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27. 8. 97
PROJECTS AND PROPERTY COMMITTEE
15 AUGUST 1997
A meeting of the Projects and Property
Committee
was held on Friday 15 August 1997 at 2.00 pm
| PRESENT: | Councillor Ron Wright (Chairman), Councillors Morgan Fahey, Ian Howell, Denis O'Rourke and Gail Sheriff. |
| APOLOGIES: | An apology for lateness was received and accepted from Councillor Denis O'Rourke who arrived at 2.57 pm and who was present for clause 4 only. |
| Apologies for absence were received and accepted from the Mayor and Councillors Oscar Alpers, Carole Anderton, Ishwar Ganda and Alister James. |
The Committee reports that:
PART A - MATTERS REQUIRING A COUNCIL DECISION
1. WESTPAC TRUST CENTRE - GROUND LEASE RR 5803
| Officer responsible | Author |
| Property Manager | Property Projects Manager, Gilbert van Schaijik |
| Corporate Plan Output: Major Projects WestpacTrust Centre |
PURPOSE
The purpose of this report is to seek the Council's agreement to the terms and conditions of the ground lease which has been negotiated between the Christchurch City Council and the Addington Raceway Limited for the area of land supporting the WestpacTrust Centre.
BACKGROUND
Negotiations for the ground lease for the WestpacTrust Centre commenced in the early stages of 1995. At the date of last reporting on the matter, agreement had been reached on the majority of the issues. The only outstanding matter is that relating to an option to purchase and striking a fair market value. This matter has since been resolved.
PRESENT SITUATION
All outstanding matters in relation to the lease have been resolved and conditional agreement has been given to the lease, conditional upon final approval from the respective parties. A Heads of Agreement has been signed by Addington Raceway Limited and the Christchurch City Council with the full lease being part of the document. Rental is being charged by Addington Raceway Limited and is being paid by the Christchurch City Council at the rate of $40,000 per annum being the agreed sum fixed for the term of the lease. The agreement is now conditional only upon the Council's approval of the lease. This formal Council approval is now being sought.
TERMS OF THE LEASE
A car parking agreement is to be entered into between the Christchurch City Council and Addington Raceway Limited. This will be drafted in consultation with the venue managers. The broad terms of this car parking agreement are contained in the lease document itself.
Other matters to be resolved only relate to the building construction and site development.
SUMMARY OF LEASE
In summary the terms of the lease are as follows:
| Commencement Date: | 2 December 1996. |
| Term: | 50 years with a right of renewal for a further term of 50 years with no rent review. |
| Total Term: | Limited to 100 years from commencement date. |
| Rental: | $40,000 plus GST per annum paid monthly in advance. |
| Outgoings/Other Charges: | The Council is responsible for rates, outgoings including garbage disposal and maintenance of services. |
| Sub-letting and Assignment: | Permissible on obtaining written consent from the lessor. |
| Improvements: | The Council is responsible for improvements, maintenance and repairs. |
| Option and Right of First Refusal: | At any time not earlier than nine months nor later than three months before the expiry of the initial term and also during the corresponding period before the expiry date of the renewed term, the Council has an option to purchase the premises at a current, fair market value to be agreed between the parties or failing agreement to be determined by arbitration. In the event that the lessor wishes to sell the premises during the term of the lease then the lessee will have sixty (60) days from the date of notice to advise the lessor that the lessee wishes to purchase the premises on mutually agreed terms and conditions. |
CONCLUSION
The agreement is now at a stage and in a form where it can be executed by the Council upon the appropriate resolution being passed. The terms and conditions as outlined are those which have been previously reported to the Council and to the former Convention and Entertainment Centre Sub-committee. The car parking agreement is currently being drafted and will be reported once the detail is completed.
| Recommendation: |
That the Council confirm the terms and conditions of the lease between Addington Raceway Limited and the Christchurch City Council as outlined in this report and as per the signed agreement to lease document. |
2. CENTENNIAL POOL REDEVELOPMENT RR 5881
| Officer responsible | Authors |
| Major Projects Co-ordinator | Mark Noonan, Albert Louman |
| Corporate Plan Output: Corporate Plan, Volume 2, Capital Output 8.4.55 |
The purpose of this report is to seek confirmation of the negotiation of a contract with Mainzeal Property and Construction Limited for the construction of Centennial Pool, in accordance with Section 247E of the Local Government Act 1974.
