Report title: Extension to Temporary boiler provision for Myatts Field South

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1 Officer delegated decision Decision Due: 2 November 2015 Report title: Extension to Temporary boiler provision for Myatts Field South Ward: Vassall Report Authorised by: Sue Foster, Strategic Director Neighbourhoods and Growth Portfolio: Councillor Matthew Bennett, Cabinet Member for Housing Contact for enquiries: Shah Hassan, Business Information and Transformation Officer, Report summary The report requests a waiver for a 12 month extension of the contract for the provision of temporary boilers at Myatts Field South, pending the installation of individual boilers, currently under consideration. The report seeks retrospective approval for the unauthorised spend as formal approval was not gained before the contract was extended in June. The temporary boilers are being provided by J & U Services Ltd. Finance summary The additional cost of the contract extension for the temporary gas fired boilers for one year from 6th June 2015 is 108k (exc. VAT). There has been a 10% discount applied compared to last year s cost of 120k. This will be met within the Myatts Field South Boiler Replacement budget. The cost of maintenance and repairs are not included in this figure and will be funded separately from existing Housing Management budgets. Recommendations (1) To agree the unauthorised spend of approximately 42,000 from 6th June 2015 until 1 November 2015 and to agree spend from 2 November to 5 June (2) To note the extension of the contract with J & U Services Ltd (t/a Nationwide Boiler Hire) for the hire of the temporary boilers until 5th June 2016 costing approximately 66,

2 (3) To waive clause 9.2 of the Lambeth Contract Standing Orders (Competition requirement for purchases and partnership arrangements), where there is no provision for the extension in the current contract. Reason for Exemption from Disclosure The accompanying part II report is exempt from disclosure by virtue of the following paragraphs of Schedule 12A to the Local Government Act 1972: Information in respect of which a claim to legal professional privilege could be maintained in legal proceedings. 1. Context 1.1 Myatts Field South is an Estate of 313 Tenancies including 81 leaseholders. A combined heat and power plant, developed as part of the Myatts Field North PFI, is located in an underground boiler room at Akerman Road. The boilers serving Myatts Field South were removed at the time the Myatts Field North Central Heating (CH) system was commissioned in 2012/13, and a temporary boiler solution was provided pending permanent replacement with a reliable, efficient, metered heat and hot water system. 1.2 The temporary boilers are currently being leased from J & U Services Ltd. The original approval to enter into a 12 month lease agreement was given by Divisional Director of Resources and Executive Director of Housing Regeneration and Environment on 4th April This agreement came to an end on the 4th June A second approval was given by Business Unit Manager for a further 12 month lease agreement for the hire of temporary boilers on 2nd August This lease ended on 4th June 2014 and the boilers were utilised for a time out of contract. A third approval was given by Commissioning Director for a further 12 month extension, during which time the Council, having considered external CH appraisals, had come to a firm decision to progress the installation of individual CH systems. However, due to prolonged opposition from the Tenants and Residents Association (TRA) and the community, the Council is currently progressing in taking legal action to force access into 100 homes to carry out the individual installations if the dispute is not resolved. However, the Council has continued to pursue its preferred option of negotiating access, which has meant that steps to enforce access to the few households which have not granted access have not been completed and therefore a further extension to the contract is being sought. Point 1.4 clarifies actions that will be taken within the next 6 months, which will result in the delivery of a permanent CH system. 1.3 The current position is that 119 households have not given access for installation. 1.4 The communual heating system will be turned off in five stages, so as to ensure full disconnection by June Residents will be advised of relevant dates. It is anticipated that each stage will take 6 weeks to complete the installation of the new individual

