Agenda item

The Panel received a presentation which provided an update around the governance and monitoring of the HRA capital budget and projects. The presentation was introduced by Christian Carlisle, Interim Assistant Director of Asset Management, as set out in the agenda pack at pages 25-32. The AD for Housing was also present for this agenda item. The following arose as part of the discussion of this item:

a.    The Panel sought more detail about how decisions were made about which capital projects to continue. In response, officers advised that in relation to refurbishment of existing properties, this was set through the Asset Management strategy, which set out how the Council plans and prioritises its investment based on the information it had available. It was commented that stock data was looked at to help identify and plan where investments would be made, based on agreed set of priorities. Officers advised that the highest priority was given to Health and Safety works and those needed to meet regulatory requirements. In relation to new builds, the AD for Housing advised that the main financial metric was positive net present value. This looked at the cash flow value received from the housing, discounted by the borrowing costs used to build it. Other considerations were whether the scheme was net cash flow positive in the first year and value for money considerations based on a threshold for price per metres squared.

b.    The Panel sought further assurance about how the Council was able to balance financial limitations with the political decisions taken to build new Council homes and invest in its existing stock. In response, officers advised that there was framework in place, within which decisions were taken. Officers set out that schemes within the HDP were based on the metrics discussed above, notably net present value (NPV). Officers advised that the Housing Delivery Plan was important to the overall viability of the HRA, as it allowed the Council to grow its income. Similarly, money spent on investing in current stock reduced repair costs. Officers advised that they knew they had to build at pace and scale, and that a lot of time was spent looking at what pace the authority could afford to viably build at. Officers commented that the service had recently completed a stock condition survey, which showed a need for £1.2 billion investment, against an allocation of around £600m in funding. It was crucial, therefore, that the Council was able to prioritise how it spent this money. Officers gave firm assurances that they would always prioritise making sure that buildings were safe.

c.    The Panel sought assurances around progress with implementing a procurement framework. In response, officers advised that there had been some delays due to the fact that Council had decide to use the new London LCP framework instead. Contractors had been notified and the Council was due to go out to procurement in October on that basis.

d.    The Panel expressed a degree of scepticism with the £1.2B stock condition survey findings, suggesting that this seemed to be very high based on the average cost spread across the number of social housing units the Council owned. In response, officers advised that the costs for refurbishing whole blocks was expensive and that external works such as new roofs and lift replacements were more expensive that upgrading new bathrooms/kitchens, for example. The Panel emphasised the need to have an accurate figure for this as it would be used to determine refurbishment costs over a 20-30year period. Officers gave an example that the average block refurbishment costs were about £10-13M. Officers to provide a written update on how the figure of £1.2B was arrived at. (Action: Christian Carlisle).

e.    The Chair requested that the budget scrutiny papers provided a detailed breakdown of the capital projects and a level of detail about which schemes were being reduced or re-profiled.

f.     The Panel sought clarification as to whether any consideration had been given to setting up an in-house company to undertake planned maintenance. In relation to planned investment works, officers advised that due to the specialist nature of the works and the range of trades needed without a steady stream of work for them to do, it was not a viable option. Officers advised that in relation to new build properties, the contractor margins were around 3-5% and that would mean that the Council would be taking on a lot of risk.

g.    Officers advised Members that they did promote the use of local supply chains in the borough in order to support local businesses and local apprenticeships.

h.    In response to a question about social value being part of the procurement process, officers advised that it was done on the basis of 60% quality and 40% price. Of that 60%, 10% of the score was on its social value.

RESOLVED

That the presentation was noted.