ITEM CA14
DETAILED PROJECT APPRAISAL R2
Name of Scheme: Better Offices Programme – Northern
area
Acquisition
of site and construction of new office, Banbury
Start Year: 2007/08
Basis of Estimate: Site acquisition terms agreed with landowner. Building construction costs provided by
developer. Other cost estimates produced by Mouchel Parkman.
1.
INTRODUCTION
On
the
Agree the funding required to implement the programme, subject to a project appraisal for the necessary capital
expenditure being approved by the Cabinet.
This
project appraisal relates to the acquisition of a freehold site in Banbury town
centre and procurement of a new office building (of approximately 1798 square
metres) to consolidate staff from 10 existing Council offices in Banbury, Bicester, Kidlington and
Witney. The approval of this project
appraisal will enable the northern area moves to proceed in accordance with the
timescales and financial appraisal of the Better Offices Programme.
The
owner of the site has had an offer from another party and is only willing to
proceed with a sale to the County Council if contracts are exchanged by the end
of June 2007.
2.
DESCRIPTION OF PROJECT
The
accommodation in the new Banbury hub office will provide space for
approximately 260 operational staff from the CYP&F and S&CS
Directorates currently based in 10 Council owned or leased properties -
enabling much fuller service integration. The proposed specification will meet the BREEAM “Very Good”
environmental standard and will comply with the Council’s own Environmental Standards.
The
preferred site has been introduced to the County Council by a local developer,
and the proposal is that the developer will deliver the building to the County
Council’s brief. The site is previously
developed land and has planning permission for approximately 2800 square metres
of offices.
To
summarise the proposed process:
(i)
The landowner has received another offer for
the site and has imposed a deadline of
(ii)
The existing outline planning permission
indicates two offices buildings on the site. The County Council’s need relies upon those buildings being slightly
redesigned. A planning application has
been submitted by the developer to resolve this issue and progress with that
application will be reported orally to the Cabinet.
(iii)
At the same time as the developer exchanges
contracts for the land purchase, it will enter into an agreement with the
County Council to ensure that the building meets the Council’s brief.
(iv)
Following exchange of contracts, the
developer’s design team would undertake the detailed design process with a view
to achieving detailed planning permission in January 2008, appointment of a
contractor by April 2008 (fully tendered process), start on site in August 2008
and completion including fit-out by September 2009.
Legal
Services is currently advising on compliance with the procurement regulations
governing County Council contracts. The developer’s initial proposal was
potentially non-compliant and Legal Services is taking Counsel’s opinion on the
regulations and the options available for working with the developer. Counsel’s
opinion will have been received by the date of the Cabinet meeting and an verbal update will be given.
The
timetable for delivery of the building is longer than originally envisaged in
the approved Business Case because the preferred site has been found to be
tenanted. This change of timetable has
been reported to the Better Offices Programme Board and will be monitored
through that process. If the tenant
chooses to leave the site early, the programme will be shortened as
appropriate.
3.
POLICY CONTEXT FOR PROJECT
Provision of suitable office accommodation makes a
significant contribution to the provision of high quality services and
therefore the project will support the corporate objective of providing Value
for Money, and the strategic priority of improving our services. Improved environmental performance, a town
centre location and a reduction in the number of buildings will contribute to
the Future First objectives. The new
office will contribute to “Improving the Performance of Our Property” by
providing accommodation which will be fully utilised by the adoption of modern workstyles, and by releasing accommodation in existing
buildings. Improved accessibility of
buildings will support Disability Equality.
The project aligns with the Property Service Plan
objective of Improving the Performance of our Property. This is defined as
providing a more efficient and effective property portfolio that secures better
value from the assets, and enhances service delivery. The project also contributes to the Asset
Management Plan objective of 90% of property being fit for purpose by 2015.
Provision of this new hub office is also directly
linked to the Council’s values (CHOICE), specifically providing a customer
focus and assisting with the delivery of more efficient and effective services
with greater team integration within and between services.
4.
JUSTIFICATION OF NEED FOR THE PROJECT
Creation
of a new northern hub office in Banbury is a major component of the Better
Offices Programme. The creation of hub offices around the County was approved
by the Council’s Executive in 2004 and will contribute significantly to
achieving the adopted success criteria for a smaller, but better quality,
flexible portfolio that will improve service delivery and is fit for purpose.
Provision
of a consolidated office will enable freehold disposal of 3 properties,
surrender of 2 leasehold buildings and the release of space within a further 5
County Council buildings to be retained for further use or reviewed for future
disposal. The project should generate a net revenue saving to support the increased costs of other
parts of the Better Offices Programme.
The
buildings to be sold or surrendered represent generally under-performing
buildings in energy and maintenance terms, which have been acquired on a
piecemeal basis over many years.
5.
OTHER OPTIONS CONSIDERED
Options
considered for the northern hub office included:
(a)
Improve Calthorpe House and acquire a second office building in Banbury:
Rejected
as the objectives and benefits of the programme would not be achieved – the
staff would still be separated and it would be difficult to bring Calthorpe House up to the standard required
(b)
Acquire an existing building in Banbury:
Rejected
as none of the existing buildings met the Council’s objectives in terms of
location, size and environmental standards
(c)
Procure a new building on the County
Council’s land at Orchard Lodge:
Retained
as a fallback option, but this would be relatively expensive as Orchard Lodge
is likely to achieve a residential planning permission. The site is larger than needed and it would
be important to include other activities to justify use of this area. There is no existing planning permission for
offices and applying for permission could delay the programme.
