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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 13/11/2001
KILNFIELDS REGENERATION SCHEME



The purpose of this report is to set out the background to the Kilnfields redevelopment scheme. It updates members on the progress of preparation work and, after describing the assessment and short-listing procedures, put forward proposals for members to select a preferred contractor partner for the development of the project. The report from the Council’s Project Advisor, Airey Miller Partnership, advises on a partnering approach with a constructor leading to a Design and Build Contract. Adjustments to the HRA Capital Programme are also detailed.

There are no “Opportunities for All” implications, Human Rights or Crime and Disorder concerns. Resource implications are contained within the report.
APPENDIX D

WAVERLEY BOROUGH COUNCIL

EXECUTIVE COMMITTEE – 13TH NOVEMBER 2001



Title:
Kilnfields regeneration scheme
[Wards Affected: Haslemere
North and Grayswood]


Note pursuant to Section 100B(5) of the Local Government Act 1972

The Annexes to this report contain exempt information by virtue of which the public is likely to be excluded during the item to which the report relates, as specified in Paragraphs 8 and 9 of Part I of Schedule 12A to the Local Government Act 1972 viz:-

The amount of any expenditure proposed to be incurred by the authority under any particular contract for the acquisition of property or the supply of goods or services. (paragraph 8)

Any terms proposed or to be proposed by or to the authority in the course of negotiations for a contract for the acquisition or disposal of property or the supply of goods or services. (Paragraph 9)


Summary and Purpose

The purpose of this report is to set out the background to the Kilnfields redevelopment scheme. It updates members on the progress of preparation work and, after describing the assessment and short-listing procedures, put forward proposals for members to select a preferred contractor partner for the development of the project. The report from the Council’s Project Advisor, Airey Miller Partnership, advises on a partnering approach with a constructor leading to a Design and Build Contract. Adjustments to the HRA Capital Programme are also detailed.

There are no “Opportunities for All” implications, Human Rights or Crime and Disorder concerns. Resource implications are contained within the report.


Background

1. Kilnfields estate and the adjacent Playing Field Bungalows comprises of 47 dwellings built predominately in the 1920’s. There are currently 8 owner-occupiers left on the estate with the remaining properties being in Council Ownership.

2. In 1998 a survey was carried out with a view to instigating a major refurbishment programme to bring all properties up to modern day standards. The survey revealed the presence of asbestos linings together with major structural defects.

3. Subsequently, the Council commissioned a feasibility study carried out by PRP Consultant Architects who indicated that a redevelopment programme could produce a project which would replace the existing council and owner occupiers’ properties, and produce a further 31 properties, 20 of which could be used for social housing.

4. By linking the new development with the need to refurbish the adjacent recreation ground and community pavilion, the subsequent public consultation with the whole of the High Lane estate resulted in general approval of the concept.

5. The resultant layout plan provided for a new estate of 78 dwellings 36 of which would replace the existing council dwellings with 20 being developed by a partner housing association for shared ownership with the balance for owner occupiers.

6. The Council also owns a vacant building site on Weycombe Road approximately 800 yards distant from the Kilnfields estate. It was proposed that this should be sold at market value provide capital to support the Kilnfields development.

7. The last two reports submitted to members on this project, to the Executive Committee in February 2001 and to Housing and Community Welfare Committee on November 2000, set out a framework for the preparation of this project. The Committee decisions taken to date are listed in Annexe 1.

8. This report updates Members on progress made to date.

Appointment of Project Advisor

9. A tendering exercise was carried out with three technical consultancies to select a project advisor, and in April 2001 Bryson Richardson Ltd was selected. This consultancy had worked successfully with the Council in the past on the completion of recent housing developments at Slip of Wood, Cranleigh, Dower Cottages at Milford and at Arthur Road in Farnham.

