Item 25 Copley Close Estate Regeneration by e8J38Z


									                                                Report for:

                                                Item Number:

Contains Confidential     YES
or Exempt Information     Appendix B: Confidential Legal and Commercial Report
                          Contains Except Information by virtue of paragraph 3 of
                          Schedule 12A to the Local Government Act 1972
Title                     Copley Close Estate Regeneration – Procurement Update
Responsible Officer(s)    Jo Rowlands, Director of Housing
                          ext 5037
Author(s)                 Mark Brayford, Head of Housing Regeneration
                 ext 5766
Portfolio(s)              Cllr Hitesh Tailor, Housing
For Consideration By      Cabinet
Date to be Considered     22nd February 2011
Implementation Date if    7th March 2011
Not Called In
Affected Wards            Cleveland ward
Keywords/Index            Estates Review, Housing, Regeneration, Copley Close

Purpose of Report:
To seek approval to stop the procurement process for a redevelopment partner for the
regeneration of Copley Close, following a process of open competition. The report also
recommends actions to take forward development of an alternative option for the
regeneration of the estate.

1. Recommendations
That Cabinet agrees;

1.1   To note the Cabinet decision in October 2008 that endorsed the comprehensive
      regeneration of Copley Close in principle and authorised the commencement of
      a suitable competitive procurement procedure for the selection of a
      redevelopment partner

1.2   To note the outcome of the procurement process summarised in paragraph
      2.2.5 below

1.3   To authorise the Director of Housing to take the necessary steps to stop the
      OJEU procurement process, currently held at the second stage, for a
      redevelopment partner for the regeneration of Copley Close.

1.4   To note the concerns of residents if the procurement process is stopped

1.5   To authorise the Director of Housing to explore other options for redeveloping
      the Estate in consultation with residents (including those steps proposed in
      paragraph 3.2.2 below).
2.    Reason for Decision and Options Considered

2.1   Background – Developer Selection

2.1.1 Ealing Council’s housing regeneration strategy was developed following the
      2008 review of 34 of our largest estates. The review identified 8 estates where
      the Decent Homes works alone will not provide the transformational effect that
      the areas demanded and therefore required a higher level of intervention.

      Detailed resident consultation on these estates looked at the potential and
      capacity for regeneration, and resident aspirations for their neighbourhoods.
      The Council are working with residents and registered provider partners to
      develop comprehensive deliverable solutions.

      The objectives of the housing regeneration programme are to:
       Put residents at the heart of delivering regeneration
       Transform their deprived and run down neighbourhoods
       Provide mixed tenure developments including socially rented, affordable
         and private homes
       Provide environmentally sustainable urban development and improve the
         public realm
       Provide a better mix of bed sizes
       Contribute to the reduction of the HRA investment gap

2.1.2 A summary of the estate review findings carried out in 2008 showed that
      Copley Close requires improvements to the quality of homes, especially the
      design and layout of homes on the estate. The review also identified the need
      to improve open spaces and reduce anti-social behaviour.

2.1.3 The options appraisal process showed that comprehensive redevelopment of
      Copley Close is the preferred solution. Residents are very supportive of a
      comprehensive redevelopment option and have been closely involved in the
      procurement process through the Developer Selection Group.

2.1.4 In October 2008, cabinet agreed in principle to endorse the comprehensive
      redevelopment of Copley Close. It also authorised the Executive Director of
      Regeneration and Housing following consultation with the Director of Legal and
      Democratic Services and the portfolio holder for Housing, to commence a
      suitable procurement procedure for the comprehensive redevelopment of the

2.1.5 An OJEU procurement process commenced and a stage 2 brief was issued in
      September 2009, conducted in accordance with EU negotiated procedure.

2.2   Stage 2 Submissions
2.2.1 Stage 2 bids were received in November 2009 from two bidders.
       Logic Homes (a consortia of Land Group, Durkan and Genesis)
       Network Housing Group

2.2.2 Both submissions returned propose to ‘extensively refurbish’ rather than to
      demolish and rebuild the homes on land leased from Network Rail which are
       also situated on a bridging structure over a main rail line that runs to

2.2.3 The refurbishment work would include transforming the external appearance of
      the buildings by renewing the existing external fabric, altering the window and
      balcony positions, new roofs and extensive internal refurbishment. The
      proposals from bidders include the construction of an additional floor of
      accommodation as part of the refurbishment works. Also, to deal with the issue
      of the unsuitable under croft parking areas, there were proposals to reinstate
      these areas and create a lightweight bridging structure over the parking area for
      use as public realm or for residential amenity space.

