesting in terms of the organisations that do invest within construction skills, and at the present time that is primarily CITB and Skills Development Scotland, colleagues from Government. In financial terms, we invest roughly 10 per cent of our £350 million budget in Scotland within skills, and we are the largest modern apprenticeship training investor alongside Scottish Government. The lack of investment in skills really leads to a further question. Has that created a skills gap or has that created an under qualified and unskilled workforce? In terms of the underskilled and under qualified workforce, yes, we have an issue in Scotland. We have by far the largest unqualified workforce among older workers in particular across GB, so there are certainly areas in terms of investment within the older workforce that we would like to have a closer look at in terms of our priorities moving forward. In terms of a fragmented supply chain, I think that you have probably heard numerous stories to date around procurement, around the relationship between tier 1s, 2s, 3s and 4s. In terms of whether that is fragmented or broken, I would defer to my colleague at the table here from the construction sector itself who has more first-hand experience of what that actually means on the ground. But clearly we often get customers saying to us from the SME and micro sectors in particular that they are being squeezed continually in terms of time getting paid or the amount getting paid or issues of retention, which I will not go over. I think that we have probably dealt with this morning, so I think that there are issues there that do need closer scrutiny. Before I come to Maureen Duglas, do you think that what is being done is enough to address the number of construction workers that will be retiring in Scotland over the next decade, estimated at 30,000? Is there something that can be done to feather out training during periods of downturn so that we then have the skilled workers or the construction workers that we need when there is the upturn again? I think that 30,000 skilled workers retiring is one part of the picture. The churn of new entrants, people coming into industry and people retiring. Actually, our research, which was carried out for the first time across Scotland regions this year and last year, shows that certain occupations and certain geographies will suffer more than others over the next three, four or five years. I can talk about that further during today's session, but certainly in terms of bringing new entrants into construction, that is a key priority in order to identify where the gaps are. People talk about skills gaps being created. It is a glass half empty phrase. Our research shows that there are 6,000 job opportunities that need filling in Scotland over the coming years across various occupations and geographies. Part of our job as a training body is to make sure that the pipeline of talent coming through, particularly from school but not exclusively, is the right pipeline to fill those job opportunities. Maureen Duglass Thank you. There are a lot of points in there, so hopefully I will cover them all off. Just a little context, I am from an SME. We cover Scotland. We directly employ 150 employees and we have created our own Skills Academy and apprenticeship framework. I am coming with the SME experience, if you like. I will touch on your original question, Gordon. Although that is not our experience in terms of investment in skills, that is not our experience of the sector, I recognise the comment that was made. Again, regarding the supply chain, as an industry, I do not think that we are fragmented. I think that we have different problems and we cannot find a solution collectively to those problems. The T1 contractor has a very different skills challenge to the SME, so let us just think about whose services our sector is. 98 per cent of the construction industry are SMEs, of which 91 per cent are micro. It is important to understand that when we are talking about how to address the skills challenges, the perception that we do not train comes from the feelings of frustration that we do not have the skills at the time that we need them. Construction is the most popular framework for apprenticeships. We are really good at apprenticeships. I spend a lot of time in other areas of the UK. Everybody looks at the Scottish model, the construction industry and the apprenticeship framework. It is phenomenal, it is the envy, but it is only one solution. The opportunities to us as a nation is to build on the good work that we do around the craft apprenticeships but to extend that beyond, to give us other forms of apprenticeship that are coming through now, through the foundation apprenticeship, through the graduate apprenticeship and then, as Iain touched on, create pathways that allow us to take a trade or a professional in one sector, transition across to another, so then we can deal with the peaks and troughs of the construction industry, which I work mainly in house building. They are either building lots of houses or if a recession comes, they do not build any, so where do those people go? I think that the opportunities lie there. I think that as an industry we do train but we are frustrated that perhaps we do not have the skills and that is the area that we should focus our attention on. I will move on to Andy Wightman. I should say that if you want to come in at any point, please just indicate with your hand and I will try to bring you in as appropriate. Andy Wightman, you talked about 6,000 job vacancies. I think that we have figures that suggest that 35 per cent of vacancies in the construction industry are hard to fill due to the lack of available skills. Why is that and has it changed over the past 10, 15 years? I think that in terms of the quality of applicants, not the volumetrics, we still have a substantial number of applicants for vacancies within apprenticeships, for example. What we are hearing from our customer base, the employer, is that the quality of the applicants is not as strong as it would have been in the past. There are some areas, and I am thinking about Highlands and Islands, in particular where, by the volumetrics, the numbers are down. There is no doubt about that. Central belt, if you have a roofing apprentice advertised, you will get two or three hundred applications for that one apprenticeship. I think that the sift of the talent that is coming through from the education system is something that we need to have a close look at in terms of a career strategy to address some of those issues. In terms of employers struggling to get the right quality of applicants that needs to be addressed within our education and further education system, as well. It is evidence that we are getting in many cases that the volumetrics are still there. It is still—I am sure that Maury would agree—an apprenticeship is still seen as a cherry within construction for a young person in particular, but we are just not seeing in many occupations the quality of applicants coming through, and that creates that percentage gap that you mentioned. I know when and to others want to come in on this, but just pursuing that. You are saying that, in the central belt, two hundred to three hundred applications for one apprenticeship opportunity? Yes, I am. It is not unusual now. Which is not unusual, but you are saying that, out of those two hundred and three hundred, you struggle to find a quality applicant? There is a sift that goes through that employers—any employer within any sector—wants the best individuals for their business. What employers are telling us over the past 10 years is that they have seen a downturn in the quality of the applicants coming through who are looking for an apprenticeship. The challenge that we have as a training body is if we look at those figures and we have a hundred applicants for a roofing apprenticeship and one gets the job, the challenge for me is what do we do with the other 99 in terms of keeping them interested and keeping them active and moving into construction. They have shown an interest into the sector. They just have not crossed the line in terms of the competitive routes in there. However, do they fall off a cliff edge at that point, or is there something that we can do to spend more time with them, work closer with them to get them over the line with another company or the same company? That is the challenge that we are facing in terms of the large number of learners in the system. We have to bear in mind that, within the FE sector alone in Scotland, there are 20,000 learners studying construction at FE college in any year. 2,000 modern apprentices, 18,000 other learners. That cohort, that talent pipeline, is something that we need to have a close look at in terms of moving them into the construction industry to fill some of the gaps and vacancies that were talked