 Welcome to the 12th meeting of the Economy, Energy and Fair Work Committee for 2019. I remind everyone to turn off electrical devices or turn to silent, please. We've received apologies from committee members Gordon MacDonald and Angela Constance and Tom Mason will be standing in for Dean Lockhart, who has also sent his apologies. Item 1 is a decision by the committee to take items 3 and 4 in private. Are we agreed on that? Yes. Thank you. We turn now to our encounter with construction in Scotland's economy. Today, we have with us a number of witnesses from the Construction Scotland Industry Leadership Group, first of all Ken Gillespie, who is the chair of the group, and Alan Mbe, who is a member of the group and Ron Fraser, who is the executive director. Welcome to all three of you this morning. The sound desk will operate the mic so that you don't need to press any buttons, and if you want to come into the discussion, just indicate to me by raising your hand. I wonder if I could just start with some questions about the role and the structures of the committee. Could perhaps one of you provide us with an overview of those? Yes, I could certainly do that. Perhaps before I do, I'd just like to make a few opening remarks. Normally, when we come in to talk about construction, we immediately focus on the challenges and the issues that the industry faces, and no doubt this morning we will come on to discuss that. I just wanted to start by saying that the construction industry is a great industry. It does fantastic things, and we deliver wonderful projects throughout Scotland. Construction touches all our lives, whether it is the houses that we live in, schools, hospitals or roads and bridges that we use to access our daily lives. Construction is very much the foundation of everything that we do. From my perspective, having spent my whole life in the industry from leaving school into an apprenticeship at 17, I am massively proud to be sat here today as chair of Construction Scotland representing our industry. I just wanted to make those opening remarks. Construction Scotland was established by the Scottish Government and Scottish Enterprise as one of the sector industry leadership groups. With the objective of providing a space and a place for the construction industry to come together and communicate with its stakeholders, both clients, Government and the participants. The objective was to establish a consensus across industry. Construction industry, I am sure that you have found through your meetings, is a very diverse industry in terms of the various professions, trades and people who participate. Therefore, getting consensus across the industry to make the positive steps to provide solutions to some of our challenges was the main objective to provide growth not only for the industry itself but for the Scottish economy as a whole. Construction Scotland refreshed its strategy towards the end of last year. I am hoping that you have all had the opportunity to at least receive a copy of that strategy. It was 18 months' worth of work where we spent considerable amount of time doing a very wide and deep consultation across industry and all of our stakeholders to include our clients and Government. From that perspective, we wanted to really land what were the key issues for the industry in order for us to support the growth of a more sustainable, productive, innovative, diverse and profitable industry. The strategy that we published set out six key priorities and outcomes that the industry felt needed to be addressed—procurement, skills, quality and standards, planning and building regulations, growth, productivity and innovation. For each of those priorities, we have established a working group and a chair for each of those working groups to drive forward the recommendations that have come from industry and to work with all our stakeholders to take the steps and deliver the actions that we feel are necessary to further develop and improve what we do. At either end of those six priorities, we have established two forums. One is a customer forum, and Alan shares that forum for us. The concept is that we can take the work of Construction Scotland and we can test it against what our customers think, whether they support some of the initiatives or whether they want to amend, alter or feed back into the industry and their perspective. At the other end, we have the industry representative bodies forum, where we communicate and consult with all the various trade bodies and federations in a similar way to ensure that we have a real sense of whether we have consensus and whether or not the wider industry supports the initiatives that we are pursuing. You have the priorities that you have set out and a working group for each priority. You have the customer forum, the industry representative forum. I am just trying to come back to my question about how your structure is set up. The industry leadership group is, as it says in the tenets, drawn from industry leaders across the wider Scottish industry. Those industry leaders, if you like, will chair and will participate in some of those working groups, as it does. As a group, in addition to that? Yes. ILG meets at least four times a year in a formal sense. Do you keep minutes of these meetings? Yes, we do. Are they public? Yes, they are. Are they online? Yes, I believe that they are. Our website is down at the moment, that is why I hesitate, but the intent is for them to be publicly available. Is that a temporary thing? Yes, it is temporary. I think that Ron Fraser wanted to... I was just going to add to what Ken was saying there. The minutes are produced and circulated to all the members and to observers, so they go to Scottish Government, Scottish Enterprise, Skills Development Scotland and in our various representative bodies. The intention has been that we get them back up on the website so that anybody can access them. We have been refreshing the website, but we will catch up with the last three more meetings and put them on the website as well. They are public and they are available for anybody to get copies on. To come back to what we were talking about, do you have a means whereby you ensure that all different types of those involved in the industry are represented on your group? For example, sole traders or SMEs? We have a maximum of 15 and we are drawing those from across the whole industry. We have structured it in a way that we would have representation from SMEs, manufacturing, construction, supply chain, tier 234, along with customers and industry trade bodies. The objective, going back to the point about consensus, is to try as far as possible to get a true representation across the breadth, not only in terms of the size and scale of businesses but also in the geography of Scotland. We are trying to draw industry leaders from other parts of Scotland into the group. I will now come to Andy Wightman for further questions. Turning to your strategy for 2019-22, this is not your first strategy, is it? No, this is the second strategy. How successful was the first one? We published within the strategy the successes that we achieved first time round. I think that it would be fair to say that we have spent a lot of time driving the structure and the need to get consensus. In the first part of our revolution, we have done lots of good work, but a lot of time and effort has been spent on getting the organisation truly representative and getting the structure of it appropriate to ensure that we can get that consensus and get what we need to. However, if you go to page 5 of our strategy, you will find a summary of the positive difference that we think we have made for the sector along the way. I do not know whether you want me to cover any of that. I mean, those are statements. You are representing the industry, engaging the industry, leading a bid, developing etc. Can you point to any practical examples to, as it were, the existence of construction Scotland? Strategies are often things that people do to make it look like they are busy and stuff. I am not decrying the work that you are doing, but what can you practically point to that is here in the construction sector now that it was not before? Obviously, the establishment of the innovation centre is perhaps the largest action that is tangible and you can see in a physical sense. Obviously, that was all about our productivity and innovation strategy around how we get the industry to innovate more freely. From that perspective, that was perhaps the biggest action that came out of the early years. Obviously, that is now established. I know that the innovation centre is providing you with evidence. We have also been very active on the planning and standards. We have consulted with Government and the planning authorities on building control on a very regular basis in order to inform industry view of how that is being developed. Equally, we have been very active in the engagement with Government on fire control for all the reasons that we would all understand. There are a number of areas in which we have been extremely active in providing industry views on the best way forward. I am just going to add something to Ken. From my perspective, we have often been criticised as an industry for being very fragmented and that is quite correct when you see the number of different industry bodies that we can have that represent us. I think that one of our successes over the last few years, and I think that evidently that, in some of the reports that I have read from previous interviews and ease on this panel, is the bringing together of so many of the industry representative bodies into one forum just like this round the table to debate common issues of concern to the industry. Just before Christmas, we had a meeting of our industry representative bodies group and we had 20 of the biggest organisations round the table debating the industry and what we needed to do to help to change it and pretty much agreeing with the strategy. For me, that is one of the biggest successes. At the end of the day, the main reason for having an organisation like us is to coalesce, to bring a very disparate industry together, to give it a voice almost like conducting the orchestra. To me, that is one of the main successes that we have had. We have now got a client forum in our midst as well, so