24 July 2007
Circular N16/2007
Arrangements for provision of Social Housing through Turnkey Projects
Dear Director /Town Clerk
I am directed by the Minister of State for Housing and Urban Renewal to remind authorities of the opportunities available to provide social housing and mixed developments through “turnkey” arrangements. This circular sets out the necessary amendments to enable the provisions of Circular N7/2007 (Revised Arrangements for the appraisal, approval and management of Social Housing Projects) to be applied to such arrangements. This opportunity is also being taken to clarify what is meant by a “turnkey” project and to outline the procedures involved in securing Departmental sanction and funding under the Social Housing Investment Programme [SHIP].
General
For the purposes of this circular turnkey projects involve authorities going to the market to procure a total social (or mixed) housing solution [land, design and construction] to meet an identified social housing need. The brief may vary from a simple output specification to a comprehensive statement of requirements including designs for indicative unit types. Whichever approach is taken, it is important to appreciate that the Contractor takes full responsibility for the completed project being ‘fit for purpose’, and that variations only arises where there is a change to the ‘Employer’s Requirements’. In all cases the development must meet design standards set out in the Department’s Quality Housing for Sustainable Communities.
Procurement Options[1]
There are two main routes to undertaking a turnkey project.
The first, following a general notice inviting proposals for turnkey developments, is where an authority decides to satisfy an identified housing need by means of a turnkey arrangement. The process normally involves a restricted tendering arrangement with the authority advertising for interested parties to submit outline proposals, the short-listing of such proposals based on predetermined criteria, the seeking of detailed tender proposals from the short-listed tenderers and the evaluation of those tenders using a Most Economically Advantageous Tender (MEAT) assessment criteria. Authorities are reminded of the need to ensure compliance with National and EU procurement requirements.
It is recognised that in exceptional cases authorities may be presented with an opportunity to undertake a project as part of a larger development or at a unique location to meet a specific housing need. Thus, the second approach, to be used only in such exceptional circumstances, allows the authority to negotiate with a single developer provided that:
a general notice inviting proposals for turnkey develops has been issued in the current year for the area in question;
the total “all-in” cost of the turnkey project is less than €5 million; and
there is an independent valuation of the land included with the project.
Departmental Approval
Authorities are reminded that all projects must be assessed by the Department for inclusion in the Social Housing Investment Programme [SHIP] and that the requirements set out in Circular N7/2007 apply equally to turnkey projects.
In all cases the authority should prepare a Project Brief as provided for in Circular N7/2007 and should include in the brief an economic assessment establishing why the turnkey approach is the preferred procurement option having regard to the estimated cost of providing social housing in the area and a benchmark costing against which subsequent proposals will be evaluated from a VFM perspective.
For the purpose of securing funding for the project, the housing authority should submit the Project Brief and associated documentation as required under Circular N7/2007 to the Department as early as possible but in any event prior to issuing the tender documentation to interested parties.
At Tender Approval Stage the submission to the Department should include confirmation that the development has been designed in accordance with the Project Brief as submitted to the Department, a report on tenders dealing with both the short-listing and tender stages, tender analysis, details of the estimated all-in cost and budget application and an independent valuation of the land [as required].
Contractual Arrangements
Contractual arrangements should normally comprise a contract for the purchase of the site and a separate design/build contract for the construction of the units (the new Public Works Contract For Building Works Designed By The Contractor should be used). Both contracts should be executed at the same time. Payment for the site is normally made on contract signing or ownership transfer (whichever is latest) and payment under the design/build contract will either be by pre-agreed stage payments or regular progress payments based on a valuation of the works in progress.
Alternative payment arrangements may be agreed, for example, payment of a deposit on contract signing with the balance being paid on completion and hand-over of the project, although stage or progress payment arrangements are preferred on the basis of the State carrying the project financing costs and this being reflected in the tender submitted by (or deal negotiated with) the Contractor.
At all times, the authority should ensure that it is in receipt of appropriate legal advice, that the Contractor provides the required insurances per the contract and satisfies the authority’s tax clearance requirements and that financial risk is properly safeguarded by means of a performance bond.
The authority should also ensure that the Contractor and design team are competent to deliver the project successfully, within the planned time period and to fulfil their obligations under the Safety Health & Welfare at Work Act 2005. The design team should have the required Professional Indemnity Insurance in place and be prepared to enter into a collateral warranty/deed of covenant contract with the authority.
Recoupment of Expenditure by Department
In addition to the amount payable to the developer and other amounts normally recoupable, the Department will include a 2% allowance of the tendered construction cost (excluding VAT) as a contribution towards the local authority costs incurred in procuring and managing the project.
Upon completion of the works authorities should provide professionally certified confirmation that the development meets the specifications set out, complies with construction standards and meets the terms of the approved Project Brief.
Enquiries
A copy of this circular is available electronically on the Sharepoint system under the category, Housing > Housing Construction. Any enquiries relating to this circular may be directed to:
Mr. David Costello
Department of the Environment, Heritage and Local Government
Social Housing (Construction and Procurement) Section
Custom House: Dublin 1
Tel:01-888 2143
Email:
Eddie Lewis
Principal
Social Housing (Construction and Procurement) Section
To:Director of Services for Housing, Town Clerks
[1]Procurement of major projects through the use of full Public Private Partnerships will be the subject of separate guidance