(d)
Procure a new building in an out-of-town
location:
As
yet the County Council does not wish to compromise its intention to locate the
office in a more sustainable town centre location
Since
commencement of the project, two other potential sites have been brought to
Officers’ attention. These do not have
planning permission, so there is less certainty about the practicality and/or
timing of delivery. These two sites
could also be counted as fallback options if necessary.
6.
LINKS
TO THE COUNCIL’S ASSET MANAGEMENT PLAN
The
Better Offices Programme is identified as a Key Objective in the Asset
Management Plan & Capital Strategy. The new hub office in Banbury is an integral part of that Programme and
meets all its objectives.
7.
FINANCIAL
IMPLICATIONS Please see (exempt)
Resource Appraisal
Exempt
Information: The Annex contains
information considered to be exempt within Paragraph 3 of Schedule 12A to the
Local Government Act 1972 (Information relating to the financial or business
affairs of any particular person, including the authority holding that
information), namely, the estimated value of property in respect of which a
sale is in contemplation; and it is further considered that in all the
circumstances of the case, the public interest in maintaining the exemption
outweighs the public interest in disclosing the information, in that otherwise
the position of the Council in negotiations in respect of that sale would be
likely to be prejudiced.
It is recommended
on those grounds that the public be excluded from the meeting during the
consideration of the resource appraisal since it is likely that if they were
present during those items there would be a disclosure of that exempt information.
The
financial case for the overall Better Offices Programme was reported to and
approved by the Cabinet in January:
(a)
Approval related to the overall financial
case for the Programme rather than the financial performance of one
aspect. Thus, one element of the
strategy can be varied provided that it is matched by equivalent variations
elsewhere in the strategy.
(b)
Capital receipts from disposals are pooled
within the financial planning for the overall programme, and are not allocated
to individual projects.
(c)
A contingency figure of 10% of all capital
expenditure has been included in the Programme Business Case, which will be
managed across the programme.
(d) A whole life costing
approach has been applied to the Better Offices Programme. That means the total costs of the Programme
have been assessed over a 29 years period, i.e. 25 years after completion of
the moves and the final phase of borrowing.
The
figures in the Business Case for the Banbury hub office were as follows:
(a) Estimated capital costs - £5,352,062
(b)
Estimated on-going annual revenue cost of
£141,900 from 2013/14, with fluctuations prior to that as properties are
disposed of and staff relocation costs are incurred. The current revenue cost
attached to the buildings to be released is approximately £199,900 per annum.
Thus, there should be a revenue cost saving of
£58,000 per annum within the northern area project, which will support other
parts of the Programme.
(c) A whole life costing
approach is being applied to the Banbury project, particularly as the County Council is acquiring a freehold building the
decisions taken now will have a long term effect. Thus, the specification is not simply related
to current capital expenditure but takes account of the likely future
maintenance and running costs. The
building layout is also designed to permit flexibility in the mode of
occupation
The detailed capital cost estimates are set out in the attached (exempt) Annex.
The
total estimated cost of provision exceeds the figure in the Business Case as
shown in the (exempt) annex. This is
primarily due to an increased cost of construction. The original estimate used for the Business
Case was provided by the developer but related to his usual “speculative
office” specification and December
2006 building costs. The County
Council’s requirement for a BREEAM Very Good standard and compliance with its
own environmental standards has resulted in a higher initial cost, and the building costs have been projected
forward to the start on site date in August 2008. The construction cost estimate includes a 10% contingency.
The
latest cost estimate provided by the developer has been reviewed by Atkins –
who are acting for the County Council on the Banbury
project. The Atkins Project Manager is
satisfied that the overall cost does represent value for money when compared
with the cost of acquiring other new office buildings currently available in
the Banbury area, and that procurement of a building in the way proposed
represents better value for money than leasing a completed building (because
the County Council will not be paying anything for developer’s risk).
The delay in incurring major items of capital
expenditure has the effect of slightly tempering borrowing costs. It reduces borrowing in the period 2007/08 to
2009/10 and spreads the cost over the remaining 25 years of borrowing. However, this alone is not sufficient to deal
with the likely shortfall. Therefore it will be necessary to:
(i)
review each
element of the cost plan and specification to ensure that best value is being
achieved and check whether savings can be made, and
(ii)
ensure that the benefits of the BREEAM Very
Good standard and the Council’s environmental standards result in savings in
running costs over and above those assumed in the business case, resulting in a
revenue saving to compensate for the increased capital cost.
Officers’
preliminary work suggests that
sufficient savings can be made and further work will be carried out to
ensure that the overall financial case remains in balance before a commitment
is entered into.
NEIL
MONAGHAN SUE
SCANE
Head
of Property Head
of Finance & Procurement
Environment
& Economy
RICHARD
DUDDING
Director
for Environment & Economy
Contact Officer: Mark Tailby, Team Leader, Strategic Asset Management, Property
Services, Tel: (01865) 816012
June 2007
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