Projects Sub (Policy and Resources) Committee

Projects Sub (Policy and Resources) Committee

Date: WEDNESDAY, 7 SEPTEMBER 2016

Time: 10.00 am

Venue: COMMITTEE ROOMS, 2ND FLOOR, WEST WING, GUILDHALL

Members: Sir Michael Snyder (Chairman)

Hugh Morris (Deputy Chairman) Mark Boleat Keith Bottomley Deputy Roger Chadwick Christopher Hayward Jeremy Mayhew Deputy Catherine McGuinness Graham Packham Deputy John Tomlinson James Tumbridge

Enquiries: Chris Braithwaite

tel.no.: 020 7332 1427 [email protected]

NB: Part of this meeting could be the subject of audio or video recording

John Barradell

Town Clerk and Chief Executive

Public Document Pack

AGENDA

Part 1 - Public Agenda 1. APOLOGIES 2. MEMBERS' DECLARATIONS UNDER THE CODE OF CONDUCT IN RESPECT OF

ITEMS ON THE AGENDA 3. MINUTES To agree the public minutes and summary of the meeting held on 20 July 2016. For Decision (Pages 1 - 6)

4. GATEWAY APPROVAL PROCESS To note the Gateway Approval process. For Information (Pages 7 - 8)

5. ACCOMMODATION AND WAYS OF WORKING - GATEWAY 2 PROJECT

PROPOSAL Report of the Town Clerk. For Decision (Pages 9 - 22)

6. GUTTER LANE AREA IMPROVEMENTS (S278) - GATEWAY 2 PROJECT

PROPOSAL Report of the Director of the Built Environment. For Decision (Pages 23 - 32)

7. TOWER BRIDGE: REPLACEMENT OF HEATING SYSTEM SERVING THE HIGH

LEVEL WALKWAYS AND TOWERS - GATEWAY 2 PROJECT PROPOSAL Report of the Director of Culture, Heritage and Libraries. For Decision (Pages 33 - 38)

8. PETTICOAT TOWER STAIRWELL PANELS - GATEWAY 2 PROJECT PROPOSAL Report of the Director of Community and Children's Services. For Decision (Pages 39 - 50)

9. CONCRETE REPAIRS TO CULLUM WELCH HOUSE - ISSUE REPORT

(GATEWAY 3) - FURTHER INFORMATION REGARDING COSTS Report of the Director of Community and Children’s Services. For Decision (Pages 51 - 66)

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10. DEALING WITH PRICE INFLATION FOR CONSTRUCTION PROJECTS UP TO GATEWAY 5

Report of the Chamberlain. For Decision (Pages 67 - 72)

11. CONSTRUCTION MARKET TRENDS - QUARTERLY REPORT Report of the Chamberlain. For Information (Pages 73 - 76)

12. REVIEW OF TERM CONTRACTS AS A STRATEGY Report of the Chamberlain. For Information (Pages 77 - 82)

13. QUESTIONS ON MATTERS RELATING TO THE WORK OF THE COMMITTEE 14. ANY OTHER BUSINESS THAT THE CHAIRMAN CONSIDERS URGENT 15. EXCLUSION OF THE PUBLIC MOTION - That under Section 100(A) of the Local Government Act 1972, the public

be excluded from the meeting for the following item(s) on the grounds that they involve the likely disclosure of exempt information as defined in Part I of Schedule 12A of the Local Government Act.

For Decision

Part 2 - Non-Public Agenda 16. NON-PUBLIC MINUTES To agree the non-public minutes of the meeting held on 20 July 2016. For Decision (Pages 83 - 92)

17. SECURITY CROSS-CUTTING AGGREGATE REPORT - GATEWAY 2 PROJECT

PROPOSAL Report of the City Surveyor.

NB – The individual Gateway reports are attached as appendices as follows: Appendix 1 – Guildhall: Glazing and Anti-Shatter Film Installation (page 99) Appendix 2 – Barbican Centre: Anti-Shatter film Installation (page 105) Appendix 3 – Guildhall: CCTV and Intruder Alarm Systems (page 123) Appendix 4 – Barbican Centre: CCTV (page 129) Appendix 5 – Guildhall: Access Control, West Wing (page 135) Appendix 6 – Barbican Centre: Access Requirements (page 145) Appendix 7 – Guildhall: Hostile Vehicle Mitigation (page 151) Appendix 8 – Barbican Centre: Hostile Vehicle Mitigation (page 157)

For Decision (Pages 93 - 164)

18. TEMPLE CHAMBERS, 3/7 TEMPLE AVENUE EC4: EXTERNAL CYCLICAL REDECORATION WORKS - GATEWAY 2 PROJECT PROPOSAL

Joint report of the Chamberlain and the City Surveyor. For Decision (Pages 165 - 170)

19. CITY OF LONDON SCHOOL VISITOR WC PROVISION - GATEWAY 2 PROJECT

PROPOSAL Report of the Headmistress, City of London School. For Decision (Pages 171 - 178)

20. CONCERT HALL 2016 – PHASE 1 - PIANO LIFT AND STAGE RISERS - ISSUE

REPORT (GATEWAY 5) Report of the Managing Director, Barbican Centre. For Decision (Pages 179 - 184)

21. POLICE ACCOMMODATION STRATEGY PROGRAMME: PHASE 3J - 21 NEW

STREET AND BISHOPSGATE DECANT Joint report of the Commissioner and the City Surveyor (to follow). For Decision

22. BRIDGEMASTERS HOUSE PHASE 2 - POST COMPLETION WORKS: REQUEST

FOR DELEGATED AUTHORITY Report of the City Surveyor. For Decision (Pages 185 - 188)

23. CITY OF LONDON POLICE PROGRAMME - RED, AMBER REPORT UPDATE Report of the Commissioner. For Information (Pages 189 - 192)

24. OPEN SPACES DEPARTMENT RED, AMBER AND GREEN REPORT Report of the Director of Open Spaces. For Information (Pages 193 - 198)

25. BUILDINGS PROGRAMME RED, AMBER AND GREEN REPORT Report of the City Surveyor. For Information (Pages 199 - 206)

26. ACTION TAKEN BY THE TOWN CLERK UNDER DELEGATED AUTHORITY OR

URGENCY PROCEDURES Report of the Town Clerk. For Information (Pages 207 - 210)

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27. QUESTIONS ON MATTERS RELATING TO THE WORK OF THE COMMITTEE 28. ANY OTHER BUSINESS THAT THE CHAIRMAN CONSIDERS URGENT AND

WHICH THE COMMITTEE AGREE SHOULD BE CONSIDERED WHILST THE PUBLIC ARE EXCLUDED

This page is intentionally left blank

PROJECTS SUB (POLICY AND RESOURCES) COMMITTEE

Wednesday, 20 July 2016

Minutes of the meeting of the Projects Sub (Policy and Resources) Committee held at the Guildhall EC2 at 10.00 am

Present Members: Sir Michael Snyder (Chairman) Keith Bottomley Marianne Fredericks Christopher Hayward

Jeremy Mayhew Graham Packham Deputy John Tomlinson

Officers: Peter Lisley - Town Clerk's Department

Christopher Braithwaite - Town Clerk's Department

Craig Spencer - Town Clerk's Department

Arshi Zaman - Town Clerk's Department

Caroline Al-Beyerty - Chamberlain's Department

Christopher Bell - Chamberlain's Department

Mona Lewis - Chamberlain's Department

Peter Bennett - City Surveyor

Brian Brierley - City Surveyor's Department

Andrew Shorten - City Surveyor's Department

Simon Glynn - Department of the Built Environment

Paul Monaghan - Department of the Built Environment

Steve Presland - Department of the Built Environment

Iain Simmons - Department of the Built Environment

Jim Turner - Barbican Centre

Paul Murtagh - Community and Children's Services Department

Mike Saunders - Community and Children's Services Department

David Pearson - Director of Culture, Heritage and Libraries

Tony Cairney - City of London Police

Peter Digby - City of London Police

Martin O'Regan - City of London Police

Oliver Shaw - City of London Police

Pauline Weaver - City of London Police

Hannah Bibbins - Guildhall School of Music and Drama

1. APOLOGIES Apologies for absence were received from Mark Boleat, Deputy Roger Chadwick, Deputy Catherine McGuiness and Hugh Morris.

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Agenda Item 3

2. MEMBERS' DECLARATIONS UNDER THE CODE OF CONDUCT IN RESPECT OF ITEMS ON THE AGENDA There were no declarations of interests.

3. MINUTES RESOLVED – That the public minutes and non-public summary of the meeting held on 29 June 2016 are approved as an accurate record.

4. GATEWAY APPROVAL PROCESS RESOLVED – That the Sub-Committee notes the Gateway Approval Process.

5. HAMPSTEAD HEATH PONDS PROJECT PROGRESS REPORT The Sub-Committee considered a joint report of the Director of Open Spaces and the Hampstead Heath Ponds Project Director which updated on progress, budget and the risk register for the Hampstead Heath Ponds Project. The report also sought approval to remove some aspects of the reinstatement works from the contract scope of works to allow this work to be undertaken by Hampstead Heath staff. The Hampstead Heath Ponds Project Director advised the Sub-Committee that any deviation from the project budget, either positive or negative, would be shared equally between the Corporation and the contractor. The Chairman asked for clarification regarding when this risk sharing agreement had been approved by Members. The Hampstead Heath Ponds Project Director explained that this information could be provided to the Chairman following the meeting. RESOLVED – That the Sub-Committee:

a) Notes the report; and b) Approves the reallocation of £25,000 of landscaping costs to be carried

out by the Open Spaces team.

6. PUDDLE DOCK IMPROVEMENTS - GATEWAY 2 PROJECT PROPOSAL The Sub-Committee considered a report of the Director of the Built Environment which set out proposals to investigate a new pedestrian route between the pier at Puddle Dock and Queen Victoria Street. The report advised that this project would include working with TfL to deliver a pedestrian crossing across Upper Thames Street, Thames Tideway to provide pedestrian access to the new crossing, a footway along Puddle Dock and alterations to the Puddle Dock/Queen Victoria Street junction to accommodate the new footway as well as to improve road safety. The report advised that other measures may be necessary to achieve the required outcome and these would be identified at the next appropriate gateway. The Chairman commented that it would be important to ensure that the pedestrian route from the site to the City was direct to ensure that it was an attractive entry point to the City.

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RESOLVED – That the Project proceeds to the next Gateway on the Regular route.

7. MITRE SQUARE (PHASE 2) - GATEWAY 4 OPTIONS APPRAISAL AND GATEWAY 5 AUTHORITY TO START WORK The Sub-Committee considered a report of the Director of the Built Environment which presented the proposed design for Phase 2 of the Mitre Square project. This would provide an enhanced public space in Mitre Square, additional seating and improved lighting, while retaining vehicle access to the Sir John Cass Foundation Primary School. RESOLVED – That the Sub-Committee:

a) approves the design for Phase 2, as shown in appendix 2 of the report; and

b) approves the implementation budget for Phase 2 of the works to Mitre Square (£728,998), as set out in section 5 and appendix 3 of this report, fully funded from the Section 106 agreement.

8. HOLBORN CIRCUS AREA ENHANCEMENT - GATEWAY 7 OUTCOME

REPORT The Sub-Committee considered a report of the Director of the Built Environment which provided the outcomes of the Holborn Circus Area Enhancement Project. Members commented that this had been an excellent project and complimented the risk sharing, information provision, engagement work and accident reduction delivered. RESOLVED – That the final cost of the project and lessons learnt are noted and the project closed.

9. CONCRETE REPAIRS TO CULLUM WELCH HOUSE - ISSUE REPORT (GATEWAY 3) The Sub-Committee considered a report of the Director of Community and Children’s Services which set out proposals regarding the remedial works to repair externally exposed concrete works at Golden Lane and Middlesex Street estates. The report advised that it was proposed to run the element of the repair works at Cullum Welch House as a stand-alone project due to the complexity of the works required. The report also advised that further investigative works were proposed to be conducted to determine the most appropriate way forward for the project. The Chairman commented that he was concerned of the increase in costs for work and fees and requested that further explanation be provided regarding these increases. He suggested that a further report providing this explanation should be provided to the Sub-Committee’s next meeting. If a decision was required during the Summer recess, he suggested that authority be delegated to the Town Clerk to consider the report.

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RESOLVED – That the Sub-Committee requests that a further report be submitted to the Sub-Committees next meeting to provide a full explanation regarding the increase in work and fee costs. Should a decision be required during the Summer recess, delegated authority be granted to the Town Clerk, in consultation with the Chairman and Deputy Chairman, to consider the report.

10. QUESTIONS ON MATTERS RELATING TO THE WORK OF THE COMMITTEE There were no questions.

11. ANY OTHER BUSINESS THAT THE CHAIRMAN CONSIDERS URGENT There were no items of urgent business.

12. EXCLUSION OF THE PUBLIC RESOLVED – That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following item(s) on the grounds that they involve the likely disclosure of exempt information as defined in Part I of the Schedule 12A of the Local Government Act. Item No. Paragraph No 13-25 3

13. NON-PUBLIC MINUTES The Sub-Committee approved the non-public minutes of the meeting held on 29 June 2016 as an accurate record.

14. HAMPSTEAD HEATH PONDS PROJECT PROGRESS REPORT - NON-PUBLIC APPENDICES The Sub-Committee noted the non-public appendices to the joint report of the Director of Open Spaces and the Hampstead Heath Ponds Project Director, which had been considered earlier in the meeting.

15. POULTRY MARKET - MAJOR REPAIRS PROJECT - ISSUE REPORT (GATEWAY 3) The Sub-Committee considered and delegated authority to the Town Clerk to approve a report of the City Surveyor which requested approval for funding for further surveys as part of the Poultry Market major repairs project.

16. EMERGENCY SERVICES MOBILE COMMUNICATIONS PROGRAMME (ESMCP) - ISSUE REPORT (GATEWAY 2) The Sub-Committee considered and approved a report of the Commissioner of the City of London Police which sought approval for spend in a number of areas in relation to the Emergency Services Mobile Communications Programme project.

