Agenda item

Consider Project Authorisation report by Service Director Assets and Infrastructure in connection with the new Jedburgh Intergenerational Community Campus (copy attached).

4.1       There had been circulated copies of a report by the Service Director Assets and Infrastructure seeking authorisation to enter into, on behalf of the Council, a contract in connection with the Design, Build, Finance and Maintain (DBFM) of Jedburgh Intergenerational Community Campus.  As recorded in the private appendix of the Scottish Borders Council Minute of 27 June 2017, approval was given to commence the preparatory stages to deliver a new intergenerational community campus in Jedburgh.  The Project Manager, Steven Renwick, advised that the project would be delivered with Hub South East Scotland Ltd and would be shared revenue funded between Scottish Borders Council and Scottish Government through its delivery agency, Scottish Futures Trust.  During 2017 the statutory process to allow closure of the three schools in the town and the opening of the new campus was successfully completed and planning approval for the project was obtained on 8 January 2018.  To maintain the overall programme commitment of an opening in March 2020, the Council entered into an enabling works contract in April 2018.  On 5 June 2018,          the scope of the enabling works was extended to include the construction of foundations and steelwork that would form part of the school building. Progress with this enabling works contract, managed using a Design and Build form of contract (“DBDA”), had been positive and in accordance with the agreed programme.  The Council project team, with the support from external advisors, had concluded the preparatory work on the project and were ready to proceed to         Financial Close early in October 2018.  The Project Documents as listed in Appendix A to the report, which were not yet in final form and subject to further amendment, would be entered into on behalf of the Council.  A guidance note, issued by Scottish Futures Trust in June 2015, that covered the principle of the structure of Design, Build, Finance and Maintain projects, was attached as Appendix B to the report.

4.2       In response to questions Mr Renwick gave further clarification about the funding issues    outlined in the report. The Stage 2 submission, being the final commercial offer from Hub South East Scotland Ltd on 13 July 2018, was within the affordability cap set by Council on 27 June 2017.  However, the construction inflation pressures that were seen during the Stage 2 market testing process meant that the only way of achieving this total had been by removing elements of the project that were able to be delivered by the Council directly, by using capital funding rather than revenue based funding. It was confirmed that all of the elements referred to did not trigger any capital contribution rules associated with revenue based funded projects.  The report to Council on 27 June 2017 identified that Scottish             Government would provide funding support in the form of revenue support covering 2/3rds of      eligible project costs.  This funding was fixed, with no allowance for further fluctuations in inflation.  Mr Renwick explained that inflation had now placed a project pressure in the order of £1.5m for which the Scottish Government did not carry any risk.  It was noted within the report that      officers had asked Scottish Futures Trust on behalf of the Scottish Government if they would be willing to recognise the change in Building Cost Information Service indices in relation to their funding.  The reply unfortunately was that the funding was fixed in June 2017, based on the information to hand at that date and that no increase in Scottish Government funding would be made.  Members noted that no elements of the project were at risk as a result of the financial pressure, the proposal was only to amend the way the Council’s share was being funded and this should be made clear in a message to the communities involved.  After further discussion Members agreed the report’s recommendations which included delegation, to the Chief Legal Officer in consultation with the Chief Financial Officer, of approval of the final project documents listed in Appendix A to the report.  There was also agreement with the Leader’s proposal to write, on behalf of the Executive Committee, to the Deputy First Minister to ask that the Scottish Government accept its part in the risk of the project by paying its share of the increased cost brought about by inflation, highlighting Scottish Government’s recent Empowering Schools Agreement with COSLA.

DECISION

(a)         NOTED:-

(i)     the progress of the project to date; and

(ii)    the continued undertaking of works under the Design and Build Development Agreement (DBDA) until Financial Close;

(b)          APPROVED:-

(i)     the Council entering into the DBFM project, following consideration of the content of this report and the progress of the works under the DBDA;

(ii)     the delegation of the negotiation, finalisation and approval of the final terms of the Project Documents (as defined in Appendix A to this report) to the Chief Legal Officer in consultation with the Chief Financial Officer;

(iii)   the Chief Legal Officer’s use of their delegated authority under section 21.3 of the Financial Regulations and under the Scheme of Delegation to execute, deliver and manage the performance of the Project Documents (as defined in Appendix A to this report), noting that the project was an approved project identified as a major procurement for the purposes of section 21.3 of the Financial Regulations; and

(iv)   the subscription by the Council of £10 equity in DBFM Co and the investment by the Council of £310,541 (plus a 5% buffer) subordinated debt in DBFM Co;

(c)           AGREED to request that a certified copy be produced of an extract of the minute of the proceedings of this meeting as verification that approval had been granted.

(d)             AGREED that the Leader write, on behalf of the Executive Committee, to the        Deputy First Minister requesting that the Scottish Government accept its part of the risk of the project and to fund its share of the increased cost brought about by inflation.