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RESOLVED:
 
To agree the
procurement of a two-stage design and build contract with a
Pre-Construction Services Agreement (PCSA) using the Notting Hill
Genesis Framework Development Contractors Lot which is compliant
with Regulations 26(4) of the Public Contracts Regulations 2015 to
deliver the Fairbank Estate housing regeneration project.
 
Delegate authority
to the Group Director - Climate, Homes and Economy, in consultation
with the Group Director of Finance and the Acting Director of
Legal, Democratic and Electoral Services to:
 
a) 
Enter a Pre-Construction Services Agreement (PCSA),
which may include but is not limited to work relating to design,
value engineering, surveys, utilities, demolition and enabling
works.
b) 
Enter into a main building contract and if appropriate
any preceding or parallel demolition or enabling works contract
with the preferred contractor or one or more suitable specialist
early works contractors, upon satisfactory completion of the Pre
Construction Services Agreement (PCSA stage), or equally;
and
c) 
Should a position representing acceptable performance
and/or value for money not be reached with the preferred contractor
at any point during or upon conclusion of the Pre-Construction
Services Agreement (PCSA) stage, to enter into the contracts
described at (a) and (b) above, as appropriate, with the reserve
bidder appointed during the first stage of the two stage
tender.
 
The Fairbank Estate project is a mixed tenure
housing development that forms part of the Housing Supply
Programme. It is located in the Hoxton West Ward in the London
Borough of Hackney. This report outlines the proposed process for
procuring a principal build contractor to deliver this new housing,
along with associated landscaping and public realm works.
 
The site is located along East Road and is
bounded by Murray Grove to the north. It is occupied by a 20 storey
Council-owned tower block, Thaxted
Court, which is to remain occupied during construction and a two
storey garage block, which is to be demolished. The western part of
the site has a lower level car park that surrounds Thaxted Court. A low rise block, Halstead Court, is
to the south of the site. The site sits directly over two Network
Rail underground tunnels, which adds a level of complexity and risk
to delivery of the project.
 
The original scheme design for Fairbank Estate
was submitted for approval to the Planning Authority in November
2020. The application received approval from the Planning
Sub-Committee in January 2021.
 
The scheme previously went to CPIC in October
2020 for approval to commence a single stage competitive tender
procurement exercise using Lot 2 of the Southern Housing Group
Framework. In November 2020, the procurement was launched for the
selection of a principal contractor to deliver the scheme. However,
the tender returns subsequently received were significantly over
budget and in the autumn of 2021, the procurement was terminated
and put on hold as the project was deemed non-viable.
 
A significant amount of work has taken place
over the past two years to improve the financial viability, risk
profile and deliverability of the scheme. The Housing Regeneration
team carried out a no-stone-unturned review of the project to
identify weaknesses in the original planning scheme and tender,
along with addressing new regulatory requirements and introducing a
range of changes to create a more affordable, deliverable project.
In October 2022, construction consultancy AECOM was appointed to
review the scheme and have since made a number of recommendations
to secure design efficiencies and reduce costs.
 
The principal drivers of the hitherto
unacceptable cost and viability position were identified as:
· 
Insufficiently de-risked site at the point of works tendering,
particularly in respect of ground investigations, substructure
design and statutory approvals to build above the Network Rail
tunnels;
· 
Unsuitability of a single stage Design & Build procurement in
light of the above, leading to unrealistic risk transfer to
contractors and therefore significant risk charging by bidders;
· 
Inefficient residential arrangements with small floor plates
leading to relatively low net-to-gross and high wall-to-floor
ratios throughout and particularly in the west block;
· 
Design complexity generally, and most especially in building
envelopes and the provision of a basement for storage and
plant.
· 
Over-specification against brief standards, for example through the
use of triple glazed windows both where needed for acoustic
attenuation but also throughout.
· 
Non-compliance with new building safety requirements for second
stairs in residential buildings above 18 metres (from external
ground to highest habitable level).
· 
Risk of non-compliance with current building regulations regarding
environmental performance, particularly overheating and
ventilation.
 
Throughout 2023, the project team worked
closely with Lynch Architects and Pell Frischman engineers, the incumbent design team, to
explore and incorporate the outcomes of the scheme review through a
range of revised design options with the principal objective being,
to significantly improve the viability, compliance and
deliverability of the extent scheme whilst preserving the overall
design intent and housing offer, primarily by:
· 
Seeking value engineering cost savings and a more efficient
residential arrangement whilst protecting the overall design intent
(three blocks around Thaxted Court and
a new public realm);
· 
De-risking delivery particularly in respect of the subsurface rail
tunnels and the scope and magnitude of changes to the extant
planning permission;
· 
Future-proofing against recent and emerging regulatory change,
particularly building safety.
 
The build costs and valuations relating to
each proposed design were updated, taking into account predicted
interest rates, sales price changes and tender/build cost
inflation. A preferred option was agreed at a ‘Way
Forward’ meeting with the Housing Regeneration and Delivery
management team in August 2023.
 
The proposed scheme consists of three six
storey buildings providing around 70 new homes, 2 ground floor
commercial/retail units and a residents’ room. There will
continue to be a new public realm introduced at street level,
replacing the sunken car park with new landscaping, play space, and
some re-provided car parking.
 
