Content

RESOLVED:
 
1. Agree to the
procurement of a two-stage design and build contract with a
Pre-Construction Services Agreement (PCSA) via the Find a Tender
service using a Restricted Procedure, for the selection of a main
contractor to deliver a housing regeneration scheme of up to 26 new
homes in the Kings Park Ward. The exact number of homes to be
delivered may change as a result of the design development
exercise.
 
2. Delegate
authority to the Group Director - Climate, Homes and Economy, in
consultation with the Group Director of Finance and the Director of
Legal, Democratic and Electoral Services to:
 
a) Enter a
Pre Construction Services Agreement
(PCSA), which may include but is not limited to work relating to
design, value engineering, surveys, utilities, demolition and
enabling works.
 
b) Enter a main
building contract and if appropriate any preceding or parallel
demolition or enabling works contract with the preferred contractor
or one or more suitable specialist early works contractors, upon
satisfactory completion of the Pre Construction Services Agreement
(PCSA stage), or equally;
 
c) Should a position
representing acceptable performance and/or value for money not be
reached with the preferred contractor at any point during or upon
conclusion of the Pre Construction Services Agreement (PCSA) stage,
to enter into the contracts described at (a) and (b) above, as
appropriate, with the reserve bidder appointed during the first
stage of the two stage tender.
 
Reasons For
Decision
 
5.1  The Pedro Street site is within the Clapton
Park Estate, at the junction of Pedro Street and Rushmore Road.
This was the site of an estate boiler house, which was
decommissioned over 30 years ago. Pedro Street is one of a number
of sites that form the Housing Supply Programme (HSP) within the
Housing Regeneration and Delivery (HR&D) service. The programme
is currently building new homes across the borough on underused
brownfield land within existing housing estates.
 
5.2  In approving the programme, Cabinet agreed
to a ‘portfolio’ as opposed to a site-by-site approach
to financial viability and planning compliance. This approach
enables the Council to combine the development of schemes which
require a net investment with those that have the potential to
generate a surplus. The new affordable homes at Pedro Street will
contribute to the Council’s target to build over 3,000 new
homes for social rent, shared ownership and outright sale. The cost
of these affordable homes will be subsidised by homes for outright
sale on other sites within the HSP. This portfolio approach to
tenure across the programme has been approved by the Local Planning
Authority via an overarching Unilateral Undertaking for the
programme.
 
5.3  The original Pedro Street project, designed
by Ash Sakula Architects, comprised 26
new homes; 13 homes for social rent and 13 for shared ownership.
The project team secured planning permission (Planning Reference:
2017/3512) in 2017 and a Unilateral Undertaking was signed in
August 2018. The scheme is 100% affordable, and as such Pedro
Street has always been a ‘deficit’ scheme, requiring
cross-subsidy from other schemes within the programme.
 
5.4  The previous contractor, Engie, was selected via a Negotiated Process
without Prior Publication using a Framework. This method was
recommended at the time for obtaining the best value in terms of
both price and quality. However, only two bids were received and
both exceeded the Council's pre-tender estimate. Engie were selected after a Negotiated
Procedure.
 
5.5  In order to satisfy pre-commencement
Planning Conditions,  soil testing was
carried out on site in July 2020 by Engie’s sub
contractor. Site investigations discovered fuel oil
contamination in connection with the former boiler house across the
site at levels that were higher than the pre-contract testing had
indicated. Due to the delays caused by the contamination, the works
associated with decontaminating the site and monitoring ground
conditions thereafter, it was mutually agreed to terminate the
contract with Engie.
 
5.6  Subsequent viability modelling has shown
that the cost of delivering the scheme had increased significantly
as a result of the significant construction cost inflation
experienced over the last few years. Furthermore, Building
Regulations have changed and the planning approved scheme is no
longer compliant. Under the Building Safety Act 2022 (BSA), Pedro
Street, as currently designed, is classified as a high risk
building in that it is over seven storeys and 18m in height. In
order to adhere to the new regulations
the consented building would require a second staircase. This would
have an adverse impact on the viability of the project as adding a
second staircase would lead to a loss of habitable floor space, and
increase construction costs. Furthermore, the new Building Safety
Regulator (BSR) Gateways 2 and 3 would have a programme impact,
potentially of several months.
 
5.7  The results of the monitoring of ground
conditions since the completion of the decontamination works have
shown that works have been successful and the site has been
certified to be in a suitable condition to progress to the
development phase. During this period a significant amount of work
has taken place to improve the financial viability of the
scheme.
 
