A London council has changed its procurement methods and will make more of preconstruction services agreement (PCSA) methods after pausing the third phase of a housing programme due to financial pressures.
The Royal Borough of Kensington and Chelsea has delivered 168 homes under its £139.3m new homes programme, with another 94 still under construction.
But the first two phases of the work came in £3.9m over budget, a report reviewing its performance found.
It also noted that the council’s initial cost estimates were 40 per cent lower than they should have been because they did not include any contingencies or professional fees.
The report described “significant issues emerg[ing]” during delivery of the first phase of the schemes.
On its Acklam Road scheme, for 32 homes and two community spaces in Notting Hill, the report said the unspecified issues meant it was necessary to change contractors, with Willmott Dixon being replaced by Morgan Sindall.
The scheme ran from 2021-2024.
The report also said an 11-home scheme on the Silchester Estate in North Kensington was hit by “a prolonged and challenging contractual relationship” with contractor Buxton.
The construction contract – worth £6.4m according to data intelligence provider Glenigan – started in May 2022 and handover is due this month (February 2026).
The report also highlighted that the council removed consultant Perfect Circle as part of a move to address unsatisfactory performance.
The report said: “While there were contractor performance issues on Hewer Street, Kelso Cochrane and Silchester, the council’s initial client function was not as robust as it could have been, relying heavily on consultant employer’s agents.
“The initial employer’s agent was Perfect Circle and, in order to address unsatisfactory performance, a decision was made in late 2023 to replace Perfect Circle with PPP, and from then on client control and employer’s agent activity became aligned; and much stronger construction project management and tighter client control put the programme back on track for delivery.”
Willmott Dixon delivered the 20-home Hewer Street and 38-unit Kelso Cochrane elements of the programme.
The need to start construction across multiple sites by March 2022 in order to make use of a £33.6m Greater London Authority grant for affordable homes was cited as a reason why projects were started before their designs and costs were certain.
PCSAs are used to reduce future risk for the client.
A “structured procurement route decision tool” will now be used to take better account of “risk, market capacity, modern methods of construction, and price certainty”, the report said.
Future pre-award contract management plans will include defined KPIs, reporting requirements and remedies for supplier or contractor breach, “alongside enhanced supplier due diligence and ongoing performance management to ensure that contractual and delivery expectations are consistently met”.
The review also blamed construction inflation driven by issues such as the Covid pandemic and the war in Ukraine for increased costs.
A third phase of the new homes programme, which the council announced in 2018, was due to deliver around 100 homes in total. Work was paused on two of its three sites due to cost concerns, with another scrapped altogether.
Some 157 of the 262 delivered during the first two phases are available for social rent.
Willmott Dixon, Morgan Sindall and Perfect Circle have been contacted for comment.
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Ian Weinfass