Agenda item

(Director of Communities) To consider the attached report, CHB-002-2017/18.

That the contents of this Progress Report on Phases 1 - 6 of the Council House-building Programme be noted, and presented to the Cabinet in line with the Terms of Reference.

The Assistant Director (Housing Property & Development) presented a report to the Cabinet Committee. He advised that the report was for noting only and set out the progress that had been made across phases 1-3 and future phases 4-6 of the Housebuilding programme.

 

Phase 1

 

Further to the determination of the contract with Broadway Construction Limited, a contract was awarded to P A Finlay and Company Limited to complete the works on Phase 1 as approved by the Cabinet Committee on the 22 September 2016.

 

The Phase 1 recovery work was completed on the 31 October 2017 with the last two homes on the Red Cross site in Waltham Abbey being handed over and occupied. The homes built are now in the defects liability period (a 2 year period where the Contractor retained responsibility for any contractual defects reported). The defects liability period for Phase 1 will end on the 31 October 2019.

 

The original contract with Broadway Construction Limited was let on the 27 October 2014 with completion expected on the 13 November 2015. With the delays that built up under the contract with Broadway Construction, together with the Council determining the contract and the subsequent procurement of a new contract with P A Finlay and Company Limited meant an overall delay of 102 weeks on the original anticipated handovers.

 

The determination of the contract with Broadway Construction Limited also led to a significant increase in costs with the works costs rising from £2,331,170.02 to £5,852,557.98. Overall, the recovery project was 66% more expensive than the original contract. The increased costs were mainly due to remediation works, additional drainage works and utility works. This can be seen as the premium paid for appointing a contractor to take on another contractor’s unfinished work and all the risks associated with the project.

 

Notice of Adjudication from Broadway Construction Limited

 

On 22 November 2017 the Council received a notice of Adjudication, which was referred by Broadway Construction Ltd (BCL). The dispute concerns the termination of the contract by the Council on 1st June 2016. BCL maintains and claims that the termination was wrongful and constituted a repudiatory breach of contract.

 

In April 2016, the Council served a default notice on BCL claiming that BCL was not preceding with the contract works regularly and diligently. Later on 1 June terminated the Contract on the ground that BCL had continued with the default specified in its notice served in April 2016. BCL assert that this was contrary to the true facts and progress of the works on the Project, and that they do not accept the validity of the default notice or the termination of the Contract.

 

BCL have therefore given notice to refer the dispute to adjudication in accordance with the Contract.

 

BCL are seeking the following relief and decision from the Adjudicator:

 

·          That the Council wrongfully terminated the Contract;

 

·          That the Council was liable for repudiatory breach of contract;

 

·          That the Council was liable to pay Broadway the costs, damages and expenses that are proven to have been incurred by Broadway as a result of the wrongful termination of the Contract and repudiatory breach of contract;

 

·          That the Council has no entitlement to retain or withhold liquidated damages improperly withheld prior to and following the termination of the Contract because no demand for payment of liquidated damages had been made in accordance with the Contract; and

 

·          That the Council shall pay the Adjudicator’s costs and expenses incurred in this adjudication.

 

The Council had appointed Trowers and Hamlins as its expert Solicitors to defend the adjudication. The Adjudicator had indicated that he should reach his decision by 2 February 2018.

 

A previous adjudication served on the Council by Broadway Construction Limited in February 2017, which was contested at the time, centred on the final payment made to Broadway Construction Limited at the time of the contract termination. The key points in that claim were:

 

·         Whether the second payless notice was given beyond the permissible date set out in the Contract;

 

·         Whether the  second payless notice failed to explain how the  proposed sum of £0 had been calculated;

 

·         Whether the Council, through previous correspondence, had derogated from the payment mechanism under the Contract and guaranteed payment of £74,494.02 to Broadway; and

 

·         Whether the Council had a contractual entitlement to serve a second payless notice.