5.8  The project team tested various options
including: building a larger scheme; replacing the apartment
building with a low rise scheme of 8 houses; and changing the
tenure mix of some affordable homes into outright sale. The
greatest challenge to viability was the need to adhere to the BSA.
Early discussions with contractors and architects affirmed the
viability challenges of delivering residential buildings above 18m,
especially when the costs can not be
mitigated by selling more homes, as is the case with a 100%
affordable housing scheme such as Pedro Street. As a result, it is
proposed that as part of the redesign work to be done via a two
stage tender, a design which reduces the building to below 18m is
explored, therefore taking it out of the BSA designated “high
risk” category. This will result in a loss of a small number
of units (likely to be four) but will enhance the deliverability of
the scheme, by reducing build costs overall, and has improved
programme implications, compared with taking forward a building in
the “high risk” category (over 18 metres).
 
5.9  Results from soft market testing with a
number of contractors and an architect have confirmed the preferred
approach to tender the scheme via a two-stage procurement with a
Pre Construction Services Agreement
(PCSA). This approach will enable the scheme to be designed in
collaboration with a contractor, in order to bring forward a scheme
which is compliant with the regulatory changes that have come into
force (or are emerging) since the scheme’s planning was
approved; whilst also unlocking cost savings during the design
phase;  and
improving the buildability of the scheme.
 
5.10  This report therefore seeks agreement from
CPIC to commence the procurement of a main build contractor for
this scheme, via a two stage procurement process with a
PCSA.  The form of contract for the PCSA
will be the Joint Contracts Tribunal (JCT) Preconstruction Services
Agreement (General Contractor) 2016 with London Borough of Hackney
amendments. The form of contract for the main build works will be a
Joint Contracts Tribunal (JCT) Design and Build Contract 2016 with
London Borough of Hackney amendments. The details of the
procurement process are set out in 5.18.
 
5.11  The Council will meet the full development
costs of the scheme and act as developer for the social rent, and
shared ownership homes. The outsourcing route is recommended
because the Council does not have the ability to carry out works to
build new homes in-house.
 
5.12  The estimated costs for the construction of
the outlined option have been provided by Potter Raper and can be found in exempt Appendix 1.
 
Alternative Options (Considered and
Rejected)
 
5.28  As noted in 5.19, the pre-tender estimate
for the works is above the UK Public Procurement Threshold for
Works of £5,372,609 and is subject to the Public Contracts
Regulations 2015.  This means that the
opportunity must be advertised on Find a Tender or procured from a
suitable framework agreement. 
 
5.29  The option to procure a contractor via a
single stage route has been considered and rejected.  The single stage route is considered unsuitable
due to the additional design work needed to bring the scheme up to
current regulatory standards, and the value engineering required to
bring the scheme to a financially viable position.  The two stage process allows the Council to
benefit from contractor buildability knowledge and access to supply
chains during the PCSA period, giving greater cost certainty at the
end of the PCSA period. 
 
5.30  The option to procure a contractor via a
framework has been considered and rejected, because the use of a
framework reduces competition, limiting the pool of potential
contractors to which the Council has access. It also presents a
risk of receiving insufficient bids for the scheme. This was
evident in the previous main contractor procurement, which only
secured two bids.
 
5.31  The following procedures available via Find
a Tender have also been considered and rejected:
 
· 
Open Procedure: The Invitation to Tender issued and any supplier
may submit a tender.  This is not
considered suitable for the Pedro Street scheme.  It may result in the Council receiving a large
number of tenders, lengthening the assessment process without
adding value.  Conversely, this approach
may put off some contractors who would otherwise bid for the
scheme, as soft market testing has indicated that contractors tend
to prefer to be part of a smaller bidding pool.
 
· 
Competitive Dialogue Procedure: Any supplier may submit a request
to participate by providing the information for qualitative
selection. Following assessment, suppliers invited may participate
in the dialogue and final tenders are invited once the dialogue
process is complete.  This is generally
used where a client cannot specify their requirements or cannot
assess without dialogue what the market can offer in terms of
technical, financial or legal solutions. This is not appropriate to
the Pedro Street scheme as it is not a complicated scheme and the
design updates and value engineering will be covered within the Pre
Construction Services Agreement.
 
· 
Competitive Procedure with Negotiation: Any supplier may submit a
request to participate by providing the information for qualitative
selection. Following assessment, invited suppliers may submit an
initial tender which shall be the basis for the subsequent
negotiations. The Council will negotiate with tenderers the initial
and all subsequent tenders submitted by them, except for the final
tender, to improve their content. This can be a time-consuming
process and it is not considered necessary for the Pedro Street
scheme.
 
5.32 
  The option
to not appoint a reserve bidder has been considered and rejected,
as having a reserve bidder enables the Council to retain some
competitive tension with the preferred bidder; and, provides a
procurement-compliant alternative to the preferred bidder in the
event that the design/price is not in line with the Council’s
budget and expectations for the project.