Further design development will take place
during the Pre-Construction Services Agreement (PCSA) stage with
the benefit of contractor buildability, technical and supply chain
input, to arrive at a final design which the extant planning
decision will be amended to.
 
This report seeks agreement from CPIC to
commence the procurement of a main build contractor for this
scheme, via a two stage procurement process with a Pre-Construction
Services Agreement (PCSA). The form of contract for the PCSA will
be the Joint Contracts Tribunal (JCT) Preconstruction Services
Agreement (General Contractor) 2016 with London Borough of Hackney
amendments. The form of contract for the main build works will be a
Joint Contracts Tribunal (JCT) Design and Build Contract 2016 with
London Borough of Hackney amendments. The details of the
procurement process are set out in paragraph 5.23-5.36 of the
report.
 
The outsourcing route is recommended because
the Council does not have the capability to carry out major capital
construction works in-house.
 
The Council will meet the full development
costs of the scheme and act as developer for the social rent,
shared ownership and outright sale homes. The Council’s
established Sales and Marketing Team shall market and sell the
shared ownership and outright sales homes under the ‘Hackney
Sales’ brand, following the established sales policy
including first dibs for local buyers.
 
The estimated costs for the construction of
this option have been provided by AECOM and can be found in Exempt
Appendix 1 - Cost Estimate. Bidders will be required to submit a
contract price for the construction of the enabling and demolition,
main build works and landscaping.
 
Preferred Option
 
The pre-tender estimate for the works is above
the UK Public Procurement Threshold for Works of £5,372,609
and is subject to the Public Contracts Regulations 2015. This means
that the opportunity must be advertised on Find a Tender or
procured from a suitable framework contract.
 
The preferred option is to procure a
construction contractor using a two stage tendering process through
the Notting Hill Genesis framework which is compliant with the
current regulations applicable to the Public Sector namely, the
Public Contracts Regulations 2015.
 
Alternative Options (Considered and
Rejected)
 
The most recent Cost Estimate for Fairbank
Estate is included as Exempt Appendix 1 to this report and is above
the Find a Tender threshold set out in the Public Contracts
Regulations 2015. The Council’s preferred option 14 is to
appoint a contractor via a PCSA and a JCT 2016 Design and Build
contract, with Hackney amendments. As a Contracting Authority, the
Council must comply with the ‘Find a Tender’
procurement processes and so will need to either tender through
this portal, in line with the prescribed timescales and
regulations, or through a framework which was set up in line with
the UK regulations. A number of alternative procurement routes have
been considered to achieve these requirements. The matrix of time,
risk and cost has been used to consider each method.
 
A single stage approach can produce a number
of benefits, but also carries a number of inherent risks. It would
enable the Council to obtain a nearly contractual commitment on
price, but should it become necessary to make any changes to the
brief post-tender this can undermine the original lump sum tender.
The single stage approach provides the potential for a clear risk
allocation between the client and contractor, but this may be
undermined if the contractor’s assessment of cost, programme
or working method is initially incorrect. The single stage approach
provides the opportunity for the Council to set a clear timetable,
but the need to clarify proposals, which is often required, can
extend the intended timescale. In addition, receipt of tenders
above budget could delay the project as redesign and re-pricing
must be completed before the contract sum is agreed. These inherent
shortcomings were apparent in the earlier single stage tender of
Fairbank Estate.
 
There are a number of routes that can be used
which comply with the EU legacy procurement processes in accordance
with The Public Contracts Regulations 2015. These are set out below
in more detail. However, these procurement routes are lengthy in
terms of the time required, often taking over a year from
commencement to appointment. As a result of the ambitious programme
Fairbank Estate is aiming for, these tendering options have been
rejected:
 
· 
Open procedure - This is where the Invitation to Tender is issued
and any contractor can respond. This is not considered suitable for
Fairbank Estate as it might result in a large number of tenders
being received, making the assessment process longer and more
difficult than necessary, whilst not adding any extra value to the
process.
· 
Restricted procedure - This is where a Standard Questionnaire is
issued, and only those contractors who pass the qualification
criteria are invited to submit a tender. This allows a robust
process but tends to take an extended period - often taking a year
from commencement to appointment. Therefore, there is not
sufficient time within the Fairbank programme to use this
procurement route.
· 
Competitive dialogue procedure - In this option there is a
qualification process and those who qualify are invited to take
part in a dialogue process. When the dialogue process is complete,
final tenders are invited. This is used where there is more than
one option, or a series of options relating to the resolution of
one particular issue. Competitive Dialogue is generally used when
clients are unable to specify their requirements or cannot assess
without in-depth dialogue what the market can offer in terms of
technical, financial or legal solutions. It is most helpful for
procuring innovative projects, or projects involving complex and
structured financing. Since the Fairbank Estate project already has
Planning Permission with most of the parameters defined,
Competitive Dialogue is not the most efficient approach to
procurement.
· 
Competitive Procedure with Negotiation procedure - In this option
there is a qualification process and short-listed contractors are
invited to take part in a negotiation process. Again, this is felt
to be too onerous for use on Fairbank Estate and would risk the
project missing key milestones such as a start on site in October
2025.
 
The option to not appoint a reserve bidder has
been considered and rejected, as having a reserve bidder enables
the Council to retain some competitive tension with the preferred
bidder; and, provides a procurement-compliant alternative to the
preferred bidder in the event that the design/price is not in line
with the Council’s budget and expectations for the
project.