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Bexhill to Hastings Link Road

Progress report to DfT - 28 June 2013

1. Introduction

This report is to advise DfT about the latest progress and financial situation regarding the Bexhill to Hastings Link Road.

2. Background

The Bexhill Hastings Link Road received final funding approval from the DfT on the 3 April 2013. As part of the funding conditions associated with the full approval East Sussex County Council (the promoter) is required to submit progress reports and to comply with the terms and conditions for the award of s31 grant in accordance with the award letter of the 13 May 2013. The general grant conditions require we inform DfT of changes to scope, programme or cost and the impacts thereof.

3. Progress of Construction Works on Site

Since the application for Final Approval there has been substantial progress on the Bexhill to Hastings Link Road project. Compulsory Purchase Orders have been enacted, the planning conditions have been discharged, and construction has commenced.

The land required for the BHLR was subject to Compulsory Purchase Orders, these having been confirmed on 20th September 2012 and enacted on 14th December 2012 and 7th January 2013.

This enabled preparatory works on site to be undertaken with the approval of the Council’s Head of Planning, including vegetation clearance (including trees), environmental surveys and environmental mitigation works (including work with protected species requiring licences from English Nature for badgers, great crested newts and dormice), archaeological surveys, statutory undertakers diversions and temporary fencing of the site perimeter.

These works were carried out at ESCC risk ahead of DfT funding approval to meet seasonal windows for the environmentally sensitive works. Had these works not been carried out, the project would have suffered further delays to the programme with consequential additional cost increases.

The initial vegetation clearance works were subject to significant and aggressive protestor activity, which required specialist security firms to remove people from tunnels, trees and lock-ons in order for work to continue.

All pre-commencement planning conditions were approved by the Council’s Head of Planning by the 11th April 2013 including the pre-commencement conditions

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imposed in the Section 106 Agreement between the Council and Rother District Council / Hastings Borough Council, triggering the ‘Commencement of Development’.

Main construction has started with the demolition of buildings along London Road in Bexhill and construction of the haul road to take construction traffic along the length of the link road site. Construction work continues with the contractor instructed to undertake necessary construction activities on a monthly basis in advance of the Phase 2 Contract award.

Detailed design of the road and the mitigation works that commenced in August 2012 is now nearing completion.

Construction exhibitions have been held in May 2013 in three locations (Bexhill, Hastings and Crowhurst). They have been very well attended, with over 900 people visiting the three exhibitions in Bexhill, Hastings and Crowhurst.

A series of photos showing the construction works progress is included at Appendix 1.

4. Progress with the North East Bexhill Developments

As DfT are aware the BHLR is a key component for the regeneration of Hastings and Bexhill and its construction enables the release of strategic new employment and housing land at North East Bexhill. These developments will provide over 1200 new dwellings and over 50,000sqm of business space, generating hundreds of additional jobs.

Following the announcement of Full Funding Approval for the BHLR, the developer, Sea Change Sussex, has submitted his planning application to Rother District Council (reference RR/2013/899/P) for the construction of the “North East Bexhill Gateway Road”, which links between the BHLR and Wrestwood Road in Bexhill.

Their proposals are shown in more detail on the Sea Change website, including an information leaflet which can be downloaded:

http://www.seachangesussex.co.uk/?p=426

The proposals also include early ideas for a business park on the site and the first set of business premises, designed to help companies expand and generate hundreds of local jobs. Sea Change Sussex expects their application for the business park and first business centre to follow later this summer.

5. Scheme Programme

Since last summer East Sussex County Council carried out various necessary seasonal ecological surveys, design works and advance site works at risk ahead of DfT funding approval in order to maintain the original BHLR programme and mitigate for the delays experienced by the scheme.

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Progress against programme has continued despite the significant and aggressive protester activity. However the programme has lost two weeks due to the extreme spring weather resulting in the hibernation period for Great Crested Newts being extended by two weeks. Taking this into account the project is due to be complete in May 2015. It is possible this two week loss will be recovered during the remainder of the project.

6. Scheme Costs

At submission for Full Approval in December 2012, the estimated total cost of the BHLR was £100.109m as reported within the appendix to the Full Approval documents. The latest estimate of total scheme costs is £113.461m an increase of £13.352m.

The Full Approval application required costs to be shown excluding “ineligible preparatory costs, allowances for Part 1 Claims and scheme evaluation costs. On this basis the cost as previously reported to DfT in the main Full Approval document (Section 3) has increased from £91.868m to £105.220m.

