Agenda item

As detailed in the recommendations.

Councillor Roberts introduced the item which followed previous updates to Cabinet on Welsh Government’s (WG) Sustainable Communities for Learning (formerly 21^st Century Schools Investment Programme, Band B) Mutual Investment Model (MIM) for the proposed 3-16 Campus project at Mynydd Isa.

The report provided the background to MIM and progress the project had made through the WG business case process and the design development process to cost certainty.

Details of the capital and revenue liabilities were outlined in the report and approval was sought for the annual Service payment, and to enter into a Project Agreement for the construction phase, finance and maintenance of the buildings and associated infrastructure for the years 3-6 campus project.  It was based on a maximum financial cap set by WG to overcome the challenges the construction sector/supply chain were currently experiencing, the complexities of MIM and in order to keep the project timeline on track.

Given the nature of the Public Private Partnership (PPP) the report was written in part to endure funders’ requirements were met, as a consequence the report contained technical and legal wording which had been simplified as much as possible.

Subject to Cabinet approval, the anticipated construction start was August 2022, with building occupation planned for the start of the new academic year, September 2024, thereafter external works would follow, starting with the demolition of the existing Argoed High School.  Any delay to the anticipated start could result in a significant project delay and associated cost increases.  Cabinet approval of the recommendations would allow completion of the funding package for the project and enable the Agreements to be entered into and works to commence in line with the programme.

The Chief Executive explained that over the past 24/30 months, various global issues had been impacting prices in the construction market which were as a result of Brexit, the COVID-19 pandemic and the war in Ukraine.  Those had conflated with the impact being:

·         An increase in demand for construction (post COVID)

·         Supply chain disruption and an ongoing energy crisis.  The consequences of that were the lack of construction materials

·         High inflation and price volatility

·         High raw material prices

·         High energy prices and increased uncertainty

To allow the project to progress, the WG MIM team, with their commissioned experts, had set a funding cap, which set the estimated maximum annual service charge.  The estimate maximum cap was a direct result of the current market, inflation and supply chain issues faced by the construction industry presently and was a reflection of where the project currently sat in the granular market testing/cost certainty process.  However, it was anticipated that the project figure would be confirmed as lower as the project moved towards financial close in July/August 2022.

The Full Business Case to WG also sought agreement from WG to cap the Council’s annual service charge contribution to a maximum value of £1,000,000 per annum.  Should the project figure be lower than the maximum capped figure, as anticipated, that would reduce the annual service charge figure accordingly to the benefit of both WG and the Council.

            The legal considerations and resource implications were outlined in full in the report.

RESOLVED:

(a)       That the execution, delivery and performance of the MIM Project Agreement with Project Co (to be established by the Welsh Education Partnership Co Limited) be approved, together with the Funders’ Direct Agreement, the Collateral Agreements, the Independent Tester Contract and the Insurance Proceeds Account Agreement, Clerk of Works Appointment, Independent M&E Commissioning Manager Agreement (together the “Agreements”) (and any documents to be delivered by the Agreements pursuant thereto) to facilitate the delivery of the Project;

(b)       That the Project Agreement at Appendix 1a be approved, together with Appendix 1b Schedule 14 Payment Mechanism which shall be incorporated into the Project Agreement, and which is summarised in  Appendix 2 and 3 of this report; so as to give effect to recommendation (c), subject to recommendation (f)

(c)        That the Funders’ Direct Agreement be approved, the Collateral Agreements, the Independent Tester Contract, and the Insurance Proceeds Account Agreement (also as Schedules of the Project Agreement), and other legal documentation at Appendix 4a – 4f of this report so as to give effect to recommendation (a), subject to recommendation (d)

(d)       That it be noted that the Monitoring Officer shall complete the Agreements for execution and is approved to:

                      i.        Complete all information gaps including but not limited to confirmation of financial obligations (including the Annual Service Charge and Monthly Service Payment) and commitments of the Council and programme dates; and

                    ii.        Make any further genuine project specific drafting changes to the Agreements, as may be required

and that by the act of execution any final changes are approved:

(e)       That delegated authority be given to the Monitoring Officer to approve any further deeds and documents for execution by the Council which are ancillary to the Agreements approved here; and

(f)        That it be noted that the Chief Executive, the S151 Officer, or the Monitoring Officer will complete and sign the certificates under the Local Government (Contracts) Act 1997 and agree to indemnify this officer in the act of doing so.