Decision Maker: Cabinet Procurement and Insourcing Committee

Outcome: Implemented

Is Key Decision?: Yes

Is Callable In?: Yes

Date of Decision: July 7, 2025

Purpose: Approval of Contract Award (£10.3m) to Asset Plus under the ReFit Framework for the delivery of the Public Sector Decarbonisation Scheme Round 4 (PSDS4) project, installing heat pumps in 10 Hackney Schools. Acceptance of the Offered Grant (6.6m) was approved at Cabinet on 28 April 2025.

Content: RESOLVED:   1.  To note the decision made by this Committee to appoint Asset Plus to undertake the Public Sector Decarbonisation Scheme 3b and 3c projects following their appointment as the Council’s delivery partner  through the GLA ReFit Framework. 2.  To award a further two (2) year contract to deliver the Public Sector Decarbonisation Scheme 4 Sites project to Asset Plus at a value of £10.3m and for the Council to continue to work with Asset Plus across the whole portfolio of Corporate properties.   Reasons For Decision   Decarbonisation of Corporate Properties is a vital step in reducing carbon across the Council’s operations identified in both Manifesto commitments and in the Carbon Action Plan presented for adoption in June 2023.   On completion, this project will replace largely end of life gas powered heating equipment in nine buildings with heat pumps displacing 3.9m kWh gas with 0.9m kWh electricity thereby saving in excess of 659 tCO2e.   The project will also act as a demonstrator that the Council takes decarbonisation seriously and is investing in Climate Change mitigation measures thereby acting as a beacon for other businesses to follow.   The project will decarbonise heating through the installation of nine High Temperature Air Source Heat Pumps (ASHP) at 9 schools.   The project will take 2 years to deliver. Completion is expected around March 2027.   The project will cost £10.3m to deliver of which £10.12mwill be awarded to Asset Plus to competitively procure, deliver and complete the installations. The remaining £0.18m will fund Project Management appointed to manage the project working with Asset Plus, the local sites and property management and the Grant Funder, Salix Finance.   In developing the Investment Grade Proposal (IGP) project costs have been estimated based on quotes obtained in August 2024 based on concept designs, estimates for grid upgrade and contingency. The Council has included a further contingency to allow for some price movements in the market between the cost estimates used for grant application and the final pricing fixing through procurement stages described below. The quotes used to establish project costs were obtained after most of the recent construction cost inflation had been incurred in the market.   The £6.6m Grants (has been provided by Salix Finance through the Public Sector Decarbonisation Scheme 4 (PSDS) and will be complemented by £3.7m internal capital allocation approved through the Capital Programme. As part of their initial appointment, Asset Plus provides a cost and savings performance guarantee. Costs are guaranteed after the final contractor procurement stage described below whilst savings in kWh are guaranteed at a 90% of predicted performance level adjusted for weather, site use variations etc. The guarantees will operate at a project portfolio level rather than at a site specific level and will be subject to the Council reporting significant changes of use within the buildings.   The project will be delivered in stages with a design phase followed by procurement through Asset Plus’ established supply chain. These contractors have a track record of delivery of this type of equipment. At least 3 quotes for each site will be gathered by Asset Plus with the award being made to the most economically advantageous offer. The selection will be by Asset Plus within the Re:Fit Framework working with Council Officers with judgements made on price, quality, programme and social value. If possible, local contractors or those using local subcontractors will be favoured but it should be noted that these installations involve specialised technical equipment and experience in successful delivery must be paramount.   Provisional sums have been included in costs for each site for DNO upgrades but these will not be required at every site and the sums allowed will be concentrated to cover the specific costs.   Following the installations, the Council is required to monitor and report on savings to the Funder with a more detailed International Performance Measurement and Verification Protocol (IPMVP) based process available from Asset Plus at extra cost should this be required. This level of detail is not required by Salix as the funder.   Alternatives Options Considered and Rejected   Alternative options considered include:   ·  Do nothing: The school buildings identified have boiler systems that are classed as aging and near end of life. Most are still working but are likely to require replacement over the next 2-3 years. ·  Like for Like Replacement: Replacement of boilers would not cost substantially less overall, would not attract external funding and would not achieve carbon savings of any magnitude. Given the impact of the grant where the Council contribution is largely defined by the like for like replacement costs, the grant makes the like for like replacement cost more than the full Low Carbon project recommended. ·  Re-procure a different principal contractor: Asset Plus were appointed less than three years ago following a full competitive procurement exercise within the terms of the GLA Re:Fit Framework which includes provisions for additional call off awards and thus  meets the regulatory and governance requirements of compliance for this award. The competitive criteria of any such reprocurement would remain the same and so an alternative outcome/contractor, may not occur from such a competition - also there would be the additional resource costs and potential delay in a new tender. As the GLA Re-Fit Framework allows for an effective extension, the Procurement team consider a reprocurement would not, for this scope, present the best value to Hackney. Also as the grant is time limited (2 years), procuring would have meant not accessing the grant or not delivering the project within the 2 years available. As the grant is 64% of the project cost, reprocuring would be unlikely to give greater savings than the grant.   Insourcing was not considered a viable option due to the specialised nature of the equipment to be installed. As the market matures and more qualified and experienced staff become available in the market this option may be able to be reconsidered for maintenance and for future installations and replacements.