Agenda item

LIST OF BACKGROUND PAPERS AS REQUIRED BY LAW

(Papers relied on to write the report, which do not contain exempt information and which are not published elsewhere)

Cllr E Seward – Portfolio Holder for Finance and Assets introduced the report and informed Members in the absence of Cllr R Kershaw that he had been involved in the scheme as a local Member, resident and Cabinet Member for its duration. He added that the scheme included a range of projects, some of which had already been delivered. It was reported that the physical works were expected to be completed by spring, and sought to bring significant benefits to the town and improve footfall. Cllr E Seward stated that the scheme had begun with an initial funding allocation from Historic England, which the Council had matched, followed by further successful bids including £1.3m from the Local Enterprise Partnership. He added that funds had been  provided with time constraints, which had presented challenges, but had also helped the Council to avoid more significant materials cost inflation. As a result, the funding uplift requested was approximately 16-18% of the total budget, and represented substantially lower cost inflation than had been seen throughout the construction industry and in other local authority’s projects. Cllr E Seward stated that the scheme had attracted further external investment to undertake projects such as developing a new bus interchange, which had significantly improved traffic flow through the town. He added that further investments included the development of the City Gates site and businesses opening on Hornbeam Road which showed growing confidence in the town. It was stated that the uplift funding would enable the completion of the Market Place works, and make significant improvements to the Bank and Black Swan Lokes.

Questions and Discussion

      i.        The Chairman noted that the Committee did not seek to challenge the merits of the scheme, but it was right to seek assurances on project delivery, planning, governance and management. He added that risks also had to be considered, including the impact of using £400k from reserves that would no longer be available for use elsewhere.

     ii.        The ADSG explained that if approved, £227k of the £400k funding request would be used to complete the Market Place works as currently scoped, whilst the remaining £173k would fund improvements to the Bank and Black Swan Lokes. He added that the Loke works could be scaled to fit the available budget, given that whilst various designs had been considered, a final design was yet to be adopted. It was suggested that there were several options for improving Bank Loke, with minor improvements already made which included decluttering the area of bins and other mobile street furniture. The ADSG informed Members that a planning application had also been submitted that would create an amenity area in Black Swan Loke. 

    iii.        The Chairman referred to contingency funds and sought clarification that this had been 10% of the overall budget. The ADSG replied that the contingency had not been 10% of the overall budget, as it had not take into account fees beyond the physical works. He added that the contingency had now been spent as a result of the previously noted construction cost inflation. It was noted that funding conditions had required external funding to be spent in-year, which meant that budget planning and allowing headroom had been more challenging. The ADSG noted that contingencies had also taken other forms, such as allowing for variation in the laying rates of paving for large sections of the physical works. He added that whilst the scheme had grown as a result of additional funding allocations, there was no longer a definitive cost as the scheme had been modified on multiple occasions throughout its delivery. It was noted that the funding time constraints had helped to avoid more substantial inflation in materials costs.

   iv.        The Chairman noted that project updates had been regularly received by the Committee, and whilst some issues had been raised, there had not been any indication that further funding would be required to complete the project. He added for example that the use of contingency funds would have been a prudent point at which to raise concerns about the potential need for additional funding. It was suggested that as a result, it was now crucial to be able to fully explain why additional funding was required. The Chairman noted that it had been difficult to obtain information on the contingency figures, which had made it difficult to properly scrutinise the project’s delivery.

     v.        Cllr N Housden stated that the budget uplift request had not been itemised, and the funding for works on the Lokes was only estimated, therefore it was difficult to justify what level of funding was required. He added that further fundraising opportunities had be mentioned for the Lokes, which raised concerns that more funding could be requested again in the future. It was noted that the paper suggested the project could be finished within the existing budget, but there was no indication of whether this included the additional £400k funding request. The Chairman suggested that a more detailed breakdown of the £400k would be required to properly determine what was driving the need for additional expenditure. The ADSG replied that the additional funding required to complete the Market Place project was the result of an overrun of costs in areas such as management fees, with NCC requiring project management costs which included various TROs. He added that there were also design consultancy fees, which included works beyond the Market Place, such as the bus interchange designs. The ADSG stated that he could provide an itemised budget, but it should be noted that whilst the scheme had begun with a target cost, the project had been delivered under challenging circumstances that had necessitated re-scoping throughout delivery. He added that it was not known until a project review in September, that additional funding would be required to complete work on the Lokes.

   vi.        The Chairman asked why a more detailed breakdown of the additional costs had not been given in advance, to which Cllr N Housden added that even when divided between the Market Place and Lokes, it was still unclear how the funding would be spent. The ADSG replied that the additional funding was required as a result of overspends on the Market Place, alongside funding to undertake works the Lokes. The Chairman stated that it would be helpful to see more detail for each, to which the DFC suggested that this could be supplied in writing in advance of the next meeting.

  vii.        Cllr C Cushing stated that he had considerable concerns about the way in which the project had been managed, given that an update in September had not provided any indication that the project was not on track. He added that a key component of good project management was to ensure that there were no surprises, such as a request for additional funding. It was suggested that in order to relieve concerns, detailed information should be provided to explain exactly why the additional funding was required and how it would be spent. Cllr C Cushing noted that other projects such as the A148 Fakenham roundabout required additional funding to meet increased costs, and the £400k requested would no longer be available for this important infrastructure. 

