Agenda item

(Director of Communities) To consider the attached report, CHB-001-2017/18.

(1)     That, following the decision made by East Thames to terminate its contract after 4-years as the Council’s Development Agent, the Cabinet Committee noted the approach now being taken to deliver the future phases of the house-building programme; and

 

(2)     That the contract with Pellings LLP, who were currently in contract with East Thames and (for which the Council has a Collateral Warranty in place) be novated to Epping Forest District Council and the existing building contracts with the Contractors for Phases 1, 2 and 3 be amended to remove reference to East Thames.

The Assistant Director (Housing Property & Development) presented a report to the Cabinet Committee. He advised in September 2017, East Thames, who were the Council’s Development Agents, gave notice of their intention to invoke Schedule 8 (Exit Management Plan) of the Housing Development Agency Services Agreement that they no longer wished to act as Development Agents on behalf of the Council. Whilst a 3-month exit management term was set out in the Agreement, East Thames agreed to extend this term to 6-months, ending on 9 March 2018, to enable as smooth a hand-over as possible.

 

The Council have appointed a Senior Project Management Officer, based on a temporary 3-year fixed term contract to work on some of the Project Management functions previously undertaken by East Thames. This was being funded from savings that had been identified through the withdrawal of East Thames.

 

The Council now had an opportunity to review its approach, based on its experiences over the last 4-years, and to put in place arrangements that could deliver a more efficient service and if possible de-risk some of the aspects of the programme that have so far resulted in additional costs across schemes that were on site. However, due to the relatively short Exit Management Plan, it was necessary to act quickly taking account of the fact any future appointments would require an EU procurement exercise, which was a lengthy process.

 

Listed below are some of the problems the Council has faced on previous phases, which have led to delays or additional costs to the Council:

 

Ground Contamination

 

Issue – Across each site, soil surveys had been undertaken to give an idea of contamination for contractors to base their risk and price accordingly in their tenders. The level of detail had resulted in that risk being understated and Contractors claiming additional costs and time where the contamination was later found to be more extensive. This was particularly the case for Phases 1 & 2.

 

Way Forward – To undertake a more extensive set of soil surveys and to consult with the Council’s Planning Officers at the earliest opportunity to agree a method statement and soil contamination remediation plan that would satisfy the Planning Conditions allowing these conditions to be discharged prior to the Contractor submitting their costs.

 

Drainage

 

Issue – Drainage design was the responsibility of the Contractor under a Design and Build contract. However, connection to local sewers was not always practical due to invert depths, thus resulting in local pumping stations or sewerage treatment stations on sites. This was not only more expensive but could lead to more expensive on-going maintenance liabilities.

 

Way Forward – To appoint an EU compliant Framework Agreement of Consultant Civil Engineers to undertake a detailed sewer investigation and to fully design the sewerage strategy for each site in advance of appointing the Contractor. This would be done in conjunction with any soil contamination remediation plan.

 

Foundation Design

 

Issue – Foundation design was the responsibility of the Contractor under a Design and Build Contract. However, foundation design followed any decision on how to deal with any ground contamination. Since ground contamination had often led to significant variations following more detailed surveys after the Contractors had been appointed, the design of the foundations often changed as a result of the final soil contamination remediation plan being agreed with the Planning Authority.

 

Way forward – To appoint an EU compliant Framework Agreement of Consultant Structural Engineers to undertake detailed foundation designs taking account of the detailed soil contamination remediation plan and the drainage design.

 

Detailed Design

 

Issue – Most of the current contracts have been let on a Design and Build basis, whereby the Contractor takes over responsibility for the detailed design from the planning stage design drawings. This had, on occasion, led to changes in the design and layout of the properties resulting in either the Employers Requirements not being met or additional costs to ensure the Employers Requirements were met.

 

Way Forward – To appoint an EU compliant Framework Agreement of Consultant Architects to undertake detailed technical drawings up to and including RIBA Stage 3, whereby key aspects of the design could be achieved; including kitchen and bathroom layouts, as well as room sizes. This Framework would also be used to undertake future feasibility studies and to take forward sites to the planning stage.

 

Selection of Contractors and Fixed Price Tenders

 

Issue – The Council has had difficulty identifying suitable, competent and willing Contractors to tender for works that were spread over multiple sites, for example, some of the larger developers were not interested in low value contracts (sub £5m) and SME Contractors had very little experience in Design and Build Contracts.

 

Where tenders had been sought, they had been based on a fixed price Design and Build Contract. When the problems described above had surfaced, the onus had been on the Contractors Design team to remedy the problem, and in most cases resulting in delays and increased costs.

 

Way Forward – To appoint an EU compliant Framework Agreement of Contractors based on a two stage tender to allow early appointment of a preferred partner, prior to the completion of all the information required to enable them to offer a fixed price. In the first stage, tenders were sought based on overheads, prelims and profit, whilst seeking preliminary views on phasing, programme, site management and opportunities to drive improved efficiency. Selected parties were then invited to participate in Stage Two, having undertaken the detailed design in a collaborative manor amongst the Project Team, after which the schemes were priced to form a fixed price.