we have the opportunity to bring not only the industry together but to bring it together with its customers to discuss jointly what the problems are and how we solve those problems. In fact, that has been manifest now in meetings with the Scottish Government as well at a senior level, so that is, to me, one of the major successes. Okay, and you say about your new strategy that you talk about game changers. Could you point to one of the six strategic priorities and give me an example again of the kind of practical outcomes that you would expect to have achieved by 2022, something that is tangible that we can look to? I think that, by far, the biggest priority that we see at the moment is the way that we do business in Scotland within the sector. We have that under the heading of procurement. We have engaged, going back to your earlier question, we have engaged now for a number of years in consulting over the procurement reform. We, as an industry, do not think that we have gone nearly far enough in terms of procurement reform, so to answer your question specifically by 2022, I would like to see us not procuring in Scotland on a project-by-project basis at the lowest price. I would like to see us being far more strategic as a country in terms of how we make that capital investment in order to improve the economic outcomes and doing it in a manner that is consistent with the ability of the industry to gear up, to create sustainable, in fact, sustainable organisations. To be doing that with a real focus on reducing economic leakage and ensuring that we can present that work in a way that satisfies how we are as a country both regionally and scale, so that we can really optimise and maximise our SMEs opportunity to deliver on a regional basis and to ensure that we are making the best that we can out of every pound invested in Scotland from a capital perspective. The priorities will be addressed by an action plan. Is this in the public domain or is it still in progress being worked up? The action plan is in draft at the moment. The reason for that is that we felt that although my assistance could produce an action plan, we felt that it was appropriate to get our working groups up and running and let the members of the individual working groups come up with their own individual action plans for their own area. We provided the draft action plan to our working group leads and said that this is some of the ideas that we could implement in each area. As each working group would refine its thinking, the procurement group would be working at the moment on the issues that they want to take to the table. The same applies to quality. Once we have coalesced them, we will publish that in the next few months. We will be ready to publish the action plan. John Mason. I wanted to move on a little bit to think about the innovation centre that has already been mentioned. Maybe someone could give us a little bit of background about how the innovation centre came about. As I understand it, it came out of Construction Scotland but is now distinct, but I do not fully understand the relationship. The innovation centre came out of the work of Construction Scotland on identifying how we can improve as an industry. We led, if you like, the submission to the Scottish Funding Council at that time in relation to the establishment of it, with the clear objective of improving innovation within the industry. As an organisation, when it was formed, it is a separate Government organisation and engages regularly with businesses to develop product services and processes to improve the various parts of what the industry is doing. That is how they function as an organisation. They bring together universities together with industry to look at distinct projects in terms of how we can change and improve and develop what we are doing. I think that it has been successful in the context of what it does. It very much is stimulating innovation with those businesses. The challenge that we are giving is that we would like to see it address some of the more large-scale strategic objectives that we have set out within the strategy and work on a pan-Scotland basis in terms of how we might move some of our key priorities forward. That is the challenge that we have working together with them. The relationship between you was close or formal? Yes, I would say that they participate in the ILG in every meeting. They also participate in our working groups. They have complete visibility to the strategic direction of the organisation and how industry is thinking at any point in time. There is a close working relationship with the innovation centre. We have slightly conflicting evidence. On the one hand, the innovation centre seemed to be saying that there was a culture of open IP and sharing ideas, but we also had from yourselves the comment that some of the work that was being done was of a commercial nature and that prevented the dissemination of new ideas. Is that a bit of both? I think that the innovation centre is not here to answer in detail for itself. As I understand it, it depends on the contractual relationship that is entered into between the parties and depending on what research is being done. Some companies, businesses and organisations might require confidentiality agreements to be signed and therefore it is not so simple a matter as just telling the industry what is being discovered. I can understand that, where intellectual property rights might arise. There are other circumstances where the initiators of the research are happy for their findings to be made available and disseminated. After I wrote those words I think that the innovation centre had a dissemination event and I have to acknowledge that. It had an event about two weeks after the report went in and it was about disseminating information on certain housing developments that had come on. Again, I assume that the originators of that research were happy for that to be the case. Our point is that sometimes when we look at what they are able to tell us in the case studies it is fairly light in information and that usually is because until a certain period of time is elapsed perhaps that the information cannot be divulged. Without looking at specifics of individual contracts it is difficult to know which ones would and which ones wouldn't. Some are able to be released immediately, some have intellectual property rights that would require them to be held back in detail for a period of time. Ms Allan, can I ask you about the relationship between colleges and universities? I realise that you are at Glasgow University, is that right? As I understand it, Glasgow University is the only member of the leadership group but I am not sure what the relationship is with the innovation centre between colleges and universities if more of them are involved. Or if you do not know that you can tell me that. There is a large number of universities that partner with the innovation centre. How they develop those relationships is certainly out with my knowledge. I leave that to our researchers, you can deal with that. If you look at all of the information on the innovation centre they call out the large number of universities that they partner with. On the leadership group, can you explain the relationship between... Do you represent all the universities and colleges or is it more just that it happens to be Glasgow University that is involved? I sit on the leadership group because I am leading a very large and complex construction project, which is a £1 billion spend over the next 10 years. We have looked at that to try and lead in terms of the way that construction can be managed and how we get good quality product delivered. I sit on that in that capacity rather than as a representative of the universities. In pulling together the client forum that Ken has mentioned, what I am trying to do to that is with that and it is still very much work in progress. It is to bring together a collective group representing universities, representing health, representing a lot of private sector as well. Representing all of those people who engage with the construction industry. When you look at the diversity of the industry there are challenges in just who you bring together into that group. I sit there as somebody who is leading a construction project as opposed to specifically a university. It is pretty obvious that the universities are doing quite a lot of construction. As far as I can see, Jackie Baillie will be asking more questions about that, about the procurement side. Would you say that the universities are exemplars in the way that they do innovation? I believe that in Glasgow we are. We spent a lot of time developing a strategy for how we would go out to the market. We spent a lot of time engaging with the market to understand what they saw a good client being. What were their challenges if we went out down certain procurement routes? It is fine developing a strategy of how you are going to procure something, but if the industry cannot engage with that, what is the point? I think that it was that understanding that led me to be very happy to sit on the leadership group. I think that we are, but again, even if you look across the university sector, we all tend to exchange information, we share knowledge, but we still all go out to the marketplace independently in terms of procuring our buildings and our maintenance and all of those aspects of work that hit the construction industry. If I can just widen it out, that is probably my final question. I can understand how both the leadership group and the innovation centre are engaging with some of the big players and they are the ones who are looking at new ways of doing things. It is an industry where there are so many small players, is it not? Are they engaged with either the leadership group and the innovation centre? Yes, I think that they are engaged with both for different reasons, but we are very keen to have the SME participation. We have a construction model at the moment that has the large contractors, the tier 1s, if you like, sitting underneath clients, and then you have tier 2, tier 3, tier 4. That is the model today, it might not be the model tomorrow, but it is how we engage with each of those tiers and how we bring them into the process of construction. That is absolutely critical to the outcomes on