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JOINT REPORT OF THE STRATEGIC DIRECTOR FOR SUSTAINABLE REGENERATION AND THE STRATEGIC DIRECTOR OF CUSTOMER AND SUPPORT SERVICES
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TO LEAD MEMBER FOR PLANNING ON 20APRIL 2010
TO THE LEAD MEMBER FOR CUSTOMER AND SUPPORT SERVICES
ON 26APRIL 2010
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EXCHANGE GREENGATE: CARILLION CONTRACT - PHASE 1A & PHASE 1B PUBLIC REALM WORKS
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1.RECOMMENDATIONS:
1.1That Lead Members approvethe appointment of Carillion Construction Limited to deliver the Phase 1A and Phase 1B Greengate public realm works.
1.2Give delegated authority for the Strategic Director for Sustainable Regeneration, in consultation with the Strategic Director for Customer & Support Services to finalise and enter into the contract with Carillion Construction Limited for a target cost of £6,549,583plus an employer’s risk contingency of £450,000.
1.3That Lead Member for Planning approve the expenditure of £107,000 of Section 106 monies from appropriate schemes to support the Phase 1A and Phase 1B Greengate public realm works scheme.
2.EXECUTIVE SUMMARY:
2.1This is a follow up report to a joint report that was approved by the Lead Member for Customer and Support Services and the Lead Member for Planningon 8th December 2008and 16th December 2008 respectively.
2.2 The first report approved the appointment of Carillion Construction Limited, following an OJEU procurementprocess, as preferred contractor for the delivery of the Phase 1A and Phase 1B Greengate public realm works (Annex 1).
2.3The OJEU procurement was managed on behalf of the Central Salford Urban Regeneration Company by the Centre for Construction Innovation, based in Manchester, in May 2008. This procurement process involved a two-stage tender process in accordance with OJEU regulations, culminating inn the short-listing of three contractors to invite to interview. Interviews were held on 23 September 2008. The interview panel was made up of representatives from Centre for Construction Innovation, the Design Team, Urban Vision and the Urban Regeneration Company.
2.4Following evaluation of the interview responses, Carillion Construction Limited were identified as the preferred contractor for the delivery of the £8.8M (including professional fees and project development costs) Phase 1A and Phase 1B Greengate public realm works.
2.5Carillion Construction Limited were initially appointed on an Early Contractor Involvement (ECI) basis during the design stage to provide the Project Team with their expertise on buildability issues, programming and experience on similar jobs.Carillion Construction Limited’s fee proposal for their Early Contractor Involvement was £1 (one pound). This early involvement has been very productive especially around the design of the footbridge and the beacons.
2.6Since October 2009 the Design Team have prepared and issued tender documentation to the main contractor, Carillion Construction Limited to enable them to issue tender documentation to various chosen subcontractors and obtain competitive market tested prices.
2.7Turner and Townsend, the City Council’s cost consultants, have worked alongside Carillion Construction Limited between October 2009 and March 2010 to ensure that the budget costs remained in line with the tendered costs during this period. The culmination of this tendering process is the project target cost set out in Turner and Townsend’s Target Cost Report (March 2010).
2.8This Early Contractor Involvement appointment ends at this point and Salford City Council are required to enter into a construction contract with Carillion Construction Limited to carry out the works.
2.9The total project funding package of £10,199,648 has been secured and legally committed from the Homes and Communities Agency (09/02/09) and the Northwest Regional Development Agency (17/03/10).
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3. BACKGROUND DOCUMENTS:
- Housing and Communities Agency Grant Funding Agreement (09/02/09);
- Northwest Regional Development Agency Grant Funding Agreement (31/03/10);
- ASK Developments and SalfordCity Council Collaboration Agreement 27/05/09)
- OJEU Notice (143172-2008) (04/06/08)
- SalfordCity Council: Planning Application – 09/57595/FUL
- ManchesterCity Council: Planning Application - 089669/FO/2009
Conservation Area Consent - 089541/CC/2009
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4. KEY DECISION: YES
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5. DETAILS:
Background
5.1The purpose of this report is to request the Lead Member for Customer and Support Services and Lead Member for Planning approve the letting of the contract for the Phase 1A and Phase 1B of the Greengate public realm works toCarillion Construction Limited. The value of the contract will be a target cost of £6,549,583 plus an employer’s risk contingency of £450,000.
5.2Carillion Construction Limited were initially appointed on an Early Contractor Involvement (ECI) basis following an OJEU Notice procurement. This initial appointment was for the design stage to provide the project team with their expertise on buildability and deliverability issues, works programming and to bring their construction experience to the project.
