Agenda item

Report of the Director of Placemaking and Housing. To be introduced by the Cabinet Member for Council Housebuilding, Placemaking, and Local Economy.

The report will seek Cabinet approval to increase total scheme budget.

Cllr Carlin left the meeting room at 19.48, in accordance with her earlier declaration of interest.

The Cabinet Member for Council House Building, Placemaking, and Local Economy introduced the report, which sought approval to increase the total scheme budget and agreement of a new contractor to complete construction of five Council homes on the Council owned land at Nightingale Lane (NGL), N8 and St. Mary’s Close (SMC), N17.

The Cabinet Member outlined that the Council had worked hard with the original contractor to resolve ongoing issues. However, the Council had terminated the contract earlier this year due to repeated underperformance on behalf of the contractor. It was now necessary to appoint a new contractor to complete the works on these homes, which would incur an additional cost in line with inflation and rising building costs. The housing schemes provide much-needed homes for five households.

In response to a question from Cllr Cawley – Harrison, it was noted that there is a constant review of the contractor performance and detail considered from project managers and clerk of works. It was noted that over 4300 construction firms in this sector had become insolvent and considering this context, the Council were not as exposed as other organisations. The original contractor had underpriced their bids and then with the increase in inflation had not been able to manage their contracts. There had been a contract performance bond in place and the Council would expect to receive a good reimbursement of funds.

Further to considering exempt information at item 25,

RESOLVED

1.    To approve increase in total scheme budget as described in Appendix 1 - Part B Exempt of this report in order to complete the works to the newly constructed homes.

2.    To approve pursuant to the Council’s Contract Standing Orders (CSO) 9.07.01a, the appointment of Contractor A (named in the Appendix 1 - Part B Exempt part of the report)to undertake building works to complete the provision of five Council rented homes at 42 Nightingale Lane, N8 and 5 & 7 St. Mary’s Close, N17 for a total contract sum of £205,359.

3.    To approve the scheme contingency sum as set out in the Appendix 1 - Part B Exempt.

4.    To approve issuance of the Letter of Intent to the 10% of the contract value as allowed under CSO 9.07.3 to expedite the works in advance of execution of the contract.

Reasons for decisions

In September 2020 Cabinet approved the award of a JCT Design and Build contract with the Contractor B to deliver 2 x 3 bed homes at St Mary’s Close and 2 x 1 bed and 1 x 2 bed flats at Nightingale Lane with approved budget as outlined in Appendix 1 Part B exempt information.

The works started on both sites in January 2021. In autumn 2021, the Council first became concerned about the Contractor’s overall performance. From autumn 2021 and throughout 2022 Council officers successfully worked with the Contractor B to improve their performance through weekly monitoring meetings chaired by an independent Employers Agent. This was initially successful resulting in satisfactory improvement to their work on both sites.

In late 2022 due to several factors, including issues with third party utilities and sub-contractors going out of business work on site slowed down. At the start of 2023, it seemed the Contractor was taking the right steps to resolve the issues by commissioning a reliable sub-contractor to complete the outstanding works. However, alongside this the Contractor was also having financial difficulties that they were not transparent about and this eventually resulted in work halting on site.

In March 2023, the Contractor decided to withdraw from the sites and therefore breached the contract’s conditions. The Council followed the contract’s termination process with the final termination notice issued on 20^th April 2023.

An approval to increase the overall scheme budget is now required to cover the cost of works completion and associated additional fees. These include additional Employer’s Agent and Clerk of Works fees, legal costs and security costs. It is important to note that the scheme is c.85% completed. However, the uncompleted buildings are currently at risk of theft, damage, vandalism, or an unauthorised entry. In fact, squatters moved into SMC homes shortly after the contractor vacated sites and the Council had to follow a Possession Order process, which was served promptly. The properties have been secured to mitigate the above risks, but it is in the Council’s best interest to complete the works as soon as possible and secure tenancies to remove the risk completely.

The recommended issuance of the Letter of Intent may not be necessary, as we will make every effort to have a contract in place once the recommendations in this report are approved. However, if it is required it will allow the contractor to carry out minor external works to prevent deterioration of the building. 

Alternative options considered

Doing nothing would mean that the nearly completed homes will be empty and the Council will be unable to rent them to residents on our waiting lists, a key priority through the Council’s housing delivery programme. There will also be a loss of rental income. Furthermore, the buildings if left in their current state will be prone to more squatting and deterioration if not completed promptly.

The Council considered an option of negotiating completion of the works with the contractor. However, the contractor subsequently became financially insolvent and entered Company Voluntary Arrangements; as such this option is no longer viable.

A direct award option to a suitable sub-contractor with experience of working on the schemes has also been considered. However, it was considered more important to ensure value for money is achieved on completing the contracts by running a competitive tender in parallel with the Cabinet governance process seeking an uplift in the overall scheme budget.