Agenda item

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

 

 

This report will sign off the final business case for the Civic Centre, following the procurement of the main contractor. It will outline the programme going forward and key project milestones.

 

 

The Cabinet Member for Placemaking and Local Economy introduced the report which sought approval of an award in principle of the main construction contract at a fixed and maximum price for restoration and refurbishment of the Haringey Civic Centre, and its expansion through the addition of an annex building.

 

The Cabinet were reminded of the complexity of the project, which involves restoration of a Grade II listed building and the provision of a new build annex building; the Council had followed a two-stage procurement which involved completion of a PCSA. The award of a PCSA allowed the Council and the contractor to work proactively to mitigate project risks, continue the detailed design elements and identify efficiencies within the current design and programme to maximise the benefits to the Council.

 

Upon conclusion of the PCSA period (on 29 November 2024) and with greater understanding of the existing building’s risks and their transfer to the main contractor, this report and recommendations were able to be put forward.

 

It was further noted that the report also included a refreshed presentation of the final business case, which had been fully considered at each key stage of this project by Cabinet, as part of a strong governance model. The final business case, with its revised information concluded that the refurbishing of the existing Civic Centre, and its expansion through the addition of an annex building, continued to be the option that offered the best value for money to the Council, whilst also best meeting its strategic objectives.

 

 

The Cabinet Member further highlighted the benefits of this project and consultation activities:

-       A functional civic hub that will provide high quality office accommodation for staff alongside excellent community facilities in a modern energy efficient space.

-       Free up the current office accommodation along Station Road in Wood Green for alternative uses that have the potential to create significant additional income to the council; and support the continued growth and development of our town centre.  

-       Councillors have played a role in developing the design that was submitted to the Planning Committee through the Civic Centre Members Forum.

-       The Civic Centre Members Forum has enabled cross-party review of design proposals, including the design of key democratic areas like the council chamber; and the on-going monitoring of the project’s development.

-       Positive feedback from residents. The Council held multiple in-person and online engagement events. These events gave residents the opportunity to learn about the proposed design for the Civic Centre and shared plans of its future use and dialogue with residents will continue.

 

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

 

-       Regarding maintaining the fixed price for the development and refurbishment, the whole procurement had been based on transparency of risk. So, the risk elements had been factored and was also part of the pre services contract agreement with Sisk. Therefore, the Council was in strong position to keep the contractor to the terms of the contract both in relation to completion timing and scope. This retention of risk by the contractor linked back to the original business case which was very detailed on the terms of the designs and the elements.

 

-       The Council had monitoring process for the contract award through the normal project capital governance system with any substantial changes reported to this project board and if necessary, back to Cabinet. However, there was good reassurances with the work already completed by Sisk through the procurement to date by the team.

 

-       In relation to comparing the current cost for Alexandra House and the Civic Centre as equal options for future Council office space, this was not correct. It was noted that there was only a level of light refurbishment to Alexandra House completed to allow the Council to continue occupation of this building and the cost of maintaining occupation of Alexandra house for future years compared to Civic Centre was not viable. One estimate was based on a full 40 year plus occupation of the Civic Centre, and the other outlined the cost of a modest rental level building. The cost per square foot of the Civic Centre was quite modest for the level of accommodation it would offer. It was further noted that comparing both sites for housing purposes could not be assessed as outlined in previous business cases that there were opportunity costs which were difficult to ascertain and even undertaking this assessment could impact one or other of the sites and also give an unfair advantage to one site affecting the potential figures.

 

Further to considering the exempt information at item 24,

 

 

RESOLVED:

 

1. To approve the final business case, which concludes that the refurbishment of the existing Civic Centre, and its expansion continues to offer the Council value for money and best meets its strategic objectives.

 

2. To approve the award in principle of the construction main contract to John Sisk & Son Limited, for the Civic Centre development project, following the completion of the Pre[1]Construction Services Period, for up to a maximum price of £54,077,000 (inclusive of contingency), in accordance with Contract Standing Order (CSO) 9.07.1(d).

 

3. To delegate the finalisation of the main contract price, up to a maximum price of £54,077,000 (inclusive of contingency), to John Sisk & Son Limited, to the Director of Placemaking and Housing after consultation with the Director of Finance and Section 151 Officer and the Cabinet Member for Placemaking, and the Local Economy, in accordance with CSO 9.07.1(d).