3 heating systems. This would result in the temporary boiler plant room being decommissioned in mid-may Legal services have clarified that the Council does not need to gain access to leasehold homes. Leaseholders have been written to twice offering them a free installation the letter made it clear the implications of not accepting the offer. Lessees will only be contacted again in the run up to the disconnection. 1.6 Legal action is being progressed to gain access into tenanted properties. 1.7 The purpose of this extension is to continue to provide the residents of Myatts Field South with a temporary solution of accessing hot water and heating, whilst the permanent solution of installing individual boiler systems or an alternative communal system is implemented. The implementation of an efficient heating system ties in with Lambeth Council s community outcomes providing more and better quality homes. 2. Proposal and Reasons 2.1 A value for money review was carried out on the viability of installing communal or individual boilers in Further to consideration of the outcome of this review, a meeting was sought with the TRA. The review was sent to residents for consideration and considered at the AGM held at Myatts Field South in March 2014, with considerable opposition expressed within the TRA to the proposal to implement individual CH systems throughout the estate. 2.2 Residents have received 3 access letters since 20th March 2015 and a further 28% residents have given access, leaving 119 residents who have not given access. The Council has commenced taking legal action to gain access into these properties. 2.3 In terms of viability, the Council s initial position was to decommission the communal combined heating system and progress the installation of individual heating. 2.4 The Council has commissioned 2 feasibility reports. The decision to carry out the second feasibility report, from independent consultants, Astecs, as well as a financial model, was agreed with residents and has now been fully considered at public meetings. 2.5 On 21st April 2015, it was agreed with the TRA Chair that a further meeting is to be held to consider the on-going process for the installation of individual systems. 2.6 An extension is being sought to continue with the usage of the temporary boiler plant room serving the estate during 2015/16 until individual systems have been installed into residents homes. 2.7 As there is no provision for the contract to be extended within its terms and conditions, a waiver to section 9.2 of the contract standing orders is being sought. 3. Finance 3.1 The cost of continuing with the existing temporary gas fired boilers from 6th June 2015 to 5th June 2016 is 108k and will be met from the existing Myatts Field South Boiler Replacement budget. The cost of maintenance and repairs is in addition to this figure

4 and will be funded from existing budgets from within Housing Management. Any legal costs acquired as a result of not being able to gain access to properties will not impact on the cost of this contract extension. However, a further extention may need to be sought if delays in gaining access to properties exceeds 5th June Legal and Democracy 4.1 The authority to approve the purchase following the end of the contract is vested in the Director, who may exercise her authority on the recommendation of the Procurement Board. 4.2 The Council s contract standing orders require that purchases in excess of 100,000 are formally tendered. This requirement may be waived in certain circumstances, including where a contract extension is sought for which no provision was made in the original contract, and where it is demonstrably in the best interests of the Council to do so. 4.3 The delegated authority to approve the waiver is vested in the Director, who may exercise her authority on the recommendation of the Procurement Board. Where unauthorised expenditure has been incurred, the Procurement Board can only note it. 4.4 The EU procurement regime applies to the proposed award by virtue of the Public Contracts Regulations The Council has a duty to publish a contract notice in the official journal if the estimated value of the contract exceeds 172,514. The Regulations allow contracting authorities to negotiate contract extensions where additional services are required from the contractor that through unforeseen circumstances has not been included in the original contract, or where, inter alia, a change of contractor would cause significant inconvenience of substantial duplication of costs for the contracting authority. However, this is only permitted where the value of the contract extensions do not exceed 50% of the value of the original contract, which does not apply here. 4.5 Officers should give consideration to securing an early termination provision in the contract extension. 4.6 The Council s Constitution requires that all key decisions, decisions which involve resources between the sums of 100,000 and 500,000, and important or sensitive issues, must be published on the website for five clear days before the decision is approved by the Director or Cabinet Member concerned. Any representations received during this period must be considered by the decision-maker before the decision is taken. 5. Consultation and co-production 5.1 The Council has sought to co-produce the option outcome for residents through agreeing to carry out a CH review testing viability and involving them in the outcome of the CHP review and through meetings. The option of installing a communal boiler is not financially viable and it has not been possible to date to co-produce an agreed option with the TRA. 5.2 The TRA is opposed to the viable outcomes noted in the independent reports noted above which have recommended the option of installing individual CH systems in homes and has led a campaign to this effect. Substantial communications with residents and the

