Richard Digard: ‘What do local builders have to do for a fair go?’

You there. Yes, at the back… it might not appear the sexiest of subjects, but procurement Really Matters, because it covers the purchase by government of all goods, works and services. Get it right and it represents demonstrable value for money for taxpayers.

And that expenditure is currently in excess of £100m. a year – excluding the ‘multiplier effect’ beloved of economists caused by all that dosh sloshing around the island, supporting jobs, skills and local businesses.

Get it wrong, and this expenditure is effectively exported from the island to offshore companies, with migrant labour paying tax in other jurisdictions and taking work away from Guernsey firms, thereby reducing investment in businesses, training and development.

It’s one reason why then Economic Development Committee president Neil Inder said procurement would be key to the ‘Revive and Thrive’ strategy to help the island recover from the Covid-19 pandemic.

‘Part of that means giving our construction firms a fair chance of winning major projects on-island. That approach will run through the committee’s work and it’s called localisation, ensuring that when the taxpayer is funding a project, big or small, as much as possible of that funding goes to local employers and local workers,' he told the Chamber of Commerce in late 2020.

Doing so was essential for recovery. ‘Prioritising investment in our economy and our businesses is one of the most effective actions that this government can take.’

Fast-forward five years, however, and ‘localisation’ seems dead in the water and the island’s construction sector, in particular, feels it is fighting for its survival in the face of a hostile tendering process weighted against it.

This is very much an underground struggle as there is some reluctance for contractors to go public or risk being seen as critical of what is, after all, their biggest customer. Particularly Ronez, which has been whacked with a regulator’s market study examining claims its aggregate and concrete product prices are ‘materially higher’ than in the UK or France. Like it’s going to be cheaper, eh?

I gather all deputies have been contacted on these concerns, with apparently just a handful expressing much interest, so the fears of being targeted are real and widespread.

Given the States’ professed enthusiasm for localisation and allowing local suppliers a fair crack of the whip – plus pages of paperwork setting out a policy and procedure – the construction sector’s fears might seem misplaced.

However, the finger is being pointed at the States’ procurement process itself, puzzling though that might appear.

The reason is, government itself states that ‘value for money is the overriding factor that determines all public sector procurement decisions’. And it goes further:

‘Our procurement team work to ensure that we consider overall value, including economic, environmental and social value, when reviewing service provision… this translates into assessing the best overall outcome for “Guernsey plc”… when conducting a tender exercise.’

Er, no it doesn’t, say a significant number of the island’s major contractors, as they point to a significant list of ‘exported’ contracts with, over the years, some questionable outcomes, including quality of work, accountability and financial viability of the off-island contractor.

The latest example is the use by the Guernsey Housing Association of the French Groupe Legendre (in partnership with the local firm Breton) to build 70 new homes at the former CI Tyres site at La Charroterie.

I don’t think the cost of that has been published but with site conditions and cost, call it £300k per unit or so and you’re looking at around £20-25m., a lot of which will be heading off island.

Does this matter? Well, as far back as 2014 someone called Gavin St Pier, then minister of Treasury & Resources, announced a review of procurement policy to redefine value as including wider benefits to the island, enabling activities such as support to the community or local charities, as well as local employment and retaining expenditure on-island.

In short, a Guernsey spend is good news, something Deputy Inder reiterated in 2020, when he was targeting more – not less – localised spend from the States’ £120m. annual procurement budget.

Use CI Tyres as a an example (and none of this is criticism of Legendre or Breton, which are merely doing what they’ve been asked) and you can track the impact of localised v. exported spend on the Guernsey construction ecosystem.

The sector directly employs nearly 3,000 people in Guernsey, or around 10% of the island’s working population, and includes skilled trades, project managers, architects, engineers, quantity surveyors, administrative roles, and suppliers. All, obviously, reliant on winning contracts.

Supporting that sector, however, are building materials and merchant suppliers, plant hire, logistics, and haulage firms, legal, accountancy, surveying, and design services, vocational training and apprenticeships through the Guernsey Institute, plus fuel, retail, and maintenance. Oh, and as anyone out on a Friday morning will know, cafes.

You’re right, some of these areas aren’t wholly dependent on construction but look at CI Tyres again and what sort of specialist skills are needed? My best estimate includes employer’s agent, architect, quantity surveyor, structural engineer, mechanical and electrical consultant, fire engineer, acoustic consultant, and principal designer.

Forget the titles if you will. The point is most of those are available on-island and they’re highly-skilled individuals reliant on a thriving Guernsey industry whose dominant client is, well, the States of Guernsey.

In such a small market as ours, this is why localisation makes sense, hence construction’s consternation that the policy of on-island spending appears to them to be under attack.

Why might that be? Some answers I’ve had is that the procurement process itself, rather than common sense, is taking over, or that it’s an attempt to introduce competition in to the island. One reason why government is making Jeff Bezos even richer by buying its envelopes through Amazon and to hell with local suppliers.

The other (alleged) reason is that the trade is ripping us off. Well, kicking builders is almost as much fun as baiting bankers, but costs across the board have risen hugely.

A scan of rates from Ronez, Norman Piette and JW Rihoy and Son from 2021 onwards indicates that ready-mix concrete has gone up by 47%, softwood by 32%, granite aggregate 43%, general purpose sand 53%, structural steel 30%, skilled labour 45% and haulage on island by 30%. Ouch. But those rises and labour shortages are reflected in the UK too.

If you accept that there’s a limited pool of work for the sector and government can directly and materially influence that supply, then clearly there are consequences from what it does or doesn’t do.

These include hollowing out the construction sector, making capacity constraints worse – tried getting a builder or window fitter recently? – reduced job opportunities and tax take, reliance on off-island companies and no on-site redress for dealing with defects.

Add to that government’s determination to use your money to build a construction village for off-island workers and companies to use, and you can see why Guernsey builders are feeling bruised and unloved.

I’m not especially taking sides on this but when you see headlines like ‘States contracts “no longer weighted against local businesses”’ (2021) against the latest offshoring, you do wonder what local builders have to do for a fair go.