Minutes:
As Cushman and Wakefield had been unable to attend the meeting the Director of Regeneration attended the meeting to respond to some of the concerns that had been raised at previous meetings and to answer Members questions.
The key components of the TFM contract were outlined to Members, in particular how these related to Cushman and Wakefield. There were four distinct elements to the contract that needed to be considered:
1. There was a Core Contract in place whereby Cushman and Wakefield operated as a sub consultant to Amey with whom the Council was in contract with for the delivery of operational property, facility management and strategic property services. Both Amey and Cushman and Wakefield operated to a ‘core contract’.
2. The contract allowed, through an incentivised process, for the achievement of Additional Income – £1m
3. Project Delivery
4. Investment Acquisition
The Core Contract.
The Core Contract that related to Cushman and Wakefield effectively reflected, through a specification, the work that the former in house Strategic Property Team undertook on behalf of the Council. This contract was in place for a period of eight years and the Cushman and Wakefield element had been running for just over one year.
The ‘core contract’ costs paid to Cushman and Wakefield showed a £50k annual saving on previous costs incurred when the service was delivered in house. This was against the delivery of the day to day activity of the Strategic Property Team and had been consistently delivered over the last year with no issues to report. The sum of £50k was slightly less than that originally reported because of adjustments to the contract sum for the costs revised employer superannuation contribution rates following a 2016 valuation. The budget head for this area was not showing as being over spent demonstrating that the £50k saving had been achieved.
There was an additional element that fell within the core contract and this was the development of a comprehensive estate strategy whereby all of the Council’s land holdings were being reviewed, the first phase of this work was complete and the intention was to share this with Members on a ward basis and seek views on particular property assets.
Additional Income ‘The £1m’
As part of the Amey bid (Cushman and Wakefield was effectively a domestic sub-consultant to Amey) Cushman and Wakefield had to identify an additional £1m of efficiencies to be achieved over the next three years. They had now presented to the Strategic Asset Management Group their draft proposals and would be seeking to work the detail over the coming weeks. This additional income would be achieved from better management of the Council’s existing estate and did not include any income for new assets. As an example, Cushman and Wakefield had identified that a significant number of existing tenants should have been contributing to the cost of insurance, but this had not been happening going back some considerable years. A strategy to rectify this position was being developed. However, there needed to be a sensitive approach to this given the size and status of some of the organisations and businesses.
In summary, a year on year revenue saving of £50k had been achieved and Officers were now beginning to firm up the additional £1m of efficiencies that featured as part of the contract proposal. The asset strategy was developing and, subject to Member approval, was likely to generate additional capital and reduce revenue commitments for landlord liabilities. There was also a further associated benefit in that it was clear that there was a much more joined up approach between Operational Property, Amey and Strategic Property (Cushman and Wakefield) than had been the case when both services were delivered in house.
Project Delivery
Cushman and Wakefield had begun to move forward on developing a number of key projects that the Council was keen to bring forward. Council had agreed to the allocation of a ‘feasibility fund’ to effectively kick start projects and pick up some momentum. The Core Contract allowed for project work through a schedule of rates approach. One benefit to this contracting approach was the ability to place feasibility/project work through this contract thus reducing the up-front time and costs involved in procuring costs and services. This process was managed within the contract through a “Property Related Works Instruction Form Tracker” whereas changes to the contract where works were either removed or added were managed through the Change Control process. Section 11 of Schedule 4 to the Contract set out in some detail the process to be followed, it also stated that there was no obligation on the customer, i.e. Bromley, to instruct the Service Provider, Amey, to deal with any additional works or projects.
Prior to the concerns raised by Members, Officers had raised concerns concerning project delivery with senior managers at Cushman and Wakefield. This resulted in some organisational changes with additional resources being placed into the Bromley contract in November 2017. However, there was little evidence that this had addressed the key concerns and as such the Director of Regeneration had met with Amey, the primary contractor, prior to Christmas and asked them to bring in four companies for benchmark costs and delivery against the delivery of projects going forward. This was due to happen over the coming weeks. No new works had been placed with Cushman and Wakefield outside of those that Members are aware of and it was anticipated that new schemes being brought forward would not be placed with Cushman and Wakefield, unless they were competitive in their pricing and clear on delivery. This approach would allow for the benchmarking of costs, but will also add time to the process as Officers will be in effect be undertaking mini competitive processes.
To date not all strategic property work had been placed with Cushman and Wakefield, for instance the work required to further develop Site G had recently been placed with Montague Evans.
Investment Acquisition
The Director of Regeneration confirmed that the Council did not pay Cushman and Wakefield for investment acquisition costs where a property was not purchased, so for example the Elmfield Road site which was ultimately not acquired did not attract any additional fees, despite the fact that Cushman and Wakefield had undertaken work to inform the decision making process.
An analysis of previous pricing schedules for the acquisition of investment properties indicated fees in the area of 0.59% for properties up to £10m (2014 figures) Cushman and Wakefield’s fee for the acquisition of the Ashford property in 2017 was 0.79% . Whilst this was clearly marginally higher, a working assumption would be that costs over a three year period had risen. In addition the original 2014 framework that the Council utilised included additional hourly rate costs, whereas the Cushman and Wakefield fee was inclusive.
The Director of Regeneration confirmed that the disposal of the Old Town Hall/South Street Car Park, would be carried out as part of Cushman and Wakefield’s core contract activity and aside from some minor costs would not attract any addition fees. Ultimately, depending on the information currently held on this site and the extent of the works, there was a possibility that the Council would not have to draw down against the £40k outlined in the previous report.
During the discussion the Vice-Chairman noted that the rates payable were a percentage of the sale price. As the value of property had increased over the past four years it was clear that the rates payable had therefore also significantly increased. The Vice-Chairman also emphasised the need to ensure that as the landlord the Council maintained an element of control over insuring properties and that costs were then recharged to tenants.
In response to a question, the Director of Regeneration reported that there was a small client-side team of 4 that was responsible for monitoring and managing the contract. 3 members of staff were responsible for monitoring the contract and 1 member of staff was responsible for managing the contract.
Members noted that the Council’s estate was changing and that there would be capacity within the current contract to realise further savings. As the estate was reduced as part of the Estate Strategy the costs of managing the estate were also likely to reduce.
The Chairman thanked the Director of Regeneration for attending the meeting and providing an update to the Committee.