BACKGROUND
The Council, at its meeting held on 26 July 1996, approved the concept plan and redevelopment programme for the Centennial Pool, and further resolved that the Projects and Property Committee report back to Council with a recommendation regarding the acceptance of a negotiated price with Mainzeal Property and Construction Limited.
A proposal based on the Design Report was presented to a special Council Meeting on 13 March 1997. This special Council Meeting set up a Working Party of Councillors and staff to develop Terms of Reference for a cost-effective building and concept design. The Working Party also had to consider inter alia "competitively tendering all work associated with the redevelopment of the pool".
At a meeting held on 3 April 1997, the Centennial Pool Working Party decided that "... given their major involvement to date and the possible costs of terminating that involvement Mainzeal should be retained as the principal contractor, recognising that under Mainzeal all sub-contracting work would be competitively tendered".
The Terms of Reference prepared by the Working Party were approved by Council at a special Council Meeting held on 15/16 April 1997. The Terms of Reference included a key result (output) of a "Negotiated tender for building prepared by Mainzeal Development and Construction Ltd."
An Options Report on the Centennial Pool Redevelopment was presented to a special Council Meeting on 4 June 1997. Under Section 7 Contract Methodology, the Report stated:
"Building
The methodology proposed for construction of the building is to negotiate a fixed-price contract with Mainzeal Property and Construction Ltd.
Mainzeal Property and Construction Ltd will submit their proposed margin and Preliminaries costs for the Project. These costs will be subject to review and agreement by Rider Hunt Christchurch Ltd, who are the appointed Cost Consultant and Quantity Surveyor for the project.
All other work, including concrete, carpentry and sub-contract work, will have a Schedule of Quantities prepared and will be tendered competitively.
This methodology means that approximately 90% of the construction budget will be tendered competitively, and the main contractor's expertise and involvement can be obtained during the detailed design phase."
The 4 June 1997 special Council Meeting resolved inter alia "That the Council approve the preparation of contract documentation (work drawings, specification and schedule of quantities) and the negotiation of a contract with Mainzeal Property and Construction Ltd."
LOCAL GOVERNMENT ACT - SECTION 247E
The Legal Services Manager advised the Major Projects Co-ordinator in an opinion dated 19 June 1997:
"This opinion is to advise that the Council must, before executing any contract with Mainzeal Property and Construction Limited, comply with the provisions of section 247E of the Local Government Act 1974.
Section 247E provides:
'(1) Where any local authority is contemplating entering into any contract for the supply of goods or services that is likely to involve the local authority in expenditure or financial commitment that the local authority considers significant, the local authority shall consider whether or not the matter shall be put to tender.
(2) Where any local authority decides not to put out to tender a contract to which subsection (1) of this section applies, the local authority shall ensure that the reasons for the decision are recorded in writing.
(3) In considering whether or not to put any matter to tender and whether or not to accept any tender, the local authority shall have regard to its objectives as stated in its annual report to the public under section 223D of this Act.'
Clearly with Centennial Pool, the Council is presently contemplating entering into a contract for the supply of services, namely, the construction of Centennial Pool, that is likely to involve the Council in expenditure that the Council considers `significant'. In my opinion a contract with an estimated net cost of $5.7M would be `significant' for the purposes of section 247E.
Therefore the Council is legally required to `consider' whether or not the matter should be put to tender.
You will note that where the Council decides not to put the matter to tender, then its reasons for doing so must be recorded in writing in the resolution.
Further, the Council must have regard to its objectives as set out in section 223D of the Local Government Act 1974."
The opinion further advises:
"In summary I would recommend that a report be prepared for the Council which:
(a) Outlines the requirements of section 247E of the Local Government Act 1974;
(b) Outlines the options available to the Council in this matter, including tendering;
(c) Contains a discussion of each of those options with a recommendation;
(d) If the recommendation is not to tender but to enter into negotiated contract with Mainzeal then clearly setting out for the Council recommended reasons as to why tender should not be let;
(e) Referring to the Council's objectives as stated in its Annual Report under section 223D of the Local Government Act 1974."
SECTION 223D
S.247E requires that the Council have regard to its objectives as stated in its Annual Report to the public under s.223D of the Local Government Act 1974.