2.2.4 The refurbishment proposals mean that the structural integrity of these
      buildings needed to be fully tested before committing to moving forward with
      the procurement process. Since stage 2 bids have been submitted, the housing
      regeneration team, planning, building control and independent advisors have
      worked to understand the viability of proposals given the difficulties of the site

2.2.5 Following further consideration, it is felt that that proposals are not viable in the
      following 6 key areas, which are set out in detail below;
    Condition of existing structures – it was found that the existing buildings could
      will not withstand extensive refurbishment and additional storeys of
    Network Rail – have advised that they have major concerns about the impact of
      redevelopment on the railway tunnel
    Planning concerns – the density of the development would further exacerbate
      issues relating to amenity space and play space under-provision; would fail to
      resolve issues of poor layout of buildings and public realm; would be out of
      keeping with the surrounding pattern and character of development; and would
      result in poor residential amenity of future occupiers of the development and
      neighbouring occupiers.
    Legal issues – the terms of the partnership approach proposed by one bidder is
      not considered to be viable
    Financial viability – concerns about how the regeneration proposals would be
    Developer Selection Group (DSG) feedback – refurbishment would not deal
      with issues and demolition and wholesale redevelopment would be the
      preferred option

2.3   Structural and Ground Condition Survey
2.3.1 The Housing and Regeneration team have been working with Building Control
      officers and Ealing Homes to understand the structural condition of each
      building. Surveys were commissioned to investigate the structural integrity of
      existing buildings on the estate;
       To withstand the extensive refurbishment proposals
       To withstand loading of additional storeys
       Potential loading to rail tunnel given proposals for new road layout
       Examine the condition of the ground on the estate given evidence of
2.3.2 The outcome of the independent structural survey confirmed that it would not
      be possible to add additional storeys to existing buildings due to the condition
      of building foundations. Furthermore, the proposed extensive refurbishment of
      buildings that bridge the rail tunnel would not be structurally viable.

2.3.3 The structural survey has also highlighted that a number of buildings on the
      estate have existing structural issues that will increase the cost of any
      refurbishment option. These buildings would be subject to ongoing survey work
      to assess the nature of movement and options for long term solutions would be

2.4   Consultation with Network Rail
2.4.1 The Council leases a significant portion of the land that the estate is built on
      from Network Rail. Approximately 350 properties occupy land leased from
      Network Rail (see land ownership map attached as Appendix A).

2.4.2 The 999 year lease was ‘inherited’ by the Council from the Greater London
      Council (GLC) who built the estate. The lease is extremely restrictive and
      prohibits any external alteration to the buildings.

2.4.3 The Regeneration team have met on site with Network Rail. Their view is that
      the close proximity of the buildings to the rail line will pose a significant risk to
      the deliverability of the bidders’ proposals for extensive refurbishment. Also, the
      rail line will be used to support Crossrail construction and any redevelopment
      scheme would be closely scrutinised against this risk factor.

2.4.4 In its current state the lease is not ‘fit for purpose’. Although Network Rail have
      indicated they would be willing to be involved in a discussion about the future of
      the Estate in order to negotiate new lease requirement, it has been made clear
      that there will not be any changes to the lease until Network Rail can
      understand the implications of the redevelopment proposals in relation to the
      rail tunnel.

2.5    Viability assessment from planning officers
2.5.1 The key issues on Copley Close include, but are not limited to, the under-
      provision and quality of amenity space and children’s play facilities, the poor
      layout of buildings and the public realm, and the severe competition and poor
      layout of car parking on street due to significant management and maintenance
      issues within the undercroft car parks. The Planning Service therefore have
      particular concerns about the proposals to refurbish the existing buildings and
      to increase residential density.

