Islands Programme capital fund 2021/22 to 2024/25: grant awards - evaluation

4. Stakeholder views of the current Islands Programme funding mechanism

4.1 This chapter discusses stakeholders’ views of different aspects of the current Islands Programme funding mechanism – that is, the competitive bidding process. The findings presented here are based both on the documentary evidence and on qualitative research carried out with local authorities; Investment Panel members; staff from the Scottish Futures Trust (SFT); representatives of community organisations whose projects were funded by the Islands Programme; representatives of community organisations whose projects were not awarded funding; and representatives of Highlands and Islands Enterprise (HIE) and Development Trusts Association Scotland (DTAS).

4.2 This chapter presents information on stakeholders’ views and experiences of:

• The process of selecting projects for application
• The involvement of island communities in the application process
• The process of assessing applications and making award decisions
• The role of the Scottish Futures Trust
• Timing and timescales
• The funding landscape
• The advantages and disadvantages of the current competitive bidding process.

4.3 Stakeholder suggestions for improvements that could be made to the current competitive bidding process – and potential alternatives to the current process – are discussed in Chapters 5 and 6.

4.4 It is important to note that, regardless of their views on the mechanism for disbursing Islands Programme funding, local authorities and community representatives were keen to emphasise how much they valued the Islands Programme as a flexible source of funding for islands infrastructure projects, particularly given the current economic climate and the increasing difficulties of obtaining funding. They particularly appreciated that the fund could be used for both small and large projects, as well as for projects that were local authority led (with community backing) and community led; and that it funded design fees as well as building costs.

Challenges of delivering infrastructure projects on Scotland’s islands

4.5 To provide a context for the findings presented below, it is helpful to first set out some of the challenges of delivering infrastructure projects on the islands.

4.6 Infrastructure development in any locality is a complex and difficult task, and there are additional challenges associated with delivering infrastructure projects on Scotland’s islands. These include:

• Geography and transport: The remoteness of (some of) the islands from distribution centres and the lack of a comprehensive network of regular and reliable transport links between the Scottish mainland and the islands, and between the islands themselves, makes it difficult and expensive to transport construction materials and personnel.
• Climate: Weather conditions can be severe and unpredictable and may impact on the progress of work and exacerbate transport difficulties.
• Lack of suitable or skilled contractors / sub-contractors: There can be difficulties in identifying suitable contractors and obtaining competitive quotes for design, building and construction work.
• Lack of temporary accommodation: There is limited availability of suitable temporary accommodation for construction (and other related) workers who may require it.

4.7 Stakeholders said that these factors present substantial challenges to the delivery of islands infrastructure projects, especially in the winter months, and can increase the time required for projects to be delivered. In addition, they emphasised that these factors can, in turn, push up the cost of projects.

General views of the current competitive bidding process

4.8 Overall, stakeholders thought that the current competitive bidding process was working reasonably well. Local authorities, Investment Panel members, and representatives of SFT said that local authorities are now familiar with the application and assessment process. In addition, there was a view that the application process has improved over time. Community representatives (in particular, those whose projects had received Islands Programme funding) were mostly positive about the experience of working with their local authorities in developing applications. In general, local authorities trust the decision making of the Investment Panel and also appreciate and value the support they receive from SFT.

4.9 At the same time, however, local authorities and community representatives do not, by any means, see the current process as ideal. These stakeholders find the competitive process demanding and resource intensive. The long list of programme objectives, criteria for expenditure and separate application assessment criteria which had to be addressed in applications were seen to be overwhelming and confusing, especially for community representatives involved in writing project applications who may be unfamiliar with policy language. Stakeholders also think that the unpredictability and inconsistency of the annual funding cycle, and the tight timescales associated with the process add further challenges. In addition, some local authorities questioned the appropriateness of using a competitive process to allocate capital funding to island communities given the clear need for improvements in infrastructure and funding to support this.