procurement from our perspective. That might be brought about by designing a procurement going forward that is very specific about how we want to see construction delivered and how we want to see those SMEs participate, which is not there at the moment. It is very much left in the main to the principal contractor to decide how he is going to do that. I think that there is an opportunity here for us to look at that and to see whether there is a better way to do that. I should add that, in terms of making progress since the publication of our strategy, we have now agreed formal engagement meetings with the Scottish Government led by the procurement directorate. We have started, I think that we have had two meetings now, where we have started to look at how we can come together with Government and stakeholders to see whether there is a better way of doing that and a better way of involving SMEs going forward. I will leave it at that, thank you so much. Thank you and Jackie Baillie. Can I keep you on the issue of procurement with you? I wonder if you could give us what your view is of the headline challenges that the construction industry faces with procurement currently? I would start with how capital is invested. I will go all the way back to how we plan our projects, our infrastructure and how we invest that money. I think that there is a challenge around the scale and the type of investment that is coming forward. If you take the size of Scotland and our capacity, if you bring a project like the Aberdeen bypass to the market, what you do is import a substantial amount of resource to deliver that in quite a short period of time, which does not provide a sustainable and stable situation for the industry, because it is having to put a lot of resources in to do something very quickly and then those resources disappear again and disappear. What we really want is to think about how we invest such that we can deliver those projects at the right scale against the right timeline to maximise product factories' employment for Scotland, such that that is more sustainable in the longer term. I think that we start there. Once we establish the right way to make that investment, Scotland has this complete drive in the main for lowest price. There is a perception that if I have spent the least amount of money in some procurement competition, that represents best value for the country. I entirely disagree with that. I think that that can be the opposite of the economic effect. No doubt you will have seen the impacts of what happens when contractors do things at the wrong price. Not only are the projects delivered poorly, there are effects of companies going out of business and jobs being lost. It is the economic impact that is the opposite of what we are trying to do. It is about trying to get ourselves into a situation where when we design and we are calling for a substantial change on how we do business together, which is not based on lowest price but is based on a number of factors that I have touched on today, we should be looking at how we maximise the economic impact from the projects that we do, not just procure them at the lowest price. You talked about access to procurement for SMEs in response to a question from John Mason. I wonder whether you would highlight that as a specific issue that you would want to take forward. I have identified that in the strategy. At the moment, the conversation that we are having with Government, which is early days, is about how we might require the construction industry to perform in Scotland and to require it to participate both regionally and in terms of scale with SMEs in a more prescriptive way, as opposed to not. Is not it that tier 1 contractors are, by and large, huge, headquartered outside of Scotland? They use their own preferred supply chain and often do not give access to local SMEs for any of the big contracts that they engage in. Is that the nature of the problem that we are having to address? I do not agree with that as an overview at all. I did my background, but I equally have spent time in the local contractor, Morison Construction, many years in Morison Construction. From that perspective, I would say that headquartered out of Scotland to me is not relevant. What is relevant is how many people does that organisation employ on a sustainable basis, not just for a project? Is it based in Scotland? Does it recruit in Scotland? Does it have a Scottish business? There are many international companies that have a strong Scottish base and workforce. From that perspective, it is about developing those. To my mind, SMEs are given the opportunity, but because of the nature of the way we do business in Scotland, everyone is driven to the lowest price. If the lowest price is going to come from somewhere outside Scotland or somewhere outside Inverness, that is what they are going to do, because that has been the driver. Is it not the case that tier 1 contractors, in order to make profits on what are quite tight margins, will squeeze everybody else in their supply chain? Before I answer that point, I was going to say that we are conscious, as an industry, that there is a gap between the top dozen, top 15 international UK companies that have a presence here in terms of size and capability, and the indigenous Scottish companies who have grown up within Scotland. Part of what we have been arguing about in terms of economic leakage and how we approach the market is to try to make sure that, in future, there are more Robertsons and more Morrisons able to break through. One of the reasons why some of the smaller companies have not been able to break through is that it has been the size and scale of some of the projects. To be fair to the Scottish Government, I understand why they have done that, because they wanted a particular boost to the economy, and that was one way of doing it to get those big projects underway. The net effect of that, perhaps, is that there is not any work for the smaller medium-sized companies to grow in. That is one of the objectives of our engagement with the Scottish Government, which is to see how we can encourage. There are tier 1s who are Scottish. I can think of Ogilvy's Mure construction heart builders, just to name a few in the Edinburgh area. We have that layer of local Scottish companies that are just not of the size of a Balfabiti or an underserv. Tier 1 contractors currently, with SFT, are not headquartered in Scotland or even based day today in Scotland. You made the connection to the SFT there, which I think, yes, I agreed, because obviously the hub companies that were set up, the way they were procured, would drive you towards a bigger and more experienced companies that have all the right skills. We do see that need to bring people on and bring them up. Can you encourage the Scottish Government perhaps to break down the contracts from these mega contracts into something that is more manageable? There are two aspects of that, though, I have to say. Yes, one way would be to break projects down to get, but one of the other aspects of procurement that we have not really covered—I have a my list of wishes—is that our industry is very bespoke, very discreet, if I can put it that way. What I mean by that is that we have a lot of things that are designed individually, each one bespoke to a particular site. We won't look at this one, but even a typical school, for example, might be designed exactly different from the next one along the road because of various reasons—different site, different design team, different needs. We then procure, even within the hubs, generally speaking, discreetly, so in other words, a contractor will get one project. They might know that there's a pipeline of work coming, but they have no idea whether they're going to win the next project and, if they do win it, what type of project is it. As a tier 1 contractor, at whatever level, you really have no knowledge, generally, of whether you're doing a prison one week, next year it might be a secondary school, next year it might be a primary school. Each of those projects will have different design teams, different solutions, different technology. The industry is often compared badly against the automotive or aircraft manufacturers not being innovative and not investing. The big advantage that those organisations have got in those sectors is that they know what their product is going to be from one project to the next. Excuse me, I'm getting dry. To come in as well, so it might be. I was just going to build on what you're hearing from Ken and from Ron, is that macro position? The industry can only deliver what the client asks for. The issue around whether it's lowest price or best value is a key issue. Again, I'd come back to what we're doing in Glasgow, where we, in a way, in a sort of micro level, have tried to deliver across some of what Ken and Ron are saying. So we have multiplex as our contractor, so yes, they are an international contractor, but actually they're using a Scottish team to deliver the buildings. They weren't the only contractor that we could have appointed, but we don't talk of them as a contractor. They are our delivery partner. We work with them. We expect them to show us innovation. I expect them to deliver quality. I expect to pay the right price for that quality. Now, what that does is that allows them, for example, to make sure they spend time going out to SMEs. They pride themselves in the percentage that they spend with SMEs. There are some interesting definitions around SMEs. I know that they're not always the one-man band, but they look at how much they spend on SMEs at the moment. We're looking at, I think, 24 per cent on our contracts. There are ways that if you get your procurement right, if we are an educated client who is working with the construction industry, then in Scotland we have some rail opportunities. The way that we've set it up allows us to look at how we drive economies of scale, so can we purchase certain items that we will use across multiple buildings. We are designing bespoke buildings for each of ours in our major new campus, but we can also share best practice and we can buy certain things, whether it sinks. They don't have to be different in each building, so you can do some procurement where you deliver economies of scale. What's going on at Glasgow University, we