The principal cost increases are broken down into 5 elements; target cost, land slip, protester action, risk and additional contingency.

a. Target Cost

The target cost at the time of submission for Full Approval was £59.451m in 2009 prices (£67.568m outturn including inflation).

It was a condition of Programme Entry that ESCC could not enter into Phase 2 of the Contract until Full Approval was granted. The target cost was reviewed prior to each funding bid submission; however negotiations to agree the final target cost could not be concluded until ESCC was in a position to formally award Phase 2.

The Contractor informed the project team on the 1st May 2013 that his current target cost was no longer sustainable because of significant sub-contractor and material cost increases, and needed to be revised. Whilst this is not desirable, it is within the Contractor’s rights under the contract to revise his target cost before the award of Phase 2 Construction. The Contractor resubmitted his target cost on 12th June 2013 in the sum of £65.294m (£72.307m including inflation).

The main increases to the Contractor’s target cost relate to increases in subcontract tender prices for the earthworks and ground stabilisation elements of the contract in particular, compared to earlier subcontract enquiries. Other increases in cost relate to material prices such as imported stone for the construction of the haul road, bitumen and steel.

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All of these price increases have been scrutinised by the project team and the Council’s commercial consultant Mott McDonald and all prices have been sought by the Contractor through commercial tenders. In essence these are market driven price increases and are legitimate ‘actual’ costs allowed under the contract.

b. Land Slip

Part of the route of the BHLR follows the line of the former railway line in a 500m long railway cutting to the north of Ninfield Road. Over the 2012 Christmas period a small land slip occurred in this cutting resulting in the adjacent residents having to vacate their property on safety grounds whilst emergency works were carried out to stabilise the slope.

The initial design of this section of road assumed the side slopes of this cutting were adequate and that no additional stabilisation was anticipated. However, the recent land slip in this vicinity has heightened the risk of slope failure and as a consequence the contractor’s design consultant, Jacobs, has put on record their concerns about the long term stability of these slopes of this cutting and what they believe to be a risk to users of the new road.

The ESCC project team is currently seeking an independent view, but in light of the severity of the Jacobs’ report it is prudent at this stage to make a provisional allowance in the project budget for further stabilisation works, and a preliminary figure of £2.0m has been included.

c. Protestor Action

Tree clearance works in particular were subject to very significant and aggressive protestor activity which attracted much local and national press attention. The protestors stated aim (in the press and on websites) was to delay the road construction and to cause sufficient delay and additional cost to deter the future road building programme announced by the government.

The tree clearance was carried out without delay to the construction programme but at a considerable additional cost to the project of £2.078m to date due to security and additional contractor costs. Security firms specialising in protestor control were required to remove people from tunnels, trees and lock-ons in order to allow the work to continue. Up to 100 security staff were required at any one time during these protests including night time patrols and 24 hour occupation of the buildings planned for demolition.

Sussex Police have been involved in facilitating peaceful protest throughout and in ensuring that the Council was able continue with its lawful work. There have been 28 arrests made to date. Liaison between the Police, the Council, the Contractor and specialist security through a Gold/Silver/Bronze command system was set up and will continue for as long as necessary.

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A legal challenge against the Council undertaking works on the BHLR, including undertaking tree clearance, was made to the High Court in January 2013. Although the initial request for a judicial review was refused on the 5th March 2013 with costs awarded to the Council, the claimant subsequently requested an oral hearing and this was set to be heard on the 12th April 2013. However, the claimant fully withdrew his action on the 11th April 2013. The Council are seeking costs.

Objections have also been made to the non-material amendments to the scheme. The non-material amendments were designed to make savings to the scheme’s capital cost whilst fully maintaining the function of the road. Planning, in accordance with planning requirements, advised those with an interest in the amendment in December 2012 and in addition advertised them in the press and on notices on the site. No objections were received within the stated time period. However, 51 objections were subsequently made in April / May 2013 and Planning have decided to refer the non-material amendments to the planning committee for determination at the planning committee on 10th July.

Protestor activities have continued since the tree clearance works were completed but have been limited to amongst other things applying pressure to the DfT not to approve funding for the scheme, organised walks through the Combe Haven valley and letter writing / website communication.

There has been however continued, sustained and what appears to be targeted damage being experienced on site against, in particular, closed badger setts and great crested newt trapping fences. Security has been increased and incidents are being reported to the Police. Some of this damage is difficult to attribute directly to protestor action rather than just vandalism.

