INTRODUCTION
AND
SUMMARY
OF
CONCLUSIONS
AND
RECOMMENDATIONS
1. The Oceanography Centre in Southampton provides
a research and teaching facility. The Centre was completed in
1995, about 22 months later than originally planned. By March
1997 the final cost had not been determined because of a dispute
with Wimpey, the main contractor.[1]
Although Wimpey have yet to submit an itemised claim against the
Natural Environment Research Council (the Council), the total
cost of the building could be £69.3 million, some £12.6 million
higher than the Council's current estimate. A key area of dispute
relates to the mechanical and electrical services.[2]
2. On the basis of a report by the Comptroller and
Auditor General the Committee took evidence from the Council on
the extent of the time and cost overruns; the quality of the building;
their management of the construction project; and their expected
resolution of the dispute with their contractor.
3. It is our conclusion that the Council should have
managed the project with greater expertise. The Council agreed
at the outset the one design put to them, without seeking alternatives.
They repeatedly rejected advice that they should appoint a professional
project manager and, instead, managed the project through a complex
network of committees with the result that nobody had a clearly
defined responsibility for completing the project to time and
within budget. They also made cuts to the specification of the
building in order to keep costs within the budget, without having
established clear criteria or priorities for the specification
changes.
4. We have no reason to doubt that the Council have
secured a good quality scientific research and teaching institution,
but it is open to question whether they might have secured a better
one for the money they paid or the same building at a lower cost.
We consider that the Council, and other small organisations who
are inexperienced in construction, should realise that it is essential
to employ appropriate expertise throughout a project. Our more
specific conclusions and recommendations are as follows.
On the time and cost overruns
(i) The Southampton Oceanography Centre
was opened 22 months later than intended. As a result the
scientific work which it was designed to facilitate was put back
by nearly two years. The Committee regards this as an unsatisfactory
outcome. We are all the more concerned that the eventual total
cost of the Centre could reach £69.3 million, should
Wimpey be successful in their claim against the Council (paragraph 10).
(ii) We consider that, within the cost of
the project, the Council should have exercised much tighter control
over the cost of their consultants. We note that they would now
operate on the basis of a fixed fee. Such terms would have provided
the Council's consultants with an incentive to get the project
completed on time (paragraph 11).
(iii) The potential total cost of £69.3 million
for the Centre, some 40 per cent more than the budget set
for it, includes items charged to other budgets, notably for relocating
the staff who were transferred to it. Since those and other costs
were directly related to the project, we consider that they should
have been provided for in the main budget. By allocating them
elsewhere, the true cost of establishing the Centre was effectively
concealed. We regard this as inconsistent with the need for full
transparency and accountability (paragraph 12).
On the quality of the building
(iv) We find it disturbing that design work
on the Centre started only two months before the target date for
approval of the outline. As a result the design period was needlessly
compressed and only one single concept emerged. We are concerned
that no other options were considered and that the architects
did not present the Council with possible alternatives. In any
major project involving large sums of public funds, several options
should be considered and the prospective users consulted. Had
this been done, an alternative method of distributing the services
might have been found which would have provided flexibility for
the future without any increase to the cost of the building (paragraph 22).
(v) It is clear from the evidence we took,
that the Southampton Oceanography Centre provides many facilities
of considerable value to the scientific and teaching work that
is undertaken there. It is encouraging to learn that it provides
a good working environment; and that the Council are confident
that it has the flexibility and durability to last for a further
120 years. It is difficult to assess how far the project's initial
objectives have been met because so few of them were set out in
full at the outset (paragraph 23).
(vi) We note the Council's evidence that
they had been rigorous in determining that the Centre's scientific
capability was not damaged by the cuts; and that it had very largely
reached its core science objectives. It is of course often necessary
to adjust the specification of a project in order that its costs
may be kept within budget. However, it is important for any cuts
to be made by reference to a set of carefully considered priorities
that have regard to the main purposes of the project. We are concerned
that this was not the case in the building of the Centre, and
that the reductions in the specification may have resulted in
the exclusion of some facilities that it would have been better
to retain (paragraph 24).
On the management of the project
(vii) The Council did not follow Treasury
guidance that the services of a project manager should be obtained.
Instead they adopted a collective approach, involving a number
of committees and groups, on the management of the Southampton
Oceanography Centre project. As a consequence, the management
structure was needlessly complicated and resulted in a weakened
grip on a project which over-ran on both time and cost. We find
it incomprehensible that the Council should have repeatedly rejected
the advice given, by those whom the Council themselves had appointed,
against the adoption of a collective approach (paragraph 42).
(viii) Given their lack of experience in
building work and their decision not to appoint a project manager,
the Council's choice of consultants was crucial to the success
of the project. Since the building was to be highly serviced and
was larger than the Council had previously managed, the Council
should have appointed consultants by means of competition and
from a wide field rather than simply relying on those with whom
they had worked in the past. We are concerned that they appointed
a quantity surveyor without competition; and that they did not,
in the case of architectural services, seek the advice of the
Royal Institute of British Architects about potential firms. It
would have been sensible for the Council to have obtained technical
advice earlier rather than later in the project (paragraph 43).
(ix) It is worrying that the Council's architect
did not challenge the users' requirements, often exceeded his
delegated limit without authorisation, and was paid £2.5 million
against an original estimate of £1.8 million. In the
light of these points we are disturbed that the Council's contract
with their architect did not provide for them to obtain redress.
In the case of mechanical and electrical services, the Council's
method of estimating the cost was less accurate than if measured
drawings had been used. We consider that, for an area so critical
to the building, the Council should have used a more accurate
method of estimating the cost (paragraph 44).
(x) The payment regime used by the Council
in the early stages of the project led to Wimpey being paid in
advance of work completed. We are concerned that this should have
been allowed to happen. It is a feature of good contract management
not to pay for services until they have been satisfactorily performed.
We note the Council's assurance that they would look more closely
at the payment terms to prevent this happening again (paragraph 45).
On the dispute with Wimpey
(xi) We note the Council's position on their
dispute with Wimpey and that they have taken legal advice. We
wish to be advised on the outcome of the dispute (paragraph 48).
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