Agenda item

The Committee received a report of the Corporate Director of Regeneration Economy and Growth and presentation that provided an update on the overall approach and performance of Major Programmes and Projects delivered by the Regeneration, Economy and Growth Directorate. The report also provided an update on key project delivery and issues with particular projects that had an impact on delivery (for copy of report and presentation slides, see file of minutes).

The Head of Transport and Contract Services introduced the item which aimed to provide assurance that appropriate standards and controls were in place to ensure programmes and projects were managed and delivered successfully within the delivery framework with appropriate levels of control, challenge, and intervention. He continued that the introduction of the Major Programme Board and the Portfolio Office approach ensured that projects are delivered efficiently and effectively. He highlighted that the approach used ensures that issues are escalated in a timely manner for decisions to be made.  

He confirmed that the environment to deliver the various projects had been very challenging over the last few years, with increased rates of inflation, higher borrowing costs and shrinking markets impacting the viability and deliverability of projects. He continued that the REG Capital Programme was growing year on year, with the current financial year 2024/2025, both the number of projects and the overall value of the programme had increased in year from 150 to 156 schemes and increased in value from a base budget figure of £167,396,016 to £177,002,379. The Head of Transport and Contract Services commented that significant world events over recent years impacting on the costs of construction together with the Service Grouping managing an increased portfolio of projects, had resulted in an impact on delivery of some projects, however, DCC continues to be successful in terms of the programmes it continues to deliver. He continued by commenting that the delivery of the various projects is often complex, involving multiple stakeholders and having to show delivery credibility to funders which is demonstrated by the significant volume of external funding secured. He referred to paragraph 31 of the report and commented that the REG portfolio of programmes and projects is considerable across a range of thematic areas and is grouped into five areas for delivery purposes: Housing Renewal and Development; Town Centre Improvements; Employment Sites; Transport and Connectivity and Visitor Economy with detail of some of the projects that fall within the various areas identified within the report. He then made reference to the examples included within the presentation and commented that the challenges had included contracts coming back above the contract rate, unchartered drainage, inclement weather resulting in delays, high specification of design, pandemic and inflation, utility connection issues, compensation events and fewer contractors in the marketplace to undertake these huge projects/programmes.

The Committee were provided with a detailed presentation that focused on:-

·      REG Major Programmes Portfolio and Capital Programme;

·      Major Programmes Board and Portfolio Approach, including timelines, controls and guidance and business process;

·      Construction Industry Intelligence;

·      Case Studies: The Story, Belmont Primary and Secondary School and NetPark Phase 3.

The Funding and Programmes Manager advised that the REG Major Programmes Portfolio totalled £878 million with projects worth £647 million in secured funding and a further £244 million unsecured in pipeline projects at different phases of development, however this did not include private sector led projects where there was significant involvement of the council to facilitate their development, with these schemes worth over an estimated £1.4 billion in private sector development. She confirmed that there are 152 schemes with REG Capital programme totalling £167m in 2024/25 and that over 60 non-REG schemes were being delivered for other Council services. She then referred to a table in the presentation which showed REG capital projects in delivery, showing the number of projects had increased from 112 in 2018/2019 to 152 in 2024/25 with the value of the schemes increasing by 195% over that period of time, with the current outturn forecast totalling £176m.

The Funding and Programmes Manager commented that the Major Programmes Board (MPB) was established in 2021 to oversee the REG portfolio and was responsible for its strategic direction. The MPB had overseen the development of a Portfolio Office which sets standards and controls for REG Programmes and Projects and is a hub for coordination of all information, Board communication, monitoring and intervention activities. Council programmes were monitored regularly and the Portfolio Office considers a range of project health indicators such as risks in terms of costs, time, quality, scope and whether projects were achieving the original impact and outcomes.

In relation to controls and guidance it was confirmed that in addition to the Process Flow Diagram followed by the MPB, there was a guidance framework to help sponsors, programme and project managers understand the requirements and outputs needed to set projects up and ensure delivery of activities in accordance with the Portfolio Office requirements. This guidance facilitated consistent and effective project setup, development and delivery and would allow the MPB to track and assure the programme mandates and objectives and that the projects were achieving the expected outcomes.

