Decision details

To agree the Works tenders

The Housing Portfolio Holder presented a report on the acceptance of the tender for Phase I of the Council Housebuilding Programme.

The Portfolio Holder stated that a tender exercise, undertaken in accordance with Contract Standing Orders, for the Design and Build contract for Phase I of the Council Housebuilding programme had resulted in 4 tenders being returned. The tenders had been evaluated by Pellings LLP, the Employers Agent acting on behalf of the Council’s Development Agent - East Thames Housing Association. At the request of the Council Housebuilding Cabinet Committee, financial evaluations on the tenderers had been carried out by the Council’s Chief Internal Auditor, including seeking independent credit checks.

The Portfolio Holder reported that, based on the financial credit details for each of the contractors, the lowest tender submitted represented a high risk, the second lowest tender submitted represented a medium risk, whilst the third and fourth lowest tenders submitted both represented a low risk. The second lowest tender, submitted by Broadway Construction Limited, was £126,000 above the pre-tender estimate but was a fully compliant bid. Financial credit checks had revealed that Broadway Construction had been trading for three years and had a average credit rating that was improving. Broadway Construction had also indicated that they could provide a performance bond to the value of 10% of the contract. The third and fourth lowest tenders each had a high credit rating but their tenders were considerably higher than the pre-tender estimate, which made it difficult to justify the additional cost from public funding. Therefore, it was recommended that the second lowest tender submitted by Broadway Construction Limited be accepted, subject to the provision of a performance bond.

The Cabinet discussed at length the award of the contract for the first phase of the Council Housebuilding Programme, as some members had concerns about awarding the contract to a supplier whose risk rating had been scored as medium. The Housing Portfolio Holder acknowledged that there was money available in the budget to award the contract to the third lowest tender whose risk rating was lower, but it would affect the monies available for the programme in the future. The Assistant Director of Communities (Property) explained to the Cabinet the nature of a ‘Design and Build’ contract being used for first phase of the Housebuilding Programme and details of the works being undertaken by Broadway Construction Limited for East Herts District Council and the East Thames Housing Association, as well as the financial information provided by the Council’s consultants, Pellings LLP. The Housing Portfolio Holder reassured the Cabinet that progress with the contract would be closely monitored by the Council Housebuilding Cabinet Committee, and the Assistant Director reported that the decision could not be deferred as the Council would then lose a grant of £127,300 from the Harlow Growth Area Fund towards the Programme.

Following the conclusion of the debate, the vote to decide the issue was tied and the Chairman used her casting vote to award the contract in line with the Officer’s recommendation.

Decision:

(1)        That the tender submitted by Broadway Construction Limited, being the second lowest of the four received, for the Design and Build Contract for the construction of 23 new affordable Council homes, making up Phase I of the Council Housebuilding Programme in the sum of £3,245,143.62 be accepted, subject to the provision of a Performance Bond to the value of 10% of the contract sum.

Reasons for Decision:

The Council House-building Cabinet Committee had agreed to tender the works using the East Thames Framework Agreement, based on a Design and Build Contract. Therefore, this tender exercise had satisfied that decision and had been undertaken in line with the Council’s Development Strategy and the Council’s Contract Standing Orders. The tender exercise had identified Broadway Construction Limited as the Council’s preferred supplier.

Other Options Considered and Rejected:

To not take account of the financial evaluations and to simply accept the lowest tender. However, this could expose the Council to the potential risk of entering into a high profile contract with a company financially unfit to complete the works.

To accept either the third or fourth lowest tender, each of which was a low risk contractor with a high credit rating. However, their tenders were considerably higher than the pre-tender estimate.