Internal Audit Report: Capital Programme Slippage

Item: 6.1

Monitoring and Audit Committee: 14 November 2019.

Internal Audit Report: Capital Programme Slippage.

Report by Chief Internal Auditor.

1. Purpose of Report To present the internal audit report on processes and controls relating to the avoidance of Capital Programme Slippage. 2. Recommendations The Committee is invited to note:

2.1. That Internal Audit has undertaken an audit of the processes and procedures relating to the avoidance of Capital Programme Slippage.

2.2. The findings contained in the internal audit report, attached as Appendix 1 to this report, relating to Capital Programme Slippage.

It is recommended:

2.3. That the Committee review the audit findings to obtain assurance that action has been taken or agreed where necessary. 3. Background Audit Scotland’s report entitled Best Value Assurance Report: Orkney Islands Council, dated December 2017, found that the Council’s capital programme had been ambitious and not deliverable due to weaknesses in forward planning arrangements. This has resulted in the Council having a history of slippage. The objective of this audit is to review capital projects that have been subject to slippage, in order to identify the respective causes and constraints. 4. Audit Findings 4.1. The audit provides adequate assurance that the processes and procedures relating to Capital Programme Slippage are well controlled and managed.

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4.2. The internal audit report, attached as Appendix 1 to this report, includes five medium priority recommendations within the action plan. There are no high-level recommendations made as a result of this audit.

4.3. The Committee is invited to review the audit findings to obtain assurance that action has been taken or agreed where necessary. 5. Corporate Governance This report relates to the Council complying with its governance and financial processes and procedures and therefore does not directly support and contribute to improved outcomes for communities as outlined in the Council Plan and the Local Outcomes Improvement Plan. 6. Financial Implications There are not anticipated to be many significant financial implications flowing from the report recommendations. The recommendation for the completion of a full feasibility study as a requirement for at least medium and larger sized projects before they may be submitted for consideration for CPA2 approval will require some additional work although it is not possible to quantify this in staff resource at this time. 7. Legal Aspects 7.1 Complying with recommendations made by the internal auditors helps the Council meet its statutory obligations to secure best value.

7.2 In terms of Section 95 of the Local Government (Scotland) Act 1973, the Council is under a duty to make arrangements for the proper administration of its financial affairs and must secure that the proper officer of the Council has responsibility for the administration of those affairs.

7.3 In terms of Section 35(1) and (2) of the Local Government in Scotland Act 2003, the Council is under an obligation to determine and keep under review the maximum amount which it can afford to allocate to capital expenditure. In so doing, the Council must comply with regulations made by Scottish Ministers.

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8. Contact Officers Andrew Paterson, Chief Internal Auditor, extension 2107, email [email protected].

Peter Thomas, Internal Auditor, extension 2135, email [email protected] 9. Appendix Appendix 1: Internal Audit Report – Capital Programme Slippage.

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Appendix 1

Internal Audit

Audit Report Capital Programme Slippage Draft issue date: 12/09/2019 Final issue date: 25/10/2019 Distribution list: Head of Infrastructure and Strategic Projects Executive Director of Development and Infrastructure Corporate Finance Senior Manager Head of Finance

Contents.

Audit Opinion ...... 1 Executive Summary ...... 1 Introduction ...... 2 Audit Scope ...... 2 Audit Findings ...... 3 Action Plan ...... 11 Key to Opinion and Priorities...... 13 Appendix 1 ...... 14

Audit Opinion

Based on our findings to this review, we have given the following audit opinion.

Adequate Some improvements are required to enhance the effectiveness of the framework of governance, risk management and control.

A key to our audit opinions and level of recommendation is shown at the end of this report.

Executive Summary

• In forming our opinion, we have considered that although the Council has had a history of slippage, the cause of this has generally been due to a desire to invest heavily which has been difficult to fulfil due to limited capacity. • The Council has recognised, as a response to the most recent external audit at the time of this report “that the capital programme for financial year 2017/18 was ambitious and not deliverable due to weaknesses in forward planning arrangements.” • Some areas of good practice as to capital projects were identified during the audit including: o a five-year rolling capital programme approved by the Council each year, o clear capital expenditure monitoring reports including detailed analysis to all projects which are presented to the Policy and Resources Committee twice yearly, o annual approval of slippage and acceleration by the Council, o a well written detailed capital project guidance document. • Not only may slippage impact on the cost of delivering the capital programme works, it also extends the timescale over which the capital finance is required. • At the time of writing this report the impact that Brexit may have on the future cost of delivering capital projects is uncertain. • There is a risk that slippage of the capital investment programme may lead to rescheduling of general fund capital projects which could have an impact on strategic priorities of the Council that rely on these capital projects being completed on time. • The report includes recommendations which have arisen from the audit. The number and priority of recommendations are set out in the table below. The priority headings assist management in assessing the significance of the issues raised. • Responsible officers will be required to update progress on the agreed actions via Aspireview.