5.3The chosen and agreed contract will be the NEC3 Engineering and Construction Contract, Option C: Target Cost with Activity Schedule, June 2005 (with amendments June 2006) and including Salford City Council’s additional conditions of contract (Z Clauses)
5.4Since early October 2009 the design team, led by Whitelaw Turkington Landscape Architects, have prepared and issued thirteen work package tenders and documentation to Carillion Construction Limited, to allow them to issue the tender documentation to various chosen subcontractors and obtain competitive market tested prices. Where Carillion Construction Limited have chosen to carry out certain parts of the works themselves, Turner and Townsend, the City Council’s appointed cost consultant have assessed on an equipment, labour and materials basis to ensure Salford City Council receive value for money.
5.5Turner and Townsend have worked alongside Carillion Construction Limited between early October 2009 and March 2010 to ensure that the budget costs remained in line with the tendered costs during this period. From Turner and Townsend Stage E Cost Report and the review of the issued tender documentation, the early indication did suggest that estimated costs were circa £350,000 - £400,000 over the available budget prior to tendering. Through the tender of the works it was anticipated that the competitive market would see tender prices come in below the Stage E Cost Report.
Turner and Townsend Tender Assessment
5.6The original budget which informed the funding bids to the Homes and Community Agency and Northwest Regional Development Agency allowed for construction works costs of £6,900,000 (including an employer’s risk contingency of £250,000).
5.7Carillion Construction Limited prepared a first pass target cost of £7,400,000, which represented a variance of £500,000 on the original budget. In preparing thetarget cost and reviewing the programme it came to light that the construction programme had extended by 19 weeks to a total of 85 weeks. This equated to an additional cost of £100,000. A series of further reviews were taken by Turner and Townsend to inform the Target Cost report and a value engineering exercise undertaken with the Design Team to identify potential cost savings.
5.8The value engineering exercise identified a number of cost savings to the project;
- Omitting the water features to The Link
- Rationalising the architectural lighting scheme
- Omission of the misting feature to the river wall
- Omission of proposed river wall design
- Introducing an alternative formwork solution for the steps
- Materials testing rationalisation
- Buying gains by contractor
The value engineering exercise produced a second pass target cost of £6,920,000, which represented a £20,000 over budget figure.
5.9Turner and Townsend undertook a further review of the costs with Carillion Construction Limited, the Design Team. The items reviewed were;
- Sub-contractors tenders
- Supplier quotations
- Quantities and rates included in the target cost
- Staff rates, labour rates, accommodation hire charges from Carillion Construction’s cost
- management system
- Consumables
- Equipment hire rates
As part of this final review, supplier prices originally priced were re-clarified with suppliers. As part of this review and ahead of Turner and Townsend preparing the Target Cost Report, the target cost was reviewed by Urban Vision and it was confirmed that Salford City Council would require an employer’s risk contingency of £400,000 instead of the £250,000 originally envisaged.
5.10As part of the review, the design team/project fees and other project development costs were reviewed and a £100,000 of savings identified. These savings have been included in the construction costs and this allows the construction budget to be increased to £7,000,000 from £6,900,000. Whilst the construction budget has been identified at £7,000,000, the overall cost has come in at £6,999,684 which includes a employer’s risk contingency of £450,000.
5.11Turner and Townsend issued the final Target Cost Report on 5th March 2010. The Target Cost Report identifies an overall cost of £6,999,684 which includes a employer’s risk contingency of £450,000. The employer’s risk contingency equates to 6.8% of Carillion Construction’s construction works. Therefore the target cost is in line with the available project budget by £1,100. Within the target cost there are a number of project manager’s assumptions which equate to £673,318. Through the Early Contractor Involvement, Carillion Construction has obtained a comprehensive understanding of the existing site and the project. Carillion Construction and the design team have prepared a list of project manager’s assumptions, were confirmation of the costs still needs to be clarified. Further cost certainty of these items will be confirmed prior to entering into the construction contract. Carillion Construction, the Design Team, Urban Vision and the Urban Regeneration Company will monitor the items very closely to ensure final costs are within the construction cost.
5.12 The construction cost budget of £7,000,684 is broken down as follows;
- Target cost (works by Carillion Construction Limited) – £6,549,584
- Employer’s risk contingency - £450,000
- Surplus - £1,100 (added to contingency)
SalfordCity Council - Section 106 Contributions
5.13The value engineering exercise, identified cost savings of £480,000. The view of the Project Team and the City Council is that the loss of a number of these items would have an impact of the quality and visual impact of the public realm scheme. It is therefore proposed that£107,000 of Section 106 monies from completed developments within the Exchange Greengate, notably the Abito development, which are targeted at public realm improvements be added to the budget for the Greengate public realm works. This would permit the reinstatement of some of the works that would otherwise be omitted.
