By Carmelo Garcia – Local Democracy Reporter
Questions have been raised over the costs associated with delivering Gloucester’s £115.1m The Forum project as around £40m of the money spent did not go on construction.
The prominent city centre landmark off Station Road houses a four star hotel, a 399-space car park and more than 106,000 square feet of office space.
A report reflecting on the major regeneration project was presented was scrutinised by councillors at Gloucester City Council earlier this week.
And bosses were quizzed over the costs associated with the project.
Councillor Alastair Chambers (I, Matson, Robinswood and White City) asked whether the total value of the project was still £107m as was originally budgeted for.
Andy Hearne, the head of place at Gloucester City Council, explained that was the original figure approved by the cabinet.
But subsequently £8.1m from levelling up funding from the ill-fated Fleece Hotel project went into the overall development project as a contingency as none had been set for it.
“In totality, the entire development cost budget was £115.1m,” he said.
Cllr Chambers thanked officers for “being so open and honest with the data” and went on to ask more about the costs of the project.
“The Kier build costs were £74.5m,” he said. “Where’s the other sort of £40-£45m come from?
Peter Langley-Smith, managing director of the council’s development partners Reef, explained there were other costs such as professional fees, land acquisition, tenant incentives, rent free costs, consultant costs, development management advisers fees.
He also said there were development management advisers fees.
“Fundamentally speaking professional fees, associated costs with development, fit out contributions, capital contributions to occupiers, those sort of things,” he said.
The main delays to the major King’s Quarter regeneration project were borne out of the discovery of an exposed gas main on October 2022, according to the Forum Reflection report.
This discovery led to an extension of time request and loss and expense claim for just under 21 weeks and £7.33m respectively.
This was received in February 2023 and owing to a disagreement as to the apportionment of risk in respect of the gas main discovery, the issue was referred to adjudication, the outcome of which was substantially in Reef’s favour.
However, the final account figure represents a 6.58 per cent increase of the build cost which is queates to around £4.8m.
Cllr Chambers said he noted the gas mains works, including the delay, cost approximately £7.3m.
“With regards to that, I thought it went to adjudication and it was in our favour, predominantly,” he said.
“However, there is an increase in the contract sum of 6.58 per cent.
“Is that on the £115m, the £107m or the build cost of £73m?”
Mr Langley-Smith said it was on the initial build cost of £73m to Kier.
Cllr Chambers said: “So if it’s on the £73m, that works out at about £4.8m.
“What were those extras on? I note the contract was design and build.
“And obviously that should encompass all risk, really. Because the contractor has taken on the liability and design and all the drawings.
“How did it come that there was an increase in costs when that should be within the design and build contract.”
Mr Langley-Smith said Cllr Chambers was right about the contract with Kier.
“As with any build contract, there are expected, throughout the period of the contract, to be a number of variations that the client instructs, typically there might be claims that the contractor is entitled to make for time, for weather for example, for unforeseen events,” he said.
“The total settlement you are referring to is the final commercial settlement with Kier. Which was trying to effectively wrap up all of the variations, all of the changes, all of the valuations, engineering, all of the extensions into one final commercial settlement.
“And that was the commercial settlement that we reached.
“It is worth highlighting that the claim that Kier were proposing in terms of the final settlement figure was in a magnitude of multiples to what we actually settled at.
“So while it was an increase. There are always a number of items that are effectively for commercial debate with the contractor.
“And we still stand by the fact it was a sound recommendation to settle at those levels.”
Councillor Anne Radley (LD, Elmbridge) followed on with questions about the gas pipe.
“What I find intriguing is, how did we not account for it, that we weren’t aware it was there,” she said.
“I know you put a space anywhere in Gloucester and find ancient artefacts but a gas pipe isn’t an ancient artefact. It’s relatively recent. How did we miss it?”
Mr Langley-Smith said they didn’t miss it and undertook initial site surveys “as best they could” prior to the start of the contract with Kier.
“The risk of then what was found in the ground sat with Kier, under the contract,” he said.
“They were obligated to undertake their own surveys and investigations and through that process they found said gas main which we weren’t aware of.
“There was a risk it might have been in the location that we thought it was but there was no certainty.”
He said the disagreement with Kier was when that was identified and the delayed that could have been mitigated had it been found earlier.
Cllr Radley said: “That is quite a beautiful way of saying we thought it was there. We weren’t sure and then we found it.”
Earlier in the meeting, Council Leader Jeremy Hilton (LD, Kingsholm and Wotton) thanked Reef in delivering “this superb regeneration project in the King’s Quarter”.
He said the Forum is a great legacy for all those involved in the early days of the project which had cross-party support.
“You’ve only got to go there now to see what a change we’ve got in that location,” he said.
“With a brand new 400-place car park, with EV charging points right next to the bus station, the green wall.
“We’ve got high tech offices now being occupied by two major businesses. We hope to secure further tenants over the next few months.
“And of course, most recently, hotel Indigo opened. Our first four star hotel in Gloucester.
“I gather it is doing really well.”