would say, is an exemplar and others could learn from, but if you think about yesterday's news headlines, or maybe it was the day before, about primary school in Dumfries, where clearly quality has been driven out at the expense of cost, and that was an SFT government commission project. I would agree with you. That's why I think there are three elements here. It is one about educating the client and the industry together to work in a different way in terms of what do I want? I actually just want buildings finished to quality on time, but you also have to change culture and change processes, and I think that's what the leadership group of Construction Scotland can take that conversation forward in the industry. That's why I'm very pleased to be a part of that leadership group to build on that, but that's going to take time to make sure we educate. I look forward to seeing your conversations with the Scottish Futures Trust. Your statement of achievements for 2013-17 in your strategy for then said that you led and co-ordinated the industry input to the Scottish Government procurement review. How do you think that went? Did it achieve change? No, I think that, as I said in my opening comments, we don't think that it's gone far enough, and that's why we've recommenced these engagement meetings with Government with a commitment to re-look at procurement. So I think that back in 2013, I think, is when that review started and the publications of some of the implementation were seen recently, but we certainly feel that that fall short of the fundamental changes that we think are required to improve what we do in Scotland. Fundamentally, we think that we need to re-look at that together, and that's what we've embarked upon. So when you say fundamental changes, are you saying that there's a need for another review or are you saying that the first review wasn't actually implemented? I think that the first review identified all the key issues, so I don't think that we're missing any of the key issues. I think that where we need to improve is implementing solutions. Job is it to do that? Is it the Scottish Government, or do you have a role? No, I think that we definitely have a role, and we've continued to work hard to try to influence the outcomes to that. There's lots of reasons why the Scottish Government isn't able to go down that route. Some of it is to do with the legalities and European law and all sorts of stuff. So what we are saying is that all the key issues are there. What we need to do is find solutions and then implement those solutions. So really action the changes necessary to improve what we do. I wasn't aware of any legal issues acting as impediments to the Scottish Government, but if you are, perhaps you could write to the committee about those. One of the recommendations of the review was the appointment of a chief construction adviser, something that the Scottish Government rejected. Do you think that a chief construction adviser would be useful? I think that any central individual or organisation that can pull all the strands together is absolutely beneficial. That's what we at Construction Scotland are. Our main objective is to pull the industry together, achieve consensus on what the solution is and then implement the solution. Any move towards providing the industry with a central focus in order to get the necessary action with the Government would obviously be welcomed. Thank you very much, convener. I think that Andy Wightman had further questions. Yes, thanks. I want to move on to talk about the Scottish National Investment Bank, but before I do, Anne, you said just a minute ago that industry can only deliver what the client asks for. In relationship to house building, I think that your chair of Homes for Scotland, one of the peculiar features of the British house construction market is that the majority of it is speculative, so there is no client, whereas most of continental Europe more than 50 per cent is driven by clients. I'm wondering how we can improve the client experience in new house building. I think that in terms of house building in Scotland, there's a considerable amount of housing delivered in Scotland for housing associations as clients. I think that in Scotland we deliver housing to the customer's specification. In terms of how we improve the customer experience in house building, if I talk about the house building industry, we are driving the changes that we think are necessary to improve that. From that perspective, you'll know that we introduced the five-star quality award from south of the border into Scotland. That's now a new accreditation that Scotland didn't have that we've introduced so that our house builders in Scotland are equally measured, as the rest of the UK are, to improve the quality of what they deliver for their customers. Buildings that go up here in the city, for example, public buildings will be procured by public authority, office buildings will be procured by some investor or a client, Waverly Court or whatever, but housing will be procured essentially by nobody, the body that builds it sells it on as a product. I'm just wondering how we can get clients more involved in the design and specification of the homes that they're going to live in long before they buy them. The house building industry is a retail business, so they are developing products and building. Can you change that, given that it's not a retail business? You have a vibrant house building industry, but they're building it predominantly driven by clients who've procured it, often in volume themselves, but they're driving it. They're developing what they believe their customers want, because otherwise, if they didn't develop what their customers want, they wouldn't sell any houses. You'll only buy it because that's all that's available. I think that the range of product available within Scotland is vast, so there are clients who can get more involved, but maybe we can have that conversation another day. Moving on to the Scottish National Investment Bank, we're about to scrutinise the legislation that will set that up, and the Government's been doing a lot of thinking on the purpose of the Scottish National Investment Bank. Given that you're recognised as the industry-lead body of construction, have you had any conversations with the Government about the Scottish National Investment Bank and what it might do? Yes, we have been particularly focused on the need to stimulate new entrants and the need to stimulate and support the SMEs. The conversation that we've had is about the investment bank offering a different proposition to what's available in the market at the moment. A lot of the industry complain that it's very difficult to access finance, particularly given the deep recession that we went through in the banking crisis. The constraints that the retail banks now have on borrowing makes it very difficult for smaller businesses to get the funding that they require to really develop their business. The conversation that we've been having is focused more around the smaller-scale businesses and how they can access capital. Again, I'm just asking that the investment bank be set up in a way that differentiates itself from mainstream borrowing, such that it can be patient capital and that it can have a focus on how we improve Scotland and have some structure around that so that it's an added value as opposed to just an alternative source of finance. Can you say a little bit more about what this capital is for? It varies, obviously, depending on what part of the sector you're in. If you were a small construction business, it would be working capital. Does the Scottish National Investment Bank provide working capital to SMEs? What I'm saying is that what Scotland needs is finance that would stimulate the smaller organisations. If you take the house building that you touched on earlier, the house building is a very capital-intensive part of the industry. It will buy land and invest for three, four or five years before they'll see income coming back in. That's where I talk about patient capital, in order to get more entrants into that market. I think that there's an opportunity there for the investment bank to take a longer-term view and to also look at the costs of capital to the smaller businesses. That's where I think there's an opportunity for Scotland to support the SMEs, to support new entrants and to develop those smaller businesses into medium-sized businesses and to create economic growth through it. Ron, what do you want to say? There is maybe also a bigger role if we look at the news, we don't know what's going to happen, but if the European Investment Bank was to disappear from the landscape, perhaps there's a role for the Scottish Bank to look at lending to some of the bigger projects. That was the point that I was going to make. I'm seeking to explore the conversations that you've had with Government rather than your particular preferences, because we don't have preferences. The bank is expected to have a very mission-orientated approach. Indeed, the Scottish Government published a... or presented with a paper to the other week looking at this. Do you expect construction as a whole to play a big role in that, possibly tied to the kind of procurement reforms that you were alluding to earlier? We certainly believe that it's an opportunity for the sector to be supported. In any particular ways, beyond what you've just touched on with the SMEs? Just in the context of making available investment in finance that's currently not available. That finance is available from clients. Clients are procuring buildings and roads and infrastructure. That capital is available. You're talking about the capital requirements from the industry's point of view? I think that there's a delay in payment cycles, so you still need to have the ability to fund that initial work, albeit that you're quite right. The construction contracts in the main are paid for by a regular payment stream, but there is still a capital requirement to be able to either start or to grow. As you increase the volume of work that you do, the resources or the cash requirements are much greater. Obviously, in the housebuilding side of things, the finance is just not, frankly, available from commercial banks at appropriate rates to allow small home builders to develop. We