Agenda item

Report attached.

Members considered a report of Councillor Mohammed Younis, Cabinet Portfolio Holder for Levelling Up, to update Cabinet on the outcome of the recent tender evaluation process to appoint an operator for the shared office/workspace within Burtons Chambers.   

The Cabinet Portfolio Holder, Councillor Mohammed Younis, reported on success in identifying an operator for Burtons Chambers which had extensive experience for this appointment.  He reported that under the Management Agreement model, the Council would be liable for all costs associated with operation of the facility, either directly or via payment to the operator.  A revenue return may be receivable by the Council where a profit was generated in the event that revenue exceeded the costs of operation in a contract year.  The share would be 60% for the Council and 40% for the operator. 

Members referred to the success in securing the expertise of appointed operator.

Councillor Fisher asked if there had been any shortfalls identified in the appointment and if the risk was all on the Council’s side and what plans were in place after the 2 year period to reduce risk.  The Cabinet Portfolio Holder for Levelling Up expressed confidence in the operator and that half million pound was being held in reserve.

Approval of the report was not deemed a key decision.

Reasons for Decision

The Levelling Up Fund had been announced at the 2020 Spending Review and focused on capital investment in local infrastructure projects that require up to £20m of funding and builds on prior programmes such as the ‘Local Growth Fund’ and ‘Towns Fund’.

Cabinet gave its formal approval in support of the Town Centre Stakeholder Board’s recommendations that the Council’s LUF submission should focus around the following three principal interventions, nothing that at the time of submission 2 and 3 had not been in the Council’s ownership;

1.    Redevelopment within the Indoor Market Hall and outdoor pavilions along Peel Street – the intervention known as Market Hall.

2.    Improvements and redevelopment to the block of properties at 43-59 Blackburn Road/2-4 Church Street – the intervention known as Market Chambers.

3.    Improvements and redevelopment to the block 61-69 Blackburn Road – the intervention known as Burtons Chambers.

Paragraph 3.3 of the report referred to: ‘At its meeting on 13 January 2022, Council approved the creation of a Levelling Up Bid Contingency Reserve in the sum of £2 million.  The purpose of this reserve is to support the delivery of the LUF interventions with the Budget Holder for these funds being the Council’s Chief Executive.  Furthermore, at its meeting in February 2023, Cabinet delegated authority to the Executive Director (Environment), following consultation with the Leader of the Council and Chief Executive, to approve expenditure from this reserve, where it is deemed essential and/or economically advantageous to the Council to deliver the LUF interventions.’

The Council appointed CBRE through the Crown Commercial Service Framework as lead consultant for the procurement of operators for Burtons Chambers and the Market Hall.  CBRE have a specialist and very experienced team advising clients on shared office/workspace and utilised consultants Barker Proudlove who have a very experienced team in advising on market redevelopments.

The work procured from CBRE for both Burtons Chambers and the Market Hall included:-

·         Reviewing the proposed product and identifying any key issues or concerns that should be addressed prior to procurement.

·         Providing an initial assessment on the market, competition and precedent developments that provide an opportunity for lessons to be learnt.

·         Summarising the optimum models that could be considered, including viability and potential revenue models.

·         Setting out the delivery method that is most likely to be suitable, informed by feedback gained from operators/potential operators, including a funding compliant procurement approach, explaining the team structure that would best support the procurement process.

·         Presenting its finding in a report that clearly sets out recommendations for the operating model and procurement process.

·         Undertaking a complaint tender/procurement process to identify a preferred operator for Burtons Chambers and the Market Hall.

Both consultants reviewed the designs and requirements for Burtons Chambers and the Market Hall, identifying the optimum contracting models which would most likely attract a strong operator interest.  These being a Management Agreement model for the share office/workspace in Burtons Chambers, and a Lease for the Market Hall.

CBRE have managed the whole tender process to identify a preferred operator for Burtons Chambers.  The invitation to tender was published on the Government’s complaint ‘Find a Tender’ portal on the 13November 2023 and closed on the 22 January 2024.

The procurement of an operator for the Market Hall was still ongoing and once concluded, a further report would be presented to Cabinet.

Further information was provided on the evaluation of tenders including the following paragraphs which were referred to in the recommendation 1 of the report:

Paragraph 4.1 - A panel containing the Council’s Executive Director (Environment) and Principal Accountant for the LUF funded projects, plus LUF Project Director (employed by Rider Levett Bucknall) met on Friday 16 February to evaluate the two tenders submitted.  The panel was moderated and overseen by a representative of CBRE in their capacity as lead consultant for the tender procurement process; and

Paragraph 4.2 – Following a rigorous evaluation process, a clarification meeting with 2-Work representatives and the Cabinet Member for Levelling Up was held on Tuesday 20 February 2024.  In light of the responses to the questions raised at this meeting and the subsequent financial clarification meeting with CBRE, the panel’s recommendation was that Cabinet accept the tender submitted by 2-Work as the preferred operator for Burtons Chambers.

Paragraph 4.7 – The shared office/workplace facility will be new and untested to the area/potential customers and therefore it is unknown if the first two years net operating income for Burtons Chambers will align with income generation projections proposed by the operator.

Paragraph 4.8 – As highlighted in paragraph 4.4 above, the Council is required to cover all the operator’s annual operating costs.  Where this cannot be met from the income generated, the Council will be required to make up the balance from its own resources.  Good financial planning would therefore recommend the Council set aside funds to cover any potential liability which is contractually due to the operator during the initial start-up period.  CBRE have confirmed £450k is an appropriate sum to mitigate the financial risk to the Council for the first two years.  The income projections for year three and onwards, indicate income exceeding operating costs (profit).

Alternative Options

The Council could have chosen not to appoint an operator and managed the facility itself.  This had been rejected as it was recognised that the Council did not have specific knowledge or experienced staff ‘in-house’ to manage a facility in this sector and on such a high profile LUF funded project.

The Council could have chosen not to set aside funds from the existing approved Levelling Up Contingency Reserve fund.  This was not recommended and failing to make the suggested provision could have placed future in-year financial pressures on the Council’s revenue budget.

Resolved                           (1)   That the report be noted and the recommendation from the Evaluation Panel and CBRE set out in paragraphs 4.1 and 4.2 of the report (and as above), to appoint 2-Work Group Limited of Innovation House, Hornbeam Business Park, Harrogate, North Yorkshire, as the Council’s preferred operator for Burton’s Chambers, be supported;

                                            (2)   That authority be delegated to the Executive Director (Legal & Democratic Services) following consultation with the Portfolio Holder for Levelling Up and/or Leader of the Council to agree and sign the Management Agreement with 2-Work Group Limited for a five year term with an option to extend this a further two years at the Council’s sole discretion; and

                                            (3)   That it be noted that the allocation of £450k from the £2m Levelling Up Bid Contingency Reserve, to cover any shortfall in the first two years net operating income for the shared office/workspace as set out in paragraphs 3.3, 4.7 and 4.8 of the report (or as above).