17. CUSTODY, CASE FILE, CRIME AND INTELLIGENCE (CCCI) PROJECT - GATEWAY 5 AUTHORITY TO START WORK The Sub-Committee considered and approved a report of the Commissioner of the City of London Police which sought authority to commence work on the Custody, Case File, Crime and Intelligence Project.

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18. 181 QUEEN VICTORIA STREET - REFURBISHMENT OF BRIDGE HOUSE

AND ADJOINING CAR PARK - ISSUES REPORT (GATEWAY 5) The Sub-Committee considered and approved a report of the City Surveyor which requested additional funding for the project at 181 Queen Victoria Street for the refurbishment of Bridge House and the adjoining car park.

19. TRANSFORMATION OF SHOE LANE LIBRARY - ISSUE REPORT (GATEWAY 2) The Sub-Committee considered and approved a report of the Director of Culture, Heritage and Libraries which requested approval to close down the Transformation of Shoe Lane Library project.

20. CONCERT HALL RIGGING SYSTEM - GATEWAY 7 OUTCOME REPORT The Sub-Committee considered and approved a report of the Managing Director, Barbican Centre which advised of the outcomes of the Concert Hall Rigging System project.

21. BARBICAN CAMPUS PROGRAMME: AMBER AND RED PROJECTS The Sub-Committee noted a report of the Managing Director of the Barbican Centre which summarised all the current building related works and projects across the Barbican and Guildhall School.

22. HIGHWAYS AND PUBLIC REALM PROGRAMME: GREEN, AMBER AND RED PROJECTS The Sub-Committee noted a report of the Director of the Built Environment which provided updated information regarding the current programme of Highways and Public Realm projects. The Chairman provided Members with an update regarding the Aldgate Gyratory Project.

23. ACTION TAKEN BY THE TOWN CLERK UNDER DELEGATED AUTHORITY OR URGENCY PROCEDURES The Sub-Committee noted a report of the Town Clerk which provided information of action taken under delegated authority or urgency procedures since the last meeting.

24. QUESTIONS ON MATTERS RELATING TO THE WORK OF THE COMMITTEE There were no questions.

25. ANY OTHER BUSINESS THAT THE CHAIRMAN CONSIDERS URGENT AND WHICH THE COMMITTEE AGREE SHOULD BE CONSIDERED WHILST THE PUBLIC ARE EXCLUDED The Town Clerk advised that there were five items of urgent business.

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a) Renewal general electrical and dimmer installation Silk Street Theatre

The Sub-Committee considered and approved a report of the Principal of the Guildhall School of Music and Drama which sought delegated authority for a decision to be taken during the Summer recess regarding the renewal of general electrics and dimmer installation of Silk Street Theatre. b) City of London School for Girls, Refurbishment Project, Phase 1 -

Amendment to Project Costs The Sub-Committee considered and approved a report of Headteacher of the City of London School for Girls which requested approval for additional funding for the City of London School for Girls’ Summer Works Programme. c) City of London Freemen's School Swimming Pool - Approval -

Gateway 5 Authority to Start Work The Sub-Committee considered and approved a report of the City Surveyor which sought approval to commence work on the City of London Freemen’s School Swimming Pool project. d) New lease of 21 New Street for the City of London Police and

collaboration agreement for redevelopment The Sub-Committee considered and approved a joint report of the Chamberlain, the Commissioner of the City of London Police and the City Surveyor which sought approval for the terms of a new lease of 21 New Street for the City of London Police and a collaboration agreement for redevelopment. e) Guildhall West Wing North Staircase Window Repairs The Sub-Committee considered a verbal report from the City Surveyor regarding proposals for the repair of the Guildhall West Wing (North End) Staircase windows. The Sub-Committee agreed to delegate authority to the Town Clerk to consider the matter.

The meeting closed at 11.55 am

Chairman Contact Officer: Chris Braithwaite tel.no.: 020 7332 1427 [email protected]

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Gateway Approval ProcessThe procedure applies to projects that result in tangible, physical deliverables (including IS projects) in the following categories.

Capital and Supplementary Revenue projects (including those within agreed strategies) >£50kRoutine Revenue projects >£250k

Capital and Supplementary Revenue projects delivered with ringfenced funds >£250k

Version 2.1 - May 2014

0. Project included in business plan

Spending Committee

1. Authority to submit Project Proposal

Chief OfficerCorporate Projects Board

2. Project ProposalProjects Sub-Committee

(Chairman & Deputy Chairman Spending Committee to be invited)

3. Outline Options AppraisalSpending Committee

Projects Sub-Committee

3/4. Options AppraisalSpending Committee


4. Detailed Options AppraisalSpending Committee


4b. Approval of the Court of Common Council(Projects over £5m)

4b. Approval of the Court of Common Council(Projects over £5m)

4c. Detailed DesignLevel of approval required to be determined at Detailed Options

Appraisal stage

7. Outcome ReportSpending Committee






5. Authority to Start Work(Includes tender report as

necessary)Spending Committee



necessary)Chief Officer


necessary)Chief Officer

6. Progress ReportChief Officer*

6. Progress ReportSpending Committee*

6. Progress ReportChief Officer*

4a. Inclusion in the Capital Programme (if unallocated City

resources required)Resource Allocation Sub-Committee

Policy and Resources Committee







RegularComplex Light

* Projects Sub Committee regularly reviews the whole progeramme of projects

Low Medium High

Under £250k Light Light Regular

£250k - £5m Regular Regular Complex

Over£5m Regular Complex Complex

Cost

Risk

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Agenda Item 4


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Committee(s): Date(s):

Projects Sub-Committee Policy and Resources Committee Establishment Committee – for information Corporate Asset Sub-Committee – for information

7 September 2016 8 September 2016 16 September 2016 23 September 2016

Subject: Accommodation and Ways of Working Public

Report of: Town Clerk For Decision

Summary

The City Corporation is a modern employer and wherever possible the work-styles and culture within the organisation have kept pace with changes both in the public and private sectors. The current position is, however, typified by Departmental working with staff performance management often focused on inputs and presenteeism. We also have an inefficient utilisation of our office spaces with a high desk to staff ratio of 1.1 which does not support modern approaches to interaction and team working. This programme aims to modernise working practices, based around the needs of our internal and external customers, optimise our buildings and facilities to provide focus for improvements to our business processes, skills and assets as well as positively enhance the Wellbeing of our staff. It is planned to introduce a pilot model office, for DBE and some Open Spaces staff on the 1st Floor of Guildhall North Block from October 2016. This will pilot the new ways of working, including accommodation changes and greater agile working enabled through IT. This experience will inform the development of the overall options and business case for the widespread programme of change envisaged. This programme will be a core enabler and trigger to starting an organisation transformation of Culture. It will also enable the rationalisation and commercial letting opportunities identified from the Operational Property Recommendations Projects Sub Committee

Approve the project to progress to Gateway 3 - Outline Options Appraisal


note the report and the implications for the Guildhall Complex Establishment Committee

Note to Accommodation and New Ways of Working Programme and the implications for the City of London Corporation Workforce

Corporate Asset Sub Committee (CASC)

Note the Accommodation and New Ways of Working Programme and the implications for improving the efficiency and effectiveness of the Corporation’s operational property. Particularly in relation to the potential to release Irish Chamber and Walbrook Wharf.

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Agenda Item 5

Main Report

Background 1. The City Corporation is a modern employer and wherever possible the work-

styles and culture within the organisation have kept pace with changes both in the public and private sectors. The current position is, however, typified by Departmental silo working with staff performance management often focused on inputs and presenteeism. The City Corporation culture and ways of working needs to keep pace with what is now standard practice for large successful organisations that successfully focus on outcomes and customer need, delivering joined up services and with whom we compete with to recruit and retain quality staff. We also have an inefficient utilisation of our office spaces with a high desk to staff ratio of 1.1 which does not support modern approaches to interaction and team working.

2. This programme will be a core enabler and trigger to starting an organisation

transformation of Culture, focused on Pride, Passion, Pace and Professionalism, with business processes orientated around achieving excellent outcomes for our customers, with the current culture of Departmental Silos and resistance to change overcome within the overall Transformation Programme. It will create the foundation for a culture that embraces continuous improvement, best practice and flexibility with performance measured through outcomes and delivery – with work styles and the tools to support these clearly defined.

3. The Chief Officers Summit Group, recognising the significance of these issues

agreed to the commencement of an Accommodation and Ways of Working project earlier this year. Initial start-up funding of £145k from the Transformation Fund and additional local risk contributions of £10k each from pilot Departments DBE and Open Spaces have enabled external expertise to be commissioned to progress the programme including preparations for introducing a model office.

4. As stated above, the City Corporation is a forward looking organisation and has

made some significant investments in improving the workplace and facilities provided over the last two decades through the Guildhall Improvement projects. This investment in the fabric of our central buildings is an enabler for the City Corporation to now embark on a significant cultural change programme. The need for this programme reflects the importance of keeping relative pace with the significant changes in the work environment, expectations of a modern workforce and stakeholders and a focus on transforming the organisational culture of the City Corporation.

Operational Property Review 5. This programme will be interdependent with the operational property review,

ensuring that identified benefits of running cost savings and rental income generation initially estimated at £1.6m per year from that project can be achieved through new ways of working. This will be through rationalisation and commercial letting opportunities enabled by staff vacating Walbrook Wharf front

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offices and Irish Chambers and moving into a more intensively utilised Guildhall Complex.

Project Description 6. The programme will create the environment that will enable a significant cultural

change through the introduction of ways of working and work spaces that break away from our traditional desk based silos. The project will encourage greater collaboration, co-creation, improved productivity and health benefits for staff with services focused around our customers whether they are internal or external. It will;

Clarify our services and how best we can deliver these through improving how we work individually, in our teams and collaboratively with others

Establish a set of worker styles that support the culture and ways of working

Identify changes to process, policy, technology, design and use of space and facilities

7. There are significant opportunities to improve services and we would like to

create a business case describing these benefits, both to staff, customers and the bottom line of costs. The project will involve:-

Introduce a flexible and agile work environment supporting new ways of working

Increase mobile technology and decrease fixed desk devices based on role and functional needs

Rationalisation of operational property – achieved through increased density of staff occupation

Reduced sickness levels and loss of productivity through presenteeism

Training for managers in HR policy and work practices that support new ways of delivering outcomes

Pilot Model Office 8. It is planned to introduce a pilot model office, for DBE and some Open Spaces

staff on the 1st Floor of Guildhall North Block from October 2016. This will pilot the new ways of working, including accommodation changes and greater agile working enabled through IT. This experience will inform the development of the overall options and business case for the widespread programme of change envisaged. Diversity and inclusion staff networks are being closely consulted in the design of the model office as it will be an ideal opportunity to trial improvements in equipment and working practices that support staff wellbeing. The pilot model office will also enable to vacation of Open Spaces staff from the Irish Chambers.

9. As preparation for this change, a corporate wide de-clutter campaign

commenced in July, championing good housekeeping of both electronic and paper records, with an aim of reducing the retention of unnecessary records. Member will be aware of the increasing IT costs associated with electronic record keeping.

10. A range of options for introducing this pilot office are currently being considered

and costed for which further funding will be necessary. Depending on the

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recommended pilot option, quantum and nature of costs (revenue or capital) funding to implement the model office is to be sought from Members in October 2016 if approved in order to maintain the momentum of the change programme.

Conclusion 11. This programme will enable the Corporation to keep relative pace with the

significant changes in the work environment, expectations of a modern workforce and stakeholders.

12. This programme will be a core enabler and trigger to starting an organisation

transformation of Culture. It will create the foundation that embraces continuous improvement, best practice and flexibility with performance measured through outcomes and delivery – with work styles and the tools to support these clearly defined. It will also enable the rationalisation and commercial letting opportunities identified from the Operational Property Review.

Appendices Appendix 1 – Accommodation and Ways of Working – Gateway 1 / 2 Report Appendix 2 – Accommodation and Ways of Working – Vision and Objectives Paul Nagle Head of Finance – Projects T: 0207 332 1277 E: [email protected]

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APPENDIX 1

Committees: Dates:

Projects Sub-Committee – for decision Policy and Resources Committee – for information Establishment Committee – for information Corporate Asset Sub-Committee – for information

7 September 2016 8 September 2016 16 September 2016 23 September 2016

Subject: Accommodation and Ways of Working

Gateway 1&2 Project Proposal: Complex

Public

Report of: Town Clerk

For Decision

Report Author: Paul Nagle, Chamberlain’s Department

Recommendations

1. Approval track and next Gateway

Approval track: 1. Complex

Next Gateway: Gateway 3 - Outline Options Appraisal (Complex)

2. Resource requirements to reach next Gateway

Item Reason Funds/ Source of Funding

Cost (£)

Programme Change Manager

Leadership and co-ordination, senior officer engagement – 6 months – av 2-3 days per week - £800 per day

Transformation Fund

£45,000

Space Planning and New Ways of Working consultant

Development of business case, space options, advice on implementation

£20k – Local Risk c’fwd funding, remainder Transformation Fund.

£60,000

2 Business Analyst – (ideally one be in-house secondment – covered by backfill cost)

Internal communication, project office, - 6 months

Transformation Fund.

