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RESOLVED:
 
Cabinet is recommended to:
1. 
Accept the
Department of Energy Security & Net Zero (DESNZ) grant of c.
£4.5 million (together with all of the associated
conditions)

 
2. 
Approve
expenditure of associated match funding for the above grant and add
to the Housing Capital Programme.
 
3. 
Approve
the business case for these works and the procurement strategy to
undertake a Direct Award of the Social Housing Decarbonisation Fund
(SHDF) works contract to a supplier from an external framework,
namely South East Consortium (SEC) or National Housing Maintenance
Frameworks.
 
4. 
Delegate
the contract award for the works for up to £20m to the Group
Director, Climate Homes and Economy, following consultation with
the Group Director, Finance and Corporate Resources, and the
relevant Cabinet Members, Housing Services & Resident
Participation, and Insourcing & Customer
Services.

 
5. 
To note
that the report on the contract award for these works will be
reported to the Cabinet Procurement and Insourcing Committee
(CPIC).

 
6. 
To approve
that the recharge of cost of these works to leaseholders are waived
(a maximum of nine).

 
DETAILS OF ALTERNATIVE OPTIONS CONSIDERED AND
REJECTED
 
In order to consider options for this procurement exercise,
officers considered some key decisions relating to contract types
in the context of the wider housing strategy; this report considers
these, and explores the various available options.
 
The grant funding has been provisionally secured against
556 homes.  These may require work to up
to 721 homes to be carried out because of the inclusion of blocks
of flats where not all homes are eligible under the
bid.  While properties have been
identified for the fund, this is based on desktop information and
the process requires specific surveys to be undertaken to confirm
eligibility.  It is expected that within
this number there are homes which prove to be
ineligible.  It is also expected that
there are homes where it is not readily technically possible to
achieve the required standard.  Hackney
Council have maximised the numbers in the bid to ensure that even
after these aspects are taken into account the council can still
deliver a meaningful programme of work.
 
The grant fund makes a number of requirements about how the
work is delivered.  Key to these is the
use of a new PAS2035 standard, which is a process for how retrofit
works should be delivered to existing homes.  This ensures that proper consideration is given to
selecting measures which are suitable to the construction, are
complimentary with one another, and which achieve the desired
energy efficiency standard.  There are
also rules around monthly reporting to the department, rules on the
selection of homes and funding levels, and requirements for risk
assessments and other project management procedures to be in
place.  These are outlined in more
detail in a presentation in Appendix 1.
 
Contractor as Retrofit Coodinator: 
Under PAS2035 it is
possible to assign the role of Retrofit Assessor and Coordinator to
the contractor.  There are some
advantages to this approach; it can be faster as the programme is
almost entirely delivered within a single organisation, and it
removes any ambiguity as to design responsibility in the
works.  However, a disadvantage is that
it limits the ability of the council to ensure effective cost
controls on the project.  The
appointment of a separate consultant to survey the condition of the
properties and schedule the necessary works to bring the home to an
EPC ‘C’ will offer an independent view to the
contractor.  In this model the
consultant will be responsible for ensuring the selected measures
are suitable and achieve the desired outcome; the contractor is
responsible for any design work necessary for the selected
measures.
 
Existing Internal Contract: A review of existing contracts
was undertaken but none were suited to the scale and type of the
work. 
 
Direct Procurement: Consideration was given to carrying out a
direct two stage procurement exercise. 
This was rejected as it would not be possible to complete this
within the funding timetable.
 
DLO for Heating Works: Use of the Direct Labour
Organisation (DLO) for heating related works; for most homes it is
expected that there can be beneficial improvements to hot water
cylinder insulation and heating controls.  Detailed examination suggested that this does not
fit within the PAS 2035 assessment and coordination process which
requires the Client to deliver all the qualifying works to any
property via a single Contractor.
 