to one earlier on. Are they not going into construction just now then? I know that the Government is looking at research to identify the direction that those learners go in. We carried out the research in England last year. We could not get the data in Scotland and Wales, but it was not available. This year, hopefully, we will see destination points for those construction learners. What we are hearing from the SME sector in particular in the construction sector is that they are not moving into that space. Where are they going, I suppose, is the question. I suppose that part of our role is that if they are not moving into construction, if they are not employable within the sector, why not? What do we need to do to address some of those issues? There is absolutely no challenge around volume of entrants coming into the sector. As Iain said, there are already 20,000 people on full-time education wanting to get into the sector. The transition rates are unknown but work is under way to find out why they are not. I would go right back to secondary school as an employer if I were to say when do we start filtering and channeling our young people. We have a very traditional vocational academic approach and that in itself means that there is a very narrow funnel of talent that ends up going down that particular channel. That is partly, I believe, one of the reasons why we have very little diversity in our workforce and that presents one of the greatest opportunities to us. If we can change the way in which we enable people to experience a sector, whether it is construction of a built environment or another, in the secondary school level through an alternative form of learning, then what we will have is young people that are work-ready and have the skills and capabilities that employers are looking for and then adapt to whatever skills are required in the industry. What we do just now is train people to do a job. You are a joiner, you are a severe, you work in public, you work in private, you are very narrow. If we can change our approach to education and change how we approach the re-skilling and retraining once people are in employment, I think that we can do wonderful things with the skills and the construction industry that we have, but we do have to look at it differently. I wonder if I could ask Fiona Stewart from skills. Yes, and also Fiona Harbour perhaps after, if Fiona Stewart wanted to come in as well. Give the name of you, the Government body responsible for this work. Why is such a shortage of skilled workers? I would say that every year we train 6,000 apprentices. Last year we had 6,104 people entering the industry as an apprentice. Not all of those individuals are new entrants, many of them are already employed and they are either upskilling or they are coming from other industries and retraining, or they are being trained at a higher level in leadership and management, certainly many of the older cohort, and that obviously improves the industry going forward. In terms of young people, we in Skills Development Scotland have foundation apprenticeships, which is a fairly new product. It's been going for a few years and it's beginning to address some of the diversity issues that we've got in the industry. For example, foundation apprenticeships in the construction area, 13.1 per cent are female, so that's a big rise from modern apprenticeships where there's only 1 per cent of females choosing that route. Remember that's vocational education. Many females enter the construction industry but go into the industry at a higher level jobs through further education or higher education. In fact, university participation by female is something like 39 per cent, so the higher the qualification, the more attractive it is to female participants. The MA programme itself is open to people of all backgrounds and gender and ethnicity, but sometimes it's difficult because it's a mobile labour market, it's a mobile labour. Individuals, female participants don't necessarily want to travel from Glasgow to Dundee every day to work, so the terms and conditions don't tend to lend themselves particularly well to female participation, particularly for older female workers. In terms of entrants into the industry, we are looking at, in school, creating new pathways for young people at lower levels, so SCQF 4 and 5, for young people who perhaps wouldn't make it in the industry through the traditional routes, trying to offer different vocational pathways for those young people to make a start in the industry and then to progress either on to foundation apprenticeship or then on to the main modern apprenticeship or graduate apprenticeship. Some young people don't relate well to the types of learning that they get in school, they don't do well with chalk and talk and vocational learning is actually something that enthuses them and makes them light up and can be successful in a career that perhaps never thought of. Those pathways, we hope, will help with that. In terms of attracting talent into the industry, I would say that Government is making big inroads in terms of looking at particular learning styles and offering pathways. As the Government Agency for Skills Development Scotland is looking at innovation and trying to bring new ways of attracting labour. Most importantly, we can't do any of this without engaging employers. As Maureen has pointed out, the industry is made up with SMEs. Most of our apprentices are employed with SMEs. It's very important to attract employers and to enthuse employers and to get them to aspire to creating their own talent pipelines, so investing in young people. As an industry in our sector in Scotland, it is the only sector where there are huge levels of both private and public investment. 22 per cent of apprenticeships are in construction in Scotland, so it is an industry that employers and the public sector take great account of and are investing for the future. Fiona Harper, do you want to? BSE Skills is a new organisation. We have been part of the building services engineering sector. That is plumbers, electricians, heating and ventilation, refrigeration and trades. We had a sector skills council that came to a sticky end. As we all collaborated in Scotland, there are three trade associations—Select, SNPF and BISA. We decided that we would continue to collaborate and that we wanted to take a very detailed, in-depth participation of what skills and training is offered in our industry. That is not to say that this was new. We have always done that, but we are working alongside organisations such as Summit Skills, SDS and SQA. We set up this new company. It is quite unique in that it is run by three trade associations that have three directors and one consultant. That is it. Our remit is simply to look at qualifications, national occupational standards and modern apprenticeship frameworks. However, underneath all that, there are three trade associations that feel very passionately about their industry and the people who work in that industry, be they employers or employees. My side of the business is looking at the skills and training. Your question was, where do these people come from? In electrical technical, our training provider would argue that they are inundated with applications, but they too would say that the quality of the applications has fallen. It is harder to do that sift that Ian was referring to, but that does not mean to say that the quality is still good. It is not as good as it was. It is not empirical evidence. It is an opinion that is expressed. Recently, with our English colleagues, I conducted an LMI for the first time in our industry, and that was in the electrical sector. That intelligence came back saying that there is a difference in young people. They are looking for different things. They do not particularly like the idea of travelling, which has been mentioned by other panellists. There probably has to be another look at how people are employed in the industry and what we are expecting from them. As far as the training goes, what came through in this labour market intelligence is that electrical technical is a sustainable occupation. People come in and progress through the industry. They come in as an apprentice and they go into management and often become company owners. We know that we are doing well. Whether or not that fills the skills gap is a difficult question to ask. All our apprentices are employed by employers on direct hire. The companies have to sustain that throughout. It is a four-year apprenticeship and it is something that they want to do to sustain the industry. That is where we focus our attention. Foundation apprenticeships for us are difficult in the context of health and safety aspects, but we run our own pre-apprenticeship programmes. We have an NPA, the national progression award that covers all three sectors, but that is not funded, so it