 

Reasons for decision

 

In April 2023 Cabinet agreed the recommendation to: “Agree to continue to proceed with the restoration and refurbishment of the existing Civic Centre, and its expansion through the addition of an Annex building, up to the conclusion of the procurement process to appoint a main contractor.”

 

The Civic Centre building has continued to deteriorate while its remained vacant, and as a Grade II listed building Haringey Council has an obligation to restore, repair and maintain the Civic Centre and bring it back into use.

 

The Civic Centre has a long and rich local history. We have seen many nationally significant moments in history take place there, as we can see on the illustrations located on the site hoarding. The Council’s commitment to the Civic Centre project means that the impressive building will be protected and revitalised and ensures that its local history

continues for future generations.

 

The business case outlined:

 

The Council’s ambition to move to be a more agile organisation, with staff working under a ‘working flexibly’ model, which will see working locations for staff split across a combination of office, community, and home. This ambition requires the Council to provide a flexible and collaborative office working environment for its staff, which enhances the positive aspects of in-person interaction, enables work and activity that is harder to deliver remotely, and supports staff wellbeing.

 

There is also an objective to maximise the opportunities to explore alternative uses for the existing Council buildings in central Wood Green by freeing up office space through effective consolidation of the Council’s office accommodation needs. The current office accommodation estate in Wood Green now includes a significant amount of space that is deemed to be no longer required following the introduction of flexible working principles.

 

The restoration of the Civic Centre building would greatly enhance the wider Civic Centre site for the benefit of both staff and the wider community. The addition of an annex will result in the most efficient provision of office accommodation and allow the exiting of existing office accommodation in central Wood Green, consolidating all the Council’s core office accommodation onto one site, alongside its democratic functions. This option will also present the greatest opportunity for creating a compelling partner and community access offer at the site, through the ability to offer shared use of a variety of flexible spaces, both inside and outside.

 

The proposed new annex building and the refurbished Civic Centre will be designed and constructed to low carbon principles, meaning this option best meets the Council’s sustainability and carbon zero objectives.

 

The economic analysis presented in this final business case (Economic Case) also showed that this option represents the greatest public value for money.

 

The last version of the Council’s office accommodation business case was presented to and approved by Cabinet in April 2023. The updated and final business case still demonstrates that the best option to meet the Council’s core office accommodation needs is to restore and refurbish the Civic Centre and extend it with the addition of a new annex building. The consolidation of the accommodation needs providing opportunities for alternative uses for the existing Council buildings in central Wood Green.

 

Cabinet approved the project to proceed ‘up to the conclusion of the procurement process to appoint a main contractor.’ In accordance with Haringey’s current Contract Standing Orders, the means of procurement did not require Cabinet approval.

 

The decision allowed Officers to continue with the necessary design development work and to progress with the submission of the full planning and listed building consent applications. Both planning consents were successfully and unanimously granted (subject to conditions) by Committee on 11 September 2023.

 

The April 2023 Cabinet report noted the highly volatile state of the construction market due to the impacts of Brexit and the Covid pandemic. Also, that the situation had worsened over the course of 2022 due the impact of the Ukraine crisis on the supply of materials and labour. The economic impact on these issues led to the Building Cost Information Service (BCIS) Tender Price Index projections increasing significantly, impacting the entre construction market.

 

Strategic Procurement were aware of the current market challenges affecting inflation, price fluctuations and lead-times in the current economic climate, contributing to a market preference for two stage tender following soft market testing, via the London Construction Programme Major Works Framework.

 

From the Council’s perspective, it was mindful that there would be a risk that further inflation and long lead-times would have an adverse effect on a ‘standard’ two-stage contract price going forward. Therefore, Strategic Procurement recognised the Project Team’s preference for a more single stage approach to the tender and that procurement would continue to work with the Project Team to identify the most effective and advantageous route to market for the Council.

 

The above market factors and the complex ‘hybrid’ project the Council were taking to market, for a nearly 50/50 split in cost and scope between a new build and heritage restoration project via a design and build route; meant the Council were procuring in a limited and extremely challenging market.

 

Following a rigorous set of workshops with officers from across the Council and our external professional consultant team, the Council agreed a ‘hybrid’ two stage proposal as its preferred procurement methodology. The idea for the contract would be like that of a two-stage procurement, the first stage of which is a Pre-Contract Services Agreement (PCSA) and the second stage being the main contract. However, limiting the scope of a PCSA period, prior to letting the full building contract to mitigate the challenging market conditions and transfer most of the risk to the contractor.

