Report of the Director of Strategic Housing and Development and the Head of Development and Investment Estate.

This report outlines the use by the Council of development agreements along with the governance arrangements in relation to the negotiation, management and monitoring of development and associated agreements over Council land and buildings.

The committee considered a report of the Director of Strategic Housing and Development and the Head of Development and Investment Estate which outlined the Council’s use of development agreements along with the governance arrangements in relation to the negotiation, management and monitoring of development and associated agreements over Council land and buildings.

Key points and themes within the report included:

·         Providing an introduction and background;

·         Non-standardisation of approach within agreements in place;

·         The Council’s formal corporate Joint Venture arrangements;

·         Overage and performance-related profit, with PwC commissioned to undertake a peer review of overage arrangements;

·         How due diligence was undertaken, including the use of a checklist and form for developing Joint Ventures and agreements; and

·         The best practice principles of overage.

Key points and queries that arose from the committee’s discussions included:

·         What was meant by ‘reputational factors’, and whether the Council would reject a tender on these grounds;

·         How reputational factors would be taken into consideration in regard to Joint Ventures;

·         Noting the peer review of overage arrangements being undertaken by PwC, and querying who the Council’s peers were;

·         Whether ethical considerations were taken into account when awarding contracts; and

·         Whether Joint Ventures were subject to procurement regulations and non-commercial matters.

The Head of Development and Investment Estate explained that the Development team worked closely with colleagues across the Council through the Best Value Working Group and the due diligence process to review, enhance and bolster governance arrangements within Development. He also stated that a dashboard in relation to development agreements and overages would be included within the Annual Property Report, which was listed on the Committee’s work programme for a future meeting.

In response to queries around what was meant by ‘reputational factors’, the Head of Development and Investment Estate stated that this referred to the ability and track record of a company and how they consulted and worked with local communities.

The Director of Development stated that Manchester was an investable city, with significant interest in opportunities to collaborate with the Council. He explained that there were a series of measures and de-risking opportunities to ensure the Council works with the right partners who could deliver on economic outputs, such as new homes, new skills and investment.

The Head of Development and Investment Estate reiterated the Council’s focus on outputs within development agreements and explained that delivery milestones were contained within each contractual framework. Checks and balances were also undertaken to examine the nature of an organisation, their corporate structure and their income streams through a procurement exercise, development agreement or land transaction. A framework had been developed in collaboration with Corporate Governance to ensure assurance prior to entering into an agreement with a tender.

The Head of Development and Investment Estate explained that PwC were a multi-disciplinary organisation with significant experience in management, contracts and finance. He stated that PwC had experience in working with a number of local authorities and organisations and were skilled in the area of the review. The review included undertaking a forensic review of some of the development agreements which the Council already had in place and would report back to the Council.

The Deputy Chief Executive and City Treasurer stated that the Council placed great importance on due diligence when considering Joint Ventures. This included best consideration for land procurement or transactions and ensuring that this was transparent.

In response to a member’s query regarding ethical considerations, the Executive Member for Finance and Resources highlighted that there was not a ‘one-size-fits-all’ approach to awarding contracts. He stated that each Joint Venture would be awarded on their own merit and that any future risk would be mitigated against.

The City Solicitor reiterated that each Joint Venture would be awarded on individual merit. There were a variety of factors which could be taken into account when considering a Joint Venture and this could include some political and ethical factors, although these could not be explicitly listed.

Decision:

That the report be noted.