This October saw the completion of the final housing scheme on the Oldham Sheltered Housing PFI Project, which has transformed almost half of the Boroughs sheltered housing stock, some 1450 properties. The resident feedback has been excellent and we are proud to have been Technical Advisor, Cost Consultant, Lead Designer and Building Surveyor on this very complex project.

With austerity measures here to stay for a good while longer, we may start to see a rise in refurbishment projects being procured via the soon-to-be remodelled public private finance vehicle. This article seeks to convey some of the main issues we addressed at bid stage and others we encountered along the way.

Firstly, some background to the project. The works involved the remodelling and refurbishment of existing bungalows, flats and communal areas, with the aspiration of achieving Scheme Development Standards as best practicable. In addition, some of the sites were cleared to make way for 3 new build schemes. One of these sites included a 59 bed Extra Care scheme, which the Local Authority Building Control nominated for the best community project category in the North West LABC awards.

In procurement terms, the project started in 1999 when Oldham MBC commenced resident consultations. This culminated in the submission of the Outline Business Case in 2002 and was subsequently approved by HM Treasury. calfordseaden attended the first bidders day in July 2002 and following successful qualification on to the bidders list by our client, Housing 21, the ITN bidding process started in September 2003.

The project was unique because, although it was predominantly a refurbishment project like many of the Round 1 PFI Pathfinder projects, it involved an extensive amount of remodelling and enlargement, which was unprecedented for a project of this size.

There were many issues to address and lessons learnt along the way. We hope that some of those listed below will prove useful to those wishing to embark on similar refurbishment, remodelling and new build PPP / PFI projects:

• A detailed performance specification with clearly defined outputs and availability standards is essential. A vague specification is open to interpretation and manipulation, especially when there could be four parties or more involved in assessing the design and completed works. The Authority is not obligated to 'comment' on reviewable designs and issues of interpretation may not arise until certification of an individual property. Some of the issues described hereafter could also be attributable to a ill-prepared specification.

• A comprehensive condition survey of retained stock should be undertaken, but moreover, it should align with the specific requirements of the Output Specification and Tests On Completion. It is important to note that the survey is a snapshot at that point in time and protracted negotiations of between two to three years, could see a dramatic shift in the condition of the stock. Usually when properties are designated for PFI, only essential maintenance is undertaken by the Authorities. In the case of Oldham, minimal planned maintenance and reactive repairs had been undertaken in the 7 years prior to financial close. It was therefore prudent to commission a further survey of all properties to update the original bid information gathered 3 years earlier.

• Measured surveys and topographical information are essential. It is difficult to design and quantify the proposals without such information, but moreover, the risk of not being able to assess compliance or non-compliance, as the case may be, could be more problematic.

• Detailed investigations and specialist advice should be sought from Acoustic, Structural, Building Services and other Engineers. These specialists are generally ignored in order to save on bid costs and a reliance is placed on free advice given by sub-contractors. Typically, free information is basic, ill-considered, unwarranted, without prejudice, and what was thought to be deliverable from the outset may not always be the case post financial close. It pays to get good advice.

• Future changes in legislation, regulation, standards and guidance are difficult to predict and it is wise to include a contingency for such items. Moreover, it is prudent to stipulate the basis on which the design and costings have been based, e.g. energy ratings to SAP₂₀₀₁, Secured By Design - 2007 Edition, Design Quality Standards - 2010 Edition, etc.. Any specific standards including version and edition references should be prescribed in the contract documents. Changes in legislation and regulation are usually borne by the SPV/Contractor, but again, there is no reason why the above approach cannot be adopted. In essence, the service is provided to the Authority and it stands to reason that any upward cost variations arising from changes implemented by government, should be borne by the Authority.

• Conflict in design requirements - there have been many changes to existing regulation, legislation and standards over recent years, and new ones have also been introduced. Some regulations and standards are basic, minimum requirements, whereas others seek to improve upon those further and embody a wider remit, which crosses over a variety of standards. It is essential to have a thorough understanding of these standards in order to identify any conflicts and consequential breaches in compliance. In some instances, overcoming the conflicts could prove very expensive with the risk being borne by the SPV or Constructor.

• The Reviewable Design process should involve all parties. There are many tiers of review involving the Design Team, Constructor, SPV/Contractor, Authority and their Technical Advisor and the Independent Certifier. It should be incumbent upon all parties to participate in the review of the design information, and to raise any queries that are specifically related to the Output Specification, at the earliest opportunity before works progress on site. Otherwise, such matters are not addressed, knowingly or not, until certification. This will inevitably cause a dispute, despite the information having been circulated previously. A clear and concise Reviewable Design process should be incorporated in the Project Agreement that embodies a comprehensive review and sign-off of all information. It is also important to seek agreement to derogations or Contractors Notice of Changes at the earliest opportunity to avoid future conflicts.

• The role of the Independent Certifier should be impartial, but it must be remembered that they are usually jointly appointed by the Authority and the SPV. Therefore, their obligations are biased to those parties, and opinions could easily be swayed on any contentious issues that arise during the course of the project. This could prove detrimental to those parties affected by the stepping down of risk, especially if damages are imposed due to failure, on the part of the IC, to issue Acceptance Certification. Do bear in mind that LAD's levied during the contract are imposed by the banks and not the Authority, and are usually unrecoverable.

• These projects are inherently finance driven and very complex. The key sectors, namely, legal, finance and technical are intertwined and it is important to understand the commercial ramifications of any changes to the SoPC and Housing PFI Procurement Pack.

• Managing residents expectations is paramount. The earlier PFI schemes were plagued with affordability problems, largely arising from inaccurate Public Sector Comparators, which resulted in broken promises to residents. Whilst, the later PFI rounds has seen much improved Outline Business Cases and cost certainty, the issue now, is curtailment of funding. The recently undertaken VFM exercises on some Round 4 and 5 schemes will ultimately diminish the scope of works or services being delivered to the residents. Therefore, it is imperative that the revised scope of the project, whether diminished or not, is conveyed to the residents via carefully structured consultation. It's very easy to embellish the project and agree to residents whims, but it pays to be fair and honest from the outset to avoid clashes at subsequent consultations. Remember, it is the Authority's brief / specification that the Contractor is responding too.

Whilst, much of the above undoubtedly comes with a price tag, from our experience, it is money well invested. To alleviate the burden of spiralling bid costs, it would be refreshing to see Local Authorities take a more proactive approach to the procurement of specialist surveys and investigations. Such information should also be warranted to the bidders and available from the outset of the bidding stage.

With so many properties falling short of current standards and the need to address sustainability issues arising from climate change and depleting energy resources, calfordseaden are ideally placed to provide the multi-disciplinary advice needed for such complex projects.