desperately want to encourage more small-scale home developers to develop businesses in Scotland. I'll finish off by inviting you to submit evidence to this committee. I think that we're seeking evidence on the Scottish National Investment Bank bill till 3 May. It's been a month to get some views in. That would be useful. Thank you. Thank you. Tom Mason. Yes. Can I now focus on retention and payments? It's been suggested that the retention of capital retentions in terms of projects is past its sale-by-date. Do you agree with that? Yes, I do. I think that as an industry we do, but we've had this debate around the table of the ILG. We would all like to see them ended, but I think that there's a little bit of pragmatism that has to come in because we know that some people in the industry still worry that they won't get the quality of their buildings and projects delivered if they don't hold some kind of retention on their subcontractors or on their main contracts because this happens from clients down. What we've been doing is saying to our industry members that what we need to do is come up with the alternatives to retention, i.e. what is the alternative model that will be acceptable to clients. One of the roles that a client forum will give us is a chance to test some of the alternative ways in which surety can be given to clients that their projects will not be completed with defects that they have no means of bringing the contractor back to fix. Obviously, the answer is to removing retentions completely, which is what we would love to do very, very soon. The answer is to make sure that we have in place the necessary quality assurance measures in all cases to make sure that the work is being done in accordance with the contract and completed with as little defect as possible at the handover date. As an industry leader, we would like to see retentions end, but we understand that that will require a little bit of effort into what alternative methods would be needed. What alternative methods are likely to be? It's still at the beginning of that process, though are we somewhere down the line? There are a number of tested ways or alternatives to retentions that are used in other jurisdictions and some clients already use a variety of techniques. There was a big paper done by an organisation called Pi Tate a couple of years ago for the UK Government that identified a whole range of alternative measures. The issue that we have in the UK is that because the use of retentions is a historic thing, it's been going since the 1890s or probably even long beyond that. It's an old thing in a way of just retaining a small pot of money, a small pot could be 5 per cent, which could be more than the profit on a job, retaining a sum of money to then be used to encourage the contractor to return. The problem that we have is that we don't have much evidence and experience of how the alternatives really work in practice. I know that there's a further research programme at the moment going on, which the Scottish Government have commissioned Pi Tate to look at for us to see what experience there is of the alternative methods and hopefully make a recommendation that we can all settle around that says end retentions, but what we're going to do is we're going to use whether it's performance bonds, whether it's bank guarantees, whether it's just more sophisticated digital quality assurance techniques. There are a number of ideas around that might help to give confidence because at the end of the day, this will be about giving confidence to all customers, both public and private, that they can dispense with the need for retentions without worrying about the performance of their contracts. Do we have timescale on this? The Pi Tate report is due to report within the next few months. Anne, I'll ask you what you're thinking in terms of being able to get the clients to the table around this point. Getting clients to the table will take some time to have that conversation. I would look at it from the... I would turn the lens the other way. The conversation that we need to have is how we make sure that we get the right quality of build, because if we know that, the retention issue becomes a much lesser issue. Working through Construction Scotland, we will be talking about one, how you monitor construction, particularly using digital, through the construction process. It's the bits that you don't see that are important to me to make sure that we start to deliver high-quality building, which is what I think everybody wants. That will then, at the same time, allow us to have a different conversation around retention. We'll put those methods in place. Quite frankly, it will take time because it takes time to build buildings. It will take time to evidence whether or not things like the digital records are meeting our needs. All of that around construction takes time, because buildings take time to build. OK. What about late payments? Do you think that any progress is being made in what is the role of the public sector in this? I'll pick this one up as well. I think that progress is being made on the late payments. I think that there's an issue in the industry of differentiating between late payments and non-payments, or payments being held back for reasons, either commercial, contractual disputes, defects or whatever. In many cases, payments are being held back, we believe, not simply because somebody wants to hold on to the money, but because a proportion of the payment is not due to the party. Sometimes it's quite hard to differentiate the two issues when you're discussing payment. If we're talking about payments being made where there's no dispute where there's no defects, there's no argument about the payment, it's being processed in accordance with the contract and everybody's happy with it. We went through a bad patch a few years ago when some quite big companies were deliberately holding on to cash and resulting in payments being delayed. A number of initiatives by Government to report on payment terms and by the industry itself to do surveys and to start flagging up, like Build UK, will have all their members reporting on their payment terms. I think that that is beginning to turn round the pure timescale issue if I can differentiate that from the dispute issue. I think that the timescale issue is getting better much better and one of the facets, I think that Select did a survey of their members recently and although they did report some delayed payments over term, actually an interesting point is that quite a number of their payments, I think almost 70 per cent, they were quoted as coming from clients, not from tier 1 or contractors. There is still an issue but it's an issue that applies right from the top, right down through the industry but I think it is getting better as a result of various measuring techniques that have been introduced and statutory legislation. Can I just add to that? It's really, really important that we differentiate between payments and those payments that are in dispute and that takes me full circle to procurement review because the reason that these payments get stuck comes back to the way projects are procured. I just want to make the point that the majority payment is talked about in terms that are not necessarily fully understood and as Ron says, our experience is the majority of issues come from how we do business together. In relation to payment timescales or normal cycle, you will see from our strategy that Construction Scotland have a stated intent to get that back to 30 days. Again, we need to be very careful about how you measure that 30 days because all the various contracts are different. At the moment, going back to Ron's point, the UKCG did an exercise recently and I think their membership which is very substantial across large and small contractors with their average period for payment was at 43 days. I concur with Ron that we are seeing the industry pull that back. Just building on Ann's point, I just think that the conversation around retention is a great example of how Construction Scotland wants to operate because the contracting industry all want retention abolished and tomorrow. Being able to take that to our customer group to say, look, this is what your contracting industry is saying they would like to do and the customer group are able to come back and challenge the industry to say, well, hang on, I think that we have a bit more work to do on quality before we would be confident and obviously we would want to look at other options. I think that it is a great example of how the industry can come together and discuss the solutions amongst itself and then promote those. Is the leadership group doing enough to achieve that conversation? We could always do more so we should never say yes. Do you have any ideas to put into the pot to discuss? I think that, as Ron says, we are exploring what the various options could be because I think that there are two issues on retention. There is the security of retention which is clearly a fundamental issue and one that we think can be addressed regardless is the security of retention, i.e. what would happen if a client or a contractor were to go out of business. It must be wrong that that money is lost. Equally, what are the alternative methods to... Well, one industry we need to drive our strategic objective of improving quality but on that journey what are the other methods that we could come up with to give the security that our clients want that the quality will be delivered and that they will be responsive in the context of any potential defects. Does anyone want to add to that? No, I'll just add. As Ken said, it wanders into the procurement arena but it also goes back into the quality aspect. We didn't say earlier that the two big themes that are coming out that we're pursuing with Scottish Government in our liaison meetings now, one is procurement quite a lot in this meeting but the other is quality and I think the industry does recognise that for a number of reasons partly to get rid of retentions partly to just regain the trust in some areas that the industry needs to demonstrate that it takes quality assurance seriously and one of the key areas where we're seeing the development of digital technology is in the area of quality management and one of the bigger companies that we've