10. Unfortunately, at the beginning of June, due to the senior partner’s ill health the firm made a reluctant decision to withdraw. Discussions took place with the Council’s partner organisation, Thames Valley Housing Association and with their help and advice, investigations were made to find a replacement adviser. From the joint shortlist that was drawn up, the consultancy of Airey Miller Partnership emerged as a candidate which was suitable to both parties. Subsequent to the normal financial and reference checks, approval was given to their appointment in late July 2001.

11. Work then recommenced on the project in early September 2001.

Type and scope of contract arrangements.

12. In any construction project it is extremely important that the relationships and procedures adopted in the preparation of the scheme are of sufficient robustness that any subsequent contract has every chance of successfully being completed on time and within budget.

13. At an early stage in the preparation it was recognised that although the project is not a complex construction activity, the key to success lay in the arrangements that were made for the moving decanting and reoccupation of the residents. Consequently the logistical planning of the different phases of construction across the site would be crucial. This has implications for the final design and is fundamental to successful liaison and consultation with the residents.

14. The most suitable body to advise the project team on these matters is the contractor who will build the units.

15. Clearly one of the main objectives in completing a project of this type is to achieve best value for the Council when contractors price for a project they will build in to their calculations all the stated requirements of the client’s specification. Subsequently they will then negotiate with their suppliers and subcontractors the best possible price which may be significantly less than they had offered to their prospective clients. In a normal contract situation contractors would then profit from the difference.

16. In consultation with the new Project Adviser it became evident that the procurement of the Kilnfields redevelopment project would best be served by a partnering approach. Although a specialist project partnering form of contract was considered, following discussions with Airey Miller it was concluded that this would not be entirely appropriate. Therefore an alternative approach was considered. Although the actual building of the units would be carried out through a traditional design and build contract, it would be necessary to appoint the contractor at the beginning of the project preparation so their expertise could be utilised not only in the design of the site but in the development of a best value price. By operating what is known as an open book approach the contractor would work within the partnership team to identify any design or purchasing issues which could be carried out more economically. All parties would then benefit from savings achieved.

17. This would mean a two stage relationship between the Project Group and the Contractor.

18. Firstly that both parties enter into a development agreement for the contractor to provide consultancy services to the team and work together to identify the risks which need to be accounted for in the design, preparation and strategy for resident consultation. Also to work together to build up a price for the work based on a combination of the contractors commercial expertise, the project teams requirement for good design and the residents need for a smooth decanting process.

19. Secondly, when preparations are complete a standard Design and Build Contract could be entered into between the Council and the Contractor which incorporates all the design and logistic agreements previously formulated by all parties.

20. This approach would mean that payment to the contractors for their preparatory work would be under separate agreement to the formal payments for the contracts to build, and that the pricing structure would be transparent.

21. A paper advocating this approach was prepared and presented to Management Board by Airey Miller partnership. The text is included in Annexe 2. The conclusions are reproduced below:-

“The Partnering/Design and Build route in our opinion provides for each criteria set out initially by the council. It is a quicker form of Pre contract procurement, it gives certainty of costs to large areas of work where risk is minimal, but still allows the Client to be a party to the design process because the contractor will not finally price the project until that process is substantially complete. However, the contractors ability to price through the design process allows greater flexibility in terms of design, building in the process of Value Engineering, which is generally absent from traditional Architect led projects.

The flexibility of this approach allows changes which are clearly to the benefit of the project to be made in all aspects, even the procurement route, before all parties are contractually bound to each other.

Fundamentally the process is more efficient, less confrontational and brings the parties together at an early stage, to ensure that the constructional phase and the responsibilities for it are clearly defined at commencement.

It is about the construction partners accepting that traditional construction procurement can be inefficient and consequently lead to confrontation. Furthermore the partnering approach can generate greater value and ultimately financial benefit to both parties if they work together….to examine where risk exists for either party, and determine a mechanism for fairly approaching such risks even if the quantum cost of those risks cannot be established until the risk is fully ascertainable, but ultimately the cost is fair to both parties”.

Shortlist for prospective contractor partners.