 

Employers Agents

 

Issue – For each of the phases already let, the Council had relied on the Employers Agents appointed by East Thames as the Development Agents. This had led to a less responsive service as any issues raised would have to go via the Development Agents and sometimes the communication broke down.

 

Since the current Employers Agents, Pellings LLP, were appointed by East Thames directly, the Council would now need to appoint its own Employers Agents. This would require an EU procurement exercise due to the overall value of the fee.

 

Way Forward – For Phases 4 onwards, to appoint an EU compliant Framework of Employers Agents with whom the Council would work directly with. This would allow a better working relationship and a better understanding of the Council’s needs and expectations.

 

Site Supervision

 

Issue – Site supervision had not presented itself as a particular issue. However, this essential role had previously been undertaken by East Thames directly. Since they were terminating their contract it would be necessary to directly appoint a Clerk of Works to undertake all client site supervision functions.

 

Way forward – To seek quotes from suitable organisations that provide Clerk of Works Services and to engage their services on a frequency to suit the progress of building works.

 

The Assistant Director advised the Cabinet Committee that the Council had appointed Cameron Consulting to undertake the specialist EU Procurement exercise to pull together the framework of various Consultants and Contractors. Their appointment was approved by the Housing Portfolio Holder in November 2017. The programme for appointing the various specialists should be completed by May 2018, which would enable the Council to pick up the 24 x Phase 4-6 sites and progress them as quickly as possible.

 

In order to maintain continuity for the sites currently in progress, it was recommended that Pellings LLP, who were currently in contract with East Thames and (for which the Council had a Collateral Warranty in place) be novated to Epping Forest District Council and the existing building contracts be amended to remove reference to East Thames, based on advice from the Councils’ Legal Services.

 

It should be noted that based on the fees paid to East Thames, which were agreed following a competitive tender exercise, there would be an overall saving of £550,000 to the Council should Pellings LLP be appointed directly to complete the schemes currently on site (Phases 1-3 inclusive) by novating the contract on their current terms.

 

The Cabinet Committee expressed concerns regarding Pellings LLP being novated and the consequences involved if they were to walk away from Phases 1-3.

 

The Assistant Director advised that Pellings LLP did not want to walk away from the Council’s Housebuilding Programme and that they had committed themselves to finishing Phases 1-3. Hoever, this was still subject to a formal contract, where negotiations were still ongoing.

 

The Cabinet Committee asked why East Thames had decided to exercise the exit clause in the contract to terminate their appointment as Development Agent of the Council Housebuilding Programme.

 

The Assistant Director advised that East Thames had stated it was for commercial reasons and that they wanted to concentrate on their own sites and their own delivery programmes.

 

The Cabinet Committee asked why the Council had employed Development Agents in the first instance and not fulfilled this project in-house.

 

The Assistant Director advised that the Council needed to react quickly and deliver new Council homes as the Council was accumulating the 1-4-1 receipts, which needed to be spent within 3 years and there were no staff resources or procedures in place to “hit the ground running”. The Council thought that Housing Associations or other Consultancies that were already doing this type of work would tender, and in simple terms, the Council could hand over the sites and the Development Agents would then hand the Council the keys at the end of the agreed time.

 

The Council have learnt a number of valuable lessons and have accumulated a wealth of knowledge and experience during the last 6 years, which it intended to incorporate into the future delivery of the Council Housebuilding Programme, from Phase 4 and beyond.

 

The Cabinet Committee congratulated P Pledger and his team for the work and effort put into the smooth operation of the Council Housebuilding Programme.

 

Decision:

 

(1)     That, following the decision made by East Thames to terminate its contract after 4-years as the Council’s Development Agent, the Cabinet Committee noted the approach now being taken to deliver the future phases of the housebuilding programme; and

 

(2)     That the contract with Pellings LLP, who were currently in contract with East Thames and (for which the Council has a Collateral Warranty in place) be novated to Epping Forest District Council and the existing building contracts with the Contractors for Phases 1, 2 and 3 be amended to remove reference to East Thames.

 

Reasons for Decision:

 

East Thames were appointed following a competitive EU tender exercise to act as the Council’s Development Agents on the Council Housebuilding Programme. The appointment was for 4-years with the option to extend for a further 3-years. However, after 4-years, East Thames have decided to exercise the exit clause in the contract and terminate their appointment giving 6-months’ notice. This has led to the Council having to act quickly to put in place an alternative delivery model for future phases. This report sets out that approach, and was for noting at this stage.

 

Other Options Considered:

 

1.               To re-tender and appoint another Development Agent to replace East Thames; or

2.               To employ the relevant resources in-house to deliver the programme directly.