talked about earlier are adopting digital techniques that will give them much more assurance of the quality they're delivering. We have a working group under construction Scotland where we bring the professions and the various levels of contractor together in the industry to debate how best to make sure that everybody gains access to these technologies and techniques and ideas that are being implemented by the bigger companies. Case studies and things develop to cascade it down so the whole industry benefits from the thinking of the larger companies and the larger companies are willing to do that and we've continued to implement those ideas and that's part of our strategy to demonstrate to customers that the industry is taking its quality mission seriously and is developing techniques to make sure that it doesn't have the problems that we've seen in the recent past again. I can just build on that on your question there about the leadership group doing enough in terms of those conversations. What I would say to this committee is that we're all doing this off the side of our desks where it's not the day job as such having these conversations so anything that can support more research into some of this anything that can give a bit of support into the leadership group to give us a bit more time to have those conversations would I think help move those conversations on more quickly. Thank you. Just on the retention point Mr Fraser you talked about other tested ways using other jurisdictions but I don't think you gave any specific example. You referred to bank guarantees but a small construction company is not going to get a bank guarantee certainly not at a affordable level if it doesn't have a track record and finance behind it so how is that going to work? That is true but I think there are a number of other softer ways of ensuring that and those things could be for example where there's a longer term relationship between the client and the customer then the customers can then having worked with a contractor over a number of projects perhaps can understand that the way that contractor operates is such that they will honour the terms of their contract without the need for retention so we see retention's go when there's a longer term relationship and that comes back to the point I was trying to get to when I got dried up earlier about the projects being discreet if we could get more repeatability of contracts more longer term relationships between contracts and consultants that helps Not more likely to be larger companies that would be in a position to take advantage of that Not if we set up the procurement back to Ken's point about the economic leakage if we set the procurement models correctly to take account of the needs of the country in terms of geographics in terms of size of project you can arrange for companies to have repeat business under the same contract that is one method of ensuring that you've got loyalty if you like both ways that they both rely on one or the client and the contractor and that relationship then dispenses with the need for retentions that quality management quality systems evidence gathering digital evidence of compliance is an obvious way of ensuring that people have confidence that their work first time and will be zero defects free when you complete and that is the one that the industry generally is focusing on I think mainly as it's trying to reinforce the quality assurance technology Other countries Do we have the enforcement mechanisms that other countries do in terms of it's not just construction that takes time it's also adjudication court cases whatever can take time whereas in other countries just to give an example if a three month period fix the defects or the customer is entitled to do it and deduct that from the contract price and then the company construction company can have a dispute in court about the money but the customer has what they contracted for and they can get on with life we don't have that in this country so do we have the enforcement mechanisms to do that quickly We do have adjudication mechanisms that can be used but do we have adjudication that can deal with things quickly You jumping This is where you get into a level of detail but most standard forms of building contract or construction contract will have a defects obligation in law which will require the contractor to perform a specific timeline and will give the client the ability as you say to employ others to carry that work out and then they can dispute that if they want to at some future date but the building, the project gets completed to the satisfaction of the customer We have that remedy today I can't think of any contract in my lifetime where that remedy wasn't there it's been in basic forms of contract for so that remedy exists today It exists and it's effective and it can be dealt with quickly Do we have a problem with retentions being kept? I think that's a reflection on the fact that retentions came into place historically, they've been there for a long time one might look at them and say they're a cash flow benefit to the customer if they want to give that up if it's custom in practice I think that the alternate side of that coin is does the construction industry respond as positively and as quickly as it should in the dealing with defects particularly at the end of the defects liability period where everyone's moved on to another project we've got challenges there we need to improve at doing that but in terms of customer remedy customer remedy is there the preference clearly is to the fact that retentions are there to pay for that so if they go away and employ someone else to do it they've got the funds to pay for it in the meantime whilst they resolve their differences but the more important point to make is that it goes back to my point on procurement there are many clients today who don't hold retention and it goes to Ron's point about how we do business together so if I give you the example of the water business in England the water business in England has been in long-term relationships with its supply chain for coming up for 30 years it was one of the first sectors to recognise the benefits of a different way to procure so that sector has involved its FSMEs its manufacturing base to the extent that a single manufacturer might have a high supply into their work they've brought their work to market in five-year intervals so there's an opportunity to create sustainable business and because it's a five-year relationship in some of those relationships I've ran for 25 years there's an absolute two-way trust and commitment that that relationship will deliver on all of the defects management and the issues and they get resolved a lot of the debates we have come back to the fact that customers procure projects on a one-off basis in a single relationship never to be repeated at the lowest possible price that doesn't create the right environment or the best environment for the relationship to get the best out of what's possible but that would never be possible to be completely eliminated surely you wouldn't ever be able to eliminate that completely because there would always be one-off contracts will there not I take what you're saying about large private bodies or public bodies might be able to look at things saying generally but there will always be one-off contracts when we have thought agreed but there is a huge opportunity for projects to be brought to market in a far more joined up way in order to create the environment I've described there's no we're procuring one-off projects at the moment that would be far better served in a programme of work over a longer period How do you think you can achieve that I understand the dream of doing that that a country spends x billion pounds every year on a regular basis for 10, 20 years but how are you going to manage that who's going to manage that process Our aspiration is through our conversation with government is to develop an understanding of the benefits of that approach we've seen a lot of traction in England now so government in England are bringing together all their purchasers and they're beginning to require them to bring their projects to market together in a manner that requires them to perform in a particular way including off-site manufacture including sustainability in relation to employment including innovation central government at the moment have started that process through the development of the CLC so it is possible to bring those spending profiles together and to explore how we can maximise sustainable economic benefit for Scotland through the way that those programmes are brought to market There's nothing you want to... Sorry It's perhaps worth mentioning again that as part of the discussions with Scottish Government, the procurement joint working group that we're setting up has a subgroup on frameworks and the idea of that is to look at how we can test some of the ideas that we have on better procurement through frameworks that Scottish Government might set up and the concept there that frameworks, if they're done properly can take account of the different needs of different parts of the country can take account of different sizes of project and can allow a variety of companies of different sizes and scale to get some of the benefits of repeatable work under a single contract so they don't have to keep bidding for things all the time so part of that will be linking into the quality assurance linking into ways of getting rid of retention so it is part of the discussions that we're having and will be having with Scottish Government about how we can end those things and fit them into this model of a series of frameworks. I'd like to look a little bit at public support for the sector. Does the construction sector get the same level of business support including financial support from public sector bodies as other sectors do and if so or if not what kind of support should they be giving? My observation having come into the chair is that there's a huge amount of support given to the industry and what we need to get better at is coordinating that and collaborating on it such that we get the outcomes that that level of investment deserves. From that perspective my observation is that I see lots of initiatives in isolation and what I'd really like to see us do