5 TRA have been held to clarify how the decision was reached and the support for residents during the installation period. 5.3 The Council will have to take legal action to gain access to over 129 residents homes to progress the installations. 5.4 Whilst maintaining the installation process as noted above, officers continue to explore options that may meet with residents general agreement. 6. Risk management 6.1 Key risks associated with this project are being identified as part of the CH options under consideration and include: The VFM, of seeking to procure another supplier, disconnect and re-connect to the pipework infrastructure. Disruption that would be incurred in the event that the temporary boiler is replaced by another temporary boiler from a different supplier. Further extension to rental of temporary boiler plant beyond June a project plan is now in place which validates actions which must be taken within the next 6 months, so as to avoid a further extension. In the event that the decision is made to confirm the contract extension provision will be negotiated permitting the Council to withdraw early, and this will mitigate procurement risk. Further major failure of the existing distribution pipework leading to prolonged loss of service. Increased level of leaks from radiators in homes causing damage to residents property. This goes beyond acceptable wear and tear and is not covered by the contract. Continued delay in delivery of the Decent Homes works on the estate as they cannot proceed without the completion the heating upgrade programme. 7. Equalities impact assessment 7.1 The EIA for Myatt s Field North noted that there are a number of tenants who are vulnerable through disability. A small communal boiler has been installed to the sheltered housing scheme, and is also proposed to the homes of 10 residents who are living in a block where residents have special needs. 8. Community safety 8.1 None 9. Organisational implications 9.1 J & U Services Ltd (t/a Nationwide Boiler Hire) pay all of their engineers above the London living wage. However, unfortunately due to the nature of their business they do not have any apprentices.

6 10. Timetable for implementation 10.1 The table below shows the stages, milestones and deadlines for implementing the contract. # Item Description Date 1 Operating without approval 6th June rd October Procurement Board date 8th October Decisions Online 23 rd October Contract Extension Order form signed 1 November Contract Extension start date 1 November The on-going hire contract for the temporary boilers will be managed and monitored by the Housing Management Service. Audit trail Consultation Name/Position Lambeth cluster/division or partner Date Sent Date Received Comments in para: Sue Foster Strategic Director - Neighbourhoods and Growth 03/09/15 03/09/15 Hamant Bharadia Financial Planning & Management 21/09/ /10/2015 Jacqui Alexander Head of Technical Services, Housing Management 21/09/2015 Graham Statham Maintenance Teams Manager - Housing Management 21/09/ /10/2015 David Thomas Legal Services 21/09/ /09/2015 4, 6 Tim Fairhurst Area Housing Manager 25/09/ /09/2015 Rachel Sharpe Commissioning Director 21/09/2015 Mandy Green AD - Commissioning 21/09/ /09/2015 1, 3, 6 Wayne Chandai Democratic Services 21/09/ /10/2015 Katy Shaw Governance Officer 21/09/ /10/2015 Cllr Matthew Bennett Cabinet Member for Housing 03/09/ /09/2015 Sharon Donovan Procurement 17/09/ /09/2015 Internal Officer Board Date of meeting Procurement Board 08/10/2015 External

7 Report history Original discussion with Cabinet Member 3 September 2015 Report deadline Date final report sent Report no. Part II Exempt from Disclosure/confidential Yes accompanying report? Key decision report No Date first appeared on forward plan Key decision reasons Background information Gateway 3 ODDR: Temporary boiler provision for Myatts Field South (PB date: 15/05/12 CR: C ) Gateway 3 ODDR: Extension of Temporary boiler provision for Myatts Field South (PB date: 06/08/13 CR: C ) Gateway 3 ODDR: Extension of Temporary boiler provision for Myatts Field South (PB date: 24/07/14 CR: C ) Appendices None APPROVAL BY CABINET MEMBER OR OFFICER IN ACCORDANCE WITH SCHEME OF DELEGATION I confirm I have consulted Finance, Legal, Democratic Services and the Procurement Board and taken account of their advice and comments in completing the report for approval: Signature Date Shah Hassan, Business Information and Transformation Officer I approve the above recommendations: Signature Date Sue Foster, Strategic Director, Nieghbourhoods and Growth Any declarations of interest (or exemptions granted): Issue: Interest declared:

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