Members were provided with the Major Programme Board, project reporting timetable and diagram detailing the Portfolio Office Business Processes and a breakdown of individual stages.

The Construction and Consultancy Service Manager then took Members through the key trends that were affecting the construction industry highlighting that by the end of 2023, the BCIS estimated that building costs had risen by 26.2% in the period January 2020 to December 2023. This increase in costs had an impact on many projects with huge increases in some material commodities up to 40-50% and affordability issues being reported to the Corporate Management Team. Fortunately, stability is now returning to the industry and there is now growth in order books and confidence returning to the market. He continued by highlighting that there had been growth in repair and maintenance which was outperforming the new build work which saw a decline in output in 2023.

With regards to national factors, he highlighted the ambition in the labour manifesto with a focus on energy, roads, rail, reservoirs, ports, gigafactories, carbon capture, green hydrogen, housing targets set at 3000,000 per year and the establishment of a new body, Great British Energy to deliver increased investment in energy generation within the UK borders. Devolution was at the heart of the new agenda and there were discussions around planning reform.

Members were provided with details in relation to the forecast growth in Tender Price Inflation, growth in the labour market and material costs. It was noted that overall the output had flatlined, but new orders were increasing and should feed through to output growth. Tender prices were easing; however they were still significantly higher than previous. It was also reported that building costs were stable, material costs had slightly increased and labour costs were still increasing although at a slower rate. He continued that there is a shrinking market with tighter margins with a number of large contractors going into administration and contractors choosing their procurement routes. He continued that it is anticipated that there would serious ramifications resulting from the collapse of ISG and it was likely that there would be more insolvencies further down the supply chain.

The Construction and Consultancy Service Manager referred to Case Studies and provided detail in relation to The Story, Belmont Primary and Secondary School and NETPark Phase 3.

Councillor Moist thanked Officers for the report and presentation which followed on from the Corporate Directors commitment to provide regular updates to the Committee. He requested that the information in future reports be made simpler to understand and that the people of County Durham would like to see a precis of the information provided. He referred to the figure of £62m quoted for NETPark Phase 3 and asked whether this was the current projected cost and if the project would go over budget. He concluded by asking for clarification as to whether Belmont School was included in the Capital Programme figure for the REG Service Grouping.

The Funding and Programmes Manager responded that school builds were included within the Children and Young People's Service Grouping Capital Programme. Belmont school was one of the programmes/projects that the REG Service Grouping manage, with the Major Programmes Board having oversight of the project. She continued that the Board had oversight on a six-week basis including detail of spend in relation to individual projects. It was confirmed that there was no current overspend on the NETPark Phase 3 project.

Councillor Moist continued by referring to the various REG projects being grouped together into the various areas and asked for clarification in relation to the Council House Build, would this have a nil value. The Funding and Programmes Manager responded that current costs were built into the programme and the actual cost would come through on a scheme by scheme basis as they are developed.

Councillor Moist was conscious that the public needed to be aware of the costs for various projects, to avoid another bus station scenario where people did not know the facts concerning that project.

Councillor Lines highlighted that Filtronic based at NETPark were doubling their commitment at the site and that he was confident that Phase 3 of the development would be filled. He asked whether there was similar interest in relation to other developments within the county. The Head of Transport and Contract Services advised that information in relation to other sites being developed within the county was commercially sensitive, however he assured Members that there was interest in all the available sites.

Councillor Surtees commented that Members had previously asked for case studies to be include within the presentation, including detail of reasons for any delay, cost of the project and challenges, noting the information provided was very detailed and helpful for Members.

Councillor Moist referred to the Leisure Transformation Programme and commented that he submitted additional questions following the Special joint meeting on the 23 September 2024, however he had not received a response to date. Councillor Surtees advised that the Chair of Economy and Enterprise Overview and Scrutiny Committee was liaising with Overview and Scrutiny Officers to ensure that a response was provided by the Service Grouping.

Resolved:

That members provided comment on the arrangements for the effective delivery, management and performance of major programmes and projects across REG.