is pull that together between Government and the industry to say look we're working really hard and there's clearly quite an investment going into various parts of the industry can we just get that coordinated in a manner such that we get better outcomes from that investment so I don't sit today saying that we're not supported as a sector or I think we are I just think we can improve the outcomes from that support and my example would be skills where we've got the CITB who on behalf of industry are investing substantial sums of money into the sector we've got Skills Development Scotland who equally are working hard on our behalf but I still see lots of little initiatives running around that we've better harnessed under one umbrella and I also see a disconnect between the educating authorities that investment and jobs so I would really like to see that joined up such that we're taking youngsters we're making opportunities available to them and then we're putting them on the job at the end of it so that the employers are at the end of that process and that they're not disconnected so I think the support is there but I think we need to coordinate it better Construction Scotland in the skills area are trying to do that through an outreach programme called Inspiring Construction so that's a programme where we're working with CITB and Skills Development Scotland to try and coordinate our effort in schools particularly in S3, S4 we'd really like to get to primary schools but that's a bit away because we do need to attract more diversity and more people into the industry for the future to deal with the challenges we're going to have and it's a great example where there's lots of effort from various bodies going on but let's pull it all together and let's get around the table and really make a difference at the end of that process as opposed to having them separated if that makes sense You're talking about disconnects Do you see that as your role to bring all that together? I see it as Construction Scotland's role to inform the debate and to actually express industry's view on how we best get youngsters back into the industry and into jobs because the industry at the end of the day are the organisations that are going to employ these people so we've got public investment and support going into that pipeline but are we doing it in the right way to get real jobs out of their end? Surely there's going to have to be some coordinating body that's going to bring together the disparate efforts and so on that we're going on out there in the market you talk about disconnects if there are disconnects it's not going to heal themselves without some force behind it There's two things there's our inspiring construction programme where we're trying to pull industry because industry as well individually are substantially investing on their own initiatives and what we're trying to say to industry is look can we all do this in the one place with a common message and a common ask on that with industry we're doing that with Skills Development Scotland CITB and indeed the schools that we are outreaching to on a regular basis at the moment so we are trying to do that and pull and grow that community into one with an inspiring construction but we've equally got our skills working group which are seeking to widen that beyond just the inspiring construction programme so that is something that we're trying to do at the moment I'll just add I take the point obviously at the end of the day Construction Scotland doesn't have the power to order, reorder what we might see is the disjointed nature of the support that's being provided in these areas but I think what we're saying is that we think it's our job to highlight that identify it work with industry and government to try and identify solutions and then when we've identified a solution to that that solution is implemented by it would have to be government I would guess to pull all the strands of the organisations that we're talking about but as Ken says this isn't just a government problem the industry is just as disparate in its approach to the school population for example in terms of skills and so there's a combined role combined responsibility here between industry clients and the government to find a way to make the money that we are spending on this whole skills sector much more much more beneficial to delivering the diverse workforce that we want in the future and say a lot of things going on but not very connected together at the moment to me it doesn't seem as you say it's all very connected and it doesn't seem that there's really that forum there that's going to put it together and make it happen it sounds like it's more hope on board than anything else I would disagree if only because we've been pleasantly surprised at the level of collaboration that we get from government and in fact the joint construction Scotland Scottish Government forum that we've talked about a couple of times here only had a couple of meetings but we've set up we're in the process of starting working groups in procurement working groups in quality and skills quality subset as well so we will be raising it with Scottish Government at these meetings and so we are hopeful that that will lead to the kind of to a listening ear that takes on board the things that we're suggesting need to be done I've perhaps not been clear in my response the skills development Scotland and CITV which are the main two main bodies that support us the industry in terms of skills are to attend the ILG meetings so they are part of our regular sit-down at that level strategic leadership level they equally participate within our inspiring construction programme and indeed that programme is actually funded by CITV so we are beginning to pull it together and equally our skills working group will develop that beyond just the inspiring construction which at the moment is focused at school leavers so I am positive that we are actively doing that today we've got a long way to go it sounds like engaging with the Government and so on is perhaps the easy side of it pulling together all the disparate companies and businesses within the construction centre sounds like cats it is but again I'll doff my hat to my colleague from the client sector here because at the end of the day we feel that the strongest way of pulling them all together is that most of these companies and organisations whether they're a construction company at tier one or every level whether they're a local subcontractor whether they're a professional body they're going into schools because of a community benefits requirement in their contract or because of some overarching reason from their own sustainability policies that they want to do this and so what we're saying to customers is if we can develop this standardised approach to this not stopping people doing their own thing but saying if you are going into a school no matter what bit of the industry you are please give the standard a little bit of information that's available, what the routes and paths into those things if we start with the clients and we can get the clients on board and the clients are saying to their contractors when you're doing your community benefits to get a tick in the box with your contract please give the construction Scotland briefing which is standard now throughout the whole country that's one way of making sure that our aim ultimately in the new process would be to make sure that every secondary school in Scotland gets the same message at some point in the year that look at the range of careers that are available it's very it covers everything from the lowest level of qualification to the highest it's the word I'm running out the word there but it's I think what we're saying about our industry is it's one way of driving inclusive growth that's the word I was trying to get to because as an industry we employ a vast array of levels of skill and sometimes that message is not out there in the schools and when they're directing children to look at careers they don't necessarily see that there is this wide range of capability that we need in the industry so if we can get customers to help us and they can drive that down through their supply chains then I think we have a good chance let me just ask a final question it's probably inevitable that this is asked why are you helping the sector to prepare for Brexit well I mean it's a real challenge I think that the issue for construction is threefold one is that the uncertainty is undoubtedly affecting investment decision making around whether or not to proceed with a project whether or not to proceed with a purchase so from that point of view difficult for us to adjust to deal with that but obviously a concern around pipeline and workload as a result of that I think that when you then go into what we can do is the two issues that would affect as most are people and the fact that we rely upon people from outside Scotland coming here and working within our industry and obviously that's a challenge for us particularly with a declining workforce anyway in terms of ageing and this drive to get younger people back in to stimulate it and equally and I've talked a bit about the real drive to get people back into the industry so that's what we're trying to do about that is actually get local population to be much more aware of the opportunities within construction so that we can get a better flow of people through the other issue for us is that some of the materials that go into our projects come from Europe and I think there's a concern around whether or not we'd have delays and or cost pressures as a result of that and certainly some of the industry have been trying to bring those products forward and have them available earlier than would otherwise bring them in such that they can give themselves some confidence that they can finish the project that they're building so there's been quite an emphasis on products coming from outside the UK let's make sure that we're not caught at the wrong time is really what they're trying to manage so they are to the extent that they're having to bring they are choosing to bring certain materials in much bigger bulk and have them available in volume that they wouldn't otherwise do so yes is the answer Do you have any percentages as to the number of EU workers in the