The meeting was scheduled to include the consideration of a report by officers about a proposed variation to a construction contract for refurbishment work at a council-owned site in Arthingworth Street.

Affordable Homes for Newham, Arthingworth Street London E15 4PW Contract Variations

The meeting was provided with a report that recommended the Corporate Director of Inclusive Economy & Housing approve a contract variation to Proma Group for an extra £120,353.00. This variation would bring the total value of the contract to £2,421,354.02.

The report explained that this was the second variation to the contract. The original contract, for the sum of £1,767,827.72, was awarded to Proma Group on the 24th of June 2021, following the approval of the Cabinet on the 1st of December 2020¹. The first variation of £533,173 was applied to the contract in March 2023, after an interim partial settlement of additional on-site and off-site costs.

The report described the background to the contract and the nature of the work that was carried out, explaining that the work consisted of the refurbishment of two existing derelict buildings at 21-55 Arthingworth Street in West Ham, in order to create 16 new homes at London Affordable Rent. The report highlighted that this approach represented a significant saving on the £4.75 million cost of demolishing and rebuilding, which had been agreed in the council's Housing Revenue Account business plan. The decision to refurbish the existing buildings was taken following a survey commissioned by the council which found the buildings to be suitable for refurbishment. A total of £1.6 million of grant funding for the scheme was provided by the Greater London Authority through the Building Council Homes for Londoner’s programme.

The report explained that the contractor, Proma Construction, was appointed following a tender process carried out via the Newlon Housing Trust Framework, a framework agreement set up by Newlon Housing Trust² to procure contractors for construction projects. The same contractor was also engaged to manage the enabling works on the site, because of logistical and health and safety issues associated with having two contractors working on the adjacent sites.

The report explained that since the contract was awarded the scope of the work had to change, and the cost had to increase because:

Fire rated cavity barriers throughout compartment lines, fire socks at eaves and vertical party walls. Installing a full coverage sprinkler system. Roof remedial works, requiring extended scaffold hire. Design work for Building Control permissions and ground investigations for planning conditions. Synergy drawings, and installations of IRS System, chargeable fibre broadband, scaffold adaptations, Thames Water and Cadent Gas connections, IPGUARD door entry, UKPN works, stairwell floor finishes, and increased quotations for external windows and Cadent gas. video surveillance system and wayfinding signage. Additional cleaning fees until the PC achieved.

It highlighted that value for money and cost substantiation had been reviewed by the Employer’s Agent for each variation. It said that the Employer's Agent had issued contract instructions in accordance with the contract and that for these reasons officers considered that the modifications remained value for money for the Council.

The report said that provision for the agreed variations and loss and expense claims had been made in the council's capital programme. It also sought to reassure members that the increased cost would be containable within the overall development contingency budget provision within the overall Affordable Housing for Newham programme budget.

The report noted that Proma Construction was now under Administration. It proposed that the £36,320.31 in retention fees that were being withheld by the council be used to pay for remedial work during the defects period and that discussions had already taken place with Newham Maintenance to undertake these repairs. The report noted an Administrator’s Letter and Council Letter to the Administrator, outlining the amounts owed in full.