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The Council have considered the remarks made at the Discussion of this Report on 15 October 2002 (Reporter, p. 211). They have consulted the Treasurer and the Director of the Estate Management and Building Service on procedures and the details of the work being carried out at the Addenbrooke's Site and have agreed to respond as follows:
1. One of the first questions raised was why work had been done on this project before it had been approved by the Regent House. The Regent House will appreciate that this is an extremely complex project and that commercially confidential negotiations with Downing College and the Addenbrooke's NHS Trust had to be carried out before any detailed proposals about the building itself could be brought forward. In order to meet the client timing requirements and in particular to ensure that Cancer Research UK (CR-UK) remained 'on board' it was inevitable that the building design was developed over the period that negotiations were continuing and before the Report could be prepared.
2. Following the government review of the construction industry led by Sir Michael Latham, procurement systems found to be successful in certain other industries were brought into the construction industry. One element of reform is the greater involvement of constructors with designers before designs and tender documents are completed. This is refined in the increasingly common procurement strategy of 'Two-stage contracting' whereby the first contract with the main contractor is for buildability, design, and tendering assistance (typically at a cost of just a few tens of thousands of pounds), with the second contract being for the construction work on site. Another common procurement technique to reduce risk is to separate out preliminary works which are difficult to plan and/or cost in detail (e.g. archaeology, removal of sub-surface obstructions). In a university, especially a university doing as much research as ours, every building is unique, and procurement is a complex process requiring different solutions to different problems. It is only after the design and tender documents are substantively completed (typically after 6-18 months work by officers and consultants) that a sound assessment of cost be made; even then the variability of the market often results in high tenders necessitating value engineering works to bring the cost of the scheme within the available budget.
3. In addition, the process of obtaining permission from the Local Planning Authority (LPA) to build on a site has become much longer and much more complex: there is wider consultation and greater environmental assessment. Success is unlikely if the local community and LPA are not consulted from the early stages. The projected cost, and the way a building fits into its site are not fully or confidently known until planning consent is obtained. Hence, it is necessary to carry through the planning process (which typically takes 6-12 months, often longer for large projects) before the nature and projected cost are substantively reported. To develop a project far enough to obtain planning consent will typically take 5% of the project cost and often exploratory work on site will also have been required. The planning application, design, and site exploration processes often attract media interest long before the design or cost are known.
4. The Council note that this protracted process has led to a lack of balance between the timing of the publication of a Report and the start of work on site. They have agreed that in future a Notice to announce proposed building work should be published before the first-stage contract has been signed to be followed by a Report for Discussion when full costings for the project are available.
5. In response to Dr Evans's comments about the Treasurer accepting tenders without some form of 'supervision', the Council refer to their response of 6 May 2002 (Reporter, 2001-02, p. 735) to her similar remarks on Reports concerning building works at the University Farm and at West Cambridge.
6. Work on site. To prepare the site for construction, an enabling works and archaeology contract is currently under way. This includes excavating and removing top soil and subsoil from the sports pitch, carrying out an archaeological investigation which satisfies the County Archaeologist's requirements, removing the existing car parks and constructing temporary car parks, and providing access to the site. The present total budget estimate is £1.7m for these works. Funding of £2.4m has been provided by Atlantic Philanthropies, Hutchison Whampoa, and an individual donor. This work was authorized by the Finance Committee. Actual expenditure from the University on the project so far totals £2m up to the end of October. The Buildings Sub-committee has recommended warranting of a further £1.7m, £1.2m, and £240,000 for the CR-UK phase 1 enabling works, the CR-UK phase 1 detailed design, and the multi-storey car park respectively. All this work is enabling work. The main contract has not yet been let. It is anticipated that funding will be drawn down from the various funding sources as expenditure is incurred.
7. Running costs. The laboratory building is to be leased to CR-UK on completion. They will meet all running and maintenance costs for at least the first ten years. The Clinical School will occupy some space within the building (approximately 4 teams out of an initial 20) and will pay occupancy costs. The details of the arrangement with CR-UK are still the subject of negotiation.
8. Funding for specific capital elements of the development is as follows:
| £m | |
| Land | |
| Land Fund | 10.025 |
| Hutchison Whampoa | 3.000 |
| Subtotal | 13.025 |
| Building | |
| CR-UK | 11.500 |
| Hutchison Whampoa | 13.500 |
| Atlantic Philanthropies | 10.000 |
| Other donations | 0.600 |
| SRIF allocation | 4.502 |
| Subtotal | 40.102 |
| TOTAL | 53.127 |
The current balance on the Land Fund, taking account of all agreed and proposed commitments, including the above, is a negative figure of £12.15m. It is intended to bring this back into credit over the next three years.
9. Multi-storey car park. Addenbrooke's NHS Trust will be the operator of the car park. The building programme for this anticipates a start on site of March 2003 with completion in January 2004. The current overall outline construction cost is £10.2m excluding VAT but allowing for inflation to the first quarter of 2003. Funding has been identified as follows: Addenbrooke's Trust will pay £3.094m for 425 spaces while CR-UK are expected to provide £1.5m for 154 spaces. This will leave a funding gap of approximately £5.6m which will be funded by a loan from the Chest, repayable over a period of 25 years through car-parking charges or otherwise, with the spaces being allocated to the Clinical School and the NHS Trust. Dr Cowley queried the statement that this shortfall would be funded from the Land Fund. This statement was indeed inaccurate. As indicated above the Land Fund will provide the moneys to purchase further land from Addenbrooke's NHS Trust on which the laboratory will be built, and that money will be used by the Trust to buy spaces in the multi-storey car park. In order to avoid accounting problems within the Trust, it was proposed that the money would not physically be transferred to the Trust at any stage but would be allocated from the Land Fund direct to the project. The Council agree however that the University must account for these transactions separately in its books. The capitalized stream of income from car-parking charges will also need to be shown as a charge to the Chest.
10. As the Council reported in their Report, the Trust holds an option to purchase land to enable it to provide key worker housing. This option is expected to credit the Land Fund with £2.8m in due course, and this amount is included in the calculations referred to in paragraph 8 above. The Council will report to the University about the sale of this land when negotiations are concluded.
11. The Council reiterate the statement in their Report that the construction of the laboratories will not commence on site until full funding has been identified.
12. The Council are confident that appropriate funding is in place for the first stages of this building work and are therefore submitting a Grace (Grace 3, p. 362) for the approval of the recommendations in their Report.
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Cambridge University Reporter, 27 November 2002
Copyright © 2002 The Chancellor, Masters and Scholars
of the University of Cambridge.