ADD314 Convoys Wharf - affordable housing review mechanism advice

Type of decision: 
Assistant Director's decision
Code: 
ADD314
Date signed: 
04 August 2015
Decision by: 
Stewart Murray, Assistant Director of Planning

Executive summary

The Mayor, acting as Local Planning Authority, decided to approve planning permission for the Convoys Wharf planning application in Deptford. In order to secure an affordable housing review mechanism in accordance with the Mayor’s decision, it has been necessary for GLA officers to commission independent specialist advice in respect of review mechanism design. The GLA will subsequently recover the full cost of this work from Convoys Properties Ltd.

Decision

That the Assistant Director approves:
•    expenditure of £20,000 on independent financial services from Gerald Eve LLP in 2014-15, the cost of which is to be fully recovered from the applicant; and
•    a related exemption from the requirements of the GLA’s Contracts and Funding Code.

Part 1: Non-confidential facts and advice

Introduction and background

1.1.    On 30 October 2013 the Mayor of London issued a direction to Lewisham Council setting out that he would act as the Local Planning Authority for the purpose of determining a strategic planning application at the Convoys Wharf site in Deptford, Lewisham. The application proposes wholesale redevelopment of the 16 hectare brownfield site to deliver a mixed use development including up to 3,500 new homes (of which, 525 would be affordable homes). 

1.2.    The Mayor’s decision to take over and personally determine this application is exceptional, and followed a breakdown in the working relationship between Lewisham Council and the applicant team (full details are available on the GLA website here: www.london.gov.uk/priorities/planning/strategic-planning-applications/ma...). At the time of making his decision to take over the application, the Mayor stressed his view that the case should be determined as swiftly as possible. 

1.3.    On 31 March 2014, having considered the facts of the case at a public Representation Hearing, the Mayor decided that planning permission should be granted subject to various conditions and the completion of a section 106 legal agreement (full details are available on the GLA website here: www.london.gov.uk/priorities/planning/public-hearings/convoys-wharf). The Mayor set a deadline of 30 June 2014 for the conclusion of the section 106 agreement (with the explicit risk of refusal of the application if this deadline was not met). 

1.4.    One of the conditions of the Mayor’s approval was that an Affordable Housing Review Mechanism       (“Review Mechanism”) must be secured in order to enable the delivery of an increased provision of affordable housing where the profitability of the development improves in future. As part of his planning decision, the Mayor endorsed GLA officers’ recommendation that the Review Mechanism should be incorporated as part of a section 106 agreement.

1.5.    Following the Mayor’s decision to approve the application, GLA officers commenced work (in conjunction with the applicant team, Lewisham Council and Transport for London) on the detailed drafting of the section 106 agreement. Given the scale and complexity of the proposed development, it was necessary for the section 106 agreement to cover a wide variety of unique obligations. It was also necessary for the GLA to undertake various rounds of engagement on certain clauses with other local stakeholders. 

1.6.    With respect to the drafting of the Review Mechanism, the GLA and Lewisham Council (“The Authorities”) originally intended to replicate the design of a Review Mechanism already established through past practice in the London Borough of Lewisham (“The Lewisham Model”). Accordingly, The Authorities did not originally foresee a requirement to seek consultant advice in respect of the Review Mechanism. 

1.7.    However, on 24 June 2014, and further to advice from its own viability consultant, the applicant raised a number of technical queries related to the suitability of The Lewisham Model in this particular instance.  