is very difficult to encourage young people and their families to become involved or employers for that matter. I think that we have limited time, so if we can committee members short-sharp questions and try to focus on the key points that you think are there and be brief in answers. I will turn now to John Mason. Thanks very much, convener. To build on some of the questions that Andy Wightman was asking, especially on diversity. It is disappointing to me that Mr Stewart made that at the higher and FE level there are more women coming in, but 1 per cent of entrants come across as pretty grim. We see other sectors, such as the police, who are predominantly male, making quite big steps forward in bringing more women in. Is there really nothing more that we can do to increase that 1 per cent? It is an absolute tragedy to be fair. I work in the sector and I am appalled about a slight history lesson. We have created this, and industry itself has created and sustained this. Unlike other sectors, we have not made the shift to change. We will not go back to the 18th century where apprenticeships are run by parishes, but prior to the world wars, it was very common to see women in as bricklayers, carpenters and crafts women. Crafts women are very common, particularly in the rural locations. The wars came, and we all know what happened when they came back from the war, and the role of women particularly changed. From that grew organisations and institutions, and as an industry, we became very narrow. The joiners, the plumbers, the electricians, the professionals, the architects all have their own little bodies and develop their own qualifications. We all know recruitment. We typically employ the person who looks and represents you. We end up with a white male predominantly—sorry, if that is slightly contentional—but we end up with an industry that looks like what it looks like. We do not have much of a desire to fundamentally shift and change that. How do we do that? When you say that there is a lack of desire, is that on the part of small employers, for example? I think that it is a blend of—absolutely employers have the responsibility because they take on, but you know what you know. With our industry being small and micro as it is, it is very difficult to change those behaviours without changing something first. For me, you did ask for a short answer, Gordon, so I will get to the point. For me, it is the talent pipeline. If we can provide a more diverse range of talent coming into the sector—I think that the foundation apprentices are phenomenal and really exciting—but coming into the sector and through a variety of different pathways so that those people coming through reflect the communities within which we work and it is not just about women, we will gain confidence with employers to then take on and to then shift it. I will move on to one of the others. Although I have mentioned women, I am also interested that the BME is underrepresented as well. Who can change that? Is it the schools? Is it the families? Is it the peers? Or is it just everybody? Everybody. We firmly believe that the schools and careers advisers can help. We run a competition in this area in Lothians and Edinburgh and it is a combination of work from training providers, universities and colleges. It is a skills competition and it is tasks that are fun in terms of electrotechnical heating and ventilating. They have to make water go through a pipe, they have to make a light turn on, build a roof and all sorts of things. It is great fun. It is aimed at S4 pupils. The number of girls that are there and how they work with the boys as teams, not as girls and boys but as teams, and they enjoy it. If we could roll that out with the help of the schools, careers, SDS and two other parts of the country, it has to influence young people and how they approach the industry and what it offers. Some of the colleges that we heard in a previous session were, at least in the first year, teaching the girls separately from the boys because they felt that that was advantageous. Is that something that you think is worthwhile? I assume that Mr Dugg is shaking her head while taking that as a... to say anything. Sadly, Morrie won't be happy with me saying this, but we are trying to encourage West College Scotland with SDS to have an all-girls class to see if that helps. From our industry point of view, I need to make it clear to all of you that there are no barriers if a girl applies. The problem is getting the girls to apply or other ethnic groups. Do you think that the name construction is an issue? I mean, I'm not a fan of just changing the name of things to give a different image, but, you know, and I think that my colleague actually will talk more about image later on, but does that make a difference? Right, Professor Smith. I think that we need to look at why is it increased, why has there been a more diverse workforce increasing in the higher levels, you know, at universities and colleges, and maybe to learn some of the elements from that. You've had some key role models from the sector, from women in the sector who've come in at particular positions. We see them in the press, we see them in the television, and that all helps. We're not seeing that at the trades area. In terms of a survey in 2016 by KeepMote, when they asked young women how did they see the construction sector, would they work in it, and I think it was 24 or 29 per cent said they thought construction was only on site. So come back to your terminology. When there's so many other clean tech and engineering and other type roles out there, I think that the sector probably needs to widen that reach of what it's saying and what the messages are. Do you think that if there was more off-site, but construction, for example, that might draw people white-of-right again? Off-site has been regarded by many as an opportunity, particularly through the flexibility of other operations around work, of people having families and various other things and shift patterns, but as we know it's not a panacea. We've seen in the car industry in America how that shifted significantly to have more female workers. However, then it shifted back and I think that's an understanding as why did it shift, why did it reduce again in America. I don't have the answer to that, but it worked in one way, but then it fell back. Mr Hughes, you want us to come in? I think that I would agree with colleagues in terms of that talent pipeline. It's quite shocking that any sector has 50 per cent of its potential talent pipeline not involved in the sector in terms of recruitment. That's a huge waste, in my opinion, missed opportunity. We are planning to put together a substantial career strategy in Scotland working with colleagues in Skills Development Scotland, and we have to look at this type of strategy over a four, five, six-year period. It's not a quick fix. There are four strands, in my opinion, to any career strategy to attract and diversify the workforce. There's use of digital and social media. There's the use of experience hands-on work with young people in particular. There's the use of ambassadors, which was touched upon, role models, and there's the use of marketing campaign harps and minds type approach. When you get that blend right and you look at it over a sustained period and you can measure the impact it's having in terms of increasing those population cohorts that are not getting involved in construction, you have a success if it works properly. We're not doing it at the present time. It's interesting that when you look at what's happening in the school environment, every sector is after a piece of that third-year or fourth-year student. Every sector, from further education, higher education to industry itself, is so competitive to get a part of Jimmy or Mary Smith. It's just not sustainable. In terms of how we address that, in terms of the sectors that need the correct skills, which need to have the right people in place to drive the economy forward, it's important that we address that collectively with Government and the training body to make sure that we can tackle that head-on. Okay, thanks so much. I think that we better leave that one. I think that we need to move on. Thank you. Angela Constance. Thank you, convener. It seems to be implied with the evidence thus far that the construction industry has an image problem and indeed the CITB published research to that effect. So, if the witnesses accept that the construction industry has an image problem, in the first instance, I want to hear about what industry can do about that. Perhaps referencing the pay gap or reputation for adversarial relationships or unconscious bias will come on to the Government agencies later, but I want to specifically know what industry is going to do to improve its image. Ms Douglas. Thank you, Angela. I disagree in part in that the