To advise Members of the financial planning and controls used in the monitoring  of Capital schemes.

The Committee considered the financial planning and controls used in the monitoring of capital schemes in property services.

In considering the report on the Capital Programme as part of the Integrated Performance Report in July the Committee had expressed some concerns that there may be systemic problems in managing capital projects and that this needed to be examined. 

The report set out how projects were prepared, tenders invited and contracts let and monitored.  An appendix to the report outlined the performance of the capital programme against funding over financial years 2004/05, 2005/06 and 2006/07.  It was noted that in these three financial years there had been a pattern of underspending against the capital budget.

The Head of Asset Management and Property Services introduced the report stating that in addition to the Corporate Asset Strategy Group the Capital Strategy Monitoring Group would be keeping a closer eye on monitoring the capital programme.  He added that the management of some individual projects had not been up to standard and project boards would be established for particularly significant projects.

In the course of discussion the following principal points were made:

·         Asked who evaluated tenders the Head of Asset Management and Property Services said that this depended on the nature of the project.  Some would be evaluated in-house, some by Owen Williams and some would be outsourced.

·         That rather than monthly monitoring of costs once a contract had been placed there should be contractual milestones, agreed in advance.

·         The risk management of contracts and the extent to which risk could and should be transferred to the contractor was discussed.  It was asserted that the causes of the additional expenditure on the following schemes: North Herefordshire pool, Weobley High School sports hall and Sutton Primary School and Riverside Primary School should have been addressed and quantified.  Whilst site investigations would not always reveal all the problems this need not be to the detriment of the Council if contracts were robust and risk transferred.

The Chief Executive observed that the higher the indemnity the Council sought the higher the price it paid to the contractor.  However, he accepted that the Council did need to give consideration to where the balance of advantage lay.

A Member questioned whether the Council should pay increased prices to transfer risk in this way.

·         Referring to Weobley High School the exact amount of expenditure on the project and the amount of overspend was questioned, different reports appearing to show different amounts.  In reply it was stated that the appendices showed expenditure on scheme by financial year and concentrated on the contract price for each of the main capital projects.

·         The Director of Resources said that the financial reporting gave a snapshot of expenditure on the capital scheme in the relevant financial year.  The post-implementation project review would provide the final expenditure on the project.

·         The robustness of the contract procedure rules and the project management of schemes was questioned.  The Director of Resources answered that contracts, for example those on Sutton and Riverside Primary Schools had not been let in excess of the budget for the Schemes.  Revised, strengthened contract procedure rules were to be submitted to Council in November 2007.  A formal approach to increases in the costs of Schemes had been agreed with Directorates. 

·         It was noted that a number of schemes did come in below tender and this should be of some reassurance.

The Committee noted the position.