2.5.2 Particular concerns with the proposals included;
       The proposed increased density would be considered to further exacerbate
         existing issues of inadequate amenity space and children’s play space
         within the site. The increased residential density would also be further out of
         keeping with the general pattern, scale and character of development in this
         suburban area;
       The conversion of the existing undercroft car park for residential
         accommodation would be likely to result in poor-quality living
         The proposals for parking and public open space would not meet Council
          requirements or fully address the current problems on the estate;
         Proposals for infill and replacement development would appear to be
          detrimental to the amenities of neighbouring occupiers.
         The retention, refurbishment and additions to the poorer-standard existing
          flatted development would fail to improve the quality of this part of the estate
          or provide an acceptable or sustainable form of development.
         The loss of the more successful elements of the estate and intensive
          redevelopment would be likely to provide a poor standard of residential
          amenity of future residents.
         Proposals for new vehicular access onto Ruislip Road East and Drayton
          Green Road as set out by the bidders required further development.

2.6   Viability assessment from legal advisors
2.6.1 An independent legal and commercial report is attached as Confidential
      Appendix B.

2.6.2 Both of the bid submissions proposed a partnership approach, with the Council
      taking a greater share of the risk in one of the bids than the Council had
      originally envisaged. Legal advisors have identified a number of procurement
      issues associated with this partnership approach and it is considered that there
      is lack of clarity around how it would operate, no identification of net income
      stream to service project finance and the greater responsibility the Council
      would be required to take on to deliver the scheme. One bidder may wish the
      Council to ring fence existing housing revenue from homes on the estate in
      order to meet or underwrite the developer’s finance costs – such an approach
      brings with it inherent risks and was not envisaged by the procurement process
      nor by the council in supporting the proposed regeneration project.

2.6.3 Given the lack of strategic viability of one of only two bidders, the Council has
      to consider the risks associated and difficulties if only one bidder proceeds to
      stage 3. The council will find it difficult to secure best value from the remaining
      bidder without the competitive pressure of more than one bid.

2.7    Viability assessment from finance advisors
2.7.1 The financial models submitted by both bidders propose to minimise the
      funding gap with an increase in density – over the density levels set in the
      London Plan and using what is considered to be inappropriate methods to
      achieve this by either building on top and underneath of existing buildings.

2.7.2 Although the principle to increase density is supported by residents and is
      recognised within the brief issued as a tool for making the project work, the way
      in which the increased density is achieved in both bids does not work in
      planning and design terms. It also poses a significant risk of consequential
      damage to those existing homes close to the rail tunnel that are to be

2.8   Consultation with the Developer Selection Group
2.8.1 The Regeneration team have worked throughout the procurement process with
      residents of the Development Steering Group (DSG). The DSG have strong
      views about the proposals from both bidders:-
       Strongly prefer a demolition and redevelopment option
         Refurbishment would not deal with fundamental issues of the estate eg.
          poor layout, security, parking, amenity space, access

2.8.2 Members of the group are aware that Copley is challenging and have accepted
      that regeneration will be difficult, however, they have pointed out at every
      meeting - if we do not go to stage 3 then the council need to have alternative
      plans being developed for discussion.

2.8.3 Council Officers met with the Copley Close Developer Selection group (DSG)
      on Saturday 27th November to discuss the reasons why they could not
      recommend that the current procurement process to find a development partner
      should continue and what other options may be available.

2.8.4 The DSG were disappointed that the process was unlikely not to move forward
      to stage three after all the hard work residents had put in for over two years. It
      was the view of the DSG that the issues on Copley Close were so major that a
      radical redevelopment needs to take place on the estate and the Council has to
      work with residents and Ward councillors to achieve this.

2.8.5 The DSG has two main areas of concern that they wished Cabinet to be made
      aware of and note.

      (i) Implementing a programme of improvement works on Copley Close
      The DSG’s first area of concern is that while the Council had been pursuing the
      redevelopment partner procurement process residents have not received any
      decent homes works and only minimal works had been undertaken to resident’s
      homes and the estate in general.

      The DSG were worried that any alternative solution would take a long time to
      be worked through and works to improve the Estate had to be undertaken
      during this time.

      The DSG stated that the Council must work with residents to set out and agree
      a clear programme of works with a clear timescale for when they would be

      It was agreed by the DSG that a meeting would be held in the New Year to
      discuss these works and that there was already a lot of information about what
      work is needed that had been provided to the Council and Ealing Homes.