Success Criteria/Key
Drivers/Indicators
The success criteria / key drivers / indicators for this
procurement exercise / contract award are:
· 
Improved energy
efficiency of up to 556 homes, meeting the required EPC
‘C’ standard
 
· 
Ensuring residents
benefit from improved thermal comfort and reduced energy
bills
 
· 
Maximising claims on
the available grant funding 
 
· 
Pilot testing retrofit
works to the new PAS2035 standard which is likely to be used more
widely in future as part of the Net Zero target
 
· 
The contract will be
subject to a range of KPIs similar to that on other capital
projects
 
· 
Ensuring the most
inefficient homes benefit from necessary improvements
 
· 
Delivering high
quality work, with low defects rates and achieving high standards
of resident satisfaction
 
· 
Ensure that this
contract delivers social value to the local community and
contribute to the Council’s wider sustainability
ambitions
 
Whole Life Costing/Budgets
The Asset Management Plan (AMP) element of the housing
capital programme covers investment in all of the stock and assets
managed by Housing Services.  The
distributed nature of predominantly street properties and estate
houses raises added complexities to deliver these works.
 
Options Appraisal and Business Case
(Reasons for Decision)
The proposed option is to select a contractor from a
suitable external framework.  These are
pre-established frameworks which offer a range of appointment terms
to contractors who have already gone through a public procurement
tendering process to be selected.  The
council often makes use of such frameworks in appointing
contractors; one main limitation of them is that they do not always
enable consultation with leaseholders in accordance with Section 20
requirements in the Landlord and Tenant Act.  This option will enable the council to enter into
contract soon enough to carry out work within the funding
window.
 
The selection of properties for this bid has focussed on
homes.  Some smaller blocks have been
included.  These include 9no.
leaseholders.  While these 9 homes are
not included within the properties to be improved using
the  grant funding it may be necessary
to carry out work to them to ensure that the neighbouring
properties in the block can be brought to the EPC ‘C’
standard.  For example it is possible to
carry out internal insulation work to a single flat within a block
but it is not readily possible to apply external wall insulation to
only one flat.
 
Carrying out a Section 20 consultation process would not be
possible within the timeframes for this funding bid.  This is also a very minor aspect of the work with
only 9 leaseholders of a total possible 721 properties.  Consequently it is proposed that possible
recharges to leaseholders are waived. 
Note that where leaseholders are included in the funding
arrangements, the fund would require that their contributions are
capped.
 
The preferred approach will be to use a partnering form of
contract in line with the approach used on other council capital
projects.  This will be proposed as a
two year contract, during which time projects can be instructed as
‘Task Orders’.  Rather than
award a single contract for the full value and volume of work, this
allows a phased approach and limits the amount of work instructed
to a contractor at any one time. 
Typically task orders are expected to contain works to about 50
homes.  This approach enhances the
council’s ability to manage performance as terms can be
established to ensure that successive projects are only issued once
a certain standard is demonstrated and maintained.
 
Hackney Council is a member of is the South East Consortium
(SEC) which has two potential framework agreements:
 
A
Major Refurbishment Lot 1b (+ £1 million):  This framework covers multi-trade refurbishment
works which are to be delivered by a single contractor.  While it is has not been established with the
specific intent of retrofit works, the measures typically required
to bring a home to an EPC ‘C’ (e.g. roof and wall
insulation, heating upgrades, window renewal) would typically be
covered by major refurbishment works.
 
A
Zero Carbon Solutions | Delivery Framework (Sept 21): This
framework is more specifically established to deliver retrofit
works and contractors have been assessed against PAS 2035
requirements to secure a place on the framework. 
Another suitable framework is the NHMF (National Housing
Maintenance Framework NHMF Framework. 
Similar to the SEC there is a framework for planned maintenance and
one for Net Zero works, both of which are likely to be suitable for
the works proposed.
 
During this period Housing Services will continue to
procure their Main Contractor Framework which offers future
potential for an element of the grant funded works to be delivered
via this alternative route, if required.
 
The outlined approach potentially allows for a contract to
be awarded in autumn 2023, with some works starting in the 2023/24
financial year.  There will need to be
some allowance in the programme for mobilisation and pre-contract
surveys and pricing.  While this
timetable does mean that there is a risk to delivering 40% of the
work in Year 1, this is unavoidable in the circumstances and it
will put the council in a good place to maximise delivery in
‘Year 2’.
 
The use of an external framework attracts a fee of up to
1.5%.