Agenda item

Report of the Director of Property, Investment and Estates

6.1     The committee received a report that outlined the events which led to the council’s decision to withdraw from proceeding with the development of the new Marylebone library at Luxborough Street. 

6.2     The report responded to questions raised following a request by a member to scrutinise the issue.  These included the purpose of the project, details of the abortive costs involved, which costs are judged to be applicable to a future scheme on the site and why the project was aborted and the lessons learned.

6.3     The Committee considered the report and raised a number of questions: (i) how confident the Committee could be that the expenditure to date that would not be written off to revenue and could be re-used was accurate; (ii) what responsibility has been taken for the identified failures around the project; (iii) why Mace, who were awarded the contract to deliver the project, were able to participate in a second procurement after withdrawing their initial tender.

6.4     Guy Slocombe, Director of Property, Investments and Estates, advised that the estimated £832,000 of expenditure that would not be written off to revenue and could be re-used had been verified by the Council’s Finance team.  In response to a question whether any officers had lost their jobs following the withdrawal of the development, Guy Slocombe responded that it was the contractor that caused the scheme to fail but that the Director that led the scheme and the two Procurement officers working on it were no longer with the Council.  Mace were able to participate in the second procurement as it was determined, following the first procurement, that none of the bidders could have delivered the project based on the terms. This was because shifts in the market made the contract unprofitable by the time matters were ready to progress.  It was determined that Mace should be able to tender under the second procurement as it was not their fault that they couldn’t deliver on their original bid.  Following their withdrawal of their second tender and on the grounds that they did not evidence and sufficiently justify why they could not proceed, the Council took the decision that Mace would no longer be able to bid for any Westminster construction contracts.

6.5     The Committee noted the lessons learned which were set out in the report.  The Committee asked whether there were any further changes in procurement processes.  Mr Slocombe advised that a more rigorous and robust approach has been developed by the Procurement team.  A dynamic procurement system has been developed which provides greater flexibility to determine which developers are suitable to bid for particular contracts.  The procurement system has also been expanded to enable and encourage a broader range of suppliers to tender for projects such as this.

6.6     Mr Slocombe stated that while the Council could not predict the vagaries of the market, such as build cost inflation of 20-25% in this case, officers were confident that problems of this kind are less likely to be repeated in future.  He explained that for contractors the speed of execution in awarding contracts is quite critical.  Markets do not want to wait six months for this to take place.  Unfortunately, the public sector is not as flexible as the private sector in this respect where there are specific procurement requirements that have to be followed.  He advised that the Chief Executive had commissioned a report to investigate the Council’s programme management and delivery processes.  The likelihood is that this will result in the creation of a programme management team that will be tasked to try and speed up project delivery.  However, the Council will still be hindered by its procurement regime and prolonged business planning process.

6.7     Members asked about the processes in place for monitoring development schemes.  Mr Slocombe advised that all development projects, of which there were over 30, are constantly reviewed and each has a formal review on a quarterly basis. 

6.8     The Committee asked about the next steps for the project.  Members were informed that an options analysis for the site was being undertaken and this will be considered by the Property Investment Board and Capital Review Group once finalised.

6.9     ACTIONS: 

1.               The Committee has requested information on whether any other schemes with similar sized costs have been aborted in the last 4-5 years.

2.               Subject to his views, Members would like sight of the Programme Management report commissioned by the Chief Executive.  (Action for: Guy Slocombe, Director of Property, Investment and Estates)