5.14Of the value engineered items identified in Section 5.8, the following items are proposed to be reinstated;
- Rationalising the architectural lighting scheme - £20,000
- Omission of proposed river wall design - £40,000
- Introducing an alternative formwork solution for the steps - £47,000
Conclusion
5.15This report seeks the Lead Member for Planning and Lead Member forCustomerand Support Services approval to finalise and enter into the contract with Carillion Construction Limited for a target cost of £6,549,583 plus an employer’s risk contingency of £450,000, and delegates authority to Strategic Directors to finalisethis.
5.16The report also seeks approval to the contribution of £107,000 of Section 106 monies, to ensure a high quality public realm scheme is achieved.
5.17Approval to finalise and enter into the contract with Carillion Construction Limited will enable Carillion Construction to be in a position to mobilise for a start on site of the construction works at the start of July 2010.
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6.KEY COUNCIL POLICIES:
6.1The Exchange Greengate Planning Guidance Policy EG17 Public Realm Proposals and paragraphs 6.56-6.58.
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7.EQUALITY IMPACT ASSESSMENT AND IMPLICATIONS:
7.1Carillion Construction Limited were procured by the Urban Regeneration Company and advised by Centre for Construction Innovation and Urban Vision onbehalfofSalford City Council through the European OJEU
procurement procedure.
7.2The OJEU Notice (2008/S 107-143172) and Pre-Qualification Questionnaire
(Section 13: Employment) both set out the requirement for contractors to
demonstrate full compliance with the provisions of the appropriate Acts on
Disability, Equal Pay, Rehabilitation of Offenders, Equal Opportunities, Sex
and Race Discrimination. In addition to been asked to demonstrate compliance, contractors also had to provide details and copies of policies for Diversity,Local Labour Policy and Corporate Social Responsibility.
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8.ASSESSMENT OF RISK:
Medium
8.1Sub-contractor tender prices for the steel work to the new footbridge, the stainless steel for the beacons has been fixed to end of April 2010. After this date sub-contractors are likely to want to include any increases in steel prices. The world market price of steel to open to fluctuations and present trends show that the price of steel is increasing in what is still a depressed market.
8.2Delivery of the Phase 1A and Phase 1B public realm works is conditioned against ASK Developments going unconditional on the Collaboration Agreement under the Development Conditions Longstop Dates. The Collaboration Agreement was entered into by Salford City Council on 27th May 2009. Failure by ASK Developments to go unconditional on the Collaboration Agreement will impact on the programme to commence construction of Phase 1A on site in early July 2010.
8.3Failure to let the contract with Carillion Construction Limited and be in a position to commence on site in early July 2010 could jeopardise the project funding from the Homes and Communities Agency and the Northwest Regional Development Agency.
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9.SOURCE OF FUNDING:
9.1The project is funded through the Homes and Communities Agency (£5.40M) and the Northwest Regional Development Agency (£4.79M). The Homes and Communities Agency funding is legally committed through the Grant Funding Agreement entered into on 9th February 2009. The Northwest Regional Development Agency’s funding is legally committed through the Grant Funding Agreement entered into on 17th March 2010. The funding package in addition to the construction costs and employer’s risk contingency identified in this report also includes property acquisition costs, demolition costs, professional fees and project development costs.
9.2The approval of additional funding from Salford City Council Section 106 monies from completed developments within the Exchange Greengate, notably the Abito development, will allow the reinstatement of some of the excluded value engineered items identified in Section 5.14.
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10. LEGAL IMPLICATIONS: Supplied byIan Sheard x 3084
10.1 Approved for monitoring purposes. Legal Services will need to be instructed to prepare the contract documentation
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11.FINANCIAL IMPLICATIONS: Supplied by Frank O’Brien ext 2585
11.1 Funding from the HCA of £5.40M and NRDA of £4.79M plus an allocation from S106 monies of £0.107M are available to finance this project going forward.
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12.OTHER DIRECTORATES CONSULTED:
12.1Whilst there has been no specific consultation with other Directorates within Salford City Council, the procurement of Carillion Construction Limited, the tendering of the public realms and the review of the target cost has been done in partnership with the Engineering Services team within Urban Vision.
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CONTACT OFFICER:Nik Puttnam (Central Salford URC)TEL. NO.0161 686 7421
David Evans TEL. NO. 0161 793 3641
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WARD(S) TO WHICH REPORT RELATE(S): Ordsall and Irwell Riverside