1.8.    Having carefully considered the issues raised, and following an agreement by the Mayor to allow a deadline extension until 1 September 2014, The Authorities decided that it was necessary to procure their own specialist advice in order to protect the public interest in this case. This was justified on the basis that the work was essential in order to support the Mayor’s statutory duties under Section 2A of the Town and Country Planning Act 1990 (as amended) and the Town and Country Planning (Mayor of London) Order 2008. A draft brief was agreed between The Authorities on 18 July 2014. The brief sought advice on the design of a Review Mechanism that was straightforward and transparent. A budget of up to £10,000 was earmarked for this work (N.B. the cost of this work is to be reimbursed to the GLA in full by Convoys Properties Ltd. under the terms of a Project Planning Performance Agreement which covers reasonable consultancy costs associated with the determination of the application). It was noted by The Authorities that Gerald Eve was already familiar with the case, having previously provided advice on the scheme to the GLA at an earlier stage in respect to matters of financial viability (refer to ADD134). Given that the GLA is responsible for supporting the Mayor in his role as the Local Planning Authority, it was appropriate that GLA officers procured the necessary advice. 

1.9.    For procurement of up to £10,000, the GLA’s ‘Contracts and Funding Code’ 2014 (“Code”) allows GLA officers to opt for a single supplier (rather than undertaking a competitive tender process). In this case, on 18 July 2015, GLA officers opted to invite Gerald Eve to undertake the work (in the absence of a tender process) given that: Gerald Eve was already familiar with the case (meaning that time and money would not need to be spent understanding the complex viability characteristics of the scheme); and, work could start more quickly (given that there was no need for a tender process).  

1.10.    Gerald Eve’s quote for the work (received on 22 July 2014) cited a cost of £3,500 for a written advice statement. Attendance at meetings (where required) was identified as chargeable in addition at hourly rates in accordance with those charged for Transport for London (and formerly for the London Development Agency). The specific rates were cited as part of the quote, and, based on the information available at that time, GLA officers were satisfied that the £10,000 overall budget was reasonable and proportionate. 

1.11.    Further to the agreement of the final project brief between The Authorities, Gerald Eve was instructed to commence work on 25 July 2014 (a Delegated Authority Record, prepared by GLA officers in tandem with the project brief, and signed by the Assistant Director – Planning on 18 August 2014, approves expenditure on this work up to £10,000). Following a meeting with The Authorities and the applicant on 8 August 2014, Gerald Eve provided its draft advice statement to The Authorities on 13 August 2014. The advice statement was also subsequently shared with the applicant, who, on 19 August 2014, identified eight points for further discussion/negotiation. 

1.12.    Following the above, detailed negotiations on the drafting of the section 106 agreement (particularly in respect of the Review Mechanism) ensued for several months - necessitating further extension of the Mayor’s deadline for concluding the section 106 agreement. 

1.13.    On 25 November 2014 Gerald Eve notified the GLA that the agreed budget of £10,000 had been reached. At this point, for the reasons set out in Section 2 below, GLA officers decided to allow Gerald Eve to continue with the project on a single sourcing arrangement. 

1.14.    In order to conclude the drafting the section 106 agreement in respect of the Review Mechanism clauses, Gerald Eve was instructed by GLA officers to engage in an intensive programme of meetings, and to undertake various areas of detailed technical drafting. Further to this, the drafting of the section 106 agreement was finalised on 4 March 2015, and the agreement was subsequently signed by all parties and completed on 10 March 2015. On 11 March 2015 Gerald Eve confirmed that final costs in respect of the Review Mechanism work are £30,000. 

1.15.    Following the above and in summary, whist approval was originally in place for expenditure of up to £10,000 for this work (refer to DAR of 18 August 2014, attached), this level of expenditure has now been exceeded by £20,000, and additional approval is required. This approval is now being sought retrospectively. Furthermore, on the basis that the final cost of the work finished above the threshold where the GLA Code normally requires a formal tender process to take pace, retrospective approval is also sought for the single sourcing of Gerald Eve in this instance. 

2.    Justification for single source procurement

2.1     It is acknowledged that, given the final value of the work is £30,000, a tender process would normally have been required in accordance with section 4 of the GLA’s Code. However, it is important to note that the working brief in this case was originally designed and approved for expenditure of up to an £10,000. Notwithstanding the intention for a streamlined Review Mechanism, the progressive complexity of negotiations with the applicant team meant that the £10,000 budget was reached (by 25 November 2014) before the project was complete. At this point the Mayor had set a final deadline of 9 January 2015 for conclusion of the section 106 agreement, and GLA officers had to decide whether: (a) to undertake a tender process in accordance with the GLA Code; or, (b) to allow Gerald Eve to continue the project on a single source basis as an exemption form the Code.