At the special Council meeting held on 30 July 1997 the Council adopted its Annual Report under s.223D for the 1997/98 year.
A copy of the Council's Strategic Objectives contained in the Annual Report is attached.
OPTIONS AVAILABLE
There are two basic options available for construction of the Centennial Pool:
- Under the Lump Sum form of contract, the project is fully documented by Consultants employed directly by the Council, a Schedule of Quantities is prepared and competitive tenders are called from Contractors.
- The lump sum contract has the advantage of the tender being based on the true competitive market price for all items.
A third form of contract - Design and Build, where the Contractor employs the Consultants directly and is responsible for the design and construction is not considered appropriate for Centennial Pool. This is due to the fact that a large proportion of the design work has already been undertaken by Consultants employed directly by the Council. There are also a large number of disadvantages with Design and Build Contracts including the lack of full competition, no Schedule of Quantities and the opportunity for the quality of the work being compromised by a Contractor seeking to maximise profit.
COUNCIL POLICY
At its meeting on 25 June 1990 the Council resolved:
"That the Council adopt a policy of active preference within a small financial cost for local firms for the supply of goods and services, and actively seek out quotes from local firms for all possible supplies."
For the reasons set out in the last paragraph of this report it is recommended that the Council not implement this policy for the Centennial Pool project.
MAINZEAL'S INVOLVEMENT
An opinion from the Legal Services Manager dated 24 July 1996 advised that "... the Council does not have any legally binding contractual relationship with Mainzeal ...". (Copy of opinion attached.)
However the Property Projects Manager in a letter dated 25 March 1997 reported to the Working Party that:
"... I have had discussion with Mainzeal regarding the matter of compensation in the event the City Council does not proceed with the development of Centennial Pool in conjunction with Mainzeal Property and Construction Limited. Mr George Haddow from Mainzeal has indicated that they have already spoken to their solicitor, Mr Ken Jones, of White, Fox and Jones, in relation to this matter, to confirm their legal position in relation to dealings with the Council on Centennial Pool. Although no figure has been indicated precisely, Mainzeal would be looking to be compensated for loss of profit from any potential development and recovery of costs for Mainzeal's time and effort to date. Indications are that this would be a minimum of $100,000.
Needless to say the implications for the Council at this stage are significant and that Mainzeal would pursue the matter with all vigour. I have no reason to doubt Mainzeal's word."
It is recommended that, in accordance with Section 247E of the Local Government Act 1974, the Council should enter into a negotiated contract with Mainzeal Property and Construction Ltd for the construction of the building at the Centennial Pool Redevelopment site for the following reasons:
In reply to a question, the Legal Services Manager confirmed the advice contained in his opinion of 24 July 1996 that there was no binding commitment to Mainzeal, notwithstanding the previous Council resolutions, and that it was therefore open to the Council should it so choose to put the contract out to public tender. In view of this advice, and the competitive conditions currently present in the construction industry members of the Committee were unanimous that it would be in the Council's best interests to put the contract out for public tender, rather than entering into a negotiated contract.
| Recommendation: |
That the Council put out to public tender the contract for the construction of the building at the Centennial Pool redevelopment. |
PART B - REPORTS FOR INFORMATION
3. PROGRESS REPORTS: MAJOR PROJECTS
The Committee received progress reports on the following projects:
| 3.1 | Centennial Pool Redevelopment | RR 5888 |
| 3.2 | WestpacTrust Centre | RR 5879 |
| 3.3 | Pioneer Sports Stadium (Pool, Stadium Additions and Alterations, Creche) |
RR 5884 |
| 3.4 | Christchurch Convention Centre | RR 5889 |
In receiving the report on the Christchurch Convention Centre the Committee noted that the final cost of the contract was estimated to be some $23,000 under the total budget provision, and requested that the Council's appreciation for the successful completion of the building within budget be conveyed to the building contractor and the Council's professional advisers.
4. PROPERTIES PURCHASED OR LEASED BY PROPERTY MANAGER UNDER DELEGATED AUTHORITY RR 5867
The Committee received a report by the Property Manager advising that pursuant to delegated power he had recently concluded the following property negotiations:
The meeting concluded at 3.00 pm
CONSIDERED THIS 27TH DAY OF AUGUST 1997
MAYOR