Agenda item

[To review and comment upon the content of the Markets Relocation – Lessons Learned report]

Keith Ireland, Manging Director reported that he had commissioned Audit Services to undertake lessons learned reviews on three capital projects. He had also agreed that the reports from the reviews be presented to the Committee in open session. He gave a brief introduction to the first of the reports on the Markets Relocation project and invited questions.

During the ensuing discussion and in response to questions, Peter Farrow, Head of Audit reported they were independent reviews and that no pressure had been was put on Audit Services during these audit reviews and the production of the lessons learned reports.

The Managing Director supported by the Strategic Executive Board and other senior officers of the Council responded to the Committees questions and observations, the details of which are summarised as follows and should be read in conjunction with the detail in the lessons learned report.

When the scheme was being considered was there any doubt a higher contract price would be needed to deliver the scheme?

·           The Council had a price of £2.5 million for a scheme based on advice from professionals. £470,000 was added to the cost of the project as a result of trader engagement and Cabinet approved the increased funding for the project as this would enhance to the market and add to the public experience of using the market.

·           From the report and the tight timescale, it was reasonable to assume that the bidder had risk priced their tender. At no time did the scheme escalate in costs once the revisions were agreed.  A contract price for the scheme was obtained..

It appears that no one was taking ownership of the project.  The feasibility study should have flagged up some markers about the site.  There was no pre-set format to approve the project and monitor it and the risks. Even if there is a fixed budget for the project there would be an element for a variation figure, but contract value has increased by 100%.

·           Lessons are being learned. There are examples of where the Council has successfully delivered major capital projects such as the Civic Centre building an and park. However sometimes it has not delivered as well on other projects.  In hindsight the market relocation project could not be delivered for the original contract figure.

·           Employees were asked to deliver a cost neutral scheme.  The issue on this project was that the costs and budget figures are being reported before we were ready.  The Council has engaged the services of Equip to advise and make sure it does not repeat these mistakes.

·           Council money has not been wasted on the scheme.  A decision needed to be made that led to the costs increasing.  The increased costs of the project were approved by Councillors. The market was telling us something else other than the £2.5 million cost.  The scheme that we want to take the Council forward cost £4.5 million.

Why did the Council only go to one company for the contract?

·           The Council sought professional advice on the matter.  The contract went out to open tender but only one response was received.

Why was that contractor awarded to the sole bidder?

·           The time and speed the Council wanted to move.  There was an end date for the relocation of the market.  The amount of construction activity taking place in the West Midlands, the buoyancy of the market was also taken into account.

Is it the case that the £2.5 million was unrealistic rather than the time constraint?

·           We cannot know what is in a bidder’s mind when they submit their tender. With the current activity in the construction industry it is difficult to get contractors to bid.  A tender was received that met our criteria. The contractor was aware of the site for the new market location so for them it was not a big shock in terms of what the Council wanted.

Could things have been done better in a political sense; was there enough guidance in the process; if you did it again would you want to see the process strengthened?

·           The reason for the three lessons learned reports was to improve the process. One issue from all of the projects is when do we release figures/cost information into the public domain.  Currently that information is released too soon.  On the political involvement and guidance, the Cabinet Member for Environment was involved in the project. The issue was undertaking more detailed work before we run with the proposition.

The lessons learned reports are welcomed but they need to be put into practice. The relationship with the Audit and Risk Committee will be important and the risk aspect needs to be focussed on and Lesson Learned 10 should be strengthened.

·           Due process had been followed on the project.  In the reports the Committee is asked to take more of an interest in assessing the actions and that they are implemented. If large capital projects are being delivered the Committee may want to monitor them through say the risk register.

Does the Council have the resources to do the job in such a way we are robust and can keep up with pace and offer a contrary view if required?

·           City Centre Regeneration had been included on the Council’s strategic risk register for a while.  Civic Halls restoration was highlighted from that.  It was also the same for the recommendations on the Interchange Programme.  The Committee would be seeing more of this in the risk register at its future meetings.  The recommendations in the lessons learned reports would be monitored by the Committee.  The Audit Services would work with other service areas to populate the plans in real time and the Audit team would review it and report back to the Committee.

·           A big learning point from the reviews was project risk management.  The Council’s ability to perform that function through its external advisors and its own internal resource.  The Council had secured the services of Bob Hide, Equib to provide project risk management advice on all of the Council’s capital projects.  The Council was learning, and it now had its own advisor on risk.  That would strengthen the Council’s capacity in this area.

Is there any redress against the advisors on the original contract price?

·           There was a change in the scope of the project.  The original price was based on there being a competitive market.

Why did we then appoint them as the Project Manager?

·           We took a view that £4.5 million was the market value for the contract.  We took the view to offer it to them

There is a perception the contract was small beer.  Why was only one month given for contractors to bid?

·           The usual process is six weeks.  With the programme to relocate the market and the Westside regeneration scheme about to commence it was decided to shorten the period for the receipt of bids by two weeks.

How did the successful contractor know they were the only tenderer?

·           A supplier would have been aware of any other interest in the contract very quickly because of the way the supply chain operates.  The successful tenderer only had prior knowledge of the site. The Council did not reveal to them that there were the only tenderer for the contract, they worked it out and this was reflected in their tender submission.

(A member of the Committee commented that the contractor had the Council at a disadvantage.  The Council should have given itself more time to secure another tender submission.  The Council needs to be mindful of this point.)

The appointment of the external consultant as Project Manager for the design and build seemed flawed in terms of the oversight and management of the project. The Council needs to hold back on putting project costs into the public arena until it has the full case.  There should also be a clear format on how the Council manages these types of projects from start to finish.

·           On the point of the advisors it is not unusual for private sector organisations to appoint Project Mangers to deliver these types of capital schemes.

It appears that the contractor had more information on the project than the Council

·           The Cabinet Member for Environment and Cabinet member for Resources challenged the Strategic Executive Board during briefings on the project.  We were challenged politically.  We could only put forward the best information we had.

The market was meant to open on the new site in May and it is now June.

·           Two events have occurred on the site.  Human remains, and a petrol tank were found.  The Council has been working with its partners for the development of Westside.  The developer was not ready to be on the site so that has worked for the Council to address the items detected on the new market site.

Are we confident the project would be delivered on £4.9 million

·           Yes.  Minus the two issues previously referred to regarding the petrol tank and human remains found on the site.  A bid is being submitted to the West Midlands Combined Authority land remediation fund towards the costs of addressing the ground contamination.  The Market would open on 17 July 2018.

Can minutes of briefing meetings and the briefing notes to Cabinet members be shared with the Committee in future as an audit trail and in order to protect employees.

·           For the Markets relocation report it was too late.  In terms of the Civic Halls Restoration programme, revised governance arrangements are in place for this and other projects.  Minutes would be available for them if required.  The Council was strengthening governance for all capital projects and would take on board the point regarding the minutes.

Resolved:

1.    That the lessons learned action plans be received.

2.    That the Committee oversee the implementation of the lessons learned programme over the next 12 months and receive a quarterly update report on the progress made in implementing the lessons learned.

3.    That the actions taken to date be supported which include:

a.    To improve programme and project management

b.    To ensure better financial modelling

4.    That the Managing Director’s decision to make the report an open report to ensure maximum transparency be noted.

5.    That the minutes from the governance arrangements for capital projects be shared with the Committee upon request when the Committee has a specific focus on a capital project through the strategic risk register.