Blog 011 - What is Shovel Ready?

So the Government have announced plans to push forward “shovel ready” projects, but what and where are they?

Shovel ready projects are projects that are at such a late stage of pre-construction planning, they are all but ready to “put shovels in the ground”. The design and engineering is substantially complete and a Contractor is ready to be appointed. It is the jobs that can be completed within 18 months that the Government is looking to promote and have requested proposals from local authorities to request funding. On this basis, it looks unlikely to include huge infrastructure projects that will take years of design and construction, but it will promote smaller schemes that will make a difference in their local areas in terms of improvements and jobs.

Glenigan identified 48 projects that have been through planning and could therefore be deemed shovel ready. The Government will be looking to cover several economic and political bases with this spending, so expect to see priority for projects in the Middle and North of the Country and especially those which promote the Government’s green agenda. Capital spending project such as roads, trams, energy farms and the like do very little to produce work for the nations “traditional trades” more typically associated with housing and internal fit out, but the hope is that there will be a series of schools, health centres, bus stations and the like that will provide opportunity for the electricians, the decorators, the plastering contractors etc. to secure some Government work.

Government work for the small specialist contractor can be a lifeline. Benefits include certainty of employer solvency, no cash retention and improved payment practices, such as 30 day payments. Just be sure to negotiate Trade Contracts that have equal payment provisions as the Main Contractor has with the Employer.

Government schemes often mandate requirements for training of the next generation, so the specialists are likely to employ apprentices as part of the project, securing skills for the next generation.

Specialist Contractor involvement will largely depend on ensuring that the barriers to entry and minimised as far as reasonably practicable. Pre-qualifications and red tape often make such projects too big or too expensive to price, the authorities need to find the appropriate balance of ensuring quality and competence in the supply chain as well as not making the simple bidding of these projects too much for many suitably competent specialists. I would also like to see the Specialist Contractors request contracts and terms and conditions that reflect the scope and value of their works. Too often Specialists are expected to sign long winded and onerous contracts that have little significance to the works being undertaken.

The most significant thing to consider is that as everyone begins to bid for this work, the market will get competitive, for the Employer this is good news, tender prices will fall, but the procurement by the Employer must be done responsibly. Abnormally low bids must be scrutinised and Main Contractor’s procurement monitored to ensure the supply chain isn’t being squeezed into a loss making position. This will be bad for the specialist and the project if there is an insolvency.

Only time will tell if this will help work pick up in the Private Sector, sometimes as amenities are built, the housing and commercial space follows. There is no doubt there are tough times ahead, but aligning your business to bid for the “shovel ready” projects will ensure there is work in hand for Clients with a good track record of paying on time. Be certain to get fair terms with Main Contractors, they will be getting them from the Employer.

If you want to discuss pre-qualification or contract negotiations further, drop me an email.