image problem, I believe, starts back at school. The fact that their first experience of a construction qualification is that, for example, the task is to measure cut and then chuck the piece of wood in the bin. That doesn't bring them into the construction experience and helps them to understand the broad range of careers. I want to know what industry is going to do to improve its image or come on to Government agencies and public services in a minute. Thank you, Annette. It wasn't meaning to be rude, but that provides the foundation from which industry has to build upon. If you like, we are already getting a preconditioned, narrow group of people into the industry. Then it's up for us as mostly small and micro's to do what we can within the environment to create something that provides for all, but when you're typically only employing a particular cohort, it's very difficult to do anything thereafter. So what are you proposing to do? I think what I'm trying to say as a small micro organisations will find it very difficult in themselves to do any one thing that's going to tackle, if you like, what's institutionally across all different sectors, whether it's education, to make a difference. I think that the solution has to come at a much higher level, whether it's the campaigns through the industry training boards, whether it's working with major contractors that have the resources that can allow the open door programmes, for example, but if you were to ask me what can industry do when 98 per cent of its micro, I think that that's a huge challenge in the responsibility, and I think that the responsibility actually lies elsewhere with the policy makers, the funders, the influencers, the educators to then create a pipeline, a talent that comes into the sector, which is then more diverse, and that in itself will culturally help businesses grow. Okay, I'm not disputing the responsibility at an institutional level, but I'm keen to hear some specific examples. Perhaps you can help me to use what industry can do to lead. Industry has to lead with the support of organisations such as CITB in terms of our leverage and our investment capability. I think that the image of the sector is poor across the board, so what you have to do in terms of rebalancing that image is to move it into a space whereby the pathways into opportunity exist. You're not making things up here, it's not anecdotal. We create tens and thousands of jobs every year, we offer tens of thousands of jobs every year and they are picked up. The image of construction for many young people in particular and, more importantly, their parents. Recently, the research carried out that 75 per cent of parents said yes to an apprenticeship, but only 25 per cent for my child. That's based on factors such as image. What does that mean? Is that the building site image? Is it the image of the guys walking down after work and covered in mud? Is it the image that the pay is not very good? Is it the image that the career opportunities aren't very good? Those all need to be rebalanced and redressed. You can't sugarcoat the fact that building sites are dirty hard places to work in. Why should we? However, when you look at the 270,000 jobs in construction, many of which are outwith the building sites, how do we get that message across? That's an image, basically. It goes back to the pathway of job opportunities. Huge amount of job opportunities, career opportunities, not necessarily on the tools on the building sites. We need to rebalance what that image is. It was mentioned earlier on. My 18-year-old daughter was going through the careers conversations recently. She was given two brochures, one in construction and one in the built environment construction over the shoulder. Built environment looks interesting because it was pitched a different way in terms of the image and the opportunities that our kids could do. What are you doing about that? It goes back to our plans, which we will announce shortly, in a matter of weeks, to invest considerable additional money in Scotland to address aspects such as image and opportunity through careers campaigns, through direct interventions of funding within the school environment, with colleagues in government not in isolation, but more importantly with employers around us who are able to step in and get that message across, whether it's ambassadors giving a story or whether it's the job opportunities that exist. We will be investing heavily over the next three to four years of additional money in this specific area to try to address that. We look forward to hearing more about that. Fiona Stewart, we've heard about the negative images and the problems with perception among teachers, parents, careers advisers and young people. I wonder if you can outline in terms of the careers information advice and guidance service what that is doing throughout every stage of our education system, starting early to overcome issues around negative perceptions. Okay, we have a digital platform, which we have My World of Work, we have Marketplace, we have information for individuals, young people, so from primary school, right through secondary school, information that is pertinent to their particular stage and the decisions that they are making about construction. If you look at what we have in My World of Work, it's a very comprehensive offering for construction. Construction is our most popular apprenticeship. We have 22 per cent of participation in modern apprenticeships in construction. If the perceptions were negative, we wouldn't have those people coming into those apprenticeship places. We have greater demand than we have supply of places in terms of employment opportunities. For every one job, there will be at least six applicants. As Iain has pointed out, in some areas there are a couple of hundred applicants for those places. We have careers advisers who are working directly with young people through all stages of their school career. When does that start? It starts in primary school. In fact, we are doing stuff to encourage primary teachers and primary school pupils to use our digital platform so that they are making choices from an informed position as they go through the transitions from primary school to secondary school. Young people have got an idea of what a career is. They can work out what their strengths are so that they can build on that as they are going through their secondary school career. We have Apprenticeships.Scot, which is a vacancy portal. Young people can look at jobs that are available in particular sectors. We have blue chip companies and all sorts of organisations. CITB is working with us on our digital platform and progressing more jobs on to Apprenticeships.Scot so that young people can see that there are jobs that are not just a bricket, not just a carpenter. There are building standards, clerks of works and civil engineering as a whole gamut of occupations. Young people can plan their career accordingly. A lot of young people want to do vocational jobs. They want to do jobs that involve making things or contributing to the making of things. Other people want to design things and outline the plans for someone else to do. The digital platform, my world of work, allows young people to gather information. It allows them to demonstrate to their parents because, as Ian said, sometimes it is difficult for a young person to persuade a parent that it is an apprenticeship that they want to do. The validity of that is that the qualifications that they will gain through an apprenticeship have an equivalence with further entire education. Young people can go through an apprenticeship programme from foundation through to graduate and come out with an equivalent of a master's degree. That is very powerful, but it is a huge hill to climb in changing hearts and minds in vocational education and achieving that parity of esteem. All our digital offering will help with that, but we need to get messages out and we need to get industry to back this. We have case studies that someone mentioned already. We have case studies where diverse individuals who are working in the industry are trying to promote them as ambassadors so that young people can aspire to be the same as them. It is not a closed occupation. If you are a female, you have a disability or you come from an ethnic background. Skills Development Scotland is spending a lot of time and effort to popularise our digital platforms with information that is relevant for individuals, parents, teachers and employers. They are the most important because those are some of the hearts and minds that we have to change. As Maureen said, people tend to recruit in their likeness until they are shown something different and so the case studies and examples that we have are talking heads, video clips etc to demonstrate that. Okay, thank you for that and I just wondered if Professor Smith