      (ii) Commitment from Council to work on alternative solutions to
      redevelop Copley Close
      The DSG’s second area of concern is that they want an assurance from
      Cabinet that they were committed to working with residents to find alternative
      solutions to ensure the redevelopment of Copley Close and that the Council
      would commit resources and would work in partnership with the DSG and
      residents to achieve this.

3.    Key Implications

3.1   Stopping the procurement process
3.1.1 The councils external legal advisors have advised that both the Procurement
      Regulations and clause 1.8.3 of the PQQ acknowledges the Council's right to
      abandon the procurement process and decide not to award a contract. There is
      no obligation to meet any costs of the bidders incurred in responding to our
      invitation to tender. Bidders’ proposals have been thoroughly analysed and
      concerns regarding deliverability have been discussed with bidders in the hope
      that either alternative solutions might have been put forward by bidders or the
      Council’s concerns could have been allayed. Bidders have been kept fully
      informed of the Council’s deliberations and it was made clear that if a viable
      way forward could not be found the procurement process would have to be

3.1.2 All bidders (including any that did not qualify at Stage 1 and those that withdrew
      from the process) will be notified that the procurement has been abandoned
      citing the reasons for the council's decision.

3.2   Next Steps – Developing An Alterative Option
3.2.1 Through the Developer Selection Group, residents have been consulted
      throughout the procurement process and are aware that there are serious
      challenges with delivering the bid submissions.

3.2.2 The DSG has made it clear that if the procurement process does not go ahead
      to stage 3, an alternative option would need to be presented. It will be difficult to
      identify a clear alternative route to delivering transformation on the estate, but a
      series of actions and consultation have been proposed.
       Housing needs survey to be undertaken to understand what the Council’s
          rehousing obligations would be.
       Cost analysis exercise of the blocks identified in the structural survey that
          require substantial refurbishment work. Recommendations would be made
          in partnership with Ealing Homes about the future of these blocks
       Liaison with officers that are developing the Sheltered Housing review to
          understand the future of the blocks on the estate
       In partnership with Network Rail, understand the condition of the rail tunnel
          and the Council’s obligations given its ownership and maintenance
       Work on revising the current lease with Network Rail
       Develop ideas about a long-term solution for the Estate with residents. This
          will include agreeing how long term consultation will be undertaken.
       The Portfolio Holder for Housing has met with Jackie Sear, Chief Executive
          of E.A.S.E. to explore ideas about moving forward.

4. Financial (to be confirmed by finance)
4.1   4.1    A key element to the evaluation process is on financial viability of the
      proposed scheme. There are significant financial risks to the council to enter
      into a Joint Venture with one of the bidders in addition to the high risk of
      increasing density on an already dense estate to meet the demands of the
      financial model. The alternative option required significant levels of affordable
      housing grant in order to be viable – officers believe that it would have been
      extremely difficult to pursue such a highly grant dependant project in the current
      public funding climateThere are 626 homes on Copley Close estate, of which
      451 are HRA tenants and 175 are owned on a leasehold or freehold basis. A
      budget of £150k was originally provided in the 2009/10 HRA revenue budget to
      fund the costs of the project team and specialist advisors. A similar provision
      was made in the current budget of which £70k has been spent to date. In
      addition there is a further revenue budget provision of £546k in the HRA budget
      for the general estate regeneration projects and it is anticipated this will be fully

4.2   A capital budget of £1m was provided in the 2010/11 HRA capital programme
      to support the buy back of leasehold properties at Copley close. To date four
      properties have been bought back at a total cost of £853k. It was originally
      intended that the capital costs would be recovered from the developer.

4.3   A key element into the evaluation process has been the financial viability of the
      proposed scheme. There are significant financial risks to the council of to enter
      into a Joint Venture with one of the bidders in addition to the high risk of
      increasing density on an already dense estate, required to meet the demands
      of the financial model. The alternative option required significant levels of
      affordable housing grant in order to be viable - officers believe that it would
      have been extremely difficult to pursue such a highly grant dependant project in
      the current public funding climate.

4.4   If the procurement is stopped, as recommended, then this leaves the future of
      the 451 tenanted properties un-resolved, and the financial implications of any
      proposal will be key to the future development of the estate. Therefore the
      results of the cost analysis exercise of the blocks, the items set out 3.2.2, and
      other options appraisals will be key to the future development of these

5. Legal
5.1  As stated above, the Council is able to abandon the procurement process and
     decide not to award a contract. There is no obligation to meet any costs of the
     bidders incurred by bidders to date.

