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5. The Concept of SFT
5.1. Overview
As set out in the previous chapters the main driver behind the concept of SFT is the desire to drive and deliver efficient infrastructure investment in Scotland.
Through the development process for this SBC the potential scope for SFT to contribute to the delivery of efficient infrastructure investment in Scotland has widened considerably beyond pure costs of funding.
SFT is now regarded conceptually as an initiative whose aim is to make scarce public sector investment go further but, equally importantly, an initiative which will have an embedded purpose of producing long-term, reliable, affordable and good quality infrastructure.
To deliver this initiative, SFT has been conceived as a new organisation with a unique overview and cross cutting role in the delivery of Scottish infrastructure investment.
A key role for SFT, therefore, will be to strengthen public sector capability in infrastructure planning, procurement and delivery though the provision of expertise and financial resources.
5.2. Developing the Concept
Currently there is no single body which takes an overview, or responsibility, for the planning, delivery, or success of infrastructure investment in Scotland. Although there is now an Infrastructure Investment Plan produced by the Scottish Government published to coincide with the Scottish budget, it is more an information document rather than a tool used proactively for driving investment appraisal, delivery efficiency, or market building.
So, at a macro level the potential has been recognised for SFT to play a role in forward planning of infrastructure investment, to facilitate aggregation and releasing of value from the bulk buying power of a significant investment programme. This release of added value may come through efficient financing, or it may come via better developed and co-ordinated programme based approaches to procurement and delivery.
As part of a wider efficiency agenda SFT can also provide the focal point for the drive for better scoped and managed procurements. It may do this through guidance or quality assurance: Significant Projects Review Group, Gateway, Key Stage Review ( KSR) or other reviews, or it may become a co-deliverer of significant projects or programmes, providing specialist skills and support where needed. It is not the intention for SFT to take responsibility away from procuring authorities, but many would agree that when faced with high value, complex or novel infrastructure delivery, public sector bodies need, and would often welcome, independent quality assurance or specialist support.
There is also scope for SFT to be an innovator and developer of new delivery models, responding to changing market circumstances such as the forthcoming move to IFRS.
To realise this potential value SFT will have to work closely and co-operatively with the existing public sector bodies and agencies involved in infrastructure delivery. Core to the concept of SFT is that SFT as an initiative is "owned" by the public sector in its widest sense.
5.3. Constraints
In developing the SFT concept, as described in the previous chapters there are a number of primary constraints which have to be given careful consideration:
- Vires: the legal powers that Scottish Ministers have, including powers to borrow;
- Relevant Accounting Standards: the application of which determines what scores against the public sector balance sheet;
- State Aid: European legislation which seeks to prevent distortion of competition, this encompasses use of Government guarantees;
- EU Procurement Rules: the application of which drives the need for competition when services are being procured or paid for;
- ONS Classification: the formal determination of whether an entity is publicly or privately classified, typically based on the influence and controls embedded within an institutional form.
Note that accounting standards are only a "constraint" in restricting the additionality of investment over and above public sector budgets that has been delivered in recent years through the use of private finance. The forthcoming change in the UK public sector from accounting under UKGAAP to IFRS accounting standards is likely to mean that PFI/ PPP projects previously delivering the additionality of off-balance sheet finance are likely (for both existing and future projects) to be accounted for on the relevant public body's balance sheet. The accounting standards constraint has been considered in relation to concepts that attempt to continue (or re-establish) this additionality.
These constraints have remained high profile throughout the development of this SBC, and will continue to require close attention as SFT moves through business planning, towards implementation.
5.4. Shaping SFT
Taking the starting point of SFT as an initiative, whose delivery is supported by a new organisation, the Delivery Team produced a number of individual working concepts to support potential individual activities for SFT. These individual concepts were evaluated and a shortlist produced. (This process is described in more detail in Chapter 6.)
What emerged from this conceptual development process was more substance to SFT as an initiative, with potential identified for SFT in four clearly identifiable areas of activity:
1) SFT as a provider of quality assurance, guidance and standardisation;
2) SFT as a developer and co-deliverer of projects and programmes;
3) SFT as an investor of risk capital;
4) SFT as an aggregator or conduit for funding.
5.5.SFT Activity
These four areas can be further combined as shown in the diagram below:
Figure 6. SFT Activity
5.6. SFT Ownership and Governance
If SFT is to be established as a new organisation it will be in the strongest position possible to deliver the potential efficiency and added value it seeks, if SFT's public sector governance is reflective of a broad base of the public sector in Scotland. Bearing in mind the delivery map shown in Chapter 2, which highlights the potential interfaces, alliances and overlaps for SFT, SFT will be most effective if is integral to the delivery map, rather than superimposed on to it.
5.7. Summary
The SFT concept has been developed from a single idea regarding improvement in the cost of project funding, to being a much wider efficient infrastructure investment initiative, underpinned by a raft of activities, all with the common denominator of making public sector investment go further, whilst ensuring investment is producing long-term, reliable, affordable and good quality infrastructure.
As an organisation, SFT will seek to deliver efficiency through appropriate use of its own funds, and by the management and aggregation of funding requirements for significant projects, or programmes of infrastructure investment.
To maximise the potential value gained from optimising funding, SFT will carry out these investment and funding functions in conjunction with quality assurance, investment planning and delivery support activities, in effect addressing two pillars of infrastructure delivery: effective procurement and efficient funding.
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