Report of the Deputy Chief Executive and City Treasurer attached

The Executive considered a report of the Deputy Chief Executive and City Treasurer, which provided an update on the progress of the refurbishment and partial restoration of the Town Hall and Albert Square under the Our Town Hall (OTH) project.

The Deputy Leader (Statutory) reported that excellent progress continued to be made with Social Value, with 57% of the project spend within Manchester (baseline target 40%) and 47% of the workforce being Manchester residents (baseline target 30%) and a social value ROI of £14.6m.  Work to develop the detail of how the building would run was picking up pace, including revenue planning and operational strategies and the project was 60% through the existing programme for the construction works, and the quality of the works continued to exceed expectations.

The contract date for completion of the construction works remained 25 June 2024. However, as a result of the ongoing challenges to the programme, the completion date would need to be updated to realistically reflect the latest position. In the meantime, it was now clear that the delays caused by Covid-19 and discovery would be significant and without any mitigation could add two years of delay.

The project had faced an extremely challenging 18-month period with intense pressures on cost and programme. These challenges included significant disruptions from ‘uncontrollable’ elements such as nesting falcons, Covid-19, extraordinary levels of inflation and unprecedented pressure on the supply chain.  The biggest risk to the budget was now the cost of delay. For every month of delay, the project incurred additional costs of circa £1m to £1.5m, depending on the point in the programme at which the delay occurred.  At the same time, the hyper-inflation experienced by the project in the post-pandemic period had been significant and remained a risk to all packages yet to be procured, and to those packages that were subject to changes arising from discovery.

It was therefore difficult to give any degree of confidence on the final cost and programme dates until these higher risk works were completed.  Given the risks outlined in the report, it was proposed to split a request for additional funding into two parts.  Part one would be a request for an additional £29m funding sufficient to cover all financial commitments to the end of 2023.. Without this funding there was a risk that completion would be significantly delayed and post December the biggest remaining cost pressure on the project was linked to programme delay. The position would be much clearer in January 2024, and it was therefore proposed to review the position on target dates for completion and cost and further budget approvals would be sought at that stage.

Councillor Leech sought clarification as to how much likely extra funding would be needed after December 2023 in order for the project to complete as he felt there needed to be clarity as what the total cost was required to complete.  He also sought clarification on who was responsible for paying any penalty costs for delays in the project

Decision

The Executive recommend to Council approval of a capital budget increase of £29m for the project, funded by borrowing, to maintain progress with the construction works until the end of December 2023.