Purpose

Approval is sought to conclude the two-stage procurement exercise, progressing into the development agreement and main works contract to commence construction of the 407 new homes and community centre building that comprise the HAP Regeneration Scheme.
 

Decision

 DECISION;

1. AUTHORISED the Corporate Director of Housing and Regeneration in consultation with the Mayor to enter into a Development Agreement and execute the Phase 1 construction contract with Vistry Group following the successful completion of the Second Stage tender via a Pre-Construction Services Agreement. Under the terms of the Development Agreement and in consultation with the Council, Vistry Group (formerly known as the development partner) shall lead on the construction delivery of Phase 1 & 2.
2. DELEGATE Authority to the Corporate Director of Housing and Regeneration in consultation with the Mayor, the authority to appoint any necessary consultants required to assist the Council in the delivery of the project.
3. Noted the Development Agreement shall include the delivery of the complete project including Phase 1 & Phase 2.
4. DELEGATED Authority to the Corporate Director of Housing and Regeneration, the authority to proceed with site remediation works, required to deliver Phase 1, under the existing Minor Works Contract.
5. DELEGATED Authority to the Corporate Director of Housing and Regeneration in consultation with the Mayor, the authority to enter into the ESCo (Energy Service Company) Agreement and relevant leases relating to the regeneration.
6. Noted the ESCo agreement is a performance-based contract where a specialised firm implements energy-efficiency projects, financing the upfront costs and guaranteeing that savings will cover the investment.

Reasons for the decision

•         The decisions sought in this report are to enable the delivery of 407 new homes and a new community centre, on council-owned land currently occupied by seven housing blocks between 4 and 8 stories (known collectively as Harriott House, Apsley House and Pattison House), comprising 68 flats, 32 maisonettes, and 2 community buildings.

•         A Resident Ballot was held between 18th March and 9th April 2020. Of the 132 eligible voters, 123 votes were cast, a turnout of 93%. 121 residents voted in favour of regeneration (98.4%) and 2 (1.6%) residents voted to reject the council’s proposal, demonstrating strong community support.

•         Of the 407 homes to be delivered by the scheme, 59 are allocated as replacement homes; a further 116 additional affordable homes will be delivered within the scheme (50 under Phase 1 and 66 under Phase 2), housing new residents to the estate, as well as helping to address overcrowding within the existing homes. 22 of these homes have been identified for hidden households across the estate, ensuring that the scheme tackles the localised overcrowding in the community, as well as serving the borough’s wider affordable housing needs.

•         The scheme delivers policy-compliant 43% (175 no.) affordable housing alongside 57% (232 no.) open market homes, meeting strategic targets with substantial net affordable housing gain. The affordable housing mix is comprised of social rent, shared ownership, and shared equity homes.

•         The new homes will replace older blocks with ongoing damp issues and repair costs, instead providing homes with: greatly improved fire safety measures, high thermal performance and the lower energy use this enables, large balconies for every home, new communal place spaces and community gardens, secure bike storage for every resident, improved public realm and street scene benefiting the wider community, along with increased refuse storage in dedicated bin chambers, removing the current large number of bins spread across the estate.

•         The new HAP buildings range between six and eight stories, respecting local character whilst homes have been designed to meet the planning policy requirements for sustainability, aiming to achieve an estimated site-wide CO2 emission reduction of at least 45% over the Target Emission Rate (TER) using the SAP 10 emission factors, through a combination of energy conservation measures, renewable heat, and electricity generation technologies, such as Photovoltaic solar panels (PV) and Air Source Heat Pumps (ASHP).

•         Furthermore, the development includes a new community space. The Council have worked closely with the Redcoat Community Centre & Masjid (RCCM) to design a space which meets their needs and the needs of those who will be using the building.

•         Given the proposed regeneration of the estate, long term maintenance of the buildings has been reduced, with limited services remaining on the estate. Decant of existing tenants shall occur upon completion of Phase 1.

•         The project has been procured on a Two-Stage Design & Build route. The open procedure procurement exercise ran between March and October 2024, with Invitation to Tender (ITT) and Pre-Qualification Questionnaire (PQQ) issued simultaneously on the 4th March 2024 via the Pro Contract e-tendering portal. 8 developers submitted responses to the PQQ, with 3 passing to full qualitative and quantitative evaluation of ITT responses. Tenders were evaluated based on a weighting of 50% quality, 40% price, and 10% social value, with the highest scoring bidder determined and resultant appointment of a Vistry Group as development partner via a Pre-Construction Services Agreement.

•         During the Pre-Construction Services Agreement, the LB Tower Hamlets Delivery Team have ensured best value through rigorous procurement and cost management procedures. Each subcontractor package was competitively tendered in accordance with the Council’s procurement requirements. All cost submissions were robustly challenged and validated against market benchmarks to demonstrate value for money. The team undertook regular value engineering exercises and maintained full cost transparency throughout the pre-construction phase. This approach enabled informed decision-making, optimised project value, and provides assurance that the proposed contract sum represents demonstrable best value for the Council.

•         The Pre-Construction Services Agreement period has enabled detailed design of the scheme and the subsequent submission to the BSR Gateway 2 submission on the 3rd of February 2026. The two applications, one submitted for each separate building mass as per best practice recommendations, were successfully validated on the 6th February 2026 and are now under review for determination by the BSR.

•         Following completion of detailed design, Vistry Group have submitted a Second-Stage tender price which enables the Council to now enter into the Development Agreement and execute Phase 1 construction contract for compete delivery of the scheme (Phase 1 & Phase 2). Vistry Group shall be responsible for complete delivery of the project including Phase 2 construction works and BSR Gateway 3 approval.

•         In relation to the proposed Form of Contract, Potter Raper Ltd, acting as Employers Agent, have recommended appointing Vistry Group under a JCT Design & Build Contract for Phase 1 on a fixed price lump sum basis and Phase 2 with fixed LBTH contribution for the affordable homes within phase 2. While construction costs have increased during PCSA period, we now have strong confidence in pricing robustness. Cost increases stem from unforeseen ground conditions; asbestos removal and contaminated material disposal substantially exceeded initial estimates following detailed site investigations. The current fixed price position is robust, comprehensively priced, and reflective of current market conditions and site-specific challenges.

Alternative options

•         Evaluation of delivery model options were considered and presented to Cabinet in February 2023 in which the development partnership model was recommended and approved. At this stage, alternatives included ‘land sale with contract’ and ‘income strip model’. An alternative option to the delivery of the project is not presently recommended as the Second-Stage tender process has now concluded and meets the Council’s requirements in terms of value for money and deliverability. 

•         Following Second-Stage tender completion, four alternatives were reevaluated:

Option 1: Open market tender creates 9-12 month delay, jeopardising secured funding and affordable housing delivery.

Option 2: Council-led private sale (232 units) exposes LBTH to market risk without specialist expertise or infrastructure. 

Option 3: Single stage retender introduces 6-9 month delay, design liability issues and loses Vistry Group's site knowledge. 

  Option 4 (Recommended): Proceed with Vistry Group under fixed

price JCT Design & Build contract and Development Agreement,

maintaining programme certainty. 

An alternative option is not recommended. The Second-Stage tender meets Council requirements for value and deliverability.

Action by:

CORPORATE DIRECTOR FOR HOUSING & REGENERATION (D. JOYCE)