had anything to add to what he's heard. I currently chair the short-life working group, the Scottish Government group on new housing construction skills. We've had a lot of involvement thanks to SDS and the SMEs and also CITB, FNB, Scottish Builders Federation and Homes for Scotland. That report will come out in the next two or three weeks. I'll make sure that the committee has sight of that if it's not too late for yourselves. We've broken it down into nine thematic areas about the short, medium and longer term skills needs of the sector and one of them is the outreach to schools. Linked to that, we're involved with the south-east of Scotland city region deal for Edinburgh and one of the aspects there has been the inclusive growth and trying to get more people to come into the sector in the south-east, because there's going to be a 40 per cent uplift in the number of new homes to be built over the next 20 years, which is a staggering amount of activity and work and therefore the amount of jobs in the south-east of Scotland, the fastest growing region in Scotland, the fifth fastest growing region in the UK can't be done with the normal routes. We've worked with SDS and others to look at what are the systematic themes that we will put into south-east Scotland and this has been feeding into the short-life working group for new housing construction skills for Scotland. There'll be a specific focus on those early years and as part of that early outreach, although the project has not started, we've been in to speak to all the head teachers of the primary schools in Edinburgh and the head teachers of the secondary schools. That is to say, we need to get in front of the teachers, the careers advisers. Presumably you'll be doing that out with Edinburgh as well if it's the south-east. It's the six local authorities for south-east Scotland and they'll be working with DYW as well with the local operational staff which are there. One of the key features there is to build on what industry has been doing in the last few years, which is the design engineer construct or a class of your own. This is going into primary schools or into secondary schools to raise the profile of what are the job opportunities in the sector and the feedback from the teachers who are in these schools who have been involved with the likes of these programmes say that it's going extremely well and very positive. We've said to the primary head teachers, because they were looking at us why you're talking about skills career pathways. This is so many years down the line and we've said because when we've asked our students to arrive at Napier, where did you first hear about sustainability, low-carbon technologies, renewable energy, they all say primary school. The primary school teachers have an incredibly influential role to plant a seed and what we'd like to do with that is build on that and take that across south-east Scotland but the short-life working group on the new housing construction skills for Scotland will also be making that recommendation to come forward. You can't just turn on a tap but it's planting the seed. A couple of quick questions. We talked about the quality of applications and applicants coming through having fallen. Since when? Is there a particular reason that that's happened? There's a particular date but year that's happened. It's been the last five years, 10 years. That's one for me as an employer. Rather than say the quality, it's the variety in the applications. It's much of the same. I receive when we launch our apprenticeship opportunities over 1,000 applications throughout Scotland, the volumes there, but there's much of a sameness in terms of the skills and competencies of those coming forward or lack of skills in some cases. I think that the challenge that we have as a sector is that we're not getting that broad vocational and academic talent pipeline. That's where the opportunity lies. If we can broaden that, that will help businesses to grow. Is that something that's changed from the past? Did you used to get that vocational and academic kind of background or people that could meet you? No, I think that's fundamentally one of the biggest problems in the sectors. We have this narrow channel of skill level coming in typically vocational and non-academic that have dropped out education and on to full-time NPAs or similar. Thank you. You said as well that the quality. Is that what you meant that perhaps there was too narrow a group of people coming through, or did you mean that the general... I think that Morning is absolutely correct. Again, I can only speak from what our employers are saying, our customers. We had a painter and decorator, had two apprenticeships, 70 applications, and he said that once he sifted through the applications, he could only get it down to a short list of four. Eventually, when they went through his internal recruitment processes, they didn't recruit anyone. What he was saying to me in terms of the skills that the applicants were bringing to the table just weren't as strong as they would have been 10, 15, 20 years ago now. Whether there's a direct correlation between what happened in the schools 10, 20 years ago, I don't know. However, that employer was definitely saying that the quality of the experience that the young person was bringing could be partly because the population of young people were doing other things. They were less interested in becoming a painter and decorator and were more interested in moving into college or university or food and drink or manufacturing. We've talked about the image and the recruitment issues and the pipeline of talent that is diminishing from the school cohort. I think that it's because construction probably hasn't kept up with its competitors in terms of the offer that it has. The offer is extremely strong, huge opportunities and great career opportunities. I just don't think that it's kept up with some of the other sectors who are in the schools. I also want a piece of that pupil in their offer, in their proposition, and I think that it's something as a sector. With public sector partners, we need to address, because I think that it boils down to what does the economic impact have on the country of construction, what does it have, and it has a very big impact. It would be remiss of us not to try and address some of that opportunity and talent pipeline, which is weak at the present time, I would suggest. The panel, do you think that a lot of schools, rather than encouraging people to go into apprenticeship or even colleges, are encouraging their students to aim towards university? Is that an area that perhaps we don't have a parity of esteem with apprenticeship places and we need to value our society apprentices more? Certainly some of the quantitative type information that we are receiving and anecdotally is that the better students are being directed towards university, and that seems to be the trend. The other piece of information that comes to us, and I have no evidence of this apart from what people feel, perceive, is that the students or the young apprentices that come along don't have the skills in talking to people, dealing with customers, attitudes towards work are different. There is a change in how the young people are coming forward from schools, but that is anecdotal. Foundation apprenticeships will hopefully start to turn the tide in that respect, because young people are making positive choices about careers and about moving into particular industries. During the senior phase of school, they are getting academic underpinning knowledge, but most importantly, they are getting vocational opportunities working with employers. Hopefully, when those young people are moving from school and from foundation apprenticeships, they are much more attractive employees for employers to take on. There is a smooth transition from school foundation apprenticeship into modern apprenticeship because they have those skills and are equipped with an understanding of the industry that they are moving into, so they are hopefully not making any wrong choices in that respect. There are obviously some positive comments that have been made about foundation apprenticeships and graduate apprenticeships and so on, but clearly there is an issue out there about the quality of the applications and so on that have been explored to some extent. Do we still have more work to do specifically in relation to construction apprenticeships to redesign those to better shape them for the future? Is there still more work there? It is one of the discussions that come up at the short-life working group early on because of the shortage, for example, of bricklayers in other areas for the sector, and not taking away from the electrical side and the else, there are shortages there too. In relation to bricklaying, we have a number of house builders who want to take on apprenticeships