Selection of projects

4.10 Local authorities use different methods to identify their communities’ priorities for capital investment. In some island groups, there are local authority officers responsible for liaising with community organisations and groups. These individuals provide a bridge between the community organisations and the regeneration or economic development officers who develop and submit the bids for Islands Programme funding. In one area, the regeneration team invites brief expressions of interest from island-based community development trusts and other community organisations when they are aware that Islands Programme funding may become available. This gives them an up-to-date picture of projects that may be ready for capital funding.

4.11 Candidate projects are often discussed with the SFT programme manager before making final decisions about which applications to submit. Some local authorities also reported that they sought approval from relevant council committees before submitting their applications.

4.12 There is a great deal of variation between local authorities in the extent to which the projects they submit for funding relate to a local authority asset or a community-owned asset. Monitoring data provided by SFT indicates that, of the 70 projects funded by the Islands Programme between 2021/22 and 2024/25, around half (42 out of 70) were delivered (or are being delivered) by a community-led organisation and / or involved a community-owned asset. This figure includes a small number of projects that involved a non-community-owned asset being developed by the local authority or other public body with the intention of leasing this to a community organisation to manage once completed.

4.13 Comhairle nan Eilean Siar and Shetland Islands Council have largely prioritised community-led projects in their use of Islands Programme funding. By contrast, Argyll and Bute Council and Orkney Islands Council have mainly focused on local authority-led projects for which they gathered evidence of community backing. Highland Council and North Ayrshire Council have funded a mix of projects – some led by the local authority and / or other public sector partners, and others led by community organisations.

4.14 Some local authorities (especially those who tended to favour community asset-based projects) explicitly stated their concern that current timescales do not allow sufficient time to organise a comprehensive, local authority-wide expression of interest stage following the announcement of each year’s funding. They thought that this kind of process would be helpful in ensuring that the ‘best’ projects are put forward.

Involvement of island communities in the application process

4.15 Community representatives indicated that these different arrangements for identifying community projects worked well in some areas. However, in a few areas, community representatives thought that the communication between them and their local authority was less well established, and that the local authority was, as a result, less aware of their community’s priorities or their organisation’s work at a local level.

4.16 Community representatives whose projects had received Islands Programme funding generally gave positive accounts of their experiences of working together with their local authorities on their applications. In most cases, community organisations provide project-specific information, while local authorities complete the more ‘technical’ sections and ensure that applications adequately address the various questions and assessment criteria. Sometimes, though, the community representatives prepare the entire application. Community representatives often commented on the amount of time they had spent on their Islands Programme application which ranged from ‘a few days’ to ‘a week or more’. Some said they struggled with the application form, expressing uncertainty about what information was required for each question, or seeing the application form as repetitive – asking them to provide the same information in two different parts of the form. However, others said that the Islands Programme application was ‘one of the better ones’ that they had completed.

4.17 Those whose projects received a grant from the Islands Programme said that they valued the input of their local authorities and appreciated the support and advice they received in relation to their application. They felt this process of working together on the application gave their local authorities a greater awareness of and investment in their project and in the wider work of their organisation.

4.18 However, some concerns and reservations about working with the local authority were also expressed by interviewees, particularly in relation to projects that had been turned down for funding. In one case, a community representative reported having had very limited involvement in the application process; they felt that greater involvement in the process would have increased their knowledge and understanding of the scheme objectives and criteria and would have enabled a better application to be submitted. In another case, the community representative felt unhappy with the resulting application submitted for funding.

Assessment of applications and decision making

4.19 Investment Panel members were generally positive about the management and operation of the process for assessing applications and the panel’s role in that. They highlighted:

• Efficient and effective management of the process by SFT
• Adequate time and information for assessing applications – although some noted the time commitment had been greater than they had anticipated, and that there was variability in the quality of applications (rather than in the quality of projects)
• Helpful briefings for new panel members, clear guidance on the assessment criteria and scoring of applications, and good support from SFT throughout the process
• Open, collegiate, and supportive panel meetings with everyone agreeing they had the opportunity to contribute to the deliberations in reaching a consensus on the applications to be recommended for funding
• Well-chaired meetings and appropriate handling of conflicts of interest.

