TIME
AND
COST
OVERRUNS
i) Time
5. The Council produced the first timetable for the
Southampton Oceanography Centre project in March 1989; this forecast
completion of the building in October 1993.[3]
During the briefing, design and tender stages, the planned completion
date was revised several times as the timetable was extended.
[4] As a result construction
did not start until January 1993, 15 months later than originally
planned.[5] The Centre
was eventually completed in August 1995, some 22 months late.[6]
6. In evidence, the Committee asked the Council why
there had been such a long delay in the start of construction.
The Council stated that there had been uncertainty about the financial
situation. There was a coming together of funds from the Council
and from Southampton University; it took a while to put that together.
There was also work on developing the specification; and a period
associated with making the specification fit the budget. These
three events had led to the long delay.[7]
ii) Cost
7. In January 1990 the Project Board set a budget
of £48 million for the project, which the Council and
the University increased in May 1991 to £48.9 million
to take account of an increase in the rate of VAT. After making
a series of cuts to the requirement, the Council got the estimated
cost of the project to within the budget when they let the main
contract in November 1992.[8]
8. The outturn may exceed the budget substantially.
In March 1997 the Council's estimated cost of the project was
£51.6 million, an overrun to date of £2.7 million.
However Wimpey's assessment was £12.6 million higher
than that. If Wimpey are successful in obtaining all or part of
this amount, the cost of the project could rise to £64.2 million,
a potential overrun of 30 per cent, excluding the costs of
arbitration or litigation.[9]
In addition the Council spent £5.1 million on the establishment
of the Centre which was provided for in other budgets, mainly
for staff relocation.[10]
9. The overrun of £2.7 million was largely
the result of an increase in consultants' fees.[11]
When asked why the cost of these fees doubled from £4.3 million
to £8.6 million, the Council replied that it came about
in large part through the extension of the period of development
of the brief by 15 months, and because of the extension of
the construction period.[12]
The Council agreed that there should have been tighter control[13]
and told us that they would now operate on a fixed fee basis.[14]
iii) Conclusions
10. 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.
11. 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.
12. 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.
3 C&AG's Report, paragraph 3.5 Back
4
C&AG's Report, paragraph 3.3 Back
5
C&AG's Report, paragraph 3.4 Back
6
C&AG's Report, paragraph 3.1 Back
7
Q3 Back
8
C&AG's Report, paragraph 4.1 Back
9
C&AG's Report, paragraph 4.2 and Figure 10 Back
10 C&AG's
Report, Figure 11 Back
11 C&AG's
Report paragraph 4.2 and Figure 10 Back
12 Q4 Back
13 Q120 Back
14
Q121 Back
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