Risk of protestor activity has increased significantly since the Council’s submission to the DfT for Final Funding Approval in December 2012 when approximately £700k had been allowed. To date, £2.078m has been spent on security and additional Contractor costs. Sussex Police have advised that protests could continue through to the end of the project although it is very difficult to predict at what level this would be and therefore what resource would be required to deal with it. Based on the reduced protestor activity at the moment a further £1.314m is required to continue with the current low level of embedded security. The total cost of protestor action / security is therefore forecast to be £3.392m ie an additional £2.692m.

d. Risk

The project risk register is a live document which is kept under review and updated as appropriate during the project as the risks change. In common with any large construction project and despite thorough investigation during

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the design stage, the risks become much clearer as construction is started. In light of this the risk register has been reviewed and a Monte Carlo simulation has been re-run. This has given a quantified risk allowance figure of £4.648m, increase of £1.444m on the value estimated at Final Approval.

e. Contingency

A contingency for budget planning purposes recognises an allowance for unforeseen miscellaneous costs which cannot be identified at this time. It is considered prudent at this time to allow an additional 2.5% contingency within the approved budget to cover unforeseen eventualities.

f. Summary

These costs increase the estimated total scheme cost to £113.461m (£105.220m excluding ineligible preparatory costs, Part 1 Claims and scheme evaluation in line with DfT guidance for Full Approval application). The additional costs are detailed within Appendix 2.

7. Value for Money

It is a condition of the DfT grant award that DfT are notified if there are any changes that affect the schemes value for money category. The BCR calculation has therefore been re-run to the DfT agreed methodology including the treatment of sunk costs. Apart from the changes to the costs, all other parameters including valuation of the scheme benefits remain the same as at Full Approval submission.

The calculation concludes that the increased costs do not change the value for money category for the scheme.

8. ESCC Cabinet Approval

Should Cabinet and County Council agree to fund these cost increases from ESCC’s capital programme at their meeting on 10 July 2013, it is our intention to commence phase 2 construction work under the contract immediately thereafter. We will update DfT on the outcome.

Rupert Clubb Director, Economy Transport and Environment - East Sussex County Council 28 June 2013

APPENDIX 1 – SCHEME PROGRESS PHOTOGRAPHS

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London Road demolition

Material awaiting crushing

London Road demolition crusher – crushed material used for haul road construction.

London Road demolition

Viking Fish Bar demolition

Woodsgate Park Bridge temporary scaffold walkway

Archaeology work

Flags show finds

Haul Road construction

Haul road construction

Ground improvement piling mat

Ground improvement piling mat

Ground improvement piling mat

Site compound

Bactec survey (unexploded ordnance) and newt fencing

Dormouse/ground nesting bird survey

APPENDIX 2 – SCHEME COST BREAKDOWN

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Scheme Cost Estimate

Final Funding Approval

Dec 2012

Scheme Cost (£m)

Update

June 2013

Scheme Cost (£m)

Contractor's Total of the Prices 59.451 65.294

Statutory Undertakers Works Included Included

Site Supervision 2.655 2.666

Fees payable by Client 0.410 0.434

Land and Compensation 12.470 12.393

Base Operating Costs 0 0

Base Cost (1) 74.986 80.787

Allowance for Construction Inflation 8.117 7.013

Allowance for General Inflation 0.069 0.022

Allowance for Land and Property Inflation 0.203 0.078

Sub-total Inflation (2) 8.388 7.113

Allowance for Quantified Risk Assessment 3.904 (including £0.7m for protestor action)

4.648

Protestor Action Risk Included above

3.392 (now separately identified)

Other Directors added risk / contingency 0 4.717

Sub-total Risk (3) 3.904 12.757

Scheme Cost Estimate (1+2+3) 87.278 100.657

Eligible Preparatory Costs 4.590 4.563

Total Scheme Estimate 91.868 105.220

Funding Source Breakdown

Final Funding Approval

Dec 2012

Update

June 2013

£ % £ %

Local Authority Contribution £34.818m 37.90% £48.170m 45.78%

Agreed 3rd Party contribution £0.200m 0.22% £0.200m 0.19%

DfT Funding £56.850m 61.88% £56.850m 54.03%

Total £91.868m 100% £105.220m 100%

Bexhill to Hastings Link Road June 2013 Profiled Estimate

£millions

Pre Approval Post Approval

Item Pre 05/06 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015+ TOTAL £m

Land and Property Inflation (2%pa) - 2012 Base 1.000 1.020 1.040 1.061

General Inflation Factor (2.5%pa) - 2012 Base 1.000 1.013 1.038 1.064 Construction Inflation Factor (4.7%pa->2011, 2.7%pa 2011->) - 2009 Base

1.000 1.024 1.072 1.101 1.130 1.161 1.192

Construction Inflation Factor (10.8% total 2013/14-2015/16 on June 2013 TC)