who perhaps in the past have not invested the same and have generally gone to their subcontractors. They are finding it difficult to take on young people who want to do a four-year modern apprenticeship in bricklaying. The house builders of some of them have also made the comments that, well, we do not want them to do curved walls and arches at this point, we just like them to get them in, start bricklaying, start working on houses, can we do a qualification, not a full MA, but a qualification that is bricklaying for house buildings, so we are getting them in, we are getting them excited, we have got them salaried, and then can we step them up to that MA and lead them on to the future? There is a request from parts of the sector, not all, and this is not watering down, this is not an MA by the back door or anything. This is a sector that is saying, they are listening to young people who are saying that they want to be at work probably slightly quicker, they are interested to do various things, there is a need, there is a demand, could we maybe adapt some of those? When we look at some of the skills and technologies to come, it is a sector that is incredibly exciting. The next 10, 20 years is transformational, not just in Scotland but globally, with the amount of new technologies and clean tech and other infrastructure required, in addition to all of the retrofit and the traditional craft skills. When we have had discussions with some organisation to say, what about if you brought out a qualification in that area? There is a general feeling that it might take a bit longer than they thought, there is a lot of paperwork and a lot of hurdles. Is there a request from the industry to adapt some of how we approach the SQA, how we approach some of our qualifications to make that more amenable and adaptable to the current and future sectors' needs? How are the industry training organisations responding to that? We respond to employer demand extensively. We will assist with partners in the public sector in designing qualifications where there is proven demand from employers for that qualification. There is no point in spending the time, effort and money in designing something that has no pickup from the employers who want to retain individuals within their business. If there is a demand from employers, we react to that. We bring our standards and qualifications colleagues around the table with employers to design a qualification that they will then pick up through the employment route itself. We are not prescriptive. We strongly support the existing four-year craft apprenticeship, for example, in Scotland. However, if there was demand for other qualifications within the sector, we would respond to that positively across the board. For me, our four-year craft apprenticeship, as I said earlier, is regarded and envied by many, but our particular organisation, the four-year craft apprenticeship at the end of that, did not produce the outcome that it did not produce, similar to what Janet was saying earlier, because it learned things that it did not do in short. We have a specialist apprenticeship programme now, which is specific to house building, but it is not one or the other. We have to have a spectrum of qualifications that create pathways that we do not have at the moment, but pathways so that you can go and do a craft apprenticeship and work in repair and maintenance and then move into house building, do your transitionary training and then become a specialist in price work and so on. We do not have those pathways. If we can protect what is great and good and then develop other qualifications specific to sector, perhaps apprenticeship models, shared apprenticeship models in the rural areas, in the highlands and the islands, we have the tools at our disposal, but we are very narrow in terms of what our offering is. We are very rigid, and I think that that is where the opportunity lies to generate greater capacity in the sector. In the BSE sector, we take a holistic view of training. We train people to be able to work in the commercial sector, the domestic sector and the industrial sector. We see that as the right way to go about things because then when people move from job to job, employer to employer, they can adapt to suit that employer's particular type of business. We also encourage and provide continuing professional development in the new technologies, the new renewable technologies, electric vehicle charging installation, building standards, all of those things. We see very much as the craftsman is the core with top-up training in the specialisms. That is part of—I did not get a chance to say it earlier—we seek professionalism in our trades. Particularly in the electrotechnical sector, we are seeking protection of title so that we can get professionalism into the industry and people will have a pride in being an electrician, not just because they are properly trained and well trained, but because they are electricians. So that is where we are. Just to continue on this, some of the submissions that we have had in evidence sent in to us have expressed concerns about the apprenticeships being dumbed down or diluted in some way. Do you have any views on that? That is our apprenticeship programme. We are one of those examples of the dumbing down. The challenge that I expressed earlier—the outcome in terms of the learner skills—was not what we needed to deliver a zero-defect roof. We worked hard with the institutions, the qualifications bodies and apprenticeships. We worked really hard to try to change the content. We were not able to, because it is a generic qualification that, quite rightly, has to cover all elements. A very few companies will be doing a particular thing in volume, so it is an unusual situation. In four years, I have put 50 apprentices through the scheme, half of which are now out in industry and qualified for that half. Half are working for other contractors, but that is okay because they will come back again. The other half are in training either in their second or the recently recruited this year. It is done in a residential programme. We seek to develop not just the individual but the learning that is contextualised to industry standards. It is that industry-standard piece, the quality control element and the fabric of what we do in volume that we cannot replicate elsewhere at other training providers. Although we are a contractor and we did not step into training, we fell into training because we could not get the skilled workers that we were looking for. I would argue that we are not an example of dilution, but I understand the fear. When you look at what has happened in England, for example, it is a plethora of confusion, different training providers. We are not like that in Scotland. We have primarily got one qualifications body, but we have primarily won. We have got funding council, we have got skills development in Scotland and we do not have the massive kind of population doubt. We can figure this out if we are creative. A lot of what you may hear is a lot of closed minds and protectionism because that is the way that it is going to be. Back to the original question, we are going to change what our industry looks like and who is in our industry. We have to challenge fundamentally how we do things. We can do that through skills and training. We need to modernise our MA programme, by the way. That is maybe a different discussion. We will need to move on to that point. Jackie Baillie. Much of my questioning has been covered, but let me ask Professor Smith about CITB, because earlier on you talked about digital transformation. CITB expressed concern that the industry has yet to undergo the digital transformation that it needs. Why do you think that that is? What do we need to do to make it happen? Maybe that would go to CITB. I am asking you for a welcome to them. Digital transformation is happening in a variety of different measures. Again, if I may use the example of South East Scotland, the two principal skills gateways that are planned for the Edinburgh and South East City region deal are data-driven innovation and housing construction infrastructure, because they are the two largest growth sectors for this regional economy. That integration of what is happening digitally or with data and the integration of where future infrastructure is going is still a bit of a learning journey. We could take BIM, as an example, building information modelling. It was great that the Governments, both south of the border and north of the border, wanted to encourage BIM, but one of the requests that we will be bringing from the short-life working group is that when we do have major consultations on changes on skills or changes on building regulations or other policies, we probably need to have a skills impact analysis. No-one turned around to the colleges and universities or the companies