4.20 Individual interviewees nevertheless also noted some specific concerns about the process and / or offered suggestions for improvements that might be made. These are covered in Chapter 5 (paragraph 5.5).

4.21 On the whole, panel members thought that current membership of the panel was appropriate and offered a suitable range of knowledge and expertise. The inclusion of representatives from the Young Islander Network was seen as bringing a helpful perspective to the assessment process.

4.22 Two panel members offered opposing views on the extent to which the Chair of the panel should have discretion to make adjustments to the recommendations made by the panel in the panel meeting itself. While one panel member thought there should be ‘full transparency’ (i.e. the panel should be involved in any subsequent changes to funding recommendations made during the meeting), another was content to allow the Chair (some) discretion to authorise changes.

4.23 There was limited comment on the role or composition of the Investment Panel from local authority or community organisations who were not directly involved in its operation. However, local authorities and community representatives occasionally commented on the feedback they had received on unsuccessful applications, offering a mix of views. Some local authorities said that they knew when a particular project was unlikely to be funded – and so were not surprised at the panel decision. However, one local authority disputed an assessment of the panel that one of the projects they had submitted for funding did not align with National Islands Plan objectives. At the same time, other local authorities reported cases where an application for funding was turned down in one year but was successful in a following year after they revamped and strengthened it. One community representative whose project was not awarded funding questioned the extent to which the panel fully understood the needs of island communities.

Role of Scottish Futures Trust

4.24 Local authority representatives were unanimous in their appreciation for the support provided by SFT from Year 2 of the Islands Programme onwards. SFT personnel (and the SFT programme manager, in particular) were described as ‘great’, ‘approachable’ and ‘knowledgeable’, and their input was regarded as ‘helpful’ and ‘invaluable’.

4.25 SFT support was especially appreciated in relation to (i) giving a ‘heads up’ on the opening of the fund for applications, (ii) advising on the selection of projects to put forward for funding (i.e. commenting on whether the project was a ‘good fit’ for the Islands Programme and likely to meet the assessment criteria and whether it was at an appropriate stage of development), (iii) providing advice on draft applications and feedback on application outcomes, and (iv) acting as a sounding board and ‘critical friend’, providing support and dealing with queries at all stages of the process – both pre-and post-application. SFT’s role as an intermediary between local authorities and the Scottish Government was also appreciated. Some local authorities said they found it easier / more comfortable to speak to the SFT programme manager in relation to queries and issues that arose, than might have been the case if they had to speak to someone from the Scottish Government.

4.26 It was also reported that SFT had become involved at a very practical level when funded projects ran into difficulties. For example, when costs increased in relation to one large development, a member of SFT staff helped to revise the design of the building – which resulted in a reduction of the construction costs.

4.27 Investment Panel members also commented positively on SFT’s experience and expertise in relation to the development and funding of infrastructure projects, and the overall value that SFT brought to the Islands Programme process.

Timing and timescales

4.28 Timing and timescales (and the challenges associated with them) was a dominant theme in discussions with local authorities and, to some extent, community representatives.

4.29 Local authorities repeatedly said that the variation in the timetable for the process from one year to the next in terms of (i) when funding announcements were made, (ii) the deadline for submissions and (iii) when outcomes were notified / grant offer letters were received hindered their ability to plan their activities efficiently.