£60,000

3. Next steps Oct 16 – Gateway 3 – Outline Options (options for implementing Model Office – including any additional funding if required)

Oct/Nov 16 – implemented Model office if approved

Dec 16 - Develop success criteria and lessons learned based on pilots for an overall programme

Jan 17 - Produce Gateway 4 Detailed Options Appraisal

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Project Summary

4. Context This programme aims to modernise working practices, based around the needs of our internal and external customers, optimise our buildings and facilities to provide focus for improvements to our business processes, skills and assets as well as positively enhance the Wellbeing of our staff. The City of London Corporation work-styles and culture, is typified by Departmental working with staff performance management often focused on inputs and presenteeism. We also have an inefficient utilisation of our office spaces with a high desk to staff ratio of 1.1 which does not support modern approaches to interaction and team working. The City Corporation culture and ways of working needs to keep pace with what is now standard practice for large successful organisations that successfully focus on outcomes and customer need, delivering joined up services and with whom we compete with to recruit and retain quality staff. This programme will be a core enabler and trigger to starting an organisation transformation of Culture, focused on Pride, Passion, Pace and Professionalism, with business processes orientated around achieving excellent outcomes for our customers, with the current culture of Departmental working overcome within the overall Transformation Programme. It will create the foundation for a culture that embraces continuous improvement, best practice and flexibility with performance measured through outcomes and delivery – with work styles and the tools to support these clearly defined. It will provide opportunities to breakdown Departmental silos and encourage Cross-Departmental working and interaction to achieve better outcomes for our customers. This programme will be interdependent with the operational property

review, ensuring that identified benefits of running cost savings and rental income generation initially estimated at £1.6m per year from that project can be achieved through new ways of working. This will be through rationalisation and commercial letting opportunities enabled by staff vacating Walbrook Wharf front offices and Irish Chambers and moving into a more intensively utilised Guildhall Complex.

5. Brief description of project

The programme will create the environment that will enable a significant cultural change through the introduction of ways of working and work spaces that break away from our traditional desk based silos. The project will encourage greater collaboration, co-creation, improved productivity and health benefits for staff with services focused around our customers whether they are internal or external. It will;

Clarify our services and how best we can deliver these through improving how we work individually, in our teams

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and collaboratively with others

Establish a set of worker styles that support the culture and ways of working

Identify changes to process, policy, technology, design and use of space and facilities

There are significant opportunities to improve services and we would like to create a business case describing these benefits, both to staff, customers and the bottom line of costs. The project will involve:-

Introduce a flexible and agile work environment supporting new ways of working

Increase mobile technology and decrease fixed desk devices based on role and functional needs

Rationalisation of operational property – achieved through increased density of staff occupation

Reduced sickness levels and loss of productivity through presenteeism

Training for managers in HR policy and work practices that support new ways of delivering outcomes

6. Consequences if project not approved

Opportunity to enable organisational wide transformation through the adoption of modern ways of working not progressed resulting in underachievement of City of London Corporation ambition.

Do not meet the needs, expectations and demands of an increasingly modern workforce resulting in increasing difficulty in the recruitment and retention of staff

Opportunity to improve efficiency in the use of time & resources in programming internal staff moves not realised.

Status quo maintained on sickness absence levels and presenteeism

Gap between current and future technology and methods of working becomes too large to bridge economically

Lack of opportunities to relocate staff out of Walbrook Wharf, Irish Chambers and Guildhall Justice Rooms.

7. Success criteria More agile and resilient services

Increased productivity and reduced sickness absence levels

More motivated, engaged and positive workforce

Efficiency and collaboration

Improved reputation as an employer

Enhanced working environment for personnel.

Reduced energy needs and carbon footprint

Improved utilisation of Guildhall North and West Wings

Creation of revenue receipts from surplus premises.

8. Notable exclusions

Any of the City of London Police accommodation

Consideration will be given to introducing necessary infrastructure across the remainder of the operational

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portfolio (i.e. offices outside the core Guildhall Complex) at a later date.

9. Governance arrangements

Project Board reporting to Strategic Resources Group, with links to

Spending Committee: Policy and Resources Committee

Senior Responsible Officer: Simon Murrells, Assistant Town Clerk

Project Board: Yes

Prioritisation

10. Link to Strategic Aims

1. To support and promote The City as the world leader in international finance and business services

11. Links to existing strategies, programmes and projects

This proposal would assist all departments with Service Based Review aims and targets.

Joint Contact and Control Centre

One Safe City initiative

IT digitisation and Flexible Working Review

IT – Unified Communications

End User Device Renewal

Joint Network Refresh Programme

HR Wellbeing Project

Guildhall Justice Rooms Redevelopment Project

Strategic Energy Review

12. Project category 3a. Spend to save

13. Project priority A. Essential

Options Appraisal

14. Overview of options

i) Do Nothing - This option continues the current inefficient use of our office space compared to modern practices and limits opportunities to progress future Guildhall Justice Rooms and Walbrook Wharf potential redevelopment options. ii) Retain the existing layout and furniture, with increased agile working – Applying a simple 8 desks to 10 staff ratio to the existing desks gives a maximum capacity of circa 1,500 staff (located in North and West Wings, 65 Basinghall Street and Irish Chambers). However, this approach would not provide the ancillary space required to support additional staff in higher densities and would not achieve all the success criteria in terms of cultural change and the benefits from adopting an enhanced working healthy positive environment for personnel.

Page 16

iii) Adopt full modern new ways of working - implementing new office layouts and furniture, agile working IT, with the purpose of optimising the space, increasing staff densities enhancing wellbeing and adopting new ways of working. The Model Office pilot will look at a range of options between ii) and iii) which will be developed for Gateway 4.

Project Planning

15. Programme and key dates

Overall programme: Propose phased through 2016 - 2018

Key dates:

October 2016 - Model Office established

January 2017 - Development of Detailed Business Case 2016 – (Gateway 4)

Other works dates to coordinate:

Timing of the Joint Network Refresh, End User Device Replacement because these projects are necessary to provide improved IT infrastructure that will support Agile working.

16. Risk implications Overall project risk: Amber

IT readiness and capability to provide the infrastructure and support new ways of working in a manner which is high performing, available, scalable and secure

Insufficient space for all staff in scope of accommodation changes

Insufficient capacity within business areas to support programme activities delaying implementation or resulting in reduced benefits

Staff do not embrace changes in ways of working resulting in negligible changes in culture

Changes to working practices negatively impact service delivery

17. Stakeholders and consultees

Chief Officers

Wider staff consultation

Trade Unions

Resource Implications

18. Total estimated cost

Likely cost range: Estimated based on experience for an organisation of this size, although this programme would only cover incremental costs for IT required and outside of the scope of existing IT Programmes.

Page 17

3. £5m+

19. Stage 1 – initial expert advice on implementation, office planning options and costs

Stage 2 – implementation of model office and development of detailed business case so can progress to Gateway 4.

Funds/Sources of Funding Cost (£)

Local risk contributions from DBE - £10k, Open Spaces - £10k

20,000

Transformation Fund 145,000

Total 165,000

20. On-going revenue implications

A significant financial benefit of the proposal is to reduce revenue costs by operating from a smaller estate (as identified from the operational property review) and to minimise wastage and improve the efficiency of operations through improved processes and ways of working as well as reducing cost from sickness absence and presenteeism.

21. Investment appraisal

A business case appraisal will be run balancing the estimated costs of investment against lower running costs and potential income and capital creation from released operational assets and other financial benefits.

22. Procurement strategy/Route to Market

A soft market testing and procurement exercise has been undertaken to research the costs of using an external companies and consultants to develop the project and provide space planning advice.

An external Progamme Change Manager with experience and skills in delivering similar programmes in other organisations has been procured to deliver the first phase of the project on a 6 month fixed contract at a rate of £800 per day.

A programme space management consultancy to support in the identification of best practice solutions, advising on the benefits of the proposal as well as the cost, alongside other issues to be considered such as M&E upgrade requirements and IT solutions has been contracted initially for £30k. Further work may be contracted to assist in the development of the work space designs.

Appointment of the two business analysts would be via internal and external advertising. Ideally one of the business analysts would be via an internal secondment.

23. Legal implications

Potential HR/contract issues, Minimum space requirements under the Workplace (Health, Safety and Welfare) Regulations 1992.

24. Corporate property

In the context of modern working environments and the Service Based Review it is essential to ensure that we are optimising

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implications our central corporate assets. Furthermore industry claims suggest that staff retention and productivity are enhanced if more flexible working is adopted; however, there must be the appropriate associated infrastructure including sufficient break out spaces, quiet spaces, meeting rooms and personal lockers.

The proposal must be supported fully by appropriate IT infrastructure and mechanical and electrical capability; existing capacities will be reviewed and options to grade to the necessary levels will be put forward.

Chief Officer support and lead will be vital in relation to potential staff resistance to changes in new ways of working.

25. Traffic implications

Increased deliveries / activities at Guildhall Complex will need to be managed.

26. Sustainability and energy implications

Energy consumption likely to increase at Guildhall Complex, but CoL cost will be offset by reduced consumption at other sites if vacated, redeveloped or sold. The Strategic Energy Review and the upcoming Energy Efficiency Fund may prioritise work differently as a result of the Accommodation and Ways of Working Programme.

27. IT implications Significant IT infrastructure investment / enhancement is already an identified requirement across the organisation.

Chamberlain’s IT Division have partly completed network upgrades to allow some agile working and are challenging the existing ‘one desk, one fixed computer terminal culture’ when dealing with new requests.

This project links to the End User Device Renewal and Joint Network Refresh Programmes. Because these projects will enhance IT capability to support agile working. These and further upgrades to infrastructure, IT equipment and telephony will be considered in conjunction with physical space and new ways of working outlined in this report. Progress on these workstreams will be a key dependency for this change programme.

28. Equality Impact Assessment

An equality impact assessment will be undertaken

Contact

Report Author Paul Nagle

Email Address [email protected]

Telephone Number 020 7332 1277

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mailto:[email protected]


Page 20

City

of

Lon

do

n The vision

1

“We will create a modern working environment that

engages people and supports effective outcomes”

Modern Engaging Effective

Appendix 2

Page 21

City

of

Lon

do

nObjectives: Modern Engaging Effective Working patterns to meet internal and external

needs

� Improved service delivery � The ability to work anywhere � Flexible, agile working � Improved physical and virtual collaboration and innovation

� Fewer formal meetings

� � �

Improved staff management focused on

outputs

� Supported staff, who know where to get effective help and guidance

� Improved work life balance

� � �

Enhanced working environment

� Flexible working environments � Increased use of mobile technology � Having the correct equipment for the role � Co-location of related services � Best practice

� � �

Attracting and retaining staff

� Staff retention / lower sickness rates � Improved staff wellbeing

� � Make best use of our property assets

� Rationalisation of operational property portfolio

� Lower running costs / release funds

�

Improve our environmental impact

� Reduced carbon footprint � Reduced travelling

� � Improved business resilience

� �

The objectives

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Committees: Dates:

Projects Sub-Committee 07 September 2016

Subject: Gutter Lane Area Improvements (S278)

Gateway 1&2 Project Proposal Light

Public

Report of: Director of the Built Environment

For Decision

Report Author: Emmanuel Ojugo

Recommendations


Approval track: 3. Light

Next Gateway: Gateway 5 - Authority to Start Work (Light)


Item Note Funding

Source Costs (£)

Staff Costs

Design Management Consultation/ Communications and Risk/ Programme Management/Reporting

S278 15,000

Fees Inclusive of Feasibility and site condition appraisals. Design Development and materials for stakeholder consultation

S278 17,500

TOTAL 32,500

3. Next steps 1. Site Condition Appraisal/Feasibility

2. Stakeholder engagement/consultation

3. Design Development

4. Cost estimating

5. Draft of Gateway 5 Report

Project Summary

4. Context 4.1. On 18 February 2016, planning approval was granted for the refurbishment of Abacus House, 33 Gutter Lane. Works include changing part of ground floor from retail to office space, with further changes to the rear courtyard area to provide additional cycle parking. Other proposals include planting and surface treatment in conjunction with a revised servicing strategy to relocate waste servicing currently carried out from Gutter Lane. In order to deliver the public benefit of the widened link between Foster Lane and Gutter Lane, on street waste collection will now take place direct from a refuse chamber located on Carey Lane.

4.2. These changes are possible due to the planned removal of an extended section of perimeter railing which delineate between public and private areas extending from Priest’s Court and flanking a section of Rose & Crown Court, thereby increasing pedestrian access. This

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Agenda Item 6

action will have the effect of opening up the area to the public which is currently narrow, uninviting and unkempt largely due to its partially hidden location, localised ponding issues and accumulation of bicycles which are often strapped to perimeter gates. Some sections of alleyway are currently used as ad-hoc storage. Please see Appendix 1: Site Location Plan, and Appendix 2: Existing Site Images.

4.3. The developer recently approached the City of London to carry out improvements in the vicinity of Abacus House to tie in with the Abacus House refurbishment programme. The developer has expressed a desire to enter into a voluntary Section 278 to fully fund local public realm improvements. The refurbishment of Abacus House is expected to be completed by June 2017.

4.4. Members should note there are sections of private land which the developer will make accessible to pedestrians by removing a large section of perimeter railings.

4.5. The developer will fully fund and implement improvement works in the private areas to seamlessly tie in with the public areas.


5.1. It is proposed to create a brighter more welcoming space by working with the developer of Abacus House to increase the space accessible to members of the public within the vicinity of the building. Streets include Gutter Lane, Carey Lane, Priest’s Court and Rose & Crown Court,

5.2. Improvements will include:

Resurfacing local footways in Yorkstone, replacing old damaged slabs that are no longer within the City’s Specification.

Providing opportunities for seating.

Avoiding opportunities for skate-boarding.

Introducing additional planting opportunities.

Upgrade of existing lighting units to modern efficient LEDs.


6.1. Whilst there are no detrimental effects of not carrying out improvements in the area; an opportunity would certainly be lost to fund local public realm improvements in an area within close proximity of Cheapside and Foster Lane.

6.2. It is also worth noting that the area in question falls within the approved Cheapside and Guildhall Area Enhancement Strategy Area which encourages the improvement of north-south and east-west walking routes. See Appendix 3 showing approved planning proposals, which are envisaged to encourage increased pedestrian movement along Priest’s Court.

Widening footways, improving/increasing greenery and providing quiet spaces for people to rest.

Creating attractive accessible spaces away from busy main streets and pollution.

7. Success criteria

7.1. Creation of attractive and accessible walking routes that are easy to navigate and accommodate future growth in pedestrian numbers. The route is well used by patrons of the restaurants adjacent to the

Page 24

alleyways.