 

This ‘hybrid’ approach was believed to provide the Council with best value for money as it was anticipated to secures a fixed price at the end of the first stage tender, for a significant majority of the works packages (estimated at circa 93% on the pre-tender estimate).

 

The Council initially started its first tender process, issuing a Selection Questionnaire in November 2023 via the restricted tender procedure. Given the challenging market conditions and complex nature of the project the Council received a limited amount of interest but were able to select three capable contractors that included John Sisk, who had been assessed as being financially sound, having the right experience, and ability to deliver the job. These three contractors were invited to bid within a restricted competitive tender process. One withdrew during the tender period due to other competing

opportunities which they wished to prioritise.

 

 The terms the Council included in the procurement to mitigate the risk of an incredibly volatile and challenging market, with several major contractors going into liquidation; were unable to be met in full by the remaining bidders.

 

The two remaining bidders were unable to accept, in full, the original contractual conditions, meaning that their tenders were non-compliant. Further to this they had differing levels of acceptance and differing terms, meaning a fair and equal offer being presented to both was not possible. Furthermore, these amendments would be deemed, under procurement legislation, to be material amendments to the original contract terms. This would introduce a very high risk of successful external challenge from contractors both within and outside of the original procurement process, were the Council to award under this procurement process. Accordingly, the procurement process was terminated.

 

However, the competitive procurement process run by the Council, resulted in John Sisk meeting a significant majority of the Council’s original procurement objectives, around fixed lump sum price, delivery programme requirements and a significant portion of the contractual terms. Given the calming in the construction market and John Sisk meeting most the Council’s procurement objectives, the Council was prepared to review certain contractual terms.

 

As mentioned in 4.16, accepting either amended bidder proposal would introduce a very high risk of successful challenge and would present a greater risk than the commercial risk of accepting contractual amendments only. Given this point it was felt that the lower risk approach was to abandon the competitive procurement and progress to a direct award via a suitable framework agreement or under Regulation 32 (of the Public Contract Regulations 2015) for this contract.

 

It was felt that going back into the wider market - which although was calming, was still challenging and because of the project’s complex nature on which many contractors choose not to bid - would not have been in the Council’s best commercial interest. It would have incurred significant time delay that would have incurred additional cost, as well as an increased the tender prices received due to inflation. The Council would have also been going back to the market with a ‘blank sheet’ and lost the benefit of what had been achieved through the original procurement and was potentially secured via John Sisk’s submission.

 

It was also noted that with any further delay there would be continued deterioration to the Grade II listed Civic Centre and continued holding costs, including its 24 hours security to consider. In addition to the ongoing maintenance costs to repair perimeter hoarding and keep the site free from vermin, infestation and overgrowth. It also would delay the move from the Station Road sites.

 

 

Whilst the initial procurement had to be abandoned it did result in a contractor offering a 98% fixed price contract, with 2% provisional sums, quality delivery and a compliant delivery programme i.e. three major objectives of the original procurement. By ensuring that these elements were embedded in the new bid awarded direct via the NHS Shared Business Services (SBS) Public Sector Framework (SBS/18/DT/PZC/9332) agreement, the Council did not only mitigate the risks that informed the original procurement route but

avoided introducing the further risks and issues mentioned in 4.20 and 4.21.

 

The framework route for the second procurement was an acceptable means of awarding a contract in accordance with the Public Contracts Regulations 2015 and the NHS SBS Public Sector Framework Agreement allowed for direct award, as this was provided for in the framework documentation. Many Councils have taken such decisions to use direct awards under framework agreements when considering their original procurement methodology. In this case we benefitted from the original procurement’s competitive elements based on our requirements, then going onto utilise the time benefits of accessing a framework agreement. This was a significant mitigation to the, often cited, concerns of using a direct award under a framework agreement. The adopted route is also in line with CSO 7.01

 

In accordance with the originally agreed approach, the framework route allowed the Council in September 2024 following the second procurement to enter into a services agreement with John Sisk, significantly limiting the time implications of the abandoned procurement process. It enables officers to now present to Cabinet a 98% fixed price main contract, with 2% provisional sums, up to a maximum price for consideration. Whilst the remaining 2% will be finalised by the end of November 2024, with the latest position contributing to this report, along with the realisation of significant value engineering savings targeted throughout the PCSA period.

