Willie Docherty vand Citybuilding
24 Jun 2008
Silver van man The vans of Glasgow's arms-length contracting company are appearing all over the city. Citybuilding, says its MD Willie Docherty, is competing with private contractors on an open market, but the Council recently 'recommended' that developers use citybuilding in their pitches for the Commonwealth Games Village. Can the city make real social and financial benefit from being both client and contractor? Is there a danger of close and cosy collaboration and second-rate buildings? Steven Raeburn investigates.
THE landscape of the city of Glasgow may be changing in ways less obvious Ð but equally as profound Ð than the arched bridges, media hubs and glassed hotels of the riverside and city centre, in part due to the quietly persistent and far reaching work of Citybuilding LLP, the new company formed by the city council to replace its direct labour organisation, that formerly operated under the building services umbrella. Citybuilding will, according to its MD Willie Docherty, contribute to improve the built environment in Glasgow simply by its existence and its unique ability to sidestep construction inflation.
It is currently turning over around £185 million per annum, and returning £6 million per year back to Glasgow City Council after reinvestment, all raised purely from competing for and gaining private sector work as well as council business. The formula is currently under scrutiny by similar sized councils in England and Ireland. The concept may prove to be revolutionary, but has also provoked concerns within construction that citybuilding may benefit from a semi-monopoly on Council work.
Docherty, himself the former director of the council's building services division, says this couldn't be further form the truth. "The reason the Council decided to create the business was that their Direct Labour Organisation was running out of work. The public sector market was diminishing but the private sector market was booming. Rules governing public sector trading didn't allow the council to go into the private sector at that time, so we had to create a new legal vehicle to do that. That allowed us to continue working with the council, and to go into the wider private sector market and take advantage of the decision the council had made," he says.
"The real driving force was to protect the jobs and the trading opportunity. The council didn't want to go to the wall and lose that workforce. The council's driving force was to protect the jobs."
Docherty points out that the former direct labour organisation system employed by the council picked up 100 per cent of the council's building and construction work, whereas citybuilding pick up only about half of the city's projects. He also believes that there is a school of thought in construction which believes that having your own direct labour force is the best way to go. With blue chip building companies recruiting again and providing their own training rather than outsourcing, he may have a point. In addition to ensuring the business is viable and solvent, Docherty says that making sure the workforce is well looked after and well trained gives Citybuilding the flexibility and productivity to keep the business going.
"It feels entirely different because we are not involved in the usual council or local government bureaucracy. We get much more autonomy in terms of recruitment, marketing and tendering. We don't spend the public pound - we just trade. The business is a big mechanism for providing jobs and training in the construction industry. In terms of turnover it is one of the biggest in Scotland. In terms of staff (numbering in excess of 2,300) it probably is the biggest."
Docherty maintains that Citybuilding's positioning and heritage does not give them an advantage, and insists that there is no benefit accruing to them arising from their close relationship with Glasgow City Council. Commissioned work, he says, is obtained strictly on financial merit.
"The Council own the LLP. The council award contracts on best value. As long as we meet the market rates - so we are not extracting cash from the council - and any surplus we make goes back to the council. The council owns this business, so it is in the best interests of the council to give it as much work as possible back to us on the right terms and conditions, to protect themselves from construction inflation. Every single big contract in Scotland in the last five years has overrun in terms of budget.
"What we can deliver is price certainty. If you can get price certainty for a £100 million schools project, that's absolutely wonderful. At the same time, if we are competing with the private sector and getting private sector rates which are higher - and therefore making profit - the council has a win/win."
Alastair Wylie, MD of city competitor CCG Construction, the team behind the Celtic FC training academy, Beith townscape heritage initiative and Cambuslang Investment Park endorses Docherty's assertion that the existence of Citybuilding is a benefit both to the city and the construction community.
"Citybuilding and the LLP aspect of it is extremely refreshing, in terms of direct labour organisation. City building and the people of Glasgow have stuck their neck out to say they can survive the commercial environment. I applaud their approach," he says.
"We can stimulate our local economy. I employ 600 people; Citybuilding far more. You can guarantee that the bulk of them will be from the greater conurbation of Glasgow. That's 3000 wage earners in Glasgow. Then you think of the buying power that has within the city. It stimulates local economic capability."
In addition to the perceived benefits of the economic spin off, with the Commonwealth Games looming and the long postponed M74 extension now finally proceeding, Docherty argues that the modus operandum of Citybuilding has a positive impact on the wider built environment, based on the virtuous cycle of construction spend allowing the company to plough profits back to the council.
"As long as the construction economy remains the way it is just now, the council will always have a win/win on this," he says.
"The council can make the right strategic decisions to boost inward investment to the city. The more inward investment you bring into the city, the more built environment there is, the more construction it will lead to. If you have a big capital programme like Glasgow has Ð and Glasgow is the economic powerhouse of Scotland - and if it can have a degree of price certainty and lack of problem inflation, that means Glasgow has more to spend on other things. It can invest in people, jobs, training and skills, and GlasgowÕs capital programme can be augmented by our surplus. It can develop the environment and develop a better infrastructure."
The scale of the operation allows Citybuilding to run and maintain a large training and apprenticeship programme, with its own dedicated training academy which Docherty says makes the company the largest provider of training in the country. In excess of 400 of their own trainees will be going through this year, with an additional 200 more private sector apprentices taking advantage of the facilities. It is this aspect of Citybuilding's work that Docherty believes can help rejuvenate both the city's environment and its economic health, and explains why other UK cities have recently visited to observe the scheme, with a view to rolling it out across the UK.
"In the very near future a number of cities may adopt something like this. We have had request from most of the major cities in Scotland, the north of England and one of the Irish cities. They see the benefits - not just of making a surplus; there is also the regeneration of the built environment and there are real social problems in some of the cities, and getting skills and getting a job is a way out of it."