 viii.        Cllr S Penfold asked whether the scheme had suffered from project creep with the addition of new projects such as the Lokes, and whether this was the reason for increased costs. The ADSG replied that the physical placemaking works had been scoped to determine what could be done to improve the town. He added that the original scope had been bigger than initial funding allowed, hence further funding had been sought which had then increased the scale of the deliverable works. It was noted that additional funding had been made available at the end of each year that was used to deliver projects such as the bus interchange and as a result, it had become an agile scheme that had grown where funding allowed. The ADSG noted that other areas had been scaled back and de-scoped in order to account for constraints faced during delivery. Cllr S Penfold noted that rescoping the project would present inherent risks, and it was possible that this may have caused issues. He asked whether there was any opportunity to seek a funding uplift from Historic England to offset the funds requested. The ADSG replied that whilst Historic England had great confidence in the scheme and had provided additional funding on other occasions, no further funding was available.

   ix.        Cllr V Holliday stated that she was surprised to hear of NCC’s project management role, then referred to the de-scoping of the scheme to fit the budget, and asked whether this had been reversed given the request for additional funding. Cllr E Seward replied that the HAZ Project Board and Cabinet had closely monitored the budget, and had been assured that the existing budget would be satisfactory, however the Council had faced unforeseen challenges as a result of high levels of inflation. He added that original scope included improvements beyond the Market Place to surrounding streets, however these had not been included which explained the de-scoping of the project. It was noted that some aspects of the project did present as potential risks, but these had been acknowledged from the start. Cllr E Seward explained that NCC had been asked to manage the project as result of preferred contractor requirements for highways work and TROs, which were primarily NCC responsibilities.

     x.        Cllr H Blathwayt stated that overall the project appeared to have helped North Walsham improve its reputation as a destination, but concerns remained regarding NCC’s project management role. He noted that the scheme appeared to show good value overall, but asked whether two projects had been joined together. The ADSG replied that the Council had sought to do as much as it could in the town with the available funding, and had taken advantage of opportunities for additional funding to have maximum impact. He added that the scheme included a number of projects, which made it difficult to define as a single project.

   xi.        Cllr S Penfold noted that he had worked with the National Lottery Heritage Fund, and informed Members that they recommended contingency funds of 20%, alongside an inflationary allowance of 10% on all projects. He added that the Council may have therefore underestimated the level of contingency required, however the risk of inflation was not known at the time. Cllr S Penfold asked whether there would be any further re-scoping prior to completion, to which the ADSG replied that whilst there would be no further expansion of the project, the project could be further de-scoped or re-engineered, if required to fit the available budget. The ADSG added that the Loke works were yet to be fully costed, and could therefore be adapted to fit the available budget. It was confirmed that there was no risk that the Loke works would exceed the additional budget, but it was possible that savings could be found to avoid spending the full funding allocation.

  xii.        Cllr L Withington sought clarification of whether cost increases for the physical works had been kept to approximately 16% as suggested, whilst other authorities had reported cost inflation above 40%, which suggested that the NWHSHAZ scheme had been well managed. The ADSG noted that the industry standard for inflation in the construction industry had been reported as approximately 12%, however it was known to be much higher, depending on the type of work and the materials used.

 xiii.        Cllr J Toye noted that inflation was beyond the control of the Council and officers had done well to keep costs at their current levels, whilst many projects elsewhere had been cancelled. He added that the need to finish the project was essential, and the funds were available within the appropriate reserve to do this.

 xiv.        The Chairman noted that it was appropriate to determine whether the project had followed the project governance and management framework as agreed by GRAC, and it may be necessary to review this at a future date. He added that the key responsibility of the Overview & Scrutiny Committee was to ensure that the additional funding request was justified, and this would require a further report with a full breakdown of the £400k. Cllr J Rest stated that as GRAC Chairman, he would be content to consider whether the project had correctly followed the project management and governance framework.

  xv.        The Chairman noted that the Committee was not opposed to the funding recommendation, but more information would be required at a future meeting to justify the request. It was confirmed following a request from Cllr N Housden that other projects such as the Levelling-Up bids were still awaiting approval, and there were no other active projects that would suffer as a result of approving the recommendation. The DSGOS noted that the recommendation was due to be considered by Full Council the following week, and it would be too late to wait until the next meeting to receive additional information. The ADSG noted that it may be possible to get the information in advance of Full Council, but due to staffing issues he could not fully commit to this deadline. The Chairman noted that given the circumstances, it would be helpful to receive more detailed information in advance of Full Council, alongside a recommendation to request that GRAC consider the management and governance of the project at a future date.

 xvi.        Cllr N Housden asked for clarification of whether the £400k funding would allow for completion of the project and whether the information supplied in advance of Council would provide details of how this would be spent. The ADSG replied that this would be possible for the Market Place works but not for the Lokes as the designs were yet to be fully agreed and costed. Cllr N Housden stated that it would be difficult to agree the recommendation without being able to confirm completion of all aspects of the project. The ADSG replied that whilst designs were available they were yet to be fully costed and further details could not be provided until this was complete. The DFR stated that works would be scoped to fit within the available budget.

xvii.        The recommendations were proposed by Cllr P Heinrich and Cllr S Penfold.

RESOLVED

1.    To recommend to Full Council that £400,000 be allocated from the Business Rates Retention Reserve for the completion of the NWHSHAZ place-making scheme.

2.    To request that a full breakdown of the uplift funding request be provided in advance of Full Council.

3.    To recommend that GRAC review the Project Governance and Management Framework for the Scheme to verify whether it followed and complied with the template and whether there are lessons to be learnt in assessing, mitigating and reporting project risks.