 

Given the complex nature of the existing Civic Centre building, and its Grade II listed status, the Council then worked with the contractor to benefit from their insight, expertise and supply chain partners through their appointment under the PCSA to develop robust opportunities for value engineering.

 

The PCSA allowed the Council to work with the contractor to provide investigation and design services for some of the most challenging aspects of the construction process to the existing building. These included: the extent of structural, concrete and brickwork repairs; the type of basement and waterproofing repairs required, mitigate risks in the ground, advise on buildability, confirm their ability to reuse and install heritage fittings, and to engage with planners to detail their methodology to repair listed features, plan and discharge pre-commencement conditions.

 

The PCSA is a services agreement only, that has helped provide the Council with the necessary information to award the main construction contract. It was not guaranteed that John Sisk who were awarded the PCSA would be awarded the main contract, as the Council and contractor still need to reach agreement at the end of the PCSA period. If agreement is not met, there is provision within the PCSA and the contract for the Council to seek an alternative contractor and re-start the tender process. However, this is not believed to be required as John Sisk, their design team and the Council’s officers and consultant team have worked collaboratively throughout the PCSA period to agree most provisional sums and agree substantial savings to the construction cost to date. With the PCSA concluding shortly, this positive progress suggests an agreement will be reached within the Council’s available budget. To date the PCSA has reduced unknown risks, as well as the cost risk of the previously undefined elements. It has also improved both cost and programme certainty as we progress into the main contract and is expected to agree a reduced fixed price construction budget that is within the Council’s budget envelope.

 

Importantly the agreed procurement approach has allowed the main contract award to be recommended to Cabinet with cost certainty of a maximum price and final sign off the previously approved business case.

 

Throughout the PCSA period John Sisk, their design team and supply chain partners have intrusively investigated challenging areas of the building to fix the previous provisional sum allowances and enable the Council to agree construction cost savings that will be embedded into a reduced main contract price to meet the Council’s budget. In addition, John Sisk have been working with planners to agree approaches to discharge Listed Building Consent conditions and submit pre-commencement condition applications, so as not to impact the proposed start on site in spring of 2025.

 

The award of the main contract up to the maximum price of £54,077,000 (inclusive of contingency), is within the available project budget envelope, and the details outlined throughout this report and the final business case, enable Cabinet to make an informed decision.

 

The Council are close to achieving this significant project milestone, and subject to this Cabinet decision to award in principle the contract and delegate the authority to finalise the award value to the Director, the Council will be able to assess the outcome of the PCSA at the end of November, award the contract without loss to programme and to further engage with internal and external stakeholders on this project.

 

Alternative options considered

 

The Council considered a range of alternative options for the award the contract. This option recommended in this report provides best value for money to the Council, has the least programme and cost risks, meeting the Council’s required budget and timescales.

 

Alternative options to award considered and rejected were:

 

To not award the contract as it is currently unaffordable: The submitted bid price is above the available construction budget and if no savings are achieved the Council would not be able to award the contract. However, the Council still has the responsibility to restore, repair and maintain the listed building and an alternate restoration approach would need to be considered.

 

If the minimum targeted VE amount is not achieved: If the identified minimum VE amount of £2 million is not achieved the Council would be required to fully utilise its retained contingency amount and reduce the fit-out cost allowances and further review use of existing furniture and IT equipment to meet the contract value. It is not recommended to enter into contract with no contingency.

 

Defer the award of contract until target VE is achieved: If the required VE is not achieved by the end of the PCSA period and it was considered to defer the award until the full target £4.5 million figure is achieved. It would further expose Haringey to prolongation to the programme, possible exposure to increased costs, and further possible risk the Council would not agree the contract within the tender validity period. This would then require renegotiation of the tendered prices with the main contractor and their subcontractors. The Council would also be at risk of wider industry inflation.

 

Reduce project brief scope: This may have a considerable impact on the brief’s objectives and Critical Success Factors, timescales, would require further consultation with internal stakeholders, and expose Haringey to redesign and possible procurement costs. A further possible risk is the Council may not agree the contract within the tender validity period. This would then require renegotiation of the tendered prices with the main contractor and their subcontractors. The Council would also be at risk of wider industry inflation.