Agenda item

The Committee considered the summary report from Fichtner Consulting Engineers – Technical Advisors.

The Chief Financial Officer introduced the report and commented that:

·         Prior to the termination of its contract with Interserve, HZI had appointed Dawnus to undertaken the civil engineering work on the turbine hall which had allowed this aspect of the project to remain on track

·         Since the termination of the Interserve contract, he had visited the site in person each month and received detailed appraisals of the project from representatives of Mercia. These appraisals had been confirmed in writing

·         Written confirmation had been received from the Sponsors that they did not consider that there were any financial risks associated with the project at this stage that impacted on them as Sponsors. The Council in its role as Funder would only be exposed to risk after the Sponsors. The positive response from the Sponsors should provide comfort and assurance to the Council as Funder about the financial risks of the project

·         Fichtner had highlighted that it had not been made aware of any issues during the month of September which needed to be drawn to the Council's attention

·         The predicted take over date had slipped to 31 March 2017 although there was still a possibility that this could be brought forward. However this would not impact on the loan as it would be repaid irrespective of this delay

·         There were a number of activities on the critical path. However it should be noted that activities moved on and off the critical path at different stages of the project

·         It was anticipated that the building services contract would be let in November 2015

·         The fire detection/suppression contracts were on the critical path as it was important that the relevant equipment was on site at the right time and that the contractors were available on site to commence work

·         Fichtner had indicated that HZI had a good health and safety record on site and had concluded that it was a well-run site with good control processes.

In the ensuing debate, the following principal points were raised:

·         In response to a query, the Chief Financial Officer confirmed that at the takeover date, the Council would be in receipt of a fully operational facility that had passed all the relevant tests. Operating tests would be undertaken for an approximate six month period in advance of the takeover date to ensure that it was in full working order. Waste would be treated during this period without any cost to the Council

·         Should the Council be concerned that the takeover date had slipped by four months from the original forecast date?  The Chief Financial Officer stated that he had received an assurance from Mercia that the present forecast actual takeover date was accurate. Although the loan would be repaid in any respect from the Planned Takeover Date, it was in the Council's best interests to ensure that the plant was up and running as soon as possible. It had been anticipated that the contracts would be let out more quickly. HZI had had to take over and let the contracts following the termination of the Interserve contract. Civil Engineering works totalled approximately £40m of which £13m remained to be let. Of the £13m, approximately £10m related to Building Services work which was particularly complex in nature but he anticipated that these contracts would be let in November 2015

·         What was the reason for the termination of the Interserve contract and was it a clean break or had it impacted on the work on site?  The Chief Financial Officer explained that HZI had been concerned about the time taken on the civil engineering works and they believed that to ensure that the contract remained on time and to budget, Interserve should be replaced. This had been agreed in consultation with Mercia.  It was a clean break in the contract however it must be emphasised that it was an issue between HZI and Interserve. HZI had acted quickly and undertaken some of the work itself. HZI had provided Mercia with evidence that there was a separation of duties within its organisation between the teams undertaking the work on site and the on-going discussions with Interserve with regard to the termination. The Council's relationship was with Mercia and an assurance in this respect had been received from them

·         In response to a query, the Chief Financial Officer stated that the only major (Schedule 7) contract not yet signed off was for building services which represented a total of £10m 

·         In response to a query, the Chief Financial Officer commented that the variation orders would not impact on the financial package but their significance to service provision would be considered by the Council's Waste Disposal Authority Team

·         Was the decision not to provide a concrete lining wall to the perimeter secant piles of any significance? The Chief Financial Officer stated that there was a process of checks and balances to ensure that HZI were delivering the construction of the Plant within the required specifications. This was a matter for the Council as the purchaser. However he confirmed that a quality test had been signed off by the Council and the matter would be referred to that team

·         Was the decision not to provide the concrete wall lining a cost-driven decision? The Chief Financial Officer commented that this was a matter for the Council's waste management team and he would facilitate a response from them.

RESOLVED that the summary report from Fichtner Consulting Engineers – Technical Advisors be noted.