Performance and Finance Select Committee
22 May 2019
Property development arrangements - procurement of a property development enterprise to work in partnership with the County Council
Report by Executive Director of Place Services

Summary The County Council has established a policy for strategic land acquisition and development that involves the County Council actively investing and/or carrying out direct development of land for longer term asset management. This approach has used the title ‘Propco’ to distinguish it from routine asset management. The PropCo Policy was approved in July 2016. This report, and attached draft decision, proposes arrangements for, and procurement of, a joint venture partner to carry out property development on surplus County Council land. The estimated cost of setting up these arrangements will be £700,000 over two financial years, with funding being identified from reserves. The focus for scrutiny The Committee is asked to consider the attached draft Cabinet Member decision report and provide comments to the Cabinet Member for Finance and Resources prior to the formal decision being taken. Members are invited to note the possible areas of focus set out in paragraph 3.1.

Proposal

Background and Context

The principles included in the PropCo Policy were approved in July 2016 (Decision FIN02 16/17). The purpose of the Policy was to set out the principles that will govern the selective acquisition of assets and the direct or indirect development of land and property. This includes the active investment and development of land for wider community and economic benefits and longer term income generation.

The Policy approved recognised that in order to develop sites, the Council is likely to require significant development and construction support, as well as market research, legal and financial advice. As the programme has developed it has been necessary to appraise the benefits of different procurement approaches including:-

The appointment of a Strategic Development Partner: West Sussex Council could opt to achieve a multiple-site strategic development/construction role through a single contractor or consortia selected to lead all development and construction work. The advantages include establishing a long-term partnering approach and potential supply chain efficiency, but it may inhibit competition on a project by project basis. (FIN02 16/17 paragraph 7.1c)

The PropCo Panel have recommended that in order to gain benefit from the Council’s land holdings a property development delivery strategy that procures and forms a long term corporate partnership with a commercial property development partner should be established. This forms the basis of the proposed decision for the Cabinet Member for Finance and Resources, attached as Appendix A.

Proposal

The proposed Cabinet Member decision attached as Appendix A sets out the proposal for setting up a ‘Public-Private Partnership’ on an equal basis. The County Council will provide land for development and, if appropriate, funding. The partnering commercial enterprise will provide expertise, resources, risk management, resilience and funding to deliver the identified developments.

The details of the proposed partnering arrangements are set out in detail in the attached Appendix. This includes the consultation that has taken place, the financial resource and legal implications, risk assessment and other options considered.

It is estimated that the set up costs of the arrangements will be £700,000 across two financial years, 2019/20 and 2020/21.This includes the costs of gaining the external advice and support necessary for the set up and procurement arrangements.

Issues for consideration by the Select Committee

The Select Committee should consider the details provided in the attached draft Cabinet Member decision report, Appendix A, which has been informed through consultation with the PropCo Panel. Issues members may wish to explore include:-

The requirement to place and maintain a pipeline of viable sites to continue the business development and planned financial returns

Whether it is comfortable for the partnership to operate at arm’s length and in a commercial environment

the other options considered in reaching the proposed decision,

any research and findings into best practice arrangements of comparable schemes in other public sector organisations,

the County Council’s financial challenges and statutory responsibilities and how these have informed the proposal,

what the set up costs include and how they have been estimated,

what impact assessment has been carried out and any planned

mitigations, bearing in mind the Council’s public sector duties,

plans to monitor the success of the proposal and

any further plans for the development of the PropCo Policy.

The Committee should agree any comments and/or recommendations for the Cabinet Member to consider before the decision is taken.

Consultation

The PropCo Panel has been consulted on the proposals in the decision and officers will continue to work with specialist consultants in order to develop the details and structure of the proposed joint venture, see section 3 of Appendix A.

Risk Management Implications

See section 6 of Appendix A.

Other Options Considered

See section 7 of Appendix A.

Equality Duty, Social Value, Crime and Disorder Implications and Human Rights Implications

See sections 8 – 10 of Appendix A.

Lee Harris

Executive Director of Place Services

Contact: Malcolm Mayo, 033 022 23031

Appendices

A	Draft Cabinet Member Decision Report for the Procurement of a property development enterprise to work in partnership with the County Council

1	Development Programme Delivery Strategy Report - Executive Summary

Background Papers

Cabinet Member Decision Fin02 16/17 - Approach to Strategic Estate Planning and Investment: Selective Acquisition and Development (PropCo Policy)