7.2. Increase the amount of local greenery contributing to local biodiversity.

7.3. Upgrade lighting coverage by replacing outdated units with modern efficient LEDs to improve safety perception.

7.4. Reduce maintenance costs through a simplified design that improves drainage and includes the replacement of damaged paving with the more robust Scoutmoor Yorkstone that is part of the City of London’s approved palette of materials.


8.1. Works to private areas do not form part of the City of London’s scope of works.


Spending Committee: Streets and Walkways Sub-Committee

Senior Responsible Officer: Clarisse Tavin

Project Board: No

Prioritisation


1. To support and promote The City as the world leader in international finance and business services


The site is located within the Cheapside & Guildhall Area Enhancement Strategy.

12. Project category

4a. Fully reimbursable

13. Project priority

B. Advisable

Options Appraisal


There is a single option to effect improvements in the vicinity of Abacus House with a voluntary funding contribution from the developer of the building.

Project Planning


Overall programme:

Indicative programme dates are below, however as the project is largely dependent on the developer’s programme, these key milestone dates could change. An updated programme will be provided at the

Page 25

next gateway and in regular Project Vision reporting.

Gateway 5 – Authority to Start Work – Quarter 3 - 2016/17

Gateway 7 - Outcome Report - Quarter 2 – 2017/18

Key dates: Implementation on site Quarter 4 16/17

Other works dates to coordinate: Completion of Improvement Works Construction Design Package – Quarter 1 – 2017/18

16. Risk implications

Overall project risk: Green

Stakeholder support for scheme is not forthcoming

Site conditions prove prohibitive to additional planting

Funding is not in place in a timely fashion to initiate scheme ( in which case the scheme will not proceed)


Internal City departments

Local occupiers

Ward Members

Emergency Services



Likely cost range:

1. Under £250k

19. Funding strategy

No funding confirmed External - Funded wholly by contributions from external third parties

Funds/Sources of Funding Cost (£)

Developer of Abacus House S278 £125-250K

The developer has expressed a desire to enter into a voluntary S278 with the City to fully fund area improvements around their building. Following Member approval, officers will commence S278 negotiations.

At present outline costs are being assessed for inclusion in proposed S278 documentation. This documentation is expected to be concluded by October 2016.

Funding will be confirmed at the next Gateway followed by regular reporting updates in Project Vision.


To be fully confirmed at the next Gateway


NA

Page 26


Procurement of consultants will be in accordance with the Corporation’s processes.

Delivery of works in public areas will be undertaken by the City’s Highway Term Contractor.


Legal advice is required to enter into a Section 278 with the developer of Abacus House.

24. Corporate property implications

None envisaged at this stage


None are envisaged, although some temporary arrangements may be in place to facilitate the improvement works.


None

27. IS implications

None


An equality impact assessment will be undertaken

Appendices

Appendix 1 Site Location Plan

Appendix 2 Existing Images

Appendix 3 Approved Planning Proposals

Contact

Report Author Emmanuel Ojugo



Page 27


Appendix 1: Site Location Plan

Page 28

Appendix 2: Existing Site Images

View Looking West from Gutter Lane

Abacus House, 33 Gutter Lane

Page 29

Rose & Crown Court

Priest’s Court

Page 30

Appendix 3: Approved Planning Proposals

Existing

Proposed

Page 31


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Committees: Dates:

Projects Sub-Committee Planning and Transportation Committee (For Information) Culture, Heritage and Libraries (For Information)

07 September 2016 13 September 2016 24 September 2016

Subject: Tower Bridge – Replacement of Heating System Serving the High Level Walkways and Towers

Gateway 1&2 Project Proposal Regular

Public

Report of: Director of Culture Heritage and Libraries

For Decision

Report Author: Jamie Bottono, Operations Manager, Tower Bridge, Culture Heritage and Libraries

Recommendations


Approval track: 2. Regular

Next Gateway: Gateway 3/4 - Options Appraisal (Regular)


Item Reason Cost (£) Funding Source

Appoint consultant

To identify options and progress outline designs

£10,000 Bridge House Estates 50 Year Plan

3. Next steps Employ consultant to provide a detailed brief and outline costs/ designs for options appraisal.

Project Summary

4. Context The Bridge House Estates 50 Year Maintenance Plan for 2017/18 includes provision to replace the heating distribution system at Tower Bridge.

Parts of the heating system, including the control panels, are 32 years old and have reached the end of their recommended life. The boilers and flues were installed approximately 10 years ago, however, they are inefficient by modern standards and there are a number of performance and under-capacity issues.

In 2013 there was a requirement to improve the heating in the walkways and the local ceiling mounted electric radiant heaters were replaced with hot water radiators connected to the

Page 33

Agenda Item 7

heating system. However, due to the existing systems not having the capacity to heat all areas concurrently it is necessary to have a daytime and evening setting to divert the majority of the heating to the occupied areas i.e. public spaces/ towers during the day and event spaces/ under floor heating during the evening.

In addition, there have been regular boiler faults and lock-outs resulting in a number of instances of under-heating or total loss of heating to some or all areas of the Bridge during the winter period. The four boilers (two in each tower) only have the capacity and functionality to heat one tower or one walkway and in the event of a fault it is not currently possible to provide heating to the affected areas.

In these circumstances electric heaters have to be sourced on extended hire as a ‘back up’ to provide additional heating where needed in the towers and walkways.


This project is for the replacement of the heating distribution system which is identified in the Bridge House Estates 50 Year Plan for 2017/18. A number of options need to be further investigated and considered in consultation with the City Surveyor’s Department and Department of the Built Environment.


The heat losses to the walkways can be excessive due to lack of insulation (which is currently being addressed through another project to replace the walkway roof coverings) and the nature of the steel structure (high thermal transmittance). The temperature of the heating in the towers is kept low as the current system includes underfloor heating and is therefore limited to maintain structural integrity.

The low reliability and lack of resilience of the current set up results in an inefficient and unreliable system prone to breakdowns resulting in loss of heating to public spaces which leads to dissatisfied visitors/ clients and staff.

This project also has the potential to reduce on-going maintenance costs due to a lower level of calls to attend to breakdowns.

7. Success criteria Improved environmental conditions in both towers and the walkways for staff, paying visitors and event clients.

Reduced breakdowns and additional costs incurred replacing boiler parts etc.

Improved resilience and reliability.


This project is for the towers and high level walkways only and heating for other parts of the asset are not being considered.

9. Governance Spending Committee: Planning and Transportation

Page 34

arrangements Senior Responsible Officer: Chris Earlie, Head of Tower Bridge

Project Board: No

Prioritisation


SA2: To provide modern, efficient and high quality local service and policing within The Square Mile for workers, residents and visitors with a view to delivering sustainable outcomes.

SA3: To provide valued services to London and the nation


S2 City Destination: To transform the sense of The City as a destination

12. Project category 7a. Asset enhancement/improvement (capital)

13. Project priority B. Advisable

Options Appraisal


1) Do Nothing – the current system is functional but limited as explained above in relation to both capacity and flexibility.

2) Defer the entire project – the proposal is for the works to be completed over the summer period of 2017 but an option could be to defer until later.

3) Provide Additional Local Supplementary Electric Heating – the current system will still be unreliable and additional heating will require works to increase existing electricity capacity to deal with the extra loading.

4) Upgrade Low Pressure Hot Water Plant, Controls and Emitters – consultant to investigate and advise as part of their remit.

5) Remove existing Low Pressure Hot Water Plant and replace with air or water source heat pump system – consultant to investigate and advise as part of their remit.

Project Planning


Overall programme:

Key dates:

Gateway Report 1/ 2 to Projects Committee – 7th September

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2016

Appoint Consultant Service Engineer - October 2016

Gateway 3/ 4 Options Appraisal – 17th February 2017

16. Risk implications Overall project risk: Green

Delays obtaining statutory consents.

Conditions Imposed by statutory consents.


Culture, Heritage and Libraries, Chamberlain’s, City Surveyor’s, Built Environment, Comptroller and Solicitor’s, Tower Hamlets/ Southwark planners, Heritage England



2. £250k to £5m

Likely cost range: Up to £500,000

19. Funding strategy These works are identified in the Planning and Transportation Committee’s Bridge House Estates 50 year Plan for 2017/ 18.


The proposed works will result in a reduction in expenditure on repairs and maintenance in the medium and long term.

The works will be programmed so as not to impact on income generation and allow for the exhibition and events business to operate as normal.


Not applicable.

22. Procurement strategy

The project will be progressed with the City Surveyor’s Department and be considered by the Tower Bridge Steering Group to procure Tower Bridge projects in an efficient and effective manner. The option to add this to other identified projects such as the Walkway Roof Insulation Works will therefore be investigated.

Works

The work required can be classified as falling within the definition of works according to Public Contracts Regulations 2015.

The reported likely cost range places the value of the work below the EU Works threshold. Where the opportunity to undertake procurement by combining with another project is not available the procurement route to market options at this contract value include:

a. Advertised competition, b. Construction Framework, c. Existing CoL minor works framework

Page 36

The optimum route to market, procurement method and form of contract remains to be agreed in consultation with City Surveyor’s Department, and Controller.

Consultant Appointment

Consultant fees for a project of this value to completion can be estimated as falling under both the EU Services threshold and the Corporations requirement to advertise. The optimum procurement route will be sought from either:

a. Project consultant framework, b. Request for quotation

The initial appointment at Gateway 1/ 2 will include an option to extend to deliver subsequent stages of the project subject to committee approval.


Not applicable.


Not applicable.


Not applicable.


The new plant will be more efficient using comparatively less fuel. Any likely reduction has not been quantified but will be assessed as part of the project.

27. IT implications Not applicable.


Tower Bridge is committed to achieving equality and diversity in accordance with the City of London Equality Scheme and as such welcomes visitors and clients from London, the United Kingdom and overseas whilst eliminating any forms of discrimination.

Equality Impact Assessments are carried out for any new of significantly changed policies - there is no significant equality impact expected from the completion of this project.

Contact

Report Author Jamie Bottono



Page 37


Page 38

Committees: Dates:


Subject: Petticoat Tower Stairwell Panels

Gateway 1&2 Project Proposal Regular

Public

Report of: Director of Community & Children's Services

For Decision

Report Author: Jason Crawford, Asset Programme Manager, Property Services, Community & Children’s Services

Recommendations


Approval track: 2. Regular

Next Gateway: Gateway 3/4 - Options Appraisal (Regular)


A consultant will need to be appointed to draw up and cost options for repairing, or replacing the existing window panels on the stairwell in Petticoat Tower. £10,000

Officer time to prepare briefs, seek fee tenders and consultant liaison will be required. £2,000

Total estimated costs to reach Gateway 3/4 are £12,000

Due to the urgent nature of the works we have raised a priority order for the erection of a scaffolding protection fan at the base of the Petticoat Tower, as well as installation of safety netting to the two elevations where the glass panelling is situated. This amounts to £3,000 and £7,789 respectively.

3. Next steps Appoint Consultant to undertake initial assessments and testing and to assist with overview of options.

Project Summary

4. Context Petticoat Tower, built in 1975 and situated on the Middlesex Street Estate is a 25 storey high rise block containing 88 one-bed and two-bed flats over 23 floors. Of the 88 flats 56 are tenanted 32 are Leasehold.

The tower is serviced by lifts and a communal stairwell which has Pilkington Profilit u-profiled glass panels situated on two elevations giving access to light and ventilation. The panels vary between 2.5 metres and 4 metres in height, and there are 11 panels at each split level landing which equates to a total number of 143 individual glass panels in each elevation, or 286 in total.

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Agenda Item 8

The window panels in the stairwell of Petticoat Tower are nearing the end of their life expectancy and the brackets and fittings which secure the individual panels are starting to show signs of metal fatigue.

The glass panels themselves have had numerous ad hoc repairs and in some places the panels are cracked or are missing altogether, having been removed and replaced with temporary perspex and in some areas wooden boarding in order to make safe.

The surrounding concrete against which the brackets are housed is also showing signs of wear and tear due to weathering and structural vibration caused by wind movement. In some places the brackets which secure the glass panels are now also beginning to work loose.

Schedules of photographs are included at appendix 1.

Due to significant concerns around safety for residents, staff and visitors if any components fail, a works order was raised for erection of a scaffolding protective fan above the communal entrance & lower level walkways of the tower as well as installation of safety netting to the two elevations to secure and make safe the glass panels.

A stock condition survey is now required in order to assess current safety issues as well as a feasibility study to explore options around on-going repair or replacement options.


Appoint a specialist contractor to undertake assessments and testing of the existing assets.

Schedule a programme of intermediate control activities and emergency repairs, as determined by the level of risk identified.

Assess future options around costs of on-going maintenance and repairs or new options around complete replacement.


Failure of legal duties – the safe maintenance of the facilities supplied by the landlord/freeholder is a prime legal duty.

Reputational damage caused to the City of London by failing to perform legal duty to keep assets in a good state of repair.

The continued deterioration of stairwell window panels which are already at the end of their useful lives and associated on-going costs of maintaining temporary protection (as well as any insurance implications).

Reactive repairs and maintenance spend will increase.

Resident dissatisfaction with The City for failing to maintain communal areas.

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7. Success criteria Assets are effectively maintained, achieving regulatory and statutory compliance.

Reduction in reactive repairs and maintenance spend.

Increased resident satisfaction.


Internal equipment e.g. lifts, handrails, lighting.

Any other works already covered by other projects.


Spending Committee: Community and Children's Services Committee

Senior Responsible Officer: Paul Murtagh

Project Board: No

The project will be monitored through the Housing programme Board

Prioritisation


2. To provide modern, efficient and high quality local services and policing within the Square Mile for workers, residents and visitors with a view to delivering sustainable outcomes


The project will form part of the Asset Management Strategy and associated 30 year plans.

These proposed works will also meet strategic objectives SO1 and SO2 of the Corporate Property Asset Management Strategy 2012/2016 by ensuring that the “assets remain in a good, safe and statutory compliant condition” and the “assets are fit for purpose and meet service delivery needs”.

