Agenda item

To allocate a further £254,465 from Tendring District Council New Homes Bonus to the Jaywick Sands Covered Market and Managed Workspace Project given the recent significant increase in construction costs demonstrated by tender returns.

To seek further external funding from partners and enter into agreement with them to meet the remaining gap in funding for the project. Depending on the success of the effort to source sufficient funds, the Council will enter into contract with a construction firm to deliver the project.

RESOLVED that, in the event that this Council (TDC) is successful in its pursuit of external funding to meet the shortfall in the Jaywick Workspace and Covered Market project, Cabinet -

(1)       authorises the Chief Executive, in consultation with the Portfolio Holder for Housing and the Portfolio Holder for Business and Economic Growth and the Council’s Section 151 Officer and the Monitoring Officer, to enter into the necessary Funding Agreement;

(2)       agrees that the Housing Revenue Account Capital Programme be increased by £1,934,647 to £4,407,000 to be funded by a TDC contribution of £254,465 from the 2022/23 New Homes Bonus and external funding of £1,680,182; and

(3)       notes that, in that eventuality, the Council will proceed to award the contract to construct the Jaywick Workspace and Covered Market project.

Cabinet had before it a joint report of the Business & Economic Growth Portfolio Holder and the Housing Portfolio Holder (A.6) which sought its approval to allocate a further £254,465 from Tendring District Council’s (TDC) New Homes Bonus to the Jaywick Sands Covered Market and Managed Workspace Project given the recent significant increase in construction costs demonstrated by tender returns.

The joint report also sought approval to seek further external funding from partners and to enter into agreement with them to meet the remaining gap in funding for the project. Depending on the success of the effort to source sufficient funds, this Council would enter into contract with a construction firm to deliver the project. 

Cabinet recalled that it had last received an update on the Jaywick Sands Covered Market and Workspace at its meeting held in October 2021 when it had agreed to grant an exemption to the Council’s procurement rules in order to allow a direct award of a service contract for the management of the facility and business support service to the Council’s’ operating partner, and also agreed that a licence to occupy would enable the most effective project delivery.

That October 2021 Cabinet report had also noted that construction material costs had increased as the country ‘unlocked’ from Covid-19 and that once the tender prices had come in for construction there was a potential risk that this budget would be insufficient to deliver the project as planned. Cabinet had been informed at that meeting that it would be updated with options if the increase in prices occurred, seeking any necessary approvals.

It was reported that since October 2021 the tender process for the construction of the facility had been undertaken by the Council with its Professional Team: HAT Projects (Architects), Potter Raper (Cost Consultants) and Daniel Connal Partnership (Construction, Design and Management Consultants). On 3 December 2021 the Council’s cost consultants Potter Raper had produced a revised cost appraisal based on the Council’s tender pack and the latest market information on the cost of materials. This work had indicated that the total construction cost of the scheme had likely increased from £2.1m to at least £2.7m.

Members were informed that, on 6 December 2021, the Council had received tenders from building contractors as part of the Council’s procurement exercise, which had come in significantly above the budget, with the lowest tender after value engineering listed at £3,877,239, over £1.1m greater than the cost consultant’s recent estimate. This had resulted in a total scheme value of £4,407,182, which was £1.98m over the total budget currently allocated of £2,427,000 to secure delivery.

As part of the tender evaluation process, Potter Raper had been requested to examine and comment on the large discrepancy between their latest cost advice and the prices quoted in the three submitted tenders. It was considered likely that contractors had sought to reduce their risk by cushioning current volatile market prices against materials cost inflation during the nine month delivery phase. It was also noted that whilst the three tenders were significantly higher than the most recent cost estimates, the three returns had all fallen within about seven percent of each other, demonstrating that this range was the price necessary to complete the work in current market conditions.

Options Available

Cabinet was advised that one option would be to end the project at this point and not to draw down the funding. However, the economic benefits of the project for Jaywick Sands would not be realised as jobs and businesses would not be attracted to that location. In addition, the wider regeneration of Jaywick Sands linked to the Place Plan would be stalled, and the ‘sunk’ costs in the project of around £300,000 would need to be covered, with no output.

It was felt that for the project to proceed, additional funding was required. As the project was within the Housing Revenue Account (HRA), it would be possible, in principle, to adjust the long term HRA business plan to fund the project. However, this would have a significant impact on the proposed current outputs of that business plan, including, for example, the repairs and maintenance of council homes and the planned purchase of new council properties.

Another option would be to allocate Council funding relevant to the HRA to the project, including the New Homes Bonus. It was therefore being recommended by the Portfolio Holders that £254,465 of New Homes Bonus 2022/23 be allocated to the project. This would be in addition to the £105,535 allocated at the start of the project and £45,000 of project costs allocated at the October 2021 Cabinet, for the first year of operation of the managed workspace.

However, despite the additional investment from the Council, a financial gap remained in project costs of £1.68m. Cabinet was made aware that TDC was looking for external funding to meet the gap. The Council had approached the South East Local Economic Partnership (SELEP) and Essex County Council (ECC) for additional investment in the project. It was expected that TDC would receive a response from those partners in early February 2022 whether such further funding was available, which would be within time for the fixed price tenders, which were on hold until 6 March 2022. TDC was also engaging with SELEP on their expectations of the timeline for this project’s delivery, given the need to source additional funding to proceed. It was expected that GBF funding could be claimed from SELEP as soon as the build started, which it was recognised would take place now in February or March 2022.

Having considered all of the information, advice and proposals contained in the Portfolio Holders’ joint report and to enable this matter to progress to a satisfactory conclusion:-

It was moved by Councillor Newton, seconded by Councillor Stock OBE and:-

RESOLVED that, in the event that this Council (TDC) is successful in its pursuit of external funding to meet the shortfall in the Jaywick Workspace and Covered Market project, Cabinet -

(1)       authorises the Chief Executive, in consultation with the Portfolio Holder for Housing and the Portfolio Holder for Business and Economic Growth and the Council’s Section 151 Officer and the Monitoring Officer, to enter into the necessary Funding Agreement;

(2)       agrees that the Housing Revenue Account Capital Programme be increased by £1,934,647 to £4,407,000 to be funded by a TDC contribution of £254,465 from the 2022/23 New Homes Bonus and external funding of £1,680,182; and

(3)       notes that, in that eventuality, the Council will proceed to award the contract to construct the Jaywick Workspace and Covered Market project.