 

The adjudicator found in favour of the Council on the first three points but on the fourth he found in favour of Broadway Construction Limited, namely that the Council was not entitled to serve more than one pay less notice in relation to a payment notice, which resulted in the Council being ordered to pay Broadway Construction Limited £74,494.02 (plus £2,985.88 interest) along with the adjudicators fees (£3,107) bringing the total to £80,586.90.

 

The Development Manager, Matthew Rudgyard presented the remainder of the report to the Cabinet Committee.

 

Phase 2 – Burton Road, Loughton

 

Works on site were progressing well, although behind schedule due to land contamination which had attributed to the completion date falling behind by 26 weeks. The anticipated completion date was 27 August 2018.

 

There was a variation in the contract sum by an extra £952,175.85 this was due to contamination remediation and utilities and cable disconnections.

 

Phase 3 – Bluemans End, North Weald

 

The contract was close to completion with handover expected at the end of January 2018. There had been a 2 week delay on this site due to the discovery of further asbestos in the ground and a delay to the installation of a water main.

 

There was a variation in the contract sum by an extra £47,758.77 this was due to additional works required to provide permeable block paving, additional clearance of the watercourse on the development boundary, boundary wall works, soil contamination remediation and asbestos removal.

 

Stewards Green Road

 

Works were at an advanced stage with internal and external finishes being focused on. There had been a 6 week delay due to a dispute between the Contractor and the Architect regarding the stairs not being fitted in accordance with the drawings. In addition, further asbestos was found in the ground.

 

There was a variation in the contract sum by an extra £25,089.81 this was due to additional works required to make alterations to the MVHR system, alterations made to the party wall insulation and alterations made to the kitchen windows.

 

London Road

 

 Construction work was proceeding well with works due to be completed on time.

 

There was a variation in the contract sum by an extra £20,415.00 this was due to changes needed to ensure that the completed home met the Code for Sustainable Homes Level 4.

 

Parklands, Coopersale

 

Work was progressing well and it was reported that there was a delay of 1 week due to inclement weather over the contract.

 

There was a variation in the contract sum by an extra £5,000.00 this was due to additional works required to the boundary of the site.

 

Springfield and Centre Avenue, Epping

 

Springfield and Centre Avenue were two separate sites which were being managed under one contract. Work was progressing well and it was reported that there was a delay of 1 week due to determining ownership of some garages/sheds.

 

There was a variation in the contract sum by an extra £165,000.00 this was due to additional works required to the boundary wall of the site.

 

Centre Drive

 

Work was progressing well and it was reported that the build was scheduled to be on target with no variation in the cost reported on this project to date.

 

Queens Road, North Weald

 

Construction works were expected to commence on site on the 5 March 2018. A package of initial enable works needed to be completed including the relocation of a UKPN substation, before the construction works could commence.

 

There was a variation in the contract sum by an extra £120,747.00 this was related to the contract uplift reported and approved by the Portfolio Holder in October 2017 and represented the increase in construction cost indices due to a delay of almost a year.

 

Phases 4-6

 

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 have agreed to extend this term to 6-months, ending on 9 March 2018 to enable as smooth a hand-over as possible.

 

The projects that make up phases 4-6 of the Council Housebuilding Programme have continued to be progressed up to the point of achieving Planning Permission. 24 sites have achieved planning consents which would deliver 74 new affordable homes. 13 sites had failed to achieve planning consent, these would either be sold at auction and the remaining sites the Cabinet Committee would decide on the future use.

 

The Cabinet Committee noted that phase 1 had been a learning curve and were confident going forward with the Council’s Housebuilding Programme.

 

Decision:

 

That the contents of this Progress Report on Phases 1 - 6 of the Council House-building Programme be noted, and presented to the Cabinet in line with the Terms of Reference.

 

Reasons for Decision:

Set out in its Terms of Reference, the Cabinet Committee was to monitor and report to the Cabinet on an annual basis the progress and expenditure in relation to the Council House-building Programme. This report sets out the progress made over the last 12-months.

Other Options for Action:

This report was on the progress made over the last 12-months and was for noting purposes only. There were no other options for action.