There is a similar project concerned with the failure of Profilit glazing systems at the Guildhall West Wing. Having consulted with Richard Litherland, Assistant Director in the City Surveyor’s Department it was deemed that, although the projects are similar in nature, they would proceed independently for the following reasons:

The Guildhall Project is already at Gateway 5 and about to commence works on an urgent basis using the COL Minor Works framework.

This arrangement may not be applicable for housing works due to the necessity for leaseholder consultation.

12. Project category 1. Health and safety

13. Project priority A. Essential

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Options Appraisal


Option 1: Continue to assess and test the assets on a regular basis, undertaking ad-hoc repair works in a reactive fashion. However, we note that the costs associated with this option are excessive and the likelihood is that we will be making recommendations around option 2.

Option 2: Explore options around complete replacement with a more modern option, comparing the costs and future maintenance against the likely repair costs of maintaining the existing asset.

Project Planning


Overall programme: September 2016 – September 2018

This timeline is subject to change following further appraisal.

Key dates:

Gateway 1/2 - September 2016

Gateway 3/4 - April 2017

Gateway 5 - October 2017

Works start/complete - April 2018/September 2018

Other works dates to coordinate: The programme will have regard to other projects that affect the wider Estate, including Concrete Testing & Repairs, Redecorations, Petticoat Tower Balcony Door and Windows Replacements.

16. Risk implications Overall project risk: Green

Health and Safety of residents and staff is compromised if assessments, testing and any associated works are not carried out in a timely fashion. However as the project is in the inception stages the current status is Green.


Residents, including leaseholders through Section 20 where they stand to incur service charges.

Departments of Community and Children’s Services, City Surveyor’s, Town Clerks and Chamberlain’s (including CLPS).

London Fire brigade,



Likely cost range:

2. £250k to £5m

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19. Funding strategy The works will be funded from the Housing Revenue Account (HRA) which includes service charge recovery from leaseholders for most works (current proportion circa 30%).

Careful planning will be carried out to ensure the burden on the HRA can be accommodated in the financial years that the works are intended. Such planning extends to ensuring the costs of the works are reasonable for leaseholders to incur.


Future revenue implications will be as per the existing freeholder obligations of repair and maintenance under the conditions of the lease agreements


N/A.


The Procurement for the works will be determined following confirmation of works scope and value.

Advice will be sought from The City of London Procurement Service (CLPS) with regards as to the best procurement method to ensure best value and economies of scale for the project are met.


There is a risk of challenge to the recoverability of the costs of some works items. However, the risk (on health and safety grounds) of not doing the works far outweighs this.


It is important that the City’s assets remain in good, safe and statutory compliant condition. Therefore all necessary action should be taken to ensure that assets are kept as such throughout the assets’ lifetime.


Any traffic implications would be negotiated with the works contractor(s) at the pre-contract and pre-start stages.


There are no known sustainability and energy implications.

27. IS implications N/A.


An equality assessment will be carried out, taking into account the needs of residents which will then be factored into the works delivery plans.

Appendices Appendix 1 - Schedule of photographs; Appendix 2 – Procurement Report

Contact Report Author Jason Crawford



Page 43


Page 44

Gateway 1 & 2 Project Proposal: Petticoat Tower Stairwell Panels Appendix 1 – Schedule of photos External elevations – communal entrance & side / sub level elevation

Page 45

Ad-hoc repairs

Page 46

Fixing brackets working loose and damaged concrete surrounds

Page 47

Cracked panels & debris from smashed panels

Page 48

APPENDIX 2 PT4 - Committee Procurement Report This document is to be used to identify the Procurement Strategy and Purchasing Routes associated with a project and only considers the option recommended on the associated Gateway report. Introduction

Author: Michael Harrington

Project Title: Petticoat Tower Stairwell Panels

Summary of Goods or Services to be sourced The window panels in the stairwell of Petticoat Tower are nearing the end of their life expectancy and the brackets and fittings which secure the individual panels are starting to show signs of metal fatigue.




Contract Duration: TBC Contract Value: £250 - £5million Stakeholder information

Project Lead & Contract Manager: Jason Crawford

Category Manager: Michael Harrington

Lead Department: DCCS - Housing

Other Contact Department

N/A N/A

Specification Overview

Summary of the Specification:




Project Objectives:

Assets are effectively maintained, achieving regulatory and statutory compliance.

Reduction in reactive repairs and maintenance spend.

Increased resident satisfaction.

Customer Requirements

Target completion date September 2018 Target Contract award date April 2018

Are there any time constraints which need to be taken into consideration? None

Efficiencies Target with supporting information

To ensure the City delivers the best quality finish for the best investment possible.

City of London Initiatives

How will the Project meet the City of London’s Obligation to

Adhere to the Corporation Social Responsibility: 10% Will be assigned to responsible procurement.

Take into account the London Living Wage (LLW): Yes

Consideration for Small to Medium Enterprises (SME): Yes – It will be beneficial to the City to Award this contract to an SME as the work is located within one site and logistics will not be an issue.

Other: N/A

Page 49

Procurement Options

Option 1: Below OJEU Tender / Advertise via OJEU.

Advantages to this Option: Advertise via OJEU

Fully clear and transparent process.

Engages with Europe as a whole.

Allows the City to build the specification it requires and work to the timescales it requires. Below OJEU Tender

Allows us to engage with the market as a whole.

Allows the City to build the specification it requires and work to the timescales it requires.

Allows us to engage with SME’s as opposed to using a framework, which stereotypically have larger suppliers appointed to them.

Disadvantages to this Option: Advertise via OJEU

Set timescales within Advertising to Europe, which are unable to be amended.

Tender may be seen as too much of a strain on resources for parties to participate. Below OJEU Tender

Will take longer to engage with the market.

Tender may be seen as too much of a strain on resources for parties to participate.

Please highlight any possible risks associated with this option:

No guarantee of the quality of responses returned.

Responses could possibly be over OJEU threshold.

Option 2: Appoint via a framework supplier

Advantages to this Option:

Quicker engagement with the market.

Pre-vetted suppliers on the framework.

Disadvantages to this Option:

Less engagement with SME’s

Larger Suppliers will subcontract the work as opposed to having employees working directly on the project.

Please highlight any possible risks associated with this option: The quality of the service and works carried out could be lower than expected.

Procurement Recommendation

City Procurement team recommended option

Option 1: Below OJEU Tender / Advertise Via OJEU – The budgets have been well worked and the possibility of an increased budget would require further Committee approval.

Sign Off

Date of Report: 30/08/2016

Reviewed By:

Department:

Reviewed By: Michael Harrington

Department: Chamberlain’s Department

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Committees: Dates:


Subject: Concrete repairs to Cullum Welch House - Further Information Report

Issue Report Public


For Decision

Summary

Project status Green

Project risk Green – low

Programme status Post Gateway 3, Pending project restructure

Timeline Project restructure – September 2016 Complete investigative work – November 2016 Gateway 4 / detailed options appraisal – January 2017 Complete design work/specification – February 2017 Procurement – to Summer 2017 Gateway 5 – Autumn 2017 Works start – Spring 2018

Expenditure to date Concrete testing and make safe – £9,980 Concrete corrosion consultancy fees – £7,800 Architectural fees – £36,150 Structural engineer fees – £18,125 Budget cost plan – £1,950 Total £74,005

Current works estimate

£900,000-£1,800,000

Project budget total £1,050,000-£2,050,000

Last Gateway approved Gateway 3 – Outline Options Appraisal: Concrete testing and repairs at Golden Lane and Middlesex Street Estates was approved by the Community & Children’s Services Committee on 11 July 2014 and the Projects Sub Committee on 22 July 2014. Summary of issue An Issues Report (see Appendix 1) was presented to the Community & Children’s Services Committee on 8 July 2016 and to Projects Sub Committee on 2 July 2016 seeking permission to restructure the scope and associated budget of the project, with works to the Grade II listed Cullum Welch House, due to their complexity and the significant design and heritage hurdles, extracted to form a stand-alone project. The issues report was approved by the Community & Children’s Services Committee. However, Projects Sub Committee required a further report presenting further information to clarify the projected increase in budget requested for Cullum Welch House. This information is presented in the main report below.

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Agenda Item 9

Financial implications These remain unchanged from the previous report, with the exception of the current projected cost for window renewal (if required) expressed as a range rather than an upper limit as potential options (subject to Gateway 4 approval) for renewal may differ considerably in cost. 1. Previous estimates

Description Previous estimates for concrete repair only at Cullum Welch House as per Gateway 3 report – Concrete testing and repairs at Golden Lane and Middlesex Street Estates (July 2014)

Concrete repair £600,000

Fees and staff costs £90,000

Total £690,000

Funding strategy Housing Revenue Account (HRA) with 47% recoverable from leaseholders via service charges

Description Previous estimates for window renewal at Cullum Welch House as per Gateway 2 report –Housing Asset Management Plan (February 2015)

Window renewal £408,525

Fees and staff costs No estimate made at this stage


2. Current estimates

Description Current estimates – concrete repair only



Total £1,050,000


Description Current estimates – concrete repair with window renewal


Window renewal £460,000 - £900,000


Total £1,610,000 - £2,050,000


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Both works and fees costs have increased from the initial estimates reported at Gateway 3. Full explanation of the increase will be presented in section 2 of the report below as requested by this Committee. Recommendations These remain unchanged from the preceding Issues Report.

1) Approve the change in project approach to separate out the works to Cullum Welch House from the wider Golden Lane and Middlesex Street Estates concrete repair project.

2) Note the estimate project budget range of £1,050,000-£2,050,000 for the replacement and repair of concrete elements at Cullum Welch House and the potential inclusion of window renewal. A full options appraisal is to be brought to Committee at Gateway 4.

3) Authorise the transfer of the existing estimated £600,000 works budget and £90,000 fees earmarked for Cullum Welch House from the estimated budget of the wider Golden Lane and Middlesex Street Estates concrete repair project.

4) Retrospectively approve the consultancy fees (design, structural and testing expenditure), totalling £74,005, already spent to reach the current position and allocate them to this project. These fees are currently charged to HRA local revenue.

5) Approve a sum of £28,000, comprised of £26,000 to complete the investigative work to the south elevation and £2,000 staff costs, to reach the next Gateway.

Main Report

1. Issue description 1. Background

Certain externally exposed reinforced concrete elements of the Grade II listed Cullum Welch House at the Golden Lane Estate are showing significant damage caused by reinforcement corrosion.

An external concrete corrosion specialist has recommended the following course of action:

1) The concrete balustrades on the north elevation have reached the end of their safe, useful life and require replacement in full.

2) The concrete elements incorporating planters and pot holders on the south elevation require significant remedial works. The potential to make a long-lasting repair (with a 50-100 year life span) should be investigated as this would prove significantly more economically advantageous than replacement. Replacement of these items would entail the temporary removal of windows and partition of residences while the works are carried out.

3) Stairwells, exposed beams and slab ends suffering from a few localised areas of cracking and spalling should be repaired.

A design team has been appointed. Listed Building Consent for the concrete repairs was obtained on 8 January 2015. Approval to re-appoint the architect to complete the design work as specified

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within the Listed Building Consent was granted by the Finance Committee on 17 November 2015 and the Projects Sub Committee on 1 December 2015. Subsequently, a structural engineer has also been procured to facilitate the production of detailed structural designs to meet further conditions of the Listed Buildings Consent. A cost planning exercise has also been completed.

As stated, further investigation is required to determine whether the concrete elements incorporating planters and pot holders on the south elevation can be effectively repaired or whether replacement is required. A cost planning exercise has identified that a fee of £26,000 should be sufficient to cover intrusive testing and laboratory analysis.

Should the investigation reveal that the replacement of the precast concrete units on the south elevation be required, the adjacent window units will need to be temporarily removed as structural drawings indicate the precast concrete units extend beneath. These windows, and those on the north elevation, are due for replacement or substantial refurbishment in the near future as they approach the end of their useful life. The renewal or refurbishment of windows at Golden Lane Estate are within the Housing Asset Management Plan – 5 Year Programme, as approved by the Projects Sub Committee on 23 February 2015 at Gateway 2.

If the removal of the window units on the south elevation is required to facilitate concrete repairs, it may well be economically advantageous to combine this with the renewal or refurbishment of these windows. A combined approach will also minimise disruption for residents. Any requirement to include the renewal or temporary removal and return of existing windows will be brought to Committee for approval at Gateway 4.

An Issues Report (see Appendix 1) was submitted to Committee requesting authorisation to remove these proposed works to Cullum Welch House from the broader Golden Lane and Middlesex Street Estates concrete repair project, to authorise the further investigative work recommended, and to procure and deliver them as a stand-alone project, restructuring project budgets as appropriate. Once the aforementioned investigative works are complete, a full options appraisal will be brought to Committee for assessment at Gateway 4.

The Issues Report was approved by DCCS Grand Committee on 8th July 2016. However, Projects Sub Committee on 20th July 2016 required a further report presenting further information to clarify the projected increase in budget requested for Cullum Welch House before approving the report. This information requested is presented below.

2. Increase in Works and Fees Cost

A cost planning exercise carried out by a qualified quantity surveyor in April 2016 has indicated that an estimated works budget

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(excluding fees and staff costs) of £900,000 should be sufficient to cover the replacement of the concrete balustrades to the north elevation, repair of the staircases and repairs to the concrete elements incorporating planters on the south elevation. If window removal and subsequent replacement is required the estimated works budget will increase to an upper limit of £1,800,000. Incorporating an allowance for staff costs and professional fees, the total estimated project budget for Cullum Welch House is in the range of £1,050,000-£2,050,000 (47% of which would be recoverable from long leaseholders).