construction industry and what sort of percentage of materials that are used in the construction industry that come from the EU these are not percentages I'm carrying in my head the number and the percentages really vary with the work and the nature of the work and the volume of work during the boom time a few years back whilst the Aberdeen bypass was at the peak of its construction for example then the percentage of European workers, particularly engineers and professionals working in Scotland was much higher than it currently is because we've ended that the bridge is complete the second Queensferry crossing is complete the Aberdeen bypass is more or less complete and so many of the Portuguese, Spanish and other engineers who were working here have moved on to other big projects elsewhere but there are still numbers of European workers in various trades in the construction industries in Glasgow and Edinburgh percentage wise I wouldn't like to put a figure on it because I say it fluctuates depending on the trades that are needed on a particular project at any particular time because the European workers in many cases being away from home move up, down between London and Scotland and elsewhere in the UK to follow that Materials the same, yes we variously import anything up to about 40% of our materials again it's one of these figures that I've plucked but it really means very little because obviously if it's a road you're building you won't be importing many materials at all other than perhaps the bridge bearings if it's a hospital then a much higher percentage of the products that come together to make the building will come from Europe whether it's air conditioning units or it's cladding systems that the industry has developed a very diverse supply chain over the whole of Europe I think the only good thing I can say in this case is one of the characteristics of our industries that we're all very pessimistic and that's probably good in this case because most construction companies have assumed a long time ago that no deal would be done and that we would be in this situation I mean we had a meeting on a date back before Christmas and we sat round the table with a bunch of construction companies and asked them just how pessimistic they were and they all said very pessimistic so that's good news because it means that they've then looked at their pipeline of work they've looked at what they need in terms of supply and they've either been trying to make arrangements for alternative sourcing or they've been trying to make arrangements for things to be procured earlier than the 29th of March to try and protect themselves obviously customers have been doing the same putting things into contracts that will terminate them if a no deal breaks it so I think the industry is as well prepared probably as it could ever be but how prepared is that it'll remain to be seen just what comes out of the wood but yes as Ken says we are at various points affected by European labour fluctuations depending on the type of work that's going on and by imports again depending on the type of project that we're actually building at this particular point We need to finish on a down note No we won't finish on a down note Jamie Halcro Johnston has questions There's a challenge I'm very quick because I'm conscious of the time I wanted to have a very brief question or a couple of questions on the school side but just first you've talked about some of the initiatives that are involved and some of the different I think what Dean Lockhart would call a cluttered landscape in terms of some of the investment I'm also very conscious some of the visits and people I've spoken to have talked about some of the skills gaps but also the skills deficits particularly within certain disciplines and they weren't particularly confident that neither those skills gaps nor skills deficits would be addressed I was going to ask you whether you're aware of those and obviously you've suggested you are role is and the suggestion I think some of the words you used was highlighting and identifying and informing so if your role is simply to identify, highlight and inform how confident can you be that we're going to be able to address those skills gaps and more importantly probably those skills deficits where we're actually going backwards in some cases I mean yes probably maybe use the wrong words in the sense of what can we only identify I think one of the powers that the industry leadership group has got is its convening power and by that I mean the power through the individuals that we have on the group and the status that they hold within the industry to bring the various parties together to hammer out solutions and that's where I see our main power really is yes we can identify the issues of the skills working group but I think the skills working group is also able to convene as Ken said to bring skills development Scotland to bring CITB to bring Scottish Government and to bring other key players round the table to try and say well what do we need to do to fix these problems that we're identifying we're at an early stage in the pooling together of the skills committee and under the new strategy the chair of that skills group Emma Dixon who's just joined the ILG and she is going through the process of identifying the myriad of organisations that play in the skills sector making contacts with them all talking to employers working out what they're saying about the availability of skills we'll be bringing all that together within the next few months using our convening power to try and hammer out solutions we can't enforce but we can convene and we can knock heads together you're confident those skills gaps and deficits will be identified and addressed? I'm confident they'll be identified and we will do our darndest to make sure they are addressed I'm not sure whether I've finished on a positive note but I'm just going to very quickly another question one of the things that have been suggested by a number of different organisations was a dedicated construction foundation apprenticeship at the moment there is obviously training at schools and I wondered what your thoughts were on that and whether that might also help play a role in bringing more digital skills within the training in an earlier way and engaging with younger people in an earlier age rather than relying on them coming later On the digital point being an old foogie we are aware that the use of digital technology is something that attracts children and pupils to the industry when they come to our inspiring construction events the thing that everybody's attracted to is the virtual reality headsets and the digital iPads that we can use to show them what a completed building is going to be I think that people have talked earlier in these sessions about building information modelling which sounds a bit dry creating a digital twin of a building so that you have the physical one being built in parallel with the electronic model that records all the information and nowadays that information can be put on a virtual reality headset you put it on and you can actually look round and see what the building is going to be that you're trying to construct and these sort of things are very powerful tools in showing pupils what the construction industry is going to be seen as the norm in just a few years' time so that has a powerful appeal I mean I know you're doing inspiring construction and I've heard very positive things about that but you think as I say a more focused foundation apprenticeship there is a foundation apprenticeship related to the industry but not on a more general approach do you think that could be something that could encourage more people to come in and perhaps encourage more young women I think a lot would depend on how it was presented what was contained in it what was the course content what were we trying to turn out at the end of the day because the industry needs skilled people and the industry needs skills at the level of an artisan trade skill because we still have a massive number of existing buildings that need to be maintained and they need the traditional joiner bricky craftsman skills to still be created I think that's the opportunity to stay on the positive The opportunity is that the industry hasn't to my mind done enough to attract young people into industry in the last few years for whatever reason and certainly we need to substantially improve the diversity of the workforce that we attract and interestingly part of the the lead up work to inspiring construction was I found myself in various events where we had invited the secondary schools to come and have a look at our projects and I very much found myself in a situation where what the schools were sending to the event were very much focused on low school trade background and when we started to open that conversation up it became very apparent that the industry has allowed the perception to grow that we are all about just trades and just wet building sites whereas actually there's probably not very many things that the construction industry doesn't do in the contemplation of careers so whether it's a professional career as an architect or a employer or an accountant or whether it's an IT there's a broad range of skills and what we need to get better at is putting the information out there not only to the pupils but to the teachers who are communicating to say look this is a great industry it's got great opportunities and actually it's very very rewarding and one of the things that when you're being in construction one of the things that you take great pride in and as Ron says, as you get older you pass more of it because you've built more or you've developed more but we're creating projects roads infrastructure that will be there for generations to come and we take great pride in the fact that we've participated and our teams take great pride in the fact that we've participated in delivering that product so we as an industry need to get the message out and we need to get it out more positively to attract a more diverse pipeline of talent into the industry so that's the opportunity I think that's a positive note that's a positive note to finish on so thank you to all of our witnesses for coming in today I'll suspend the meeting and we'll move into private session thank you