MD3317 Compressor House Update

1.1.    Compressor House is on the northern bank of Royal Albert Dock (RAD), in the Royal Docks Enterprise Zone. Built in 1914 for cold storage of Royal Docks cargo, it retains many original features – including original hoists, rails and winching machinery. The building has been vacant for some time, and now requires significant investment to bring it back into a usable condition. It is in GLA Land & Property Ltd’s (GLAP’s) interest to do this, for both financial and placemaking purposes; and to reduce its significant maintenance and security liabilities.
1.2.    The London Borough of Newham (LBN) successfully applied to the government’s Levelling Up Fund (LUF) and secured £1.725m capital funding to invest in Compressor House’s refurbishment (as set out in MD3019). An LUF grant agreement between LBN and the GLA (the LUF LBN-GLA agreement), dated 11 May 2023, set out the conditions attached to, and outcomes to be achieved through, this funding.
1.3.    The Royal Docks Team (RDT) conducted an open-market process to find a new operator for the building. The Really Local Group (RLG) was ultimately selected and unlocked a further £563,000 of Royal Docks Good Growth Fund (RDGGF) grant (approved in DD2634). These funds were for RLG to deliver the capital refurbishment scheme, taking it through the following RIBA Plan of Work stages:
•    stage 0: strategic definition
•    stage 1: preparation and briefing
•    stage 2: concept design
•    stage 3: spatial coordination
•    stage 4: technical design
•    stage 5: manufacturing and construction
•    stage 6: handover
•    stage 7: use. 
1.4.    Following this, the funds would allow RLG to operate the facility under a planned 10-year lease (to be issued once the capital scheme was complete).
1.5.    Via a RDGGF grant agreement (dated 16 March 2023, approved in MD3178), RLG had developed the refurbishment scheme from RIBA stages 0 to 4. For reasons beyond the GLA’s control, it has become necessary to end the GLA’s grant agreement with RLG. Through approvals sought in this MD, the GLA’s proposal now is to: lead on, via direct award, the capital works to Compressor House; and run a process to secure a new tenant for the asset.
1.6.    For the refurbishment of Compressor House, plans at RIBA stages 0-3 were taken forward by RLG, working with architects Paper House Project Limited (PHP). PHP left the project at stage 3. Stage 4 plans were subsequently developed by MGL (a design-and-build contractor), under RLG’s management, over Summer 2024.
1.7.    As the grant agreement with RLG is ending, this MD requests approval for the GLA to contract directly with MGL to deliver the capital refurbishment works. This will be done under a new engineering contract (NEC), confirmed with appropriate legal oversight, and with the necessary best-practice project management systems in place. As there was no contract in place between RLG and MGL, there is no option for a contract novation.
1.8.    This MD also requests approval for the GLA to directly award a professional services contract to PHP, who will support delivery of the capital refurbishment at RIBA stages 5 to 7.
1.9.    These direct awards to MGL and PHP are justified on grounds of urgency and commercial advantage, as explained below:
•    Urgency: These direct awards will enable the delivery of the construction works by May 2025, via a 16-week programme (beginning in January 2025); and crucially, urgent LUF spend by March 2025 (a key requirement of LBN as an external funder). RDGGF spend elements will follow (there is no time pressure for these). The direct award means that committed outcomes can be met (as per the LUF LBN-GLA agreement), resulting in a new, digitally enhanced community hub. Spending time on a new tender process for the construction works would mean these deadlines cannot be met; without the funding, the scheme would likely fail to proceed. The building would remain vacant and in a state of deterioration, while continuing to incur estate management costs.
•    Previous involvement: MGL has developed the RIBA stage 3 plans to stage 4 and is therefore familiar with the building and design. PHP already has knowledge and experience of the project and building, having taken designs to stage 3 on RLG’s behalf. As such, both can pick up the project much more quickly than any other partner that would be procured; this reduces the potential for misunderstandings or delays. MGL also has a fully costed and approved scheme of works approved by the GLA’s independent consultants Avison Young. There is every expectation that re-tendering will lead to higher costs returned; therefore, previous involvement in developing costs within budget is a critical factor in this approval request. PHP has also provided a professional fee proposal, in line with expectations for the necessary work; this, again, makes previous involvement a crucial factor in securing costs that are within budget.
1.10.    Two single-source requests are currently being appraised by TfL Procurement for the same purpose (to directly appoint MGL and PHP).
1.11.    There is also a plan to secure a new tenant to deliver the project’s ambitions – specifically, to achieve the outcomes set out in the LUF LBN-GLA agreement. To achieve this, the RDT will run another RDGGF exercise (as occurred when RLG was secured in 2023), to find a new operator with the necessary vision and capability for Compressor House. The opportunity is considered more attractive for the current market than when an exercise was run previously. This is because the capital works will already have been completed, and there is more clarity on the condition of the asset and the commercial terms of its occupation. This has been confirmed by early, and ongoing, soft market testing.
1.12.    This overall approach ensures that: the LUF financial contributions are safeguarded; and the project’s ultimate aims are realised. It offers a fresh opportunity to work with a new operator who can bring an exciting vision to Compressor House, for the benefit of local communities.
 