Estimated costs have increased from those notified at the previous Gateway for both the concrete repair element (by £300,000) and window renewal element (by £491,475). Associated professional fees and staff casts have also increased in proportion to these works. These increases shall be addressed in turn. Concrete Repairs The original cost estimate for the works to Cullum Welch House of £600,000 which was presented to Committee at Gateway 3 in July 2014 was based on a condition survey of the block carried out in 2012 and qualified by officers’ assessments of previously carried out similar works to other City of London Housing Estates. This early officers’ estimate was therefore based on information already two years old at time of reporting to Committee and at the current time of writing is now four years old. The Office for National Statistics reported in 2015 a 3.9% year-on-year increase in the Output Price Index for Construction. For the preceding year up to 2014, the Department for Business Innovation & Skills had calculated this yearly increase at 4.3%. It therefore seems reasonable to assume an annual 4% increase in construction costs over the 4 year period since the original officers’ estimate was made as there is no indication that these inflationary trends in the construction market have eased. A sum of £75,000 out of the estimated increase of £300,000 can therefore be attributed to construction industry price inflation. It should also be noted that the original estimates were officers’ estimates based on the information contained within the initial testing report and forecasts derived from historical spend on similar projects. The current estimates, of which we have far greater confidence, have been produced by an external quantity surveyor based on a recommended approach detailed by an external concrete corrosion specialist. At the time of the initial estimation the full extent and proposed methodology of the works was unknown. Window Replacement The existing windows in Cullum Welch comprise single glazed timber framed units serving the kitchens on the north elevation, with single glazed aluminium framed units on the south elevation. A

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recent condition survey notes that these single glazed units are cold, draughty and particularly prone to condensation issues due to the lack of a thermal break on the aluminium frames. Initial estimates in the Gateway 2 report, ‘Housing Asset Management Plan’ covered like for like replacement only. It is however potentially possible, at a cost, to upgrade the units to double glazing whilst complying with the heritage constraints of the buildings listing. If window replacement is required as part of this project, the full options for window replacement will be brought to Committee for approval at Gateway 4. The potential works cost for window replacement is perhaps therefore at this stage better expressed as a range as the specification for the work, if necessary, is yet to be determined. Allowing for the same year-on-year 4% construction industry inflation as previously described above puts the lower end of the range for simple like for like replacement at £460,000 to an upper level of £900,000 for substantially upgraded units. Professional Fees & Staff Costs The increase in staff costs and fees (by £60,000 for concrete repair only) can be partially attributed to the significant design hurdles to be overcome to comply with listed buildings constraints (the extent of these requirements was initially under-estimated). The listed buildings consent attained required further design and structural reports to be submitted prior to commencing construction. Specifically these include, a photographic record of elements removed or replaced, 1:1 samples of units to be replaced, samples of finishes and samples of any bricks or mortar to be used, existing and proposed drawings at a variety of scales and structural details of junctions between elements to be replaced and the existing structure. Furthermore, additional expenditure on professional fees has been recommended to enable further concrete testing targeted to explicitly determine whether concrete elements on the south elevation can be repaired in situ rather than removed and replaced in totalis. The initial testing report commissioned was a general concrete condition report of the building and did not include in its scope a requirement for the specific information now required; its need could not have been known or anticipated at the time. In addition, the Gateway 2 report, Housing Asset Management Plan (February 2015), covering window renewal at the Golden Lane Estate presented works costs only; fees and staff costs were not incorporated in the Housing Asset Management Plan. If fees and staff costs for this had been estimated at the time it is likely that they would have been in the region of £60,000, assuming the standard departmental estimate of 15% of works costs to calculate fees was applied. Significant expenditure on design fees can be anticipated due to the heritage constraints on the building.

It should be noted that while the estimation of fees is typically based on 15% of the estimated works cost the out turn costs will

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only be based on actual spend.

2. Last approved limit

As per the previous Issues Report, the total estimate of costs for concrete testing and repair at Golden Lane and Middlesex Street Estates at Gateway 3 was £2,587,000, subject to a potential range of £2.5-3 million; the total works budget for Golden Lane was estimated at £1,800,000 of which £600,000 was earmarked for Cullum Welch House. Further to this, a sum of £1 million was approved at Gateway 3 for concrete testing and any immediately required repairs at the two estates (£750,000 for Golden Lane Estate and £250,000 for Middlesex Street Estate); none of this sum has been spent at Cullum Welch House. All expenditure to date (totalling £74,005) directly relating to the required concrete repairs at Cullum Welch House has been charged to HRA local revenue.

3. Options These remain unchanged from the previous Issues Report (see Appendix 1):

1) No change to the existing project approach. Concrete repairs to Cullum Welch House will remain within the wider Golden Lane and Middlesex Street Estates concrete repair project. Retrospective approval of the consultancy fees (design, structural and testing expenditure), totalling £74,005, already spent to reach the current position; and approval of a further £28,000 to facilitate the investigative work detailed to reach the next Gateway.

2) Establish a stand-alone project for the concrete repairs at Cullum Welch House, granting retrospective approval of the consultancy fees (design, structural and testing expenditure), totalling £74,005, already spent to reach the current position; and approval of a further £28,000 to facilitate the investigative work detailed to reach the next Gateway. A full options appraisal, including the potential for window renewal if temporary removal of units is likely to be required, will be brought to Committee at Gateway 4.

Option 2 is recommended.

There is no practicable ‘do nothing’ option – the condition of the externally exposed concrete precludes this. In addition, the Grade II listed status of Cullum Welch House presents significant design hurdles which must be addressed.

Appendices

Appendix 1 Issues Report – ‘Concrete repair to Cullum Welch House’ – 8th July 2016.

Report Author: David Downing

Email Address: [email protected]

Telephone Number: 020 7332 1645

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APPENDIX 1 Committees: Dates: Item no.

Community and Children's Services Committee Projects Sub Committee

08/07/2016 20/07/2016

Subject: Concrete repairs to Cullum Welch House

Issue Report Public


For Decision

Summary

Project status Green

Project risk Green – low

Programme status Post Gateway 3, Pending project restructure

Timeline Project restructure – July 2016 Complete investigative work – September 2016 Gateway 4 / detailed options appraisal – November 2016 Complete design work/specification – December 2016 Procurement – to spring 2017 Gateway 5 – spring 2017 Works start – summer 2017

Expenditure to date Concrete testing and make safe – £9,980 Concrete corrosion consultancy fees – £7,800 Architectural fees – £36,150 Structural engineer fees – £18,125 Budget cost plan – £1,950 Total – £74,005

Current works estimate

£900,000-£1,800,000

Project budget total £1,050,000-£2,050,000

Last gateway approved Gateway 3 – Outline Options Appraisal: Concrete testing and repairs at Golden Lane and Middlesex Street Estates was approved by the DCCS Grand Committee on 11 July 2014 and the Projects Sub Committee on 22 July 2014. Progress to date including resources expended Concrete testing to the Golden Lane and Middlesex Street Estates is ongoing. Testing to the Grade II-listed Cullum Welch House (at a cost of £9,980) was carried out in advance of the main programme due to safety concerns about the condition of its externally exposed concrete. Testing results have been analysed by an independent concrete corrosion specialist (at a cost of £7,800) and remedial works have been specified detailing recommendations for a replacement or repair of the affected elements. An

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architect (at a cost of £10,750) was appointed to obtain the Listed Building Consent required to commence these works; this was attained on 8 January 2015. This architect was subsequently re-appointed to finalise the design work as per the conditions specified within this consent (at a cost of £25,400). A waiver was granted for this appointment on 1 December 2015. In addition, a structural engineer has been appointed, via a compliant tender process, to ensure that the structural elements specified within the planning consent are met (at a cost of £18,125). A cost plan has also been produced to facilitate a realistic working estimate of possible project budgets depending on the potential scope of repairs (at a cost of £1,950). Total expenditure to date directly relating to concrete repair at Cullum Welch House is therefore £74,005, which is currently charged to the Housing Revenue Account (HRA). Summary of issue Due to the complexity of the remedial works required to repair the externally exposed concrete elements of Cullum Welch House and the ongoing significant design element involved, it is proposed to split these works off from the main Golden Lane and Middlesex Street concrete testing and repair project and run it as a stand-alone project. Specialist design works for Cullum Welch House would therefore be able to progress with expediency; these would be unhindered by the more prosaic concrete repairs anticipated for the other blocks which are covered by the wider project, and where testing remains ongoing ahead of a potentially lengthy specification and tender process. Proposed way forward Remedial works required for the north elevation and staircases of Cullum Welch House are known. Further investigative work is, however, recommended to determine if the concrete elements incorporating planters on the south elevations can be externally repaired or if they need to be replaced in totalis. Wholesale replacement of these elements would necessarily entail the temporary removal of windows and partition of residences while the works are carried out. Should window removal be required, it may be necessary – due to the age and condition of these units, particularly if they cannot be removed intact so as to make best use of scaffolding – to consider renewing them. The estimated total budget for these works therefore covers a broad range, pending the outcome of this investigative work. It is intended to return to Committee with a Gateway 4 paper once a realistic range of options for this work is known and appropriately costed. At this time, a repair of these elements is the preferred option. Financial implications 1. Previous estimates

Description Previous estimates for concrete repair only at Cullum Welch House as per Gateway 3 report – Concrete testing and repairs at Golden Lane and Middlesex Street Estates (July 2014)



Total £690,000


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Description Previous estimates for window renewal at Cullum Welch House as per Gateway 2 report –Housing Asset Management Plan (February 2015)



2. Current estimates

Description Current estimates – concrete repair only



Total £1,050,000


Description Current estimates – concrete repair with window renewal




Total £2,050,000


Estimated costs have increased significantly from those notified at the previous Gateway for both the concrete repair element (by £300,000) and window renewal element (by £491,475). It should be noted that the original estimates were officers’ estimates based on forecasts derived from historical spend on similar projects. The current estimates, of which we have far greater confidence, have been produced by an external quantity surveyor. Furthermore, the increased costs can be attributed to (a) significant inflation in the construction and maintenance industry since the time of writing of prior reports; (b) significant cost inflation in the supply of scaffolding and access equipment. The increase in staff costs and fees (by £60,000 for concrete repair only) are due to the significant design hurdles to be overcome to comply with Listed Buildings constraints (the extent of these requirements was initially under-estimated). In addition, the Gateway 2 report, Housing Asset Management Plan (February 2015), covering window renewal at the Golden Lane Estate presented works costs only; fees and staff costs were not incorporated in the Housing Asset Management Plan. Recommendations

1) Approve the change in project approach to separate out the works to Cullum Welch House from the wider Golden Lane and Middlesex Street Estates concrete repair project.

2) Note the estimate project budget range of £1,050,000-£2,050,000 for the replacement and repair of concrete elements at Cullum Welch House and the potential inclusion of

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window renewal. A full options appraisal is to be brought to Committee at Gateway 4.

3) Authorise the transfer of the existing estimated £600,000 works budget and £90,000 fees earmarked for Cullum Welch House from the estimated budget of the wider Golden Lane and Middlesex Street Estates concrete repair project.

4) Retrospectively approve the consultancy fees (design, structural and testing expenditure), totalling £74,005, already spent to reach the current position and allocate them to this project. These fees are currently charged to HRA local revenue.

5) Approve a sum of £28,000, comprised of £26,000 to complete the investigative work to the south elevation and £2,000 staff costs, to reach the next Gateway.

Main Report

1. Issue description 1. Background

Certain externally exposed reinforced concrete elements of the Grade II-listed Cullum Welch House at the Golden Lane Estate are showing significant damage caused by reinforcement corrosion. Concrete testing has revealed that the main elements of the building suffering from damage are the precast concrete balustrades and stairways on the north elevation and the planter units, exposed beams and slab ends on the south elevation.

The balustrades and planters are safety-critical items, the primary danger being falling concrete. Secondary dangers include an increased risk of failure to prevent objects penetrating the barriers formed by the balustrade and an increased risk of injury due to the degraded rough edges of the balustrade.

Temporary safety netting is in place to mitigate these risks in the short term.

2. Concrete repairs to Cullum Welch House

An external concrete corrosion specialist has recommended the following course of action:

1) The concrete balustrades on the north elevation have reached the end of their safe, useful life and require replacement in full.

2) The concrete elements incorporating planters and pot holders on the south elevation require significant remedial works. The potential to make a long-lasting repair (with a 50-100 year life span) should be investigated as this would prove significantly more economically advantageous than replacement. Replacement of these items would entail the temporary removal of windows and partition of residences while the works are carried out.

3) Stairwells, exposed beams and slab ends suffering from a few localised areas of cracking and spalling should be repaired.

A design team has been appointed. Listed Building Consent for the concrete repairs was obtained on 8 January 2015. Approval to re-appoint the architect to complete the design work as specified

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within the Listed Building Consent was granted by the Finance Committee on 17 November 2015 and the Projects Sub Committee on 1 December 2015. Subsequently, a structural engineer has also been procured to facilitate the production of detailed structural designs to meet further conditions of the Listed Buildings Consent. A cost planning exercise has also been completed.

3. Further investigative work required

As stated, further investigation is required to determine whether the concrete elements incorporating planters and pot holders on the south elevation can be effectively repaired or whether replacement is required. A cost planning exercise has identified that a fee of £26,000 should be sufficient to cover intrusive testing and laboratory analysis.

4. Window removal

Should the investigation reveal that the replacement of the precast concrete units on the south elevation be required, the adjacent window units will need to be temporarily removed as structural drawings indicate the precast concrete units extend beneath. These windows, and those on the north elevation, are due for replacement or substantial refurbishment in the near future as they approach the end of their useful life. The renewal or refurbishment of windows at Golden Lane Estate are within the Housing Asset Management Plan – 5 Year Programme, as approved by the Projects Sub Committee on 23 February 2015 at Gateway 2.

If the removal of the window units on the south elevation is required, it may well be economically advantageous to combine this with the concrete repair and window renewal or refurbishment at Cullum Welch House. A combined approach will also minimise disruption for residents. Any requirement to include the renewal or temporary removal and return of existing windows will be brought to Committee for approval at Gateway 4.

