DEFRA cutbacks leave civils sector strapped

Civil contractors face a drought in new orders for the next two years with the Department for Environment, Food and Rural Affairs (DEFRA) apparently cutting back on spending.

The news comes after DEFRA announced that no new coastal defence projects will go ahead this year as the Environment Agency's (EA) 'traditional shared pot', used for capital projects, has been cut by nearly £30m. This moratorium may drag into next year as well.

Justifying the move, former climate change and environment minister Elliot Morley said that priority scoring - the process used by DEFRA to determine how to prioritise proposed schemes for the next financial year - will not be announced for projects in 2007/08 or 2008/09.

In a statement, Morley said his decision was due to a "high level of existing commitment in the programme". The situation over new projects isn't due to be revisited until next autumn, said Morley. This is expected to leave a huge gap in new works coming on stream.

"There is going to be a real continuity problem," said one contractor. "It takes at least a year to work up a coastal defence project as many now come in the early contractor involvement mould. This decision will really slow things up."

Meanwhile, in a letter to the EA, the Local Government Association and the Association of Drainage Authorities, Morley reveals funding for the EA's traditional shared pot falling from an indicative figure of nearly £114m to just £87m for the year. This would appear to back up claims by some contractors that work is drying up on the EA's frameworks, currently being retendered, because there are "too many contractors across each region". The cuts, Morley argued, were due to an "unusually high local authority spend". A DEFRA spokeswoman denied there is a freeze on current works, which were supported by a "record" £579m of funding this year.

However, sources claim that most of this funding was being spent on coastal management "desktop studies" than physical work on the ground. "There will be no priority score announced for the year," said a DEFRA spokeswoman. "This year's budget is fully allocated to many worthwhile projects, including coastal defence works, around the country, so we are not able to approve any further projects to start in 2006/07."

[Contract Journal, 1 June 2006, p 4]