and said, Do you have enough BIM trained? What is the investment that you require for software? How many licences do you need? We had this very short termism, sadly, where there was not that initial investment. People were recovering from the sector, from the recession. As a result, you then had this huge churn of people who were of BIM, building information model qualified, jumping through companies to get increased salaries, because there just was not the supply. I cannot blame CITB for that, because they were not responsible for the policy. However, when a policy change comes, which is important and helps the sector for the future, I think that it has to come with the investment. Things are happening now in BIM, in BIM training, in the innovation centre, and others are doing things, but I think that that is an example of where the car came before the horse. If we are going to embrace digital correctly, we need to make sure that the training that we require for some of that training or digital content or others is ready to roll out. The whole space of digitalisation lies within the future skills requirements of industry and their staff. We have recently signed a partnership agreement with the Construction Scotland Innovation Centre, with four key themes running through digital being one of them, and its widest sense is not restricted to BIM. Our vision in that space is to enable employers to access the right training within future skills with our financial support in order to get their workforce and their business capability moving forward. The model that we have within CITB of not directly delivering things like future skills when we have an innovation centre for Scotland, which is tasked with doing such a thing, and what we bring to the innovation centre is hopefully our employer network of interested parties and investment. Next month, we are launching a major funding initiative around digitalisation, which will be a commissioned funding bid open to the marketplace, but being nation-specific, we are required. Scotland, England and Wales will be able to bid separately if they need to. Before I move on to my questions, I want to ask you a question about training levies. Construction companies pay two levies for training, the CITB levy and the UK Government apprenticeship levy. Do Scottish companies benefit from the UK Government apprenticeship levy or is it seen as another form of taxation? Just in terms of an overview, there are approximately 70 companies in Scotland pay the joint apprenticeship levy to both CITB and Westminster levy. There are 70 companies with a payroll exceeding £3 million. We work and we have worked with those companies on a one-to-one basis, and we did offer them a transition financial assistance in the first year. We fully accept and we are working closely with Westminster in order to get the message across from and via employers and via the construction leadership council, for example, that to have one sector having to administer two levies within that tier one level in particular does not make particular sense in terms of economies of scale or efficiencies of scale. The main difference, I think, in Scotland and England, and colleagues may want to comment, is that our English companies, our English employers who pay the apprenticeship levy can then tap into a digital process of accessing limited funds to train in very specific areas. That is very different from the CITB levy and the diversity that we bring in terms of additional leverage, additional value. I think that there is something, obviously, working with employers that needs to be done in this space, just to make sure that there is a bit of a level playing field. We will undoubtedly—and we are under pressure from our tier one customers—ask us why we are paying two levies, why do we need to pay a construction levy. It is managed by CITB as well as Westminster levy. They are asking the question and it is coming off their P&L, so they have the right to ask the question. I think that there is work to be done here with Westminster Government in particular in order to try and rebalance the impact on the sector itself. A general feeling from the larger companies is that there is more transparency in England of how the apprenticeship levy is spent or what it sees. Perhaps there is a role coming forward or a function for the Scottish Government, just to make it a bit more transparent of how the levy is then spent in Scotland by sector. That might reflect back of how, if you are in construction and you are paying into the apprenticeship levy and the moneys are coming back north, then how much is then going into the sector in the various forms, whether it is FAs, MAs, graduate apprenticeships or wherever else it is happening. Several voices were raised in that regard that they would like to see more transparency, because in England they can see how they are spending or where it is going. 99 per cent of the industry are small and micro, so they do not. The CITB levy provides a different form of support to the sector, which is invaluable to Scotland. Scotland actually receives back from the industry training board far more than it puts in, because it trains it, and rightly so. The CITB has the challenge of being able to communicate clearly the offering and the value add that it brings back to the large, the medium and the micro, because it has moved away from a grants in money out to levy in skills out. There are two very different things. The Construction Index website highlighted in 2017 that 94 per cent of Scottish respondents were dissatisfied with the aspects of CITB. My question is what needs to change to make the governance and operation of CITB more accountable to Scottish CITB levy pairs? That is an interesting statistic. I will throw another statistic back when we carried out our last consensus poll in Scotland. We had over 80 per cent response happy with what CITB is doing in terms of its business, so I think that in terms of who you speak to and what stats you use, it is interesting what those responses are. Our governance model is changing. Our structure is changing. It is in the public domain. We are downsizing our headcount. That is a reaction to what employers, Governments and institutions have been telling us for a number of years. We became too large, too complex, too bloated, one would say. We are reducing our headcount and reducing what we are doing. We will concentrate in our key three operational areas, which are training and development, careers and standards and qualifications. Everything else that we have been doing over the decades will be moved aside—either outsourced or sold off in terms of our future operating model. Our timeline is to achieve that by 2020. That does not mean that, by any stretch of the imagination, we will be investing less in skills and training, and certainly we will be investing more in this whole area, particularly in Scotland because of the research that was carried out last year. The change is fundamentally within the back wiring and the back engine of the business. We are increasing our customer-facing units on the ground in Scotland, whether it is apprenticeships or company advisers who are on the ground. Our change to the governance model, which is now a Scottish Council, which is 100 per cent employer-led in that council. We have a split of roughly 50 per cent tier 1s and 50 per cent SMEs and micros on the Scottish Council. Their role is to hold the main CITB board to account in terms of what is happening in Scotland. That change was implemented quarter one this year, maybe the final quarter of last year. We will monitor that new governance model to make sure that it has the impact and influence over what we do in Scotland based on the CITB strategy that is coming out of HQ. CITB is very relevant in Scotland. We rely on CITB to shape standards and frameworks that set out the framework in which qualifications are then developed. We rely on CITB to work with industry to identify where technology has changed and qualifications and the national occupational standard, which governs the jobs and job descriptions, etc. Are all kept up to date. For me, there is a definite relevance in Scotland. It is like any organisation. There are challenges to do more with less and be better and faster and more responsive. I think that CITB is developing towards that. They are looking at the things that are their core activities and are going to do them better as we go forward. We spoke about the negative perceptions of the industry. CITB is going to do more. They do a huge amount of work in relation to diversity. They work with us. We have a five-year equalities plan and they work very close with us and SDS as do our other partners to try and change some of those entrenched behaviours and patterns. There is a huge task for them to rise to the challenge on. It is exciting that the shape