4.30 In addition, they offered comments on specific aspects of timing and timescales:

• The time between the announcement of funding and the deadline for submissions: Some local authorities were concerned that current timescales did not allow them sufficient time to organise a comprehensive ‘expression of interest’ stage with their local communities. This meant that the selection of projects to go forward to the application stage was often based on existing networks and contacts, or their own knowledge of projects already ‘on their radar’. In addition, the time available to develop applications and get clearance through the local authority’s own internal scrutiny processes (including consultation and sign-off from relevant committees and undertaking value for money assessments) was also challenging.
• The time between the deadline for submissions and notification of application outcomes: Some local authorities said they were not able to progress a project while awaiting the outcome of their application and that this period was, essentially, ‘dead time’.
• The time between receipt of the grant offer letter and the end of the financial year (31 March): Local authorities said that the short period of time between receipt of the grant offer letter and the requirement for funds to be fully committed presented a substantial challenge for them in relation to (i) undertaking formal procurement exercises to identify suitable contractors and entering into legally binding contracts, and (ii) securing any co-funding required. These challenges were magnified in relation to large-scale projects. In addition, if the (formal) grant offer letter was delayed (as had happened over the course of the programme), the local authority might have to enter into a contract early (without formal notification) or risk ‘losing the contractor’. This represented an ‘uncomfortable risk’ for the local authority.

The funding landscape

4.31 Another dominant theme in discussions with local authorities and community organisations – as well as with DTAS and HIE – was the challenge of having to piece together a comprehensive funding package for a capital project from a wide range of disparate sources. This issue was raised repeatedly by community representatives. Stakeholders pointed out that every fund has its own aims and objectives, different criteria, different application processes, and different deadlines. They described this as a ‘cluttered’ funding landscape. See Annex 4 for a list of organisations that co-funded Islands Programme projects.

4.32 A related issue raised by stakeholders was the difficulty of obtaining grants to cover revenue funding for organisations in addition to capital funds for infrastructure projects. This was seen to be critical to the successful delivery of projects. As one stakeholder said: ‘it's people who deliver projects’.

Advantages and disadvantages of competitive bidding

4.33 One of the main aims of this evaluation was to explore the advantages and disadvantages of different funding mechanisms for the Islands Programme. In relation to the current competitive bidding model, the main advantages, described by SFT, some members of the Investment Panel and some community representatives, were seen as:

• Providing assurance that there is full policy alignment between the strategic objectives of the National Islands Plan and the projects selected for funding
• Providing an independent and external evidence-based assessment to ensure that projects selected for funding are the ‘best’, in the sense of being the most impactful and the most aligned with national and local community priorities
• Ensuring, by using a consensus-based approach to awarding grants, that no single individual is able to exert undue influence over which projects receive funding
• Giving all island local authorities – and all individual islands – the potential to access substantial funding, regardless of their geography or size
• Facilitating and supporting better partnership working between local authorities and their local communities.

4.34 Local authorities, some Investment Panel members and some community representatives described what they saw as the disadvantages of the current competitive bidding process. These were that:

• It was not aligned with the Scottish Government aspiration for ‘subsidiarity’ and the devolving of decision making to a local level.
• It was not aligned with the ethos of the National Islands Plan – which was described as one of collaboration and partnership, rather than competition. The competitive nature of the process was seen as particularly problematic where there is more need (demand) for infrastructure projects than can be met by the Islands Programme alone.
• It was a very resource intensive approach, especially given the limited capacity and capability within local authorities to undertake the tasks of project selection, development, management and delivery. Some local authority staff reported decreased staffing in regeneration / economic development teams in recent years. In this context they highlighted the risks to the local authority of devoting significant resources to developing applications which were not funded.
• It was a very resource intensive approach for community representatives – and even more so for those relying on volunteers rather than paid staff.
• The timetable associated with an annual bidding round does not align well with the timescales for progressing all projects.
• It can result in funding being given to the best bids, not necessarily the best, most transformational projects. This is because the competitive process depends on the capacity and ability to write bids.
• ‘Shovel ready’ projects are prioritised over potentially more impactful projects which may require phased funding over a period of time.
• It did not match the standards of scrutiny which would apply at local level (where, it was said, all project proposals would be required to go through a rigorous committee process comprising elected representatives of local communities).