2.2    In coming to a decision in this regard GLA officers noted that section 5 of the Code provides that exemptions from the requirement to tender may be approved where a supplier’s previous involvement in a specific project means that it cannot be separated from the new (or continued) project work. In line with the justification below, and having considered the risks in this case, GLA officers are of the view that an exemption is justified. Accordingly, it was decided to pursue option (b) for the reasons set out below.

Corporate significance of this work 
2.3    As discussed in section 1, this work is essential in order to support the Mayor’s statutory duties under Section 2A of the Town and Country Planning Act 1990 (as amended) and the Town and Country Planning (Mayor of London) Order 2008, and fundamental to the proper implementation of the London Plan – the Mayor’s spatial development strategy for Greater London. The Mayor’s decision to take over this application is high profile and exceptional, and the Mayor has publically stated that he will determine the Convoys Wharf planning application as swiftly as possible. On 25 November 2014 the Mayor set a deadline of 9 January 2015 for the conclusion of the section 106 agreement - of which the Review Mechanism (the subject of this work) is an integral part.

Critical relationship of Gerald Eve to the project work
2.4    As discussed in paragraph 1.9, from the start of the process Gerald Eve was the logical supplier given that it was already familiar with the case (meaning that time and money would not need to be spent by a new consultant understanding the complex viability characteristics of the scheme). Clearly these principles still held true on 25 November 2015, when GLA officers were notified that the £10,000 procurement threshold had been reached, and officers were required to consider whether a tender process should be undertaken. Given the advantage that Gerald Eve had over other potential suppliers (in terms of its ability to continue the project work without requiring additional time and resources to ‘get up to speed’), and noting the project programme and potential for delay (set out below), GLA officers quickly concluded that Gerald Eve could not reasonably be separated from the continued project work - pursuant to paragraph 5.4, point four, of the GLA Code.    

Project programme
2.5    Table 1 below sets out the project programme just prior to 25 November 2014 (the date it was brought to the attention of GLA officers that the £10,000 procurement threshold had been reached) through to 9 January 2015 (the deadline set by the Mayor for conclusion of the section 106 agreement). In view of the Christmas holiday period, GLA officers intended to conclude all section 106 drafting by 11 December 2014 (subject to final legal checks). This was intended to allow the Mayor’s endorsement to be sought at the last planning meeting of the year on 18 December 2014, so that all that would remain would be for the agreement to be circulated and signed between 19 December 2014 and 9 January 2015.

Date

Programme milestones

18.11.2014

All party meeting regarding the nature and implications of Review Mechanism growth assumptions (subject to specialist financial services advice).

21.11.2014

Applicant to provide its proposals for addressing growth as part of a revised Review Mechanism drafting proposal.

24.11.2014

Specialist financial services review of the applicant’s drafting.

25.11.2014

GLA and Lewisham Council to consider local stakeholder responses to draft section 106 agreement.

01.12.2014

GLA and Lewisham Council to consider applicant’s drafting in the context of specialist financial services advice.

05.12.2014

GLA and Lewisham Council circulate joint drafting refinements to Review Mechanism.

09.12.2014

Specialist financial services expert review of joint authorities drafting.

10.12.2014

Circulation of GLA final positon on the Review Mechanism.

11.12.2014

Circulation of GLA final positon on all other section 106 matters.

16.12.2014

GLA lawyers to provide final GLA draft section 106 agreement.

17.12.2014

All party lawyers page turn check of GLA draft section 106 agreement.

18.12.2014

GLA officers seek Mayor’s endorsement of relevant key schedules of the draft section 106 agreement.

19.12.2014

Final agreement prepared for engrossment and circulated to all parties.