that they are trying to get into for 2020 should really help us to make a difference in Scotland and make it a much more stronger sector. It is good to hear that new governance arrangements are coming in. There must have been concerns that you had to address within your membership. However, how much collaboration is there between the two bodies, given that you both have responsibility for providing apprenticeships? There is great collaboration. As I mentioned in a number of times, CITB is using our digital platform. As it digitises its activity, it is in a better place to be much more responsive. It helps us as we try to get enough information and relevant information and up-to-date information on to our platforms to allow young people to make informed choices about their future and parents and teachers. There is a huge amount of collaboration. The regional plans that they have, none of us can do this ourselves. We all have to work together. I think that it is quite exciting as we move forward into that new future. Just before you come in, Mr Hughes, the reason for asking that question is that some of the written submissions that we received from Glasgow Caledonia University in particular said that there was little evidence of any collaboration between the two bodies. They also said that, as far as Scotland is concerned, CITB was out of touch in meeting the needs of the industry. You are telling that there is one thing, but the written submissions that we have had from other organisations suggesting other ones. There are two aspects to this. CITB is our biggest contractor for apprenticeships. From a training and operational delivery, there is a huge partner. On the other side, standards, frameworks and qualifications, they take information from companies such as Morines and other small companies but also tier 1 suppliers. They try to shape a framework that will allow individuals to be trained for the industry, not just one job, so that when a downturn comes, they can move, they are mobile, they can change and go into other jobs that become available. Some of the work that we have done recently in the downturn in oil and gas, the transition training fund, has set up a fabulous model for being responsive and being fleet of foot to help individuals to change from one industry into another. Construction has been a huge supporter of that because it has benefited from people moving from oil and gas industry into construction. We have run an adopt an apprenticeship scheme with CITB again to try to change, tackle some of the perceptions that an apprentice can only complete their apprenticeship if they are in employment when it comes to doing the skills test. We have challenged through CITB trade organisations to allow some of those qualifications or skills tests to be done six months before the end, because they have the underpinning knowledge and the vocational capability and competence to do that at that point. I would say that some of the submissions do not understand the complexity and depth of partnership working that we have, but I would say that, from an SDS perspective, it is a very good collaboration with CITB. It is just to re-emphasise the point that, as you well know, skills, training and education are devolved across the three nations, and we are moving our business model to reflect that. We align ourselves with public sector partners to deliver government policy ostensibly. We do not create the CITB policy within three nations. We align ourselves with what the Government wants us to do in terms of priorities, and we make sure that it is communicated to our employer customer base to make sure that they know where their money is being invested within. In terms of the alignment with organisations such as SDS, and there are other public sector bodies that we have agreements with and we are putting in place shortly as well, it is to deliver the policies that are set by government. It is not to work on a vacuum or a bubble, and we cannot do that in isolation. I believe that the national construction college in Shinnon is getting close with the 29 training jobs moving down to York. Can you give us some background to that? In Shinnon is one of the six college networks that we are withdrawing from in terms of direct delivery. We are not withdrawing from the training that is being provided. What that means is that we will not deliver the scaffolding training in Shinnon moving forward. That is part of our operating model. We will find a new partner and enable them to deliver that scaffolding training. We have publicly said that we will not withdraw from any specialist training in any nation until a better alternative can be found within the marketplace. Much of what we evolved in doing over the decades was because of market failure, so we stepped in and we invested and we directly trained scaffolding in Shinnon. We believe that the market is now in a position to pick up training. We have a tremendous FE network in Scotland, for example, with infrastructure, with assets, with skills. I am not saying that they will pick up in Shinnon, but there are organisations out there that we believe can do it as well, if not better, than CITBs. Our overall model is to withdraw from that, but not to do that at the jeopardy of the training that is being provided. You cannot stop scaffolding being trained in this country. It would be disastrous. A number of other functions within Shinnon are being outsourced to other organisations, and they are in the process of colleagues having conversations with those new organisations to decide where they may or may not be located in the future. I cannot comment on whether they will go to York or not. I am sorry to interrupt, but we are a bit pressed for time here. I will have to catch up there. Dean Lockhart wants to come in very briefly, and Andy Wightman has a question as well. I will keep it brief. I want to come back to the observation made by a couple of panel members that Scotland does not do enough to train older people either in work or between jobs. We have heard about the role of apprenticeships in addressing the gap, but what about part-time college places? How important are part-time college places for retraining older workers in the sector, and are there enough college places available to meet the issue? In use, perhaps, I could ask you first, because I think that you made the observation about that we are not doing enough to train older people in the sector. I think that, in terms of the investment that goes into that cohort, we will call it, for example, it is about priorities, and I am sure Fiona will comment on that, and there is better than myself. The priority for government in the present time is 16 to 19-year-olds in terms of modern apprenticeships. For example, our employers are saying that they would be more than happy, and many of them would be delighted to work with older entrants into the workplace. The funding model at the present time makes it difficult because the reality is that, when you have a 25-year-old entering into construction on an apprenticeship rate in terms of wages, it is not attractive. We are keen to explore, as there is more that we can do in this space, to make an attractive proposition for an older individual to enter, but the present time, in terms of modern apprenticeships, Fiona is right in saying that government's priorities are that younger cohort, and that is where we concentrate our resources at present. Government policy is to give young people the best start that they can into careers. However, a third of the modern apprenticeship programme is 25-year-olds plus. As I mentioned earlier on, many of those individuals are doing leadership and management, so they are progressing their careers and using the apprenticeship employers or the apprenticeship for workforce development. Many of them are doing level 4 in construction site management, for example. Many of them are retraining from other industries and taking the opportunity. However, it is down to the employers and the support that employers make in terms of wage costs, etc., when an individual is maybe not as productive at the start of their career as they are as they move through their training. A third of apprenticeships currently are 25-year-olds plus. Thank you very much. I am afraid that we have other business that we have to deal with before 1 o'clock, and members also have other matters to attend to in Parliament. If there is anything that you wish to add to your evidence today on any of the points that we have perhaps not had time to cover fully or to come in on some of those last questions, then please feel free to write into the committee and that will be treated as part of your evidence. Apologies that we need to cut things short there, but thank you very much to everyone for coming in. We will suspend the meeting very briefly just to allow the witnesses to leave.