Agenda item
Dolphin Centre Replacement - Financial Update
Minutes:
The Cabinet considered a report on the final contract sum proposed by the preferred building contractor for the replacement of the Dolphin Centre and a request for additional funding to support the increase in associated costs.
Richard Smith and Paul Robertson from Mace the Council’s Project Managers and cost Controllers on the project were welcomed to the meeting.
Members were reminded that in January 2016, following a successful funding application to Sport England, an increase of £1.5m in overall capital budget had been approved, bringing the current Capital Programme for the entire scheme to £13m. This had enabled the provision of additional facilities for residents.
It was reported that since that decision officers had been working with the preferred contractor as part of a two stage tender process to reach an agreed contract sum. It became apparent that the cost plan was under pressure due to a number of unforeseen additional costs above those included within key assumptions contained in the original report considered by Cabinet and Council in July 2014. Members attention was drawn to section 3.8 of the current report which set out the reasons for the additional costs including:
· unusual ground conditions leading to the need for a retaining wall and a change in the car park design;
· utility supplies costs increasing due to the need for a new electricity substation and connection to an upgraded mains water supply;
In addition there had been a rapid increase in building costs due to an upturn in the construction sector in general, together with the large number of Swimming Pools and Leisure Centres built in the 1960’s and 1970’s being replaced across the country . The impact of inflation was now at 9.8% as opposed to 7.1% allocated for the period up to the midpoint of construction.
It was reported that following an initial proposal for costs approximately £2.5m over the approved budget, there had been a very detailed review process undertaken by the Project Team and this was outlined in the report. The additional costs had now been reduced to £619k. Officers had also advised that the contingency be increased to £235k to enable a more realistic contingency to support the project should it be required.
The total increase therefore proposed to the Capital Programme was £700k bringing the total cost to £13.7m (including the funding from Sport England). There was clearly a risk that there would be further inflationary pressure and if agreed to by Members, the Council should be in a position to sign construction contacts as a matter of urgency with a view to the new centre opening in the Autumn of 2017.
It was reported that following a review of the facility mix agreed in January 2016 and the submission of the contractors financial proposal, the prudential borrowing position had been revisited as part of a final review of the business case. The resulting income levels now anticipated from the larger site to be provided had increased the level of prudential borrowing. Based on the revised level of prudential borrowing set out in section 3.15 of the report there would be no detrimental impact on the Medium Term Financial Plan should the expected income levels be achieved.
In accordance with Cabinet Procedure Rules and with the agreement of the Leader, Councillor C. A. Hotham spoke on this issue.
Councillor Hotham referred to the original Business Case in comparison with the more recent projections. In particular the significant increase in income and the potential revenue that may be received from the use of the BAM Sports Hall.
In addition Councillor Hotham referred to surplus predictions for the project of £60k which had increased significantly to £92k and requested that Cabinet consider the detailed background to this and in particular the impact which this would have on the potential prudential borrowing position.
The Executive Director and Deputy Chief Executive reported that a request had been received from Councillor Bloore that a meeting be arranged between the Portfolio Holder, respective Group Members and relevant officers, in order that all parties could understand the issues within the report more fully prior to consideration at Council. The Portfolio Holder Councillor P. J. Whittaker indicated that he was in agreement with this approach and had requested that the meeting be arranged as soon as possible.
Following discussion it was
RECOMMENDED:
(a) that the Capital programme for 2016/17 – 2017/18 be increased by £700k to £13.7m to progress the scheme;
(b) that the funding of £700k be secured by
(i) prudential borrowing of £465k; and
(ii) release of balances of £235k to fund the contingency should it be required.
Supporting documents:
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