2.1.    The aim of investing in Compressor House is to deliver a project in line with the financial, social and place-making aspirations of the RDT and its partners – notably LBN, via its LUF proposals. With the project being part-funded by the LUF, the outcomes and outputs associated with it are linked to this funding programme – specifically, in this case, digital inclusion linked to LBN’s Levelling Up project, and Newham Sparks. Other areas of focus include digital and urban technology; young people; arts, creativity and culture; and heritage. 
2.2.    The Royal Docks Cultural Placemaking Strategy outlines the vision to mould the Royal Docks into the cultural engine of London. Within this, Compressor House can become a destination space; a cultural and community hub; and an event space that converges multiple communities within the Docks. It will also support the wider RAD development site, through a range of events, exhibitions and performances, with a focus on digital inclusion, heritage and learning.
2.3.    A new grant agreement between the successful operator and the GLA (secured through a new RDGGF process) will be tied to the achievement of outputs and outcomes, as specified in the LUF LBN-GLA agreement, largely around digital inclusion. This approach mirrors that used with RLG.
2.4.    There will also be a commercial lease between this new organisation and GLAP that mirrors the grant agreement; however, this will be on a necessary commercial basis. This approach mirrors that used with RLG. Once terms are finalised, a separate decision will be brought for approval to secure this disposal.
 

3.1.    Section 149(1) of the Equality Act 2010 provides that, in the exercise of their functions, public authorities must have due regard to the need to:
•    eliminate discrimination, harassment, victimisation, and any other conduct that is prohibited by or under the Equality Act 2010
•    advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it
•    foster good relations between persons who share a relevant protected characteristic and persons who do not share it. 
3.2.    Relevant protected characteristics are age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex, and sexual orientation. 
3.3.    The LUF is, by definition, aimed at equalising investment between and within communities UK-wide. LBN was awarded this funding to, in part, reflect the systemic disadvantages that some of the borough’s communities face. The investment at Compressor House responds directly to this agenda. Such structural inequalities are also reflected in the headline LBN policy of community wealth-building; and the recovery agendas of the Mayor of London and LBN. All of these agendas are core themes running through all Enterprise Zone programme activities. Specifically, the project aims to address digital exclusion by providing (as part of the broader offer at Compressor House): basic digital inclusion services and training; exposure to digital creative skills training; and digital cultural activity.
3.4.    LBN is an integral partner in realising this opportunity. Key to this vision is the borough’s commitment to addressing inequality; and creating economic, social and environmental value for all. LBN’s community wealth-building agenda will be a key focus for the site: addressing economic and social disparities in local communities; and putting local communities at the centre of shaping a local economy where growth and investment benefit all residents. Compressor House has the potential for significant benefits, including promoting equality of opportunity for local residents and protected groups. This includes local employment, skills development, educational initiatives and broad economic growth. 
3.5.    Whilst commercial in nature, the opportunity seeks to significantly increase the site’s added social and placemaking value. It has the potential to be a link (physical and otherwise) between Royal Docks opportunities and the surrounding local communities. LBN is one of the youngest, most diverse places in London – so responding to the opportunity set out here, if delivered well, is likely to be a valuable means of addressing inequality in the area. It is also a valuable vehicle through which several other RDT priorities could be delivered or housed – especially from the Cultural Activation Team’s programme.
 