22. As the estimated costs of the project exceed the threshold under the relevant legal requirements, an advertisement was place in the Official Journal of the European Community (OJEC) to invite expressions of interest from suitable contractors interested in a partnering and /or Design and Build arrangement leading to a contract to build for the Kilnfields project.

23. Some 20 replies were received, all of which were submitted to an evaluation exercise and scored on the basis of the following criteria:-

(a) experience of building projects as described in the advertisement;

(b) track record of working with RSL’s and local Authorities in social housing projects;

(c) experience in partnering projects; and

(d) financial status, viability and probity.

24. From this process, seven contractor partners were selected and a financial assessment undertaken, five were shortlisted, and invited to an interview to make a presentation on their approach to the project. The interviewing panel consisted of The Director of Housing, two representatives from Airey Miller Partnership-(The Project Advisors), the Project leader from Housing Department, and a representative from the Audit section.

25. The contractors were assessed and then scored on their proposals for the following:-

(a) The design process;

(b) The collective process at arriving at a contract sum;

(c) Defining and evaluation of risk;

(d) Tenant liaison;

(e) Proposals for dealing with the owner occupiers;

(f) The maximisation of capital receipts resulting from the sale of land at Weycombe Road;

(g) How they might utilise local labour; and

(h) How they would cope with post construction defects.

26. The names of the two contractors who scored the highest marks are named in (Exempt) Annexe 3.

27. It is proposed that these two contractors should make further presentations to members who can then make a choice as to the preferred contractor for the Kilnfields redevelopment project.

Thames Valley Housing Association as a project partner

28. As recommended in the report to Housing and Community Welfare Committee of the 6/15th November 2000 and ratified by the Executive Committee on 16th February 2001, Thames Valley Housing Association was invited to be the preferred RSL as a partner in the project who would build out the shared ownership part of the scheme.

29. Discussions have been held to establish the working ground rules of the relationship, and with the joint agreement to utilise the Airey Miller partnership as the Project Advisor, good progress has been made. More detailed will occur once the contractor has been selected and work begun on detailed designs and full costings for the project.

Disposal of Weycombe Road site

30. In the report to the Executive Committee in February 2001 it was recommended that the site should be marketed and sold to provide capital monies to invest in the project. Although it is considered that the principle is still valid the project advisor has proposed that better value may be available from the site if the preferred contractor, drawing on his expertise in land transactions, could put forward more innovative methods of disposal which may benefit the project as a whole. It can be seen that one of thee criteria of assessment of the five contractors specifically addressed this issue, and the final two contractors had particular expertise in this area. It is expected that this issue will form part of the final choice.

Design and Phasing

31. At an exhibition which was held in December 1999, the residents of Kilnfields and the surrounding High Lane estate were invited to comment on draft layouts for the redeveloped area.

32. The current layout of the site was derived from comments and suggestions made by the residents at the time. A group of volunteer residents from Kilnfields was subsequently convened to form the nucleus of the resident group who would be involved with the final design options, and they gave an oral approval to the final idea in August 2000.

33. Since that time there has been no change to the principle layout except that in response to requests from the Environment And Leisure Department more detailed proposals have been produced for their comment on the pavilion and its surrounding area.

34. As previously mentioned in the above section on “Type and Scope of Contract Arrangements”, the phasing of the project will be crucial to the success in decanting and reoccupying residents, which consequently is key to the success of the whole project.

35. To organise the phasing effectively it is evident that certain design adjustments are necessary.

36. These necessarily revolve around specific practical constructional issues. The architect is currently working on the basic changes. However, to finalise the layout it is essential that the chosen contractor partner will need to be involved in the process at the earliest opportunity.

37. Once this work is complete the strategy for involving residents can then be formulated and put into operation. It is at this point that the finalised plans can then be prepared for a full planning application.

Risk assessment for the scheme

38. Risk to the success of the scheme will come from 5 potential areas:-

1) Incomplete design at the time of contract start.

2) Unknown conditions below ground and environmental conditions surrounding the site.