09.01.2015

All parties to have signed the agreement.

Table 1: Convoys Wharf section 106 agreement conclusion milestones November/December 2014.

Potential for delay
2.6    The GLA Code requires officers to undertake a tender process for goods or services above £10,000. Even the most basic form of tender process generally requires five working days to allow reasonable time for potential suppliers to prepare a quote/business pitch. GLA officers must then also take time to fully consider all pitches received, before selecting and instructing a preferred supplier, and providing feedback to the unsuccessful parties. Past practice indicates that the selection process commonly takes between three to four working days for a project of this scale. Accordingly, a tender process for a project of this nature typically requires between eight and nine business days in total. 

2.7    In order to meet the Mayor’s prescribed deadline (and to determine the application in broad accordance with the terms of the Project Planning Performance Agreement that the GLA is committed to through a separate contract with the applicant) it was necessary for specialist financial services advice to be provided by 1 December 2014 (refer to Table 1 above).

Implications of delay
2.8    Delay in the receipt of specialist financial services advice would impact on the overall timetable for concluding the section 106 agreement - meaning that the Mayor’s deadline for determining the application would have been likely to be missed. Any unnecessary postponement of the determination would reflect badly on the GLA and the Mayor, and would result in unwelcome delay for this major regeneration project. Failure to determine the application within the time allowed would also put the GLA in breach of its contract with the applicant, and would put the application at risk of being refused (jeopardising the delivery of 525 affordable homes).

2.9    At the point of considering the risks associated with an exemption to the GLA Code, officers also noted that a local Community Infrastructure Levy (CIL) was scheduled to be introduced by Lewisham Council early in 2015. The CIL is a non-negotiable charge that authorities can place on most types of new development in their area (the Mayor of London adopted his own CIL in April 2012). The CIL is a useful tool for authorities to generate income in order to help pay for the infrastructure required to support growth and development. However, given the timescales involved in this case, the financial design of the Convoys Wharf scheme does not take the proposed levy costs into account. Nevertheless, where the Lewisham CIL would be introduced prior to the issue of any decision notice for the Convoys Wharf planning application, the levy would need to be applied to the scheme (it is important to note that a decision notice could only be issued following the conclusion of the section 106 legal agreement). Therefore, where the Mayor’s determination programme would be delayed (and the proposed development would become subject to the levy), there would be an additional financial burden on the scheme. This would result in an adverse impact on financial viability, and could potentially threaten delivery of the scheme in its current form (including the proposed 525 affordable homes).

2.10    Accordingly, the risks associated with not approving the proposed exemption to the GLA’s Contracts and Funding Code were:

•    GLA in breach of its Project Planning Performance Agreement contract with the applicant;
•    negative reflection on Mayor and GLA for failing to deliver a decision to deadline on this high profile case (particularly since timely determination was a principal reason for the Mayor intervening);
•    a major regeneration scheme would be subject to further unwelcome delay and put at risk of being refused; and,
•    potential adverse impact on financial viability, and threat to delivery of the scheme (where Lewisham Council’s CIL would be introduced prior to issue of a decision notice).
    
Securing value for money 
2.11    Whilst the Convoys Wharf scheme is large and complex, Gerald Eve has excellent experience and a proven record of undertaking such assessments rigorously and delivering them to challenging deadlines. Furthermore, having previously assessed the financial viability of the Convoys Wharf masterplan, Gerald Eve was already familiar with the case (meaning that time and money would not be spent reaching a working understanding of the complex financial characteristics of the scheme). The pricing schedule provided (including hourly rates for meetings) is in line with previous rates competitively agreed by TfL (and formerly the LDA), and accordingly GLA officers are satisfied that the pricing schedule has offered value for money. The final cost of the work has been confirmed as £30,000. Whilst the GLA must pay for this work in the first instance, the applicant has agreed (as part of the Project Planning Performance Agreement) to reimburse the GLA for the cost of this consultant work. Therefore, the service will ultimately be delivered at no net cost to the Authority.

