Agenda item

(Cabinet Member with Special Responsibility Councillor Mace)

Report of Corporate Director (Regeneration).

(Cabinet Member with Special Responsibility Councillor Mace)

The Corporate Director (Regeneration) submitted a report updating Cabinet on progress on this key regeneration project, explaining why this development is currently stalled and to present proposals for how the Council might facilitate a satisfactory and timely project delivery.

The options, options analysis, including risk assessment, were set out in the report as follows:

Options:

Market conditions severely constrain what can reasonably be done. To make progress the only option available is

Option 1 is for the NWDA to grant the Council funding for it to clear and remediate the site and undertake essential infrastructure works and thereby ready the site for development when the market starts to recover. (The Developer costs such works at some £5.2 million).

The alternative, Option 2, is to do nothing.

Analysis:

Officers consider that option 1 is the only one available. Doing nothing is not realistic, not least because obligations on the Council under the JFA and its contract for ERDF funding put it at substantial financial risk until it delivers or at least can assure full development delivery. In total, funding for some £5 million of expenditures already made is at stake and, in the worst-case scenario, the Council would be left with expenditure to this amount unfunded.

In addition, doing nothing would have serious implications for regeneration and planning. The full potentials of this development in terms of the environmental improvements, homes and jobs that it should deliver will not be realised. There will be no significant inward investment into the wider Luneside area for years to come.  Failure to develop out this site and, because of this, prospectively other sites, will also mean the Council’s total housing delivery is lowered and developers will be in a stronger position to force the Council to release Greenfield sites instead.

A related point is that terminating the involvement of the Developer is neither sensible nor reasonable at this stage. The developer has undoubted capacity, knowledge, commitment and readiness to deliver and the Council can mitigate its risks significantly by keeping the Developer with it so it can draw on its knowledge and experience. Further, the reasons the Developer cannot proceed as planned are no fault of its own. 

Option 1 is also deliverable (subject to a positive funding decision). The NWDA (and also the HCA) has the discretion to grant the Council sufficient funding to undertake the works described and a variation to the JFA would be the mechanism. The Corporate Director (Regeneration) has the delegated authority to apply for such external funding. The Council owns the whole site and therefore would have full site control. It is practised as an accountable body. Planning Services’ Engineering Team has the capacity and expertise to act as client for the works. This team is well versed in mechanisms for managing and mitigating risk (including cost risk) in contract management.  To maximise efficiencies and minimise costs the Council should secure services from the Developer’s expert consultancy team to assist with the client role, most particularly from Entec UK Ltd as consultant advisors for the remediation works and RW Gregory for servicing and utility works. The Developer has consented to this. The necessary procurements could be made under the Council’s procurement rules.

Critically, the Council would need to procure an expert remediation contractor. The Council could draw from the applicable NWDA Panel of pre-validated contractors and, after clarifying capabilities, tender. The Council should also take advice from Entec’s given it tendered the remediation contract on behalf of the Developer. The Council’s Engineering Team consider that the procurement process will take some 6-9 months to complete with a 2-3 month mobilisation period after this before the contractor could commence. Entec, for the Developer, has planned on a nine-month period for site works.

If it is assumed that that tenders for a remediation contract are advertised in late Spring 2009 then prospectively, the site works should commence in early 2010 and be completed by autumn 2010.  Given that most commentators predict economic recovery to commence in 2010 this should time well with any market recovery and the need then to present the site as a compelling development opportunity.

Risk assessment:

Option 1 relies on the Council securing external funding to cover the costs of it undertaking site works and any grant secured would be capped. This would place the onus on the Council to manage costs and cost risks within the budget made available. Given the recession, the Council should be very well placed to secure very competitive tenders and to further mitigate out cost risk by drawing on the experience gained by Entec in its procurement for the Developer.

There are other risks including regulatory, technical and environmental risks but proper project management approaches and effective contract management should mitigate these to a satisfactory level. Again, the experience of Entec and also RW Gregory will assist. In addition, the continued involvement of the Developer itself in an advisory capacity would assist with risk management during site clearance and remediation works and enable the Council to tailor remediation standards and infrastructure provision very precisely to the first phase construction by the Developer. The Council could accommodate for this in its project management approach.

Officer preferred Option:

Option 1 is strongly preferred. A specific short-term gain is that undertaking site works bring local benefits in terms of jobs and economic activity. Resolving the problems of land contamination will remove the main constraint on development of the site. This will transform the development opportunity in the perceptions of potential investors and house builders and should significantly advance final project delivery. There are no other practicable options.

It was moved by Councillor Mace and seconded by Councillor Charles:-

“That the recommendations, as set out in the report, be approved.”

Members then voted:-

Resolved unanimously:

That Cabinet:

(1)         Approve that, if the NorthWest Development Agency provide the Council with full grant funding for the purpose, the Council undertake all works necessary to clear and remediate (clean up) the site and put in place essential infrastructure in order to facilitate the subsequent development of the site by the private sector, subject to the  Corporate Director (Regeneration) and the statutory officers being satisfied as to any conditions imposedby the NWDA. 

(2)         Subject to Recommendation 1 being approved and the outcome of the funding bid, that the General Fund Capital programme and the General Fund Revenue Programme are updated accordingly.

Officers responsible for effecting the decision:

Corporate Director (Regeneration)

Head of Planning Services.

Reasons for making the decision:

A specific short-term gain is that undertaking site works bring local benefits in terms of jobs and economic activity. Resolving the problems of land contamination will remove the main constraint on development of the site. This will transform the development opportunity in the perceptions of potential investors and house builders and should significantly advance final project delivery. There are no other practicable options.