Issue - decisions

Decision made:

It was AGREED:

1. To fund up to an additional 10% of the original grant award (£98,239) for increased costs relating to current inflation levels towards YFS project CF211 Old Woking Community Centre.

a.  The project is underway and due to open the Woking College element of works in September 2023. The completion of elements of the community works (funded by YFS) is intrinsic to meeting this deadline.

b.  The contingency funding amount included within the original grant award (£80,000) is also being claimed, however the additional 10% is required to meet inflation related increased costs.

The original YFS funding application of £982,389 was prepared by Old Woking Community Centre Association, in June 2022. It was based on preliminary designs and estimated costs that were available at that time.

Tender prices have exceeded the grant award. This has in part been due to the sudden and significant inflation rises, which have been widely reported in the press, with inflation running above 11%. Construction costs are no exception to this sudden inflation spike, and this can be seen reflected in the various published indices.

• The All-in Tender Price Index published by the Building Cost Information Service. This shows that over the year of 2022, tender prices are forecast to have risen 9.0%.
• The current General Building Cost Index published by the Building Cost Information Service. This shows that over the year of 2022, general building costs are forecast to have risen 9.2%.
• The current Consumer Price Index which shows that over the last 8 months from June 2022 (when the bid was submitted), inflation has averaged 8.9% per annum.

All 3 indices broadly show an annual inflation rate of 9%. The midpoint of the construction period for the YFS funded works, is June 2023, which is 12 months from the date on which the funding application was submitted. An inflationary price rise of £982,389 x 9% = £88,415, has been included in the tenders received.

One example that demonstrates inflation is the air source heat pump, which was originally costed at £60,000 based on 2 nr 40 kW units, i.e. a total of 80 kW (£750/kW).  It is now proposed to install a single 66.6 kW unit, at a cost of £55,870 (£839/kW). This is an inflation increase of just under 12%.

This report seeks to support the applicant request for additional funding to cover this unexpected and significant rise.

Officers consider that the applicant has been proactive in managing the cost increases by reviewing costs and removing some scope.

It was AGREED:

1. to fund up to an additional 10% of the original grant award (£58,640) for increased costs relating to current inflation levels towards Your Fund Surrey project CF149 Ripley Village Hall.

a.  The original grant award for £586,396 was granted 06/10/21. An additional 10% inflation hardship claim of up to £58,640 is allowable, and fully in line with, the Cabinet decision from November 2022.^[1]

b.  The project has not yet started. The funding agreement is still being negotiated following an update to the tendered costs following Cabinet approval and a review of how to address the subsequent funding gap.

c.   Costs have increased due to increased material and labour costs across the build, including construction, electrics and plumbing. Costs have been evidenced and assessed as reasonable.

d.  The contingency funding amount included within the original grant award (£102,790) has been amended to 5% of the new build cost (£67,511) and is also being claimed towards the increased costs, however the additional 10% is also required to meet inflation related increased costs.

e.  There remains a funding gap of £158,221. It is proposed that the applicant review further other funding options, fundraising and/or a further review of scope to remove or defer items. Whilst not ideal this is a necessary compromise in the current challenging inflationary environment.

f.    It is proposed to complete the funding agreement including this 10% funding (total YFS funding £645,036).

The project cost changes and reasons are detailed below:

*5% of build cost

The increase in building costs is the result of Brexit, Covid and supply issues following the world unrest. The increase in build cost is 25%, in line with the current market.

Four contractors submitted bids in January 2023 as previous tenders had expired. The preferred contractor is the least expensive at £1,350,203.

Some scope has already been deferred to a later date, including:

·         removal of the soft landscaping;

·         consolidation of two function rooms.

·         removal of A/V equipment

Officers consider that the applicant has been proactive in managing some of the cost increases.They have reviewed the costs and removed some scope. They feel the responsible way forward is a fixed price contract and have been meticulous with the tender document to detail every element to reduce surprises during the build.

The applicant believes removing any more scope would mean the Halls would not be able to be safely used. The tender only allows for basic decorations, sanitary fixtures and other fittings.

Officers consider that the remaining funding gap could be addressed through a combination of the following:

1. seeking other funding
2. fundraising
3. further reductions on scope

It was AGREED:

1.               to fund up to an additional 10% of the original funded value (up to £50,000) for increased costs relating to current inflation levels towards Your Fund Surrey project CF171 Leatherhead & Dorking Gymnastics.

a.    The original grant award for £500,000 was granted 05/07/2022. An additional 10% inflation hardship claim of up to £50,000 is allowable, and fully in line with, the Cabinet decision from November 2022¹.

b.    Works are currently underway and approaching fit-out of the new building.

c.     Costs have increased due to increased material and labour costs across the build, including construction, electrics and plumbing. The evidence provided by the applicant sufficiently demonstrates the impact of inflationary pressures on the project.

d.    Contingency funding included within the original grant award (£63,000) is also being claimed towards increased costs, however the additional 10% is also required to ensure successful completion of the build and achievement of the assessed community benefits.

The remaining build costs are £116,406 The project cost changes are detailed below:

It was AGREED:

1. to fund up to an additional 10% of the original grant award (£51,835) for increased costs relating to current inflation levels towards Your Fund Surrey project CF104 Normandy Community Shop and Cafe.

a.  The original grant award for £518,354 was granted 09/12/21. An additional 10% inflation hardship claim of up to £51,835 is allowable, and fully in line with, the Cabinet decision from November 2022.^[1]

b.  Works are currently underway and approaching fit-out of the new building.

c.   Costs have increased due to increased material and labour costs across the build, including construction, electrics and plumbing. Costs have been evidenced and assessed as reasonable.

d.  Contingency funding included within the original grant award (£37,676) is also being claimed towards the increased costs, however the additional 10% is also required to ensure successful completion of the build and achievement of the assessed community benefits.

The remaining build costs are £113,700. The project cost changes and reasons are detailed below: