Decision Maker: Cabinet

Outcome: Decision approved

Is Key Decision?: Yes

Is Callable In?: Yes

Date of Decision: December 3, 2024

Purpose: ·  To Approve a Total Development Budget for Pier Road and Cyprus Gardens Developments. ·  To Approve an increase in Populo Design & Builds DMS contract to and approve Populo entering into contract with Hill Partnerships providing that contract includes a Notice to Proceed mechanism that limits expenditure to the budget approved by Cabinet in December 2023.  ·  To Approve the issue of a Notice to Proceed between Hill Partnerships and Populo via delegation to the Corporate Director of Resources in consultation with the Lead Member for Finance. 

Content: Decision   For the reasons set out in the report and its appendices Cabinet RESOLVED to Agree to:   i)  Approve an increase in the development budgets to cover the full construction budget as per Appendix 3:   ·  Pier Road from £8.1m to £155.1m. This reflects the inclusion of £147m in the budget to deliver the construction phase of the project, including expenditure of £1.7m of Brownfield Land Remediation Fund (BLRF) grant funding per Section 5, noting that once the grant funding is drawn down, LBN will be obliged to release the land for housing development by March 2028. ·  Cyprus from £10m to £107.2m, to reflect the inclusion of a £97.2m budget to deliver the construction phase of the project.   ii)  Approve Populo entering into contracts that includes a Notice to Proceed mechanism with Hill Partnerships for the Contract Sum of: ·  £110.3m for the Pier Rd. ·   £75.4m for Cyprus.   iii)  Delegate to the Corporate Director of Inclusive Economy in consultation with the Corporate Director of Resources to approve the final form of contracts that Populo will enter into with Hill Partnerships in respect of Pier Road and Cyprus Developments.   iv)  Approve an increase in the authorised expenditure limit for the Pier Rd development from £8.1m to £9.3m (an increase of £1.2m and is within the proposed project budget) as per Appendix 3 to cover early enabling works.   v)  Approve the variations to the Populo Design & Build Development Management Services (DMS) contracts to include Construction Stage Services and an increased contract value which is within the increased budget (being the Total 5 Development Budget including Populo’s DMS fees less LBN capitalised interest as per Appendix 3): ·  Pier Road of £142.5m. ·  Cyprus of £ 99.1m.   vi)  Delegate to the Corporate Director of Inclusive Economy and Housing in consultation with the Portfolio Holder for Inclusive Economy and Housing Delivery to approve the final varied terms of both Pier Rd and Cyprus Development Management Services Agreements.   vii)  Delegate to the Corporate Director of Inclusive Economy and Housing in consultation with the Portfolio Holder for Inclusive Economy and Housing Delivery to issue the Notice to Proceed on both Pier Rd and Cyprus contracts to Populo.   Alternatives Considered   a)  It could be possible to convert to a 2-stage Design & Build process. The Contracts agreed with Hill would become the ‘Draft Contract’ and a Pre-Construction Services Agreement completed for Hill to progress the works necessary to get through GW2. The costs payable and activity undertaken will be the same as per the proposed contract route, however the cost certainty is lost, and the Council would be exposed to cost increases during the second stage. Therefore, the contract with NTP mechanism is preferred. b)  Pause both developments – the Council could pause both developments. The money spent to date (set out in the Financial Implications) would continue to roll up interest and no new homes would be built to help address the housing crises. c)  Exit both developments via a sale to the market prior to construction – The estimated valuations for each site will not be sufficient to offset the costs estimated to be spent pre-NTP and will therefore result in a loss as per Appendix 4. This would also mean a loss of control of the sites and their long-term income. It would also delay delivery of the new housing. The external grants already referenced may be clawed back by the respective grant givers.