Evaluation of alternatives
2.12    Notwithstanding the justification given above (and the competitive advantage that Gerald Eve has given its prior work on the project), GLA officers have explored various alternatives to single sourcing. These are summarised below.
        

Running a tender process once the procurement threshold was reached
This is the approach advocated by the Code. However, as discussed within paragraphs 2.5 to 2.10 above, this would result in an unacceptable delay on the determination programme.

Continuing work in-house until a tender process was completed
This option was swiftly discounted because the GLA does not have the relevant in-house expertise to undertake this work itself.
Extending the determination programme
This option would allow for a tender process to be run in accordance with the GLA Code. However, for the reasons set out in paragraphs 2.4 to 2.9 above this was not proposed.

2.13    Accordingly, GLA officers concluded that there were no available alternatives to single sourcing in this instance.

Conclusion
2.14    Having had regard to the circumstances in this case, including: the Mayor’s reasons for intervention and the public commitment to ensure a timely resolution; the clear link to corporate priorities and statutory duty; value for money; the implications of delay; and, the risks of approving an exemption from the GLA Code, GLA officers are of the view that Gerald Eve could not reasonably be separated from the continued project work, and accordingly conclude that single source procurement is acceptable in this instance pursuant to paragraph 5.4, point four, of the GLA Code.   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Objectives and expected outcomes

Objective
3.1    The GLA’s objective is to obtain specialist financial services advice in order to inform the detailed drafting and finalisation of an affordable housing Review Mechanism to ensure that the maximum reasonable amount of affordable housing would be delivered as part of the scheme in line with the Mayor’s planning decision.  

Outcome
3.2    The outcome of the work procured is a written advice statement, and a finalised affordable housing Review Mechanism. Whilst the advice statement is not proposed to be published, the finalised affordable housing Review Mechanism has been incorporated within the Convoys Wharf section 106 agreement – which is publically available on the GLA website here: www.london.gov.uk/priorities/planning/public-hearings/convoys-wharf.  

Equality comments

7.    Equalities

7.1    The Review Mechanism (of which Gerald Eve’s work for the GLA is intrinsically related) is necessary to support the delivery of an increased provision of affordable housing for Deptford, and was a condition of the Mayor’s approval of the Convoys Wharf planning application (refer to paragraph 1.4). The Equality Act 2010 provides that in exercising its functions (which includes the functions exercised by the Mayor as Local Planning Authority), the Mayor as a public authority shall amongst other duties have due regard to the need to a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited under the Act; b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; c) foster good relations between persons who share a relevant protected characteristic and persons who do not share it.
7.2    The protected characteristics set out in the Equality Act are: age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex and sexual orientation. The Equality Act acknowledges that compliance with the duties set out may involve treating some persons more favourably than others, but that this does not permit conduct that would otherwise be prohibited under the Act.
7.3    With regard to age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex and sexual orientation there are no identified equality considerations which arise in respect of this request for Assistant Director Decision.

Other considerations

Confidentially
4.1    The consultancy work involves financial information that is commercially sensitive for the applicant. Whilst the Review Mechanism (the end product of this work) has been published on the GLA website, the detailed financial structuring of the scheme needs to be treated as confidential by the GLA. However, GLA officers commonly handle such information, and have processes in place to ensure commercial confidentially. Accordingly, subject to normal due diligence (and notwithstanding duties under the Freedom of Information Act and Environmental Information Regulations), GLA officers are of the view that the procurement and completion of this work of is of low risk to the Authority and the Mayor.  

Impartiality 
4.2    It is important that the Authority procures this work – so that the consultant’s duty is to the GLA (therefore ensuring that the advice is seen as truly independent). The applicant has, nevertheless, agreed to reimburse the GLA for the cost of this consultant work. Accordingly, the work will ultimately be undertaken at no net cost to the Authority.  