3) Changes of design during the construction programme.

4) Unprepared decanting and removal arrangements for all the residents, i.e. resulting in one or more residents refusing to move.

5) Contractor going out of business.

39. The proposals for partnering arrangements which enable the contractor to be brought into the project team at the design stage are intended to strengthen the preparation procedures. If all the partners to the project are in agreement as to the detailed design and prior to the contract start, there is no room for changes either to the budget or timetable.

40. Similarly by working with the contractor who will advise on the practicalities of phasing it will be possible to prepare a workable decanting programme. Also early warnings of residents who may prove reluctant to move will have been shared with the contractor and the specification to the contract worked up to account for such difficulties.

41. The process of creating a shortlist of contractor partners referred to above has included robust internal checks on all the companies financial position. No company has been selected which fail those tests. Additionally after the final company has been selected but before their appointment further investigations will be made with the most up to date information available.
Strategy for the owner occupiers

42. The eight owner occupiers living on the estate have so far expressed a desire to be relocated in a new house on Kilnfields. In terms of impact on the phasing of the redevelopment, the position and reasonableness of the owner occupiers is a key consideration.

43. The two selected contractors have experience of “resale covenants” whereby owners’ existing value in their properties is retained, albeit under a covenant, in their new property. Therefore, it is appropriate that the contractors have the earliest opportunity to liaise with the owner occupiers to meet their needs and ensure that the project aims are not frustrated.

Resource Implications

44. At the meeting of the Executive Committee on the 16th February 2001 the report on Kilnfields regeneration set out a preliminary financial model which set the parameters for capital finance for the scheme over the next 3 years. Since that time there has been no change to the principles that underpin that model. However, due to the need to appoint a new Project Advisor, progress in this financial year less expenditure is projected. A readjusted financial model, which includes the key assumptions, is therefore shown in (Exempt) Annexe 4.

45. Once the contractor partner has been appointed to join the project team under the direction of the Project Advisor the detailed design and consequently the detailed build up of costings can begin. At the end of that process the final financial model will be put before the Council for approval. That model will set out the whole cost of the scheme, and detail the total value of the design and build contract which will be drawn up with the contracting partner to commence work.

Conclusion

46. The Kilnfields regeneration project has unavoidably been delayed as a result of the need to re-appoint a new Project Advisor. The new appointee Airey Miller Partnership (AMP) have quickly established a clear understanding and grasp of the key issues relating to the project.

47. The AMP report at Annexe 2 outlines a partnering approach to design and early selection of the contracting partner, under a development agreement to prepare for and subsequently detail the costings for a Design and Build Contract.

48. This process is intended to provide certainty in terms of build prices and clear identification of risks for the Council and its contracting partner.

49. The contractor evaluation process has identified that two contractors have the range of skills and experience to undertake this project and officers are of the opinion that members should now make the selection of the preferred contracting partner.

50. Partnering approaches to contracting are increasingly becoming the standard method of building procurement as clients and contractors put in place the “Egan Principles”. The Councils draft Procurement Strategy considered as a separate item on this agenda recognises that the development of this approach has implications in terms of standing orders and financial regulations.

Recommendation

It is recommended that:-

1. the Partnering approach detailed by the Airey Miller Partnership, as the Council’s Project Adviser, in Annexe 2 be adopted for the Kilnfields Project;

2. the evaluation Process as detailed in (Exempt) Annexe 3 be approved;

3. the two preferred contractors be invited to make a presentation to members and that the Executive Committee select the most suitable contractor at a meeting on 4th December;

4. officers and other members of the project Partnering team report further on costings, design and other associated matters in order to enter into a Design and Build Contract with guaranteed maximum price in due course; and

5. the revised financial model at (Exempt) Annexe 4 be accepted.



Background Papers (DoH)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.



CONTACT OFFICER:

Name: Mr D Simmons Telephone: 01483 523374
E-mail: dsimmons@waverley.gov.uk