Agenda item

Cabinet Portfolio:                 Housing

Strategic Directorate:           Adult Care, Housing and Public Health

Consideration was given to a report submitted by the Strategic Director of Adult Care, Housing and Public Health which was due to be determined by the Cabinet on 18 March 2019 concerning proposed amendments to the Site Cluster programme which was increasing and accelerating the amount of new housing in Rotherham. Members noted that, at the point of reporting to Cabinet in 2017, the total scheme cost could only be estimated. Given that the sites concerned were extremely challenging and extensive ground remediation work had been necessary to make them developable. Other unforeseeable costs had arisen from utilities diversions and an industry-wide increase in the cost of materials and labour. The report to Cabinet in July 2017 stated that in order to protect the Council from exposure to a situation where the amount exceeded the amount authorised, the development agreement provided the Council with the ability to reduce the number of units built on the final site. The report indicated to Cabinet that the authority needed to decide whether to reduce the programme to ensure the original budget was not exceeded, or to increase the budget to enable all 217 homes to be built, and Rotherham to receive the full range of benefits afforded by the partnership. The report recommended the latter approach.

It was reported that the Council and its Employer Agent, Rider Levett Bucknall, had challenged and scrutinised all costs presented by Wates and a range of efficiencies had been identified. The remaining risks had been analysed and a realistic maximum price had been calculated. If a decision was reached to increase the budget, there would be two further options to consider. One option was to continue with the current contractual arrangements. If any savings were identified, the final cost could potentially fall below the revised budget figure. However, the Council would bear the costs associated with any further risks that materialise for example as a result of the UK’s exit from the European Union or adverse weather conditions. Alternatively, the Council could renegotiate the contract to a fixed, guaranteed maximum price contract, which would ensure no further risk of cost increases for the Council. This was the recommended approach.

Members were encouraged to see due diligence being undertaken in the management or the project, with measures devised to manage the risks associated. Whilst risk appetite was high at the outset of the project, it was evident that things had not progressed as had been intended and the approach now was to minimise the risk associated with the programme. Members sought assurances that the risk appetite had been lowered in the light of this experience and whether there was a commitment to pursue fixed price contracts in future. In response, the Cabinet Member for Housing indicated that a lot of lessons had been learned from this experience. The approach had been adopted as the Council was directly delivering homes and there was commitment the authority’s leadership to make sure that they were built. It was accepted that there would be less risk with the proposed approach and more information would be provided in future before financial terms would be presented for approval. Assurances were provided that lessons had been learned and officers were clear on the need to provide as much information as possible and clearly assess risk.

A further question was put in respect of why the Council was not doing more to deliver housing directly. In response, the Cabinet Member for Housing indicated that there would be further reports coming for to Cabinet for determination that would propose to do exactly that. However, a point would be reached where there would no longer be sufficient monies available from the Housing Revenue Account and this would limit what more could be done in future.

Members sought assurances as to what work had been undertaken with Finance and Procurement to ensure that there would not be further spike in costs associated with the programme. Officers reiterated that lessons had been learned and there was a needed for a sizable contingency in the programme. Some increases referred to in the report had taken account of inflation and the costs of labour, but other costs could not be identified until the ground had been dug to establish conditions. With regard to assurances, officers were scrutinising every line of the project with Wates and believed the majority of risks to be known and anticipated no further increases.

Clarification was sought in respect of what lessons had been learned from experience. The Cabinet Member for Housing confirmed that multiple lessons had been learned, including the need to establish as much information as possible before agreeing the financial enveloper and the need to hold developers to account much more. It was also noted that the tender process needed to be much clearer, but officers had taken a lot of learning from the project and a number of measures had been put into place as a result.

Members asked a number of questions concerning the financial information set out in the exempt appendix to the report. Assurances were provided by officers in respect of the robustness and reliability of the information provided.

The Board were satisfied with the proposed approach detailed within the report, but were also keen to ensure that the learning from the project, specifically in respect of tendering and contract arrangements, were shared broadly across the Council to ensure that this was built into future major contracts and procurement processes.

Resolved:-

1.    That Cabinet be advised that the recommendations be supported.

2.    That the Section 151 Officer be requested to share the learning from this project in respect of the tender and contract agreement process, to ensure that larger scale projects undertaken across the authority are well managed and controlled.