5. Financial implications

A cost planning exercise has indicated that an estimated works budget (excluding fees and staff costs) of £900,000 should be sufficient to cover the replacement of the concrete balustrades to the north elevation, repair of the staircases and repairs to the concrete elements incorporating planters on the south elevation. If window removal and subsequent replacement is required the estimated works budget will increase to an upper limit of £1,800,000. Incorporating an allowance for staff costs and professional fees, the total estimated project budget for Cullum Welch House is in the range of £1,050,000-£2,050,000 (47% of which would be recoverable from long leaseholders).

6. Proposed way forward

Due to the scale, complexity and design requirements of the concrete repairs required at Cullum Welch House, it is proposed to

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remove these works from the broader Golden Lane and Middlesex Street Estates concrete repair project, and procure and deliver them as a stand-alone project. Once the aforementioned investigative works are complete, a full options appraisal will be brought to Committee for assessment at Gateway 4.

Running parallel to this, estate-wide concrete testing, as approved at Gateway 3 by the DCCS Grand Committee on 11 July 2014 and the Projects Sub Committee on 22 July 2014, will continue at Golden Lane and Middlesex Street Estates. The outcome of this testing programme will be brought to Committee via a separate Gateway 4 report where options for a planned programmed of more prosaic repairs will be presented for approval.

2. Last approved limit

The total estimate of costs for concrete testing and repair at Golden Lane and Middlesex Street Estates at Gateway 3 was £2,587,000, subject to a potential range of £2.5-3 million; the total works budget for Golden Lane was estimated at £1,800,000 of which £600,000 was earmarked for Cullum Welch House. Further to this, a sum of £1 million was approved at Gateway 3 for concrete testing and any immediately required repairs at the two estates (£750,000 for Golden Lane Estate and £250,000 for Middlesex Street Estate); none of this sum has been spent at Cullum Welch House. All expenditure to date (totalling £74,005) directly relating to the required concrete repairs at Cullum Welch House has been charged to HRA local revenue.

3. Options 1) No change to the existing project approach. Concrete repairs to Cullum Welch House will remain within the wider Golden Lane and Middlesex Street Estates concrete repair project. Retrospective approval of the consultancy fees (design, structural and testing expenditure), totalling £74,005, already spent to reach the current position; and approval of a further £28,000 to facilitate the investigative work detailed to reach the next Gateway.

2) Establish a stand-alone project for the concrete repairs at Cullum Welch House, granting retrospective approval of the consultancy fees (design, structural and testing expenditure), totalling £74,005, already spent to reach the current position; and approval of a further £28,000 to facilitate the investigative work detailed to reach the next Gateway. A full options appraisal, including the potential for window renewal if temporary removal of units is likely to be required, will be brought to Committee at Gateway 4.

Option 2 is recommended.

There is no practicable ‘do nothing’ option – the condition of the externally exposed concrete precludes this. In addition, the Grade II- listed status of Cullum Welch House presents significant design hurdles which must be addressed.

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Appendices

None

Report Author: David Downing

Email Address: [email protected]

Telephone Number: 020 7332 1645

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Committee(s): Date(s):

Project Sub- Committee 7 September 2016

Subject: Dealing with Price Inflation for Construction Projects up to Gateway 5

Public

Report of: The Chamberlain

For Decision

Report author: John James, Chamberlain's Department

Summary

The purpose of this report is to consider the impact of price inflation on construction project costing, and determine how this issue can best be tackled in gateway reports. It is suggested that such project reports should clearly state, at each gateway, the price base of the estimated project cost included and be transparent on any inflation assumptions within the figures. It is further suggested that costs for short term projects (defined as those projects which will reach the authority to start work stage, Gateway 5, within a year of the initial project proposal at Gateway 2 being agreed) should usually be shown at outturn prices. For longer term projects, estimated costs should be shown at current prices with any inflation allowance held as a central provision by the Chamberlain, to be drawn down at Gateway 5 as required. It is too early to assess the long term impact of Brexit on construction inflation, but in the very short term it may have an effect of depressing prices.

Recommendations Members are asked:

i. to note the contents of this report; and ii. to agree the approach set out in paragraphs 16/17 and in particular confirm

reports should show clearly the price base of any estimated costs shown in the report and advise both the basis and the sum included for any inflationary uplift.

Main Report

Background 1. As a project progresses through the gateway process up to Gateway 5

(authority to start work) it has been observed in recent times that there has often been an increase in costs between stages attributed to 'construction inflation'.

2. Of course, there are numerous reasons for cost increases and some of the explanations identified by City Procurement for cost increases beyond the pre-tender estimate include :

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Agenda Item 10

a) Reliance on inaccurate or incomplete cost data b) Employer generated scope change between outline business case (City

Gateway 2) and full business case (City Gateway 5) – with associated implication for item a)

c) Continued employer generated scope change in tendering period prior to full business case (City Gateway 5) with an associated implication for item a)

d) Short notice to market and short tender return periods contributing to reduced opportunity for tenderers to engage supply chain on pricing

e) No allowance for contingency (or optimism bias) for complex projects which are necessarily reliant on early contractor involvement/design contribution

f) Seasonal trends in demand g) A tendency towards adversarial contracting and pushing risk (price et al)

onto contractors h) Reliance on out of date cost data (beyond 12 months old) without inflationary

adjustment

3. Nevertheless the explanation of 'construction inflation' is one increasingly cited to explain cost increases. The purpose of this report is, therefore, to consider the best way to tackle the issue of inflation of project costs in reports up to Gateway 5, from which point costs will be based either on the contractor's tendered (usually fixed) price or on term contract rates (which are subject to price adjustment for inflation), depending on the nature of the project.

4. In this context, building projects tend to be let on the basis of fixed price lump

sum contracts, whereas highways/ civil engineering works may employ term contracts such as the Highways Repair and Maintenance Term Contract currently let to J. B. Riney.

Current Position 5. In the past, price inflation has been relatively low and therefore has had a

marginal effect on project costing. In more recent times some projects have seen significant increases attributed to this issue with prices at Gateway 5 received well above the sums estimated for the project.

6. It is important from an early stage to get project option costing right for three

principal reasons: a. Need to reflect the full project cost when planning/agreeing projects to

confirm affordability. This is particularly important for schemes funded from cash limited funds (e.g. S106, Designated Sales Pool etc.). A key issue being the question of affordability which must be addressed before the project can proceed. A reasonable allowance for inflation is therefore important but unrealistically large inflation provisions are not desirable as they tie up funds that could be used for other projects.

b. Need to ensure that best estimate of project cost is included for those

projects subject to investment appraisal. This is particularly important for works on investment properties as the scale of works, or indeed whether the project goes ahead at all, will be determined by the anticipated financial return.

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c. Need to provide consistent data for capital forecasting purposes. There is a need to ensure consistency in inflation assumptions used on project costing that feed into the City's capital expenditure forecasts. This is a particular problem for projects spanning a number of years.

Evidence of Tender Price/ Construction Cost Inflation 7. Depending on the nature of the contract to be employed for a project (e.g. fixed

price lump sum, re-measurement term contract subject to adjustment for inflation), consideration needs to be given as to whether the focus should be on either tender price inflation or general construction cost inflation. This is because movement in tender price or general construction cost inflation may not move together eg in a tight market tender prices may fall, even though construction cost inflation is rising, as contractors absorb the construction cost inflation to effectively 'buy in' work.

8. Tender prices and margins on construction works have seen increases in

London and the City over the previous years. Current construction market indicators show these increases are not generally being driven by rising costs, as the cost of materials (generally) and labour has remained relatively stable with a small number of exceptions in the material market place. It is the strength of demand for construction work and the ability for contractors and sub-contractors to fill their order books without having to offer cut-throat prices which are increasing profit margins, particularly for those projects that contractors are not particularly keen on winning. The combined effect will push up tender prices at above the level of general inflation.

9. These indices exclude any effect of Brexit which may have an effect of

depressing prices if significant construction projects are put on hold because of market uncertainty. Certainly previous experience has suggested that should work for major projects slow down this can have a knock on effect for more minor projects costs, as larger contractors compete for work on smaller projects whilst they wait for the market for major construction projects to recover.

10. At this early stage it is too difficult, however, to predict the Brexit effect for the longer term.

Understanding Change of Scope v Inflation 11. As projects progress through the gateway process costs inevitably change as

options are changed or refined. There will always be a difficulty in splitting out cost changes relating to change in scope rather than inflation.

12. For short term projects (those that reach Gateway 5 within a year of the project

proposal being agreed at Gateway 2) cost consultants should be reflecting costs at outturn prices at each stage, on the basis that there should be small difference between gateway stages.

13. For longer term projects (those anticipated to reach Gateway 5 more than a

year after the initial project proposal was agreed at Gateway 2) this is more problematic. Whilst an allowance for inflation could be made, it might be better to quote costs at current prices and hold a central provision for inflation which could be drawn down at authority to start work stage (Gateway 5), subject to

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Members' agreement. This would mitigate against project estimates being padded out due to overzealous inflation assumptions.

14. A further factor that should be considered is 'market appetite' for projects

subject to competitive tender, which can be as big a factor as inflation. The competitiveness of the market and in particular the City's often quirky/bespoke schemes may produce a price significantly different to that anticipated.

15. Finally at Gateway 5, for most building contracts, the tender price accepted is

fixed (as we usually employ fixed price construction contracts) so should not be subject to further inflation increases. The price bid by the contractor, of course, will not be transparent for the inflation sum built in, but assuming this has been accepted through a competitive process the issue becomes a moot point. For highways/ civil engineering works procured using a term contract, the prices current at Gateway 5 may be subject to a price fluctuation adjustment (usually based on published indices) depending on the timescale of the project.

Proposal 16. The following changes are suggested:

a. Construction project costs quoted in gateway or other reports should always show the price base used for clarity. Any inflation assumptions should also be clearly set out in the report both in terms of the basis and the sum included.

b. The price base used for Gateways 1-4 (inclusive) should depend on the

duration of the project and the gateway stage it has reached as follows:

Short Term Projects - defined as those that are anticipated to reach authority to start work stage (Gateway 5) within a year of the initial project proposal (Gateway 2) being agreed. Price base should be at outturn prices. Report author should confirm that inflation has been considered when completing the costing and advise the basis/sum that has been included.

Longer Term Projects - defined as those that are anticipated to reach authority to start work stage (Gateway 5) more than one year from the initial project proposal (Gateway 2) being agreed. Price base should be at current prices. The Chamberlain will hold a central provision for inflationary uplift which they will also feed into the financial forecasts. Where practical a sensitivity analysis should be prepared to clarify the impact of varying rates of inflation on the proposals. This is considered essential for projects subject to investment appraisal or funded from cash limited funds. Very Long Term Projects - defined as those that will be delivered in phases over a longer period, via a series of tenders. An example would be the Central Criminal Court Plant Replacement Works which stretches over a 10 year period. Special arrangements would need to be made for allowing for inflation for the overall project. However as such projects are delivered in phases the principles above could be applied as each phase is taken through the gateway process.

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17. It is further suggested that reports should clearly show the price base and detail any inflation assumptions. Some suggested wording for inclusion in project reports is detailed in Appendix 1

Beyond Gateway 5 18. Gateway 5 onwards the price base for both short and long term projects should

always be at estimated outturn prices e.g. fixed price tendered sum or, for term contracts, an allowance for estimated inflation should be included. Only for very long term projects will there need to be special arrangements which, for transparency, should be clearly set out in the report.

Conclusion 19. The above paper sets out ideas on how construction inflation could be dealt

with in the costing of projects and Member's views are sought on the suggestions made.

Appendices Appendix 1 - Suggested wording on price base for inclusion in reports Mr John James Chamberlain's Department T: 020 7332 1532 E: [email protected]

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APPENDIX 1

Suggested Wording for Inclusion in Construction Gateway Reports Concerning the Price Base Used It is suggested that the following wording be included depending on whether costs are shown at current or outturn prices. 1. Figures at Current Prices "The project cost included in this report are shown at current prices (Month/Year price base). As a consequence no uplift has been included for inflation." 2. Figures at Outturn Prices "The costs included in this report are shown at outturn prices (Month/Year price base). As a consequence costs include an x% uplift for inflation which equates £x of the total cost."

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Committee: Date:


Subject: Construction market trends report - 3rd Quarter 2016

Public


For Information Report author:

Chris Bell, Head of City Procurement

Summary

Members of the committee requested that City Procurement in conjunction with key service departments produce a quarterly report on construction market and industry trends that have an impact on tender pricing and capital project cost certainty. The report uses indexes and market tracking reports published by the Chartered Institute of Procurement and Supplies (CIPS) and other news sources. This quarter’s construction market trends report shows that the UK construction industry faces an extended period of uncertainty due to the decision to exit the EU, this is causing some investors and developers to pause projects particularly in the commercial development category. There is evidence in the UK, that contractor’s order books have slowed and gives the public sector an opportunity of take advantage of market conditions that see contractors being more competitive in adjusting pricing. That will be balanced by the indicative costs of materials continuing to rise. The market is not slowing as aggressively in London and it is projected to see an overall cost increase of construction and property works of 4 to 5% per annum in the London region between now and the end of 2017. The report findings are summarised below: UK Construction market trends

August 2016 shows the fastest overall drop in construction industry output since June 2009

All three sub-categories of construction record lower outputs, led by commercial development activity

New orders falling at pace since quarter one of 2016

Insufficient new work to replace completed projects resulted in a decline in construction employment numbers for the first time since May 2013

London Construction market position

Developers particularly in commercial sector pausing live projects

Contractors expecting an increase in single stage tendering as investors reduce their risk appetite

Evidence of more competitive pricing from contractors for those developments that are prepared to continue, this should see benefits in particular to the public sector

Material prices continuing to rise due to the weak position of sterling

On-going pressures of skill shortages, minimum wage legislation and Health and Safety legislation leading to inflated costs of project delivery

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Agenda Item 11

A forecast of an increase of 4 to 5% per annum of construction costs during the next 18 months

Recommendation(s)

Members are asked to note the report.

