Decision details

West Kirby Flood Alleviation - Variation of Construction Phase Contract and Acceptance of Flood Defence Grant Funding

Decision Maker: Environment, Climate Emergency and Transport Committee

Decision status: Recommendations approved

Is Key decision?: Yes

Is subject to call in?: Yes


This report seeks the approval of the Director of Finance and Section 151 Officer to disburse grant in aid (GiA) of £3m from the Environment Agency (EA) towards the West Kirby Flood Alleviation Project and to approve the necessary purchase orders to vary the council’s construction contract with Volkerstevin Ltd up to a maximum value of £17,273,533.  The recommendations require an urgent decision under Section 4 of the Constitution as a matter outside of the council’s budget policy framework, because there is an urgent need to make immediate contractual payments.




Resolved – That


(1)  additional Flood Defence Grant Funding and Local Levy Grant Funding of £4,400,000 provided by the Environment Agency be accepted.


(2)  a variation in the value of the construction contract with VolkerStevin Ltd for the West Kirby Flood Alleviation Scheme from £9,640,000 to £14,282,000 be approved.


(3)  the Director of Law and Governance be authorised to negotiate and finalise the associated grant funding agreements and contract variations.


(4)  Officers be thanked for the considerable amount of work put into the project.


(5)  the report be referred to the Audit & Risk Management Committee so that consideration can be given to reviewing concerns relating to the procurement of the construction contract and the increase in cost of the project.

Reasons for the decision:

On 15 November 2021, the Environment, Climate Emergency and Transport Committee approved use of the Environment Agency’s Collaborative Delivery Framework for the Engineering Construction Contract (ECC) to deliver the West Kirby Flood Alleviation Scheme. The Committee also delegated authority to the Director of Neighbourhood Services to award the ECC to the Framework supplier, VolkerStevin Ltd, following a procurement process.


On 11 April 2022 the Director of Neighbourhood Services agreed to award a contract to VolkerStevin Ltd following a procurement process which set the Target Cost of the ECC contract at £9,640,000. The supporting report to the decision identified the total available project budget as follows:

·  Environment Agency’s Flood Defence Grant Aid £3,014,000

·  Environment Agency’s Other Government Department Grant £3,300,000

·  Regional Flood Coastal Committee Local Levy £1,468,000

·  Wirral Council Capital Programme £3,800,000 TOTAL £11,582,000


The accompanying report to the above officer decision identified the forecast costs for the project against a total budget as follows:

·  Committed and Existing Expenditure Total £1,000,000

·  Main ECC Value £9,640,000 o Contingency £ 942,000 TOTAL £11,582,000


Construction commenced in May 2022. During the construction works various matters detailed in section 3.0 and Appendix A to this report have resulted in the contract manager re-assessing the sums properly due to VolkerStevin Ltd under the terms of their contract with the council. The contract manager is acting independently and impartially as Project Manager under the form of contract used: New Engineering Contract version 4 (NEC4). The Project Manager is appointed under the council’s contract with AECOM, which is a global construction consultancy also providing the project design resource. The Project Manager’s current assessment of the final contract outturn sum likely to be properly due to VolkerStevin Ltd is £14,282,000.


Therefore, there is predicted to be a resulting variation to the final contract sum that is likely to become due to VolkerStevin Ltd on completion of the works which is in excess of 10% of the contract sum at the time of award of contract. The additional costs exceed the contingency identified in the April 2022 report and therefore exceed the allocated budget for the project.


A detailed business case update and supporting application was prepared by council officers and submitted to the Environment Agency, as described in paragraph 3.6 of this report. The Environment Agency has approved this application, which provides a further £4,263,000 of Grant Aid funding and £137,000 Local Levy funding into the overall project budget. This additional funding will be sufficient to meet the contract Page 8 sum variation and include for delivering the remainder of the project with a modest contingency amount retained. Consequently, in accordance with the council’s Constitution, Committee approval is required to formally accept the total additional £4,400,000 Grant Aid funding.

The increase in contract value of £4,642,000 is met by the additional grant of £4,400,000 and £242,000 as part of contingency budget allocated to the scheme.

Alternative options considered:

To do nothing is not an option. The additional contractual sums have been independently assessed and determined under the terms of the council’s contract with VolkerStevin Ltd. There is a requirement to vary the contract sum value accordingly in order to allow for continuation of payments to VolkerStevin Ltd. Failure to do so would place the council in breach of contract and liable for interest on late payments.


Nevertheless, in order to mitigate the impacts upon the budget, all possible means of minimising costs by value engineering including reviewing working methods, materials and scope, have been properly considered by all parties through the relevant contract governance processes, meetings and Project Board. Any savings have been, and will continue to be, implemented where they are practicable and without detriment to the project.


As well as the Grant Aid funding from the Environment Agency, which has been successfully secured, two other funding sources were considered to address the additional budget requirement:

· Additional Council Capital Funding

· Additional Regional Flood and Coastal Committee Local Levy Grant


Given the council’s current budget pressures an option to increase the council’s contribution from reserves or from additional capital borrowing to address the additional project budget requirement was not seen as viable and was not pursued.


In January 2022 the Regional Flood and Coastal Committee (RFCC) agreed to contribute funding to the project up to a maximum of 15% of the contract value presented at that time. This amount equates to £1,605,000. The previously approved amount of £1,468,000 has now been received with the additional £137,000 referenced in paragraph


Discussions have taken place with the RFCC regarding a further increase in the contribution. However, the current Local Levy budget is fully allocated in 22/23 and also in 23/24, and indications are that a bid would be unlikely to be approved

Report author: Simon Fox

Publication date: 15/03/2023

Date of decision: 14/03/2023

Decided at meeting: 14/03/2023 - Environment, Climate Emergency and Transport Committee

Effective from: 21/03/2023

Accompanying Documents: