Purpose

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

Content

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