Main Report

Background 1. Members of the committee requested that City Procurement in conjunction with

key service departments produce a quarterly report on construction market and industry trends that have an impact on tender pricing and capital project cost certainty. The report uses indexes and market tracking reports published by the Chartered Institute of Procurement and Supplies (CIPS) and other news sources.

2. This report is the first iteration of the quarterly report and uses market which will

be adapted in future versions to ensure it provides members with the required industry insight and information to assist the work of the committee.

UK Construction market trends

3. Market data produced by the Chartered Institute of Procurement and Supply show that the UK construction industry’s output has fallen in July 2016 since quarter one of 2016. July 2016 data signalled a further downturn in UK construction output, but the rate of contraction was only fractionally faster than that seen during the previous quarter. At the same time, new order volumes dropped at a slower pace than the three-and-a-half year low seen in June 2016.

4. Anecdotal evidence suggested that economic uncertainty following the EU

referendum was the main factor weighing on business activity in July 2016, especially in the commercial building sector. However, there were also reports suggesting that demand patterns had been more resilient than expected, and some firms linked new enquiries from international clients to exchange rate depreciation.

5. The seasonally adjusted Markit/CIPS UK Construction Purchasing Managers’

Index registered the fastest overall decline in construction output since June 2009. This largely reflected the steepest fall in commercial building for over six-and-a-half years, alongside a drop in civil engineering activity for the first time in 2016. Residential construction also declined at a solid pace in July, but the rate of contraction eased from June’s three-and-a-half year low.

6. Construction companies noted that weaker order books continued to act as a

brake on business activity in July. Reflecting this, latest data signals an overall reduction in new work for the third month running, but the rate of decline eased since June and was close to that seen in early-2013. Survey respondents noted that uncertainty following the EU referendum had dampened client confidence, led to greater risk aversion, and encouraged a wait-and-see approach to decision making. That said, after taking into account the uncertain business

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outlook, there were also some reports that overall demand had been relatively resilient in July, especially for house building and infrastructure projects.

7. Insufficient new work to replace completed projects resulted in a decline in

construction employment numbers for the first time since May 2013. Survey respondents mostly cited the non-replacement of voluntary leavers. Moreover, there was a sharp reversal in sub-contractor availability, which rose at the fastest pace since September 2012. Weaker demand for sub-contractors also contributed to the slowest rise in their average charges for over three years. Materials prices meanwhile increased at the steepest rate since March 2015, despite lower demand for inputs. This was overwhelmingly linked to the weaker sterling exchange rate.

London construction market position

8. London and south-east has over recent years been almost immune to recession and construction trends seen elsewhere across the UK. Due to the EU exit decision though, this could well be reversed with London being hit and seeing contractors having to be more competitive to gain the work required to sustain order books.

9. According to pre-Brexit trend reports, commercial development offered more

construction opportunities than any other sector. Since the referendum, however, investors have started to cool on commercial property developments.

10. Construction activity in the commercial property sector only occurs when there

is an excess of demand for space over current supply and where investment returns over the costs of construction justify the risk. In the City there is still an excess of demand although that may be changing. The cheaper pound and yield shift has encouraged an increase in foreign investment in City commercial property. Whether this will extend into new build schemes without a major pre-let has still to be seen although standing investments are likely to be initially more attractive to those buyers.

11. What is being seen is a more considered and drawn-out verdict from investors

and developers. Although there is no evidence on any impact on pre-let schemes, it is being reported that clients to the construction industry where speculative schemes are involved are not saying ‘never’; what they are saying is, ‘Not now, not until we get clarity on what Brexit means’.

12. For contractors, this could see a return to single-stage tendering where the

buying organisation is not prepared to take on risk. New developments within the City of London area as well as Canary Wharf are exposed to the ‘Brexit effect’ particularly if there is no immediate pre-let space. This may result in more competitive pricing from contractors for those developments that are prepared to continue, although many pre-let or pre-sold schemes will continue to dominate the market.

13. Material prices have continued to rise as sterling has decreased to a thirty-year

low. While prices were already rising before the referendum, the increased weakness of the pound will make importing more expensive, potentially

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accelerating these price hikes. Finally market trends report that supply chains have seen lead-in times for certain materials increase which again leads to price increases.

14. Other on-going factors that challenge the construction sector in London and the

south-west are skill shortages, minimum wage legislation and Health and Safety legislation with these leading to inflated costs of project delivery timescales.

15. The impact of all the current market trends on London forecast an increase of

between 4 and 5% per annum of construction costs until the end of 2017.

Conclusion 16. The construction market trends report shows that the UK construction industry

faces an extended period of uncertainty due to the decision to exit the EU, this is causing investors and developers to pause projects particularly in the commercial development category.

17. There is evidence that some contractors’ order books have slowed and this

may give the public sector an opportunity of take advantage of market conditions that see contractors being more competitive in adjusting pricing. That will be balanced by the indicative costs of materials continuing to rise. It is projected to see an overall cost increase of construction and property works of between 4% and 5% per annum in the London region during the next 18 months.

Author Chris Bell Head of City Procurement, Chamberlain’s Department T: 020 7332 3961 E: [email protected] Sources The Chartered Institute of Procurement and Supply (CIPS) Markit/CIPS UK Construction Purchasing Managers’ Index Construction News Gleeds Property and Construction Consultants Market report City of London Corporation – City Surveyors ‘Brexit’ Property Market Impact note 2

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Committee: Date:


Subject: A guide to the use of Term contracts

Public


For Information Report author:

Chris Bell, Head of City Procurement

Summary

This report outlines the use of Term contracts as a procurement option and considers the benefits and disadvantages of such contracts. This type of contract has not been utilised widely to date by the Corporation and should become an option explored in future procurements where scope and specifications cannot be fully defined. The report includes a case study on the Corporation’s Highways Maintenance term contract with JB Riney Ltd as a live example as requested by the Chairman of the committee.

Recommendation(s)

Members are asked to note:

i) Term contracts are compliant and effective options that form an important aspect of the procurement toolkit to service high volume repetitive maintenance and works contracts of a project nature in particular.

ii) There can be clear advantages such as competitive costs due to the economies of scale and combined spend being attractive to the market. Softer benefits include early contractor engagement, flexible prioritisation of projects and a contractor team well versed in working with and in the City. See paragraph 6 for more details.

iii) That term contracts will feature more in strategic options reports moving forwards for in particular areas that involve minor works, maintenance and specialist support services such as asbestos surveys.

iv) There are clear risks to the City in instances of over loading spend onto the term contract and the use of the contract for wider works not originally envisaged within the scope. See paragraph 7 for more details.

v) The Corporation’s Highways Maintenance Contract is a live working example that has proven beneficial to the City as outlined in the Case Study (see paragraph 8).

Main Report

Background 1. Members of the committee requested that City Procurement produce a report

on the use of Term contracts as a procurement option in comparison to traditional tendering per project. This report explains what Term contracts are, considers their advantages and disadvantages and shares the case study of the Corporation’s Highways maintenance contract as a working example.

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Agenda Item 12

Term Contracts 2. A Term Contract is an arrangement whereby an organisation appoints a single

contractor to carry out a series of works orders over an extended period of years (typically 3-12 years), within a defined geographical area and/or defined scope of works where the work is subsequently measured and valued at rates contained in a pre-priced Schedule of Rates.

3. Buying organisations use the leverage of the combined expected spend over

this period in order to encourage competition as tenderers submit a contract discount percentage off the Schedule of Rates to reflect their assessment of all additional factors in securing guaranteed works. Sometimes, separate percentages are requested for different value bands so that the more work that goes through the contract the more benefit in commercial terms there are to the buying organisation. The Contract percentage is then applied to all work priced on the Schedule of Rates. An annual adjustment is generally made to update the pricing level of the schedule to match the current inflationary increases.

4. Use of this type of contract is typically found where the client has an on-going

need for maintenance or new works. The estimated annual workload should be sufficiently large to attract contractors, offering them continuity of work and a consequential saving in cost and documentation to the client. If a client needs speed of response, a term contract should be the answer, and similarly it provides a good method for controlling budgets as spend is approved and committed on a project by project basis. This type of contract allows the suppliers to work with the client in producing and monitoring cost & resource profiles to ensure best value and efficiencies become every day practice.

5. In addition, the availability of suitable Contractors and any particular specialist

requirements of the Client are risks that are mitigated due to the commitment. 6. Because the Term Contract is a particularly flexible package it allows

contractors to balance their costs over the life of the contract. For example if a contractor has to replace all the rainwater goods on a housing estate, the Schedule of Rates will provide him with a fair return whilst on the other hand if he is required to travel 50 miles to replace a pane of glass they will not be so fortunate and making a loss. It is important therefore, to order all work covered by the scope with the appointed contractor, not just the low value and awkward work. The Contractor will have tendered on the basis of all work with a spread of value.

Pros and cons 7. The advantages of Schedule of Rates Term Contracts are:

i) Variations are easy to estimate and normally cheaper than on fixed price traditional contracts.

ii) The client can stop and start work at a pace that might be determined by cash flow, funding or changing priorities

iii) The contractor will often provide a fixed client team that drives effectiveness as they understand the operations of the buying organisation

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iv) A large pool of contractors can be asked to tender as the process is inexpensive and quick driving stronger competition due to the leveraged spend

v) Greater commercial benefit due to long term commitment and economies of scale.

vi) It is flexible in relation to scope and contractual commitment. vii) As a fully detailed design is not required the client can obtain tenders at the

early stages of a project and begin construction activity before completion of the design. So to this extent it is 'fast track'.

viii) Significant reduction on procurement, legal and contract management resource costs for the business compared to running a tender per project.

8. The disadvantages can be:

i) Additional resources are required to measure work and certifying payments.

ii) Contractors may be tempted to load front end costs in case later work does not materialise.

iii) There is no real incentive for contractors to treat such work with any sense of urgency and its better staff will be placed on the other client projects where the contractor is carrying more risk.

iv) A risk of the buying organisation over flexing the scope to include works that are not core to the contractor meaning risk and increased costs on individual projects creep in.

v) The buying organisation being too reliant of the contractor over time meaning loss of skills or knowledge retained in the business.

Case Study – City Highways Maintenance contract

9. The City delivers its highway maintenance, streetscene enhancement and local transportation project work though a term highway works contract, currently with JB Riney & Co Ltd. Typically £8m to £12m of works are delivered through the contract each year, depending on the volume of externally funded streetscene enhancement and transportation projects.

10. Experience has shown that having a term contract in place has delivered a

number of benefits. These include:

i) Economies of Scale: Matters of highway maintenance and scheme delivery clearly overlap in terms of plant, material procurement, and labour & management skills. Delivering a combined volume of both maintenance and project work through the term contract delivers economies of scale, which were clearly demonstrated in February 2012, when Members of the Planning and Transportation Committee awarded the current term contract to JB Riney. This contract award combined three previously separate term contracts (highway maintenance, highway resurfacing and highway drainage) and delivered efficiency savings of around 18% on revenue works and 22% on typical capital streetscene works.

ii) Quality of work: In addition to economies of scale, there is a risk to the City of using different contractors for different types of work. This is because of the City’s difficult working environment, its use of high quality materials that

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need particular expertise, and its desire for high quality finishes that better suit a regular, skilled and knowledgeable workforce. The value of using JB Riney is that the majority of their gangs have worked in the City for many years, using TUPE to transfer across companies to remain here. As a result, they are used to working in the City’s narrow streets with our difficult combination of traffic, cyclists, pedestrians, businesses, residents and visitors. They also have a proven track record of delivering high quality work with our specialist pallet of materials that has stood the test of time.

iii) Early contractor involvement: The City is sufficiently skilled in the process

of delivering complex highway schemes that we develop the final design for the eventual scheme in parallel to how the scheme will be built. This allows the range of construction costs to be narrowed during the design process, with contingencies reduced and potential savings identified. Key to this is the early contractor involvement, meaning the decision over the choice of contractor has been made early on in the project. Riney are actively involved in the design and construction planning process, advising on maintainability and build-ability issues in the certainty that they will be undertaking the eventual work. Without a term contract in place, this would not be possible, and these benefits would be unrealised.

iv) The risk of claims: Under a tendering arrangement, there would also be a

much greater risk of claims as tenderers will be more likely to lack an adequate appreciation of how difficult a place the City is to work because of its narrow streets, high traffic, private development sites and pedestrian density, high quality requirements and major subsurface utility infrastructure. As a result, they are much more likely to request compensation events than under the City’s current term contract arrangement, where such claims are virtually nil as the contractor is able to redeploy staff to other City work in the event of delays caused by unforeseen issues.

11. Finally, in 2013, the City and TfL undertook a benchmarking exercise to

establish the relative cost and value delivered under each contract. This exercise compared rates for a typical set of resurfacing works as well as a major scheme, and the results showed the City’s Highways term contract rates were approximately 6.3% less expensive for resurfacing and 11.5% cheaper for the scheme example. This exercise was repeated earlier this year to see how the relative costs of both contracts might have shifted in the intervening period. Five different types of works were compared, including different sizes and types of scheme and resurfacing. This assessment found that in three of the five examples, Riney’s rates were significantly cheaper (between 7% and 20%), one showed equivalent costs, and one showed a very small saving under TfL’s alternate LoHAC contract of 2%.

Conclusion 12. Term contracts are an effective procurement option in circumstances where

there is a large volume of repetitive maintenance, works and services of a similar nature projects needed regularly. The can attract great commercial benefits due to leverage project spend over several years and typically attract high levels of competition due to this. They additional add a number of softer

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benefits including significantly decreased procurement and administrative costs, greater working knowledge and partnership between the parties as well as consistent levels of quality. There are some risks but with appropriate governance and contract management processes being in place are easily mitigated. We would expect there to be more future contracts that consider term contracts as a strategic option.

Author Chris Bell Head of City Procurement, Chamberlain’s Department T: 020 7332 3961 E: [email protected]

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Projects Sub (Policy and Resources) Committee