1.108

Construction Cost:

Hochtief/Vinci Estimate incl. Design, SU Diversions & Contractors Risk

Q3 - 2009 5.189 29.783 27.325 2.997 65.294

Inflation adjusted 5.711 33.000 30.276 3.321 72.307 Network Rail Q3 - 2012 0.010 0.153 0.153 0.316 Planning Fees Q3 - 2012 0.119 0.119

Client Agent Supervision Q3 - 2012 0.421 0.623 0.476 0.031 1.552

Client Supervision / Project Management Q3 - 2012 0.152 0.372 0.376 0.215 1.114

Inflation adjusted 1.017 0.255 1.273

Expected Outturn Cost (inc inflation) 6.413 34.147 31.293 3.576 75.430

Land Cost:

2011 Cost Estimate (land entry 12/13) Q3 - 2012 1.742 3.692 0.566 0.600 6.600

Valuation advice & fees 0.168 0.290 0.014 0.164 0.191 0.220 0.150 1.197

Legal fees - external 0.042 0.020 0.062

Legal fees - internal 0.045 0.016 0.061

Blight 1.400 0.120 1.780 0.263 0.820 4.383

Noise Insulation Regulation Claims 0.089 0.089

Expected Outturn Cost (inc inflation) 1.400 0.120 1.780 0.263 0.988 0.290 0.014 2.083 3.919 0.818 0.796 12.470

Non Eligible Costs:

Engineering Studies/ Design 0.350 0.240 0.650 0.023 0.012 1.275

Environmental Studies/ Design 0.400 0.680 1.490 0.063 0.079 2.712

ES Supplement 0.044 0.174 0.218

Business case development 0.138 0.138

Orders / Exhibition 0.086 0.123 0.209

Public Inquiry 0.050 0.009 0.082 1.670 1.811

Client Supervision / Project Management 0.290 0.190 0.050 0.020 0.550

Scheme Evaluation - Benefits Realisation Plan 0.250 0.250

Expected Outturn Cost (inc inflation) 0.750 0.920 2.190 0.225 0.899 1.860 0.050 0.020 0.000 0.266 7.180

Eligible Preparatory Costs:

ECI Phase 1 costs 1.786 0.260 0.444 2.490

Contract procurement 0.132 0.017 0.149

pre-work surveys 0.099 0.582 0.437 1.118

Business Case - Final submission 0.056 0.161 -0.011 0.206

Client Agent 0.519 0.080 0.599

Expected Outturn Cost (inc inflation) 0.099 0.714 2.815 0.340 0.161 0.433 4.563

TOTAL (Excluding Risk Mitigation) 2.150 0.920 2.310 2.104 1.876 5.663 0.680 0.195 8.929 38.066 32.111 4.638 99.643

Construction Risk 0.320 2.678 1.150 0.500 4.648

Other Director Risk allowance/Contingency 1.769 2.359 0.590 4.717

Protestor/Security Risk 1.939 1.158 0.114 0.181 3.392

Total Employer's Risk Mitigation Costs 2.259 5.605 3.623 1.271 12.757

TOTAL (Including Risk Mitigation) 2.150 0.920 2.310 2.104 1.876 5.663 0.680 0.195 11.189 43.671 35.734 5.908 112.400

Part 1 Claims - Not included within DfT cost estimate 1.000 1.000

Inc Inflation 1.061 1.061

Expected Outurn Cost inc Part 1 Claims 2.150 0.920 2.310 2.104 1.876 5.663 0.680 0.195 11.189 43.671 35.734 6.970 113.461

Eligible Preparatory Costs 0.099 0.714 2.815 0.340 0.161 0.433 4.563

Ineligible Preparatory Costs 0.750 0.920 2.190 0.225 0.899 1.860 0.050 0.020 0.266 7.180

Pre Approval Main Scheme Costs 1.400 0.000 0.120 1.780 0.263 0.988 0.290 0.014 4.855

Main Scheme Costs Post Approval 10.755 43.671 35.734 5.643 95.802

Total 2.150 0.920 2.310 2.104 1.876 5.663 0.680 0.195 11.189 43.671 35.734 5.908 112.400

Scheme Cost excluding non eligible prep cost 1.400 0.000 0.120 1.879 0.977 3.803 0.630 0.175 11.189 43.671 35.734 5.643 105.220

Part 1 Claims 1.061 1.061

Total Including Part 1 Claims 2.150 0.920 2.310 2.104 1.876 5.663 0.680 0.195 11.189 43.671 35.734 6.970 113.461