Agenda item

Report of the City Treasurer

8.1       The committee considered a report that provided an update on arrangements that are in place and which are further developing to manage the Council’s capital programme for the General Fund and Housing Revenue Account (HRA).

8.2       The report covered the current capital programme, capital budget analysis – performance against net budget 2011/12 - 2016/17 and improvements implemented and planned: budget setting, business cases, Programme Delivery Office and governance.

8.3       The Committee was pleased to see action was being taken to address slippage in the capital programme.  Members asked how the new arrangements avoided duplicating processes that were already in place.

8.4       Guy Slocombe, Director of Property, Investments and Estates, reported that to help create an overarching, coordinated and consistent approach to the delivery of projects the Council had established a Programme Delivery Office (PMO). One of the key issues that the PMO will focus on will be removing historical processes that had accumulated over many years that are unworkable.  These will be replaced with Council wide governance processes which are much more streamlined.

8.5       Barbara Brownlee, Director of Housing and Regeneration, provided her experience of the improvements since the new arrangements had been implemented.  She explained that when she first joined the Council she observed that while there were highly skilled project managers working on capital projects within Growth, Planning and Housing and similarly accountants in Finance the Council did not have capital programme managers.  As these officers were not located within the same office the complex dependencies, slippage and changing costs within projects did not always clearly translate sensibly to finance colleagues. One of the significant differences now is that the finance support for a project is based in the same office as the project manager.  This has enabled a different type of finance support where there are more regular updates between colleagues. Additionally monthly reports on projects are provided to the Programme Delivery Office.

8.6       The Committee referred officers to a paper published in the Oxford Review of Economic Policy (Vol 25, No. 3, 2009) on major infrastructure projects which highlighted the propensity for optimism bias in public sector projects.

Barbara Brownlee commented that the aspiration to deliver Housing Renewal in the City led the Council to be overly ambitious in forecasting that the programme would be delivered in a matter of a few years.  She stated that an HRA business plan session would be starting in September where officers would feed in all major assumptions over regeneration and other projects over the course of the week.  These would then be thoroughly tested and worked up by Christmas before they are entered into the HRA business plan.  Separate to this monthly capital programme monitoring meetings are held between housing and finance so that projects are tightly controlled.  She explained that this will not stop all delays as some matters are out of the Council’s control.  For instance, sometimes a contractor may decide not to move forward with a scheme for their own reasons.

8.7       The Committee asked given the identified optimism bias and the historic slippage on some projects whether independent challenge will be undertaken when developing business cases and appraising potential projects?  Mr Hodgkinson stated that he was not sure whether independent challenge will feature within the remit of the Programme Delivery Office.  Kevin Goad, Head of Service, Highways and Public Realm, advised that his service obtains independent challenge on its major schemes such as the Baker Street Two Way project.  Barbara Brownlee commented that not enough independent challenge was undertaken when developing proposals for the regeneration of Ebury Bridge.  She explained that a former Managing Director of Barretts is engaged to assess some but not all large projects being developed by CityWest Homes.  She undertook to consider expanding this approach to all major housing projects. 

8.8       Guy Slocombe further commented that the Council has too often begun consulting on projects at too early a stage before feasibility studies have been completed.  Members considered that greater consultation with Ward Councillors when developing business cases for major projects was important as they can provide useful insight of the views of the local community.

8.9       With reference to the summary of Major Projects set out in the report, the Committee asked officers whether delivering these was achievable given their number.  Guy Slocombe explained that not all the projects would be delivered simultaneously as they will be prioritised in accordance with how they meet the Council’s pre-determined criteria. 

8.10     The Committee asked officers about the challenges of procuring contractors from a limited set of providers.  Barbara Brownlee stated that the Housing Department works closely with the Procurement Service which had increased its resources over the last year.  She also stated that there now exists a dynamic procurement process where one did not exist before.  Procurement participate in monthly planning meetings to discuss the forward pipeline of developments.  There are different ways to obtain a range of bids.  Some are established and others are new to the Council.  The Council still uses frameworks such as those of the GLA and TfL but also go out to the open market.  It also looks at packaging contracts in different ways to make projects attractive. 

8.11     ACTIONS: 

1.            The committee would like further information on capital projects by type (development, operational or investment schemes/asset acquisition) with an explanation of how the Council can address some of the inherent issues that affect these different types of schemes.  It would also like a breakdown of the general fund major projects by Ward together with expected start and completion dates. (Action for: Steve Mair, City Treasurer)

2.            The Committee would like future quarterly reports to include a breakdown of the capital programme by project type (development, operational and investment) to see where the slippage is occurring and any trends. (Action for: Steve Mair, City Treasurer)

ii.