5.2   All bidders (including any that did not qualify at Stage 1 and those that withdrew
      from the process) will be notified that the procurement has been abandoned
      citing the reasons for the Council's decision. There is no obligation to inform the
      market by serving a cancellation notice through OJEU.

5.3   The Network Rail lease will require redrafting to meet the purpose of any future
      redevelopment option. Proposed changes to the current lease have been
      drafted and discussions will continue with Network Rail.

6. Value For Money
6.1   The whole developer selection process was aimed at ensuring that value for
      money is achieved, and the best deal is struck for the Council and residents on
      Copley Close. A key component of this process was the use of competition in
      the selection process.
7. Sustainability Impact Appraisal
7.1  Any future redevelopment of the estate will require all homes to meet energy
     efficiency requirements in accordance with the Council’s current planning

8. Risk Management
8.1   The Council has taken external advice to understand the implications of
      stopping the current OJEU procurement process.

9. Community Safety
9.1    The Council will work with Ealing Homes, the DSG and community partners to
       help reduce the opportunity for crime and anti-social behaviour by securing
       vacant properties and carrying out necessary repair work in line with housing
       management standards.
10. Links to the 5 Priorities for the Borough
     Making Ealing Safer
       The purpose of this report is to stop a current procurement process. However, it
       is still the intention of the Council to look at options to redevelop Copley Close
       that would support a safer community.

      Securing Public Services
       The purpose of this report is to stop a current procurement process.

      Securing Jobs and Homes
       The purpose of this report is to stop a current procurement process. However, it
       is still the intention of the Council to look at options to redevelop Copley Close
       that would support employment training, job creation and new homes.

      Delivering Value for Money
       The purpose of this report is to stop a current procurement process. However, it
       is still the intention of the Council to look at options to redevelop Copley Close
       that would secure value for money for the Council.

      Making Ealing Cleaner
       The purpose of this report is to stop a current procurement process. However, it
       is still the intention of the Council to look at options to redevelop Copley Close
       that would support an enhanced environment and improved public realm.

11. Equalities, Human Rights and Community Cohesion
    An Equalities Impact Assessment screening has been completed.

12. Staffing/Workforce and Accommodation implications:

13. Property and Assets
    The purpose of this report is to stop a current procurement process.

14. Any other implications:

15. Consultation
    The Portfolio Holder for Housing has been consulted at regular stages of the
    procurement process.
     Cleveland ward members have been briefed about the reasons for stopping the
     procurement process and participated as part of the Copley Close DSG.

     Residents on the estate through the DSG have been informed and consulted on
     the recommendations outlined in the report. Regular meetings are held with the
     DSG and the council proposes to continue to work in partnership with the DSG
     and the wider community to seek alterative options for regenerating the estate.

 16. Timetable for Implementation
     Cabinet approval to stop procurement process               Feb ‘11
     Meeting with DSG to propose timescale of next steps        March ‘11
     Start Housing Needs Survey                                 Spring ‘11
     General Consultation                                       Spring ‘11
 17. Appendices
     Appendix A: Copley Close Land Ownership
     Confidential Appendix B: Legal and Commercial report

 18. Background Information
     Cabinet report, 14th October 2008: Housing regeneration update
     Cabinet report, 7th April 2009: Housing and regeneration update


Name of consultee           Post held            Date          Date          Comments
                                                sent to      response         appear in
                                               consultee     received        paragraph:
Cllr Hitesh Tailor   Cabinet Member for       04/01/10      09/02/11
Pat Hayes            Executive Director       22/11/10
                     Regeneration & Housing
Jackie Adams         Head of legal planning   22/11/10      07/12/10
                      and property
David Ewart          Director of Finance      22/11/10      21/12/10
Jo Rowlands          Director of Housing      22/11/10

Elizabeth Piper      LBE Planning Service     06/12/10      08/12/10

Andrea Squires       Legal advisor,           01/12/10      04/12/10
                     Winkworth Sherwood
Richard              Financial advisor,       01/12/10      04/12/10
Beckingsdale         Urban Delivery

 Report History

Decision type:         Urgency item?
Key decision           No
     Report no.:       Report author and contact for queries:
Mark Brayford,

To top