4.1.    In addition to the above, this programme will help deliver the following Mayoral policies and strategies:
•    the Mayor’s Skills for Londoners Strategy 
•    the Mayor’s Equality, Diversity and Inclusion Strategy, Inclusive London 
•    the Mayor’s London Health Inequalities Strategy
•    the Mayor’s Economic Development Strategy for London
•    the London Plan
•    Culture for All Londoners
•    the London Environment Strategy.
4.2.    The project will also align with a range of proposed GLA programmes. Most fundamentally it will bring back into active use an asset for both commercial and social benefit. In doing so it will celebrate the Royal Docks by becoming a focal point for the regeneration of the area – both that led by the GLA and by others (as detailed in DD2634 with the Royal Docks team and model in situ). The external funding contribution is tied to digital inclusion outcomes, with an expected focus to be on young east Londoners and the digital creative industries. This will include dedicated programmes with local schools and surrounding communities. The overarching ambition is for Compressor House, and many of the activities it supports, to become a key feature of inclusive growth in the Royal Docks.
4.3.    The key project risks and mitigation measures are set out in the table below. 

4.4.    There are no conflicts of interest to declare from any of the officers involved in the drafting or clearance of the Mayoral Decision.

5.1.    The refurbishment costs for Compressor House are to be funded by £1.75m Levelling Up Fund and £563,000 earmarked for this purpose by Royal Docks, which is funded through its borrowings and delivery plan. 
5.2.    Considering that the project funding is externally sourced and necessary due to the nature of the asset being refurbished, there is no financial impact on GLAP from this refurbishment. 
5.3.    Leasing of the property will result in c£75,000 savings in GLAP estates costs in 2025-26 as the tenant becomes liable for these costs and in addition to the cost savings, minimum set rental income of £10,000 is expected.
 

6.1.    Section 30 of the Greater London Authority Act 1999 (as amended) (GLA Act) gives the Mayor a general power to do anything that he considers will further one or more of the principal purposes of the GLA as set out in section 30(2), which are:
•    promoting economic development and wealth creation in Greater London
•    promoting social development in Greater London 
•    promoting the improvement of the environment in Greater London.
6.2.    In formulating the proposals in respect of which a decision is sought, officers confirm they have complied with the GLA’s related statutory duties to:
•    pay due regard to the principle that there should be equality of opportunity for all people
•    consider how the proposals will promote the improvement of health of persons in Greater London; promote the reduction of health inequalities between persons living in Greater London; contribute towards the achievement of sustainable development in the UK; and contribute towards the mitigation of or adaptation to climate change in the UK
•    consult with appropriate bodies.
6.3.    Section 9 of the Authority's Contracts and Funding Code (the "Code") requires that the Authority undertake a formal tender process or make a call off from an accessible framework for procurements with a value between £10,000 and £150,000. The procurement of a construction contract to MGL Projects Ltd (MGL) to refurbish Compressor House and for a professional services contract to Paper House Project Ltd (PHP) to support this refurbishment exceeds this value. However, section 10 of the Code also provides that an exemption from this requirement may be justified on the basis of urgency and previous involvement in a specific project. The officers have set out at paragraph 1.9 above as to the reasons why the procurement of the services from MGL and PHP falls within the said exemption.  Accordingly, the Mayor may approve the exemption, if he be so minded.
6.4.    Sections 1 – 3 of this report indicate that the decision requested of the Mayor falls within the GLA’s statutory powers.
 

7.1.    The table below provides a summary of the project timetable.