Decision Maker: Cabinet
Decision status: Recommendations Approved
Is Key decision?: Yes
Is subject to call in?: No
To consider the outcome of the tender
The Cabinet had before it a report * from the Director of Place informing Members of the latest position regarding the Tiverton HIF/A361 junction scheme and seeking a decision regarding the next steps.
The Cabinet Member for Planning and Economic Regeneration outlined the contents of the report stating that Members would be aware that the Tiverton HIF scheme related to the delivery of the second set of slip roads at the new junction on to the A361 and that DCC were undertaking a procurement exercise on behalf of Mid Devon District Council to seek to identify a contractor to deliver the works. At the time of the August 2021 Cabinet report, it was reported that the cost of works could exceed the available budget and this shortfall was reported as being in the region of £1.9m.
DCC had now completed the tender exercise and the tender results had been assessed. Unfortunately, whilst the tendering exercise had been successful in attracting tender responses, the returns had come in at levels which significantly exceeded the available project budget and went beyond the £1.9m shortfall previously foreseen.
Discussions had taken place between key stakeholder organisations regarding the potential to find additional funding to support delivery of the scheme, but unfortunately it had not been possible to identify the funding at this time.
Clearly, this remained a very important project and so officers would continue to work on this project, in conjunction with key stakeholders including Homes England, as quickly as possible in order to seek to identify opportunities to enable delivery of this scheme as soon as practicably possible.
The following answers were given in relation to each of the questions raised during Public Question Time:
Responses to questions from Mr Elstone
Members were aware of the position in relation to the land transactions, as appropriate.
Members were kept informed of progress in relation to the scheme and the tender exercise.
As stated previously; Cabinet Members had been kept informed of progress on the project and previous Cabinet reports had provided updates in relation to the project.
The Tender exercise had been run by Devon County Council on behalf of MDDC and had followed public procurement regulation requirements; the processes for which are often lengthy and time-consuming.
Cost increases had been seen across many infrastructure projects throughout the country and so the cost increases were not unique to this project, or a result of the process that had been undertaken.
This item has been brought to Cabinet as quickly as possible following earlier conversations with key partners to consider the scope to secure the additional funding to support delivery of the programme and accounting for purdah requirements.
Yes I am a Devon County Councillor but this project is not within my remit as a Devon County Councillor. Conversations are ongoing and the project is moving forwards.
Neither project is in disarray. However, both are absolutely dependent upon external funding mechanisms to support delivery – as has been detailed in other Cabinet reports. By their very nature, these are not within the council’s direct control. But just as we achieved delivery of the off-slip at Tiverton EUE well in advance of the private sector development coming on stream in the first phase, it remains the ambition of the council to achieve this second phase of the junction in advance of Area B coming forward. In Cullompton, we have managed to secure a commitment to the reopening of the railway station, and are now within touching distance of achieving a relief road that the community has been seeking for decades. If such projects were easy they would have been done years ago, but this council is not shying away from the challenges and is doing all it can to bring these much-needed projects to fruition for the good of our communities.
Responses to Hannah Kearns questions
I was not aware of this briefing paper, but was aware with the position of the project as a result of our own internal MDDC briefings.
MDDC has never budgeted for capital investment in the delivery of the junction beyond the amount provided for through the Housing Infrastructure Fund. It would not be typical for a district authority of the size of Mid Devon to fund strategic infrastructure works such as a new junction on a major A-road or motorway.
The cost estimate is not set out so as to avoid revealing cost information in the public domain which could prejudice any future retendering exercise.
Technically, Homes England are able to seek repayment of the grant funding where the project does not proceed to completion, but this is at Homes England discretion. Homes England is fully engaged in this project and so is aware of the position. It should also be noted that an indemnity exists in relation some of the most recent elements of this expenditure.
No S106 funds have been deployed yet.
The formal decision to stop the current tendering exercise will be sought from Cabinet today. No quantified risk analysis has been run in relation to this project and I struggle to see the value in seeking to quantify a specific risk percentage in this scenario.
The Council’s activity in relation to 3Rivers is wholly different to the position in relation to the funding and delivery of highways infrastructure. The Council, like many others, seeks to undertake development activity through its development company in order to generate profit to the Council which the Council is then able to utilise to support the provision of services. Infrastructure development on the other hand involves significant financial outlay and risk for the Council over the long term where repayment of the investment in dependent upon many factors and is uncertain. The different types of investment activity are therefore wholly different.
There is no particular reason as to why the report does not mention the employment land. It equally does not mention other scheme components, but this does not mean that they are any less important or that they have been overlooked or omitted for any reason.
a) That the current tender process (being run by Devon County Council on behalf of MDDC) be stopped and that tenderers be notified that, owing to forecast construction costs exceeding the available budget, the Council will not be seeking to let a contract at this time.
b) That Cabinet instructs officers to continue to investigate additional funding opportunities and scope for project value-engineering, working with key project partners including Devon County Council and Homes England and that a further report be brought back to Cabinet as soon as possible.
(Proposed by Cllr R Chesterton and seconded by Cllr C Slade)
Reason for decision:
In 2019, Mid Devon District Council entered into an Agreement with Homes England, formally securing £8.2m of Housing Infrastructure Fund (HIF) grant money to support delivery of a new junction to the A361.
Since that time, work on the EUE scheme, junction and linking road has progressed. Devon County Council has also undertaken a competitive tendering exercise in relation to the second phase of junction works which would see the delivery of the second set of slip roads and overbridge of the junction scheme, along with further works. It was anticipated that the cost of these works may exceed the available budget owing to recent cost inflation and limited contractor capacity and, based on Devon County Council estimates, the August 2021 Cabinet report projected this possible shortfall as £1.9m.
The County Council’s tendering exercise has now identified a preferred bidder, however the total cost significantly exceeds the previous estimated shortfall of £1.9m. This is due to significant increases in construction sector costs and the need for an increased contingency to reflect the current contractor marketplace and the volatile prices of steel, concrete and aggregate.
Since identifying this increased shortfall, officers have been working to consider ways in which this shortfall could be mitigated and have also sought to identify further funding to support delivery.
Further work is therefore required to consider options to support delivery of the scheme and further discussions are required with partners, including Homes England and DCC, around ways in which the project might be funded and delivered.
Note: *Report previously circulated, copy attached to the minutes.
Report author: Richard Marsh
Publication date: 18/07/2022
Date of decision: 12/07/2022
Decided at meeting: 12/07/2022 - Cabinet