Links to Mayoral strategies and priorities
4.3    This work is fundamental to the implementation of the Mayor’s London Plan, which identifies that the delivery of additional affordable housing is a key Mayoral priority. The completion of this work enables the Convoys Wharf section 106 agreement to be completed - allowing planning permission to be issued. Accordingly, this enables the Mayor to fulfil his statutory duty under The Greater London Authority Acts 1999 and 2007, and The Town and Country Planning (Mayor of London) Order 2008. 

Recovering costs
4.4    Hutchison Whampoa Properties (Europe) Ltd., acting on behalf of the applicant (Convoys Properties Limited) has agreed in writing to reimburse the GLA for the cost of the consultancy work required in order for the Authority to determine the Convoys Wharf planning application. This commitment is contained within a Project Planning Performance Agreement which provides various covenants (between the applicant, GLA and TfL) associated with the timely determination of the Convoys Wharf case. 

Retrospective approval
4.5    Approval for expenditure on this work up to £10,000 is in place, however, GLA officers were notified on 25 November 2014 that this threshold had been reached before the work was completed. Accordingly further approval is necessary. Whilst initial drafting of this ADD request commenced shortly after it became apparent that the £10,000 threshold would be exceeded, given the demands of the application determination programme a GLA officer level decision was taken to instruct Gerald Eve to continue working prior to final approval of this ADD request (and on a single source basis as an exemption form the Code). Similarly, the administration associated with finalising this ADD request was necessarily held in abeyance until the project programme allowed sufficient time for this to be taken forward. This was necessary so as not to jeopardise delivery of the overall programme (refer to section 2).

Financial comments

5.    Financial comments

5.1    Retrospective approval is being sought to increase expenditure on the independent financial services of Gerald Eve to provide advice on the technical drafting of an affordable housing Review Mechanism for the Convoys Wharf section 106 legal agreement.

5.2    The final cost of this work was £30,000. This expenditure has been accrued against the 2014/15 Planning Decision budget, with subsequent recovery of the full costs from Convoys Properties Ltd. under the terms of a Project Planning Performance Agreement - which states that payment will be made within 14 days of the receipt of an invoice from the GLA.

5.3    All appropriate budget adjustments will be made.

5.4    Any changes to the proposal, including budgetary implications will be subject to further approval via the Authority’s decision making process.

5.5    The Planning Unit within the Development, Enterprise & Environment Directorate will be responsible for managing the contract, ensuring compliance with the Authority’s Financial Regulations and Contracts and Funding Code.

6.    Legal comments

6.1    The above sections of this report indicate that the decisions requested of the Assistant Director – Planning may be considered to be facilitative of, or conducive, or incidental, to the exercise of the Mayor’s powers under Section 2A of the Town and Country Planning Act 1990 (as amended) and the Town and Country Planning (Mayor of London) Order 2008.

6.2    In formulating the proposals in respect of which a decision is sought officers have complied with the GLA’s related statutory duties to:

(a)    pay due regard to the principle that there should be equality of opportunity for all people;
(b)    consider how the proposals will promote the health of persons, health inequalities between persons and to contribute towards achievement of sustainable development in the United Kingdom; and,
(c)    consult with the appropriate bodies.

6.3    Section 4 the Code requires the GLA to seek three or more written quotations in respect of the services required or call-off services from an accessible framework. However, officers may approve an exemption from this requirement under section 5 of the Code upon certain specified grounds. One of those grounds is “previous involvement in a specific current project or continuation of existing work which cannot be separated from the new project/work”. GLA officers have stated in this report that this ground applies and that the contract affords value for money. On this basis, the Assistant Director – Planning may approve the proposed exemption if satisfied with the content of this report.

Planned delivery approach and next steps

8.1    At the time of finalising this ADD the work procured in this case has been completed, and the planning approval for Convoys Wharf (including the completed section 106 agreement with Review Mechanism) has been issued in accordance with the Mayor’s planning decision. Further details are available on the GLA website here: www.london.gov.uk/priorities/planning/public-hearings/convoys-wharf