Agenda item

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

A report seeking approval to appoint a new Contractor to take over the Construction Works at Edith Road. These Sites were previously Contracted with Cosmur but following Cosmur's abandonment of the Sites they have had to be reprocured.

The Cabinet Member for Council House Building, Placemaking, and Local Economy introduced the report and sought approval to the appointment of contractor A to complete the delivery of the new Council homes on a former vacant/car park site at Land opposite 16 Park Road/Edith Road N11.

Works had started on site with the previous contractor in September 2021; however, following lack of progress and repeated underperformance by the appointed contractor, the Council terminated its contract in March 2023. Subsequently, the appointment for a new contractor to complete the development had been underway.

In response to questions from Cllr Connor, the following was noted.

-     Significant efforts had been made to performance manage the contract with the previous contractor and the Council had stepped in when it was apparent that the contactor was not able to continue to fur fill the requirement of the contract and complete the works. The overall nature of any contractual agreement did not safeguard any party when a contractor became insolvent. It was noted that this was a small scheme in the delivery programme and savings made on other schemes mitigated the impact on the housing delivery programme.

-     The Director for Placemaking and Housing agreed to provide Cllr Connor with the financial information concerning how much had been paid to the previous contractor, the time and money spent managing the contact, and the loss to the Council because of the contractor becoming insolvent.

-     It was noted that this particular provider also had other contracts in the housing delivery sector and had underbid for contracts during Covid and subsequently found that they were not able to deliver the programmes of works.

Further to considering, the exempt information set out at item 26,

RESOLVED

1.   To approve pursuant to the Council’s Contract Standing Orders (CSO) 9.07.01d, the appointment of Contractor A (named in the exempt part of the report)to undertake building works to complete the provision of eight Council rented homes at land opposite 16 Park Road/Edith Road for a total contract sum of £2,404,164; and approves the on costs and client contingency sum set out in 6.31 of the exempt part of the report (Appendix 2).

2. To approve the issuance of a letter of intent up to a maximum value of £240,416 being no more than 10% of the contract sum.

Reasons for decisions

On 3 December 2019 Cabinet included the land opposite 16 Park Road/Edith Road N11 into the Council’s housing delivery programme. This scheme was subsequently granted planning consent and a works contractor was appointed to build the scheme in November 2021. However, due to lack of progress, underperformance and entry in to a Company Voluntary Arrangement by the Contractor, the Council terminated the contract and took back possession of the site and partially constructed building. A tender process was initiated in late spring 2023 to appoint a new contactor to complete the development. In this case a Performance Bond is in place against which a full Claim will be made in accordance with legal advice and Claims protocols.

The Council seeks to performance manage all Contractors by continual vigilance by the Council’s Project Manager and the oversight of both Employer’s Agent and Clerk of Works to every New Homes Build Project.

This continuous monitoring, allied to frequent Site Meetings and both formal and unannounced Site inspections, ensures that the Council is able to obtain value for money on all New Homes Projects by reducing waste on Site in terms of time, materials and labour costs, and works collaboratively with our appointed Contractors to build sustainable partnership working, which enables problems to be solved in a manner that ensures the best and most cost effective outcomes for the Council and our future Tenants.

This partnership working relies on trust and transparency on both sides of the working relationship and, regrettably, this was not an approach adopted by the previous Contractor who chose not to openly identify their corporate problems and instead mistakenly relied on the Council lacking proper professional diligence.

This working practice was quickly identified by the Council Team, including the external and independent Employer’s Agent and Clerk of Works and despite more frequent Site meetings and discussions at Director level with the Contractor, their poor performance led, ultimately, to their abandonment of the Site in mid – Construction, followed, shortly afterwards, by their entry in to a Company Voluntary Arrangement ( CVA ). A CVA is used when a limited company is insolvent, it can use a CVA to pay creditors over a fixed period.

The Council always seeks to determine a Contractor Company’s financial health by due diligence at the time of entry into the Contract, hence the reason for Contract terminations to be a, very rarely used, last resort. In this case the financial checks were satisfactory at the date of the Contract, but the extraordinary levels of labour and materials inflation experienced in 2021 and 2022 as a consequence of Brexit and the War in Ukraine, had an extremely adverse effect on the finances of the Contractor in this case and the Council, having taken independent legal advice, was forced to adopt this very unusual step.

Contractor A has been selected via a formal tender process to undertake these works. The competitive nature of the Tender and the evaluation of the Tender returns (more particularly described below ) has involved Council Officers in additional due diligence and detailed technical clarification to ensure that best value for money can be demonstrated and achieved and, if approved, Contractor A will be subject to the continuous monitoring and performance assessment described above until the new homes have been delivered and occupied.

The Council’s New Homes Employer’s Requirements have two principal objectives: 1. To ensure that the next generation of Council Housing is built to the highest standards of design, engineering and specification and 2. That the new Homes will be as fuel efficient as possible and will be readily capable of economically viable maintenance throughout their lifespan of not less than 80 years. These are the tests to which all Contractors are put, and the Strategic Procurement Team have been vigilant in ensuring that all of the compliant Tenderers for this Project were subject to these tests of quality and performance which are scored separately and rank equally with the price mechanism against which each Bid is evaluated.

Following a formal procurement process, a contractor has been identified to undertake these works.

Alternative options considered.

It would be possible not to appoint a contractor to complete the development of this site for the Council. However, this option was rejected as it would leave a partially constructed building on the site and blight the area, furthermore, it does not support the Council’s commitment to deliver a new generation of 3000 Council homes by 2032.

Additionally, a failure to complete the partially constructed development would lead to a   further burden of cost being placed on the Council’s Temporary Accommodation portfolio and supporting Services and would have potential for some reputational damage to the Council. This was not considered to be a viable, value for money option for the Council which can, by the appointment of Contractor A, continue to deliver a high-quality Scheme at a competitive cost.

The re-tender was procured via a competitive tender through the West Works Dynamic Purchasing System (Category 2), using JCT Design & Build 2016 with amendments, the recommended route for a contract of this value. An alternative option would have been to do a direct appointment, but this option was rejected due to the estimated contract value of the scheme and to give opportunities for local small to medium size contractors to submit a tender.