Total High Medium Low

0 0 5 0

• The assistance provided by Officers contacted during this audit is gratefully acknowledged.

Introduction

Audit Scotland, in their report entitled, Best Value Assurance Report: Orkney Islands Council, dated December 2017, stated that “the council’s comfortable financial position has allowed it to be ambitious in agreeing its capital programme for a number of years. However, the desire to invest heavily in capital projects (such as new buildings or transport infrastructure) has been difficult to fulfil due to limited capacity. This has resulted in the council having a history of slippage, that is not completing capital projects and applying the allocated budgets within the planned timeframe.”

This review was conducted in conformance with the International Standards for the Professional Practice of Internal Auditing.

Audit Scope

Our review included each capital project that has been subject to slippage in excess of £100,000.

The objectives of this review were:

• To review the causes and constraints of slippage to each of these projects in order to establish common themes.

• To review the lessons learned register or capital monitoring report to each mid-size and major project.

• To assess the impact of slippage in meeting the strategic priorities of the Council, where these may rely on capital projects being completed on time.

• To make recommendation as to improvements that can be made in minimising slippage.

Audit Findings

1.0 Overview of slippage over the last four financial years.

1.1 An analysis of the value of slippage, i.e. the amount reprofiled, during the financial year and at year end, and net of acceleration, has increased each year over the previous four financial periods. Rising from £7,961,000 at the 2015/16 financial year end to £15,187,000 at the 2018/19 financial year end. (see table 1)

1.2 Overall slippage as a percentage of the original budget has also risen over the same period from 27.7% to 51.6%. (see table 1)

Financial Year 2015/16 2016/17 2017/18 2018/19

Slippage £000’s 7,961 11,511 11,750 15,187

Slippage as a 27.7% 47.9% 45.3% 51.6% percentage of original budget.

Table 1

2.0 Impact of main projects within overall slippage

2.1 For the 18/19 financial year, 11 projects with individual amounts reprofiled of over £100,000 formed 100.5% of the overall net slippage total. Net slippage is after deducting acceleration on other projects within the programme. Therefore, a selection of individual projects may equate to over 100% of the overall net slippage total. (see table 2)

Projects where slippage has exceeded £100,000 for a financial year

Financial 2015/16 2016/17 2017/18 2018/19 4 year Year Average

Number of 11 15 11 12 12 Projects.

Percentage 95.2% 100.1% 97.4% 100.5% 98.7% of total net slippage.

Table 2

2.2 For the 18/19 financial year, 6 projects with individual amounts reprofiled of over £1,000,000 formed 86.5% of the overall total slippage. (see table 3)

Projects where slippage has exceeded £1,000,000 for a financial year Financial 2015/16 2016/17 2017/18 2018/19 4 year Year Average Number of 4 5 5 6 5 Projects. Percentage 66.6% 61.5% 81.7% 86.5% 75.7% of total slippage. Table 3

2.3 The tables at 2.1 and 2.2 therefore demonstrate that focusing on avoiding slippage to higher value projects would have a significant impact on the monetary value, and proportion of budget being slipped to future financial years.

2.4 There are however several factors that needs to be considered for all projects including those of a lower value. All projects will utilise at least some element of capacity within the Council and it is conceivable that the timely completion of some lower value projects may have a high impact to meeting the Council’s objectives.

3.0 Analysis of causes of slippage by stage of the capital project

3.1 For the purpose of analysis we have categorised 6 general stages to capital projects, these being: Planning; including feasibility study, concept and developed design; Procurement; Delivery; Project Change; Completion (including retentions); and Budget Savings. Our analysis of slippage at each of these six general stages are given below. (see Table 4).

3.2 We have performed a high-level analysis of projects where slippage has exceeded £100,000 over the last four years to determine at which stage slippage occurs. Whilst analysis was only carried to a level of detail as to be indicative, we can conclude that a high proportion of slippage over the past four financial years can be attribute to the forward planning stage of projects. The most common themes being an underestimation of the timeframe needed to achieve the deliverable required to get to construction or project delivery stage. Some of the difficulties to estimation factoring in capacity issues within the market to deliver capacity issues.

3.3 An extract of detailed comments made to the Policy and Resources Committee as part of capital expenditure monitoring, where project slippage has exceeded £100,000, is provided at appendix 1.

Table 4

4.0 Stage - Planning including Design

4.1 Our analysis identifies that approximately 80% of slippage is attributable to the initial planning stage of projects.

4.2 Common factors we have attributed to slippage at the initial planning stage are, underestimation of the time and requirements to carry out and fulfil the following: preparation of detailed planning applications with various required statements, reports and assessments, building regulation approval and meeting conditions attached, negotiating with landowners and adjacent landowners, public consultation, adequate scoping of the overall project, designs completed later than expected, formal permission to start being received from the appropriate funder and awaiting completion of dependent pre project work.

4.3 As many, if not all the factors detailed at 4.2 are either dependent on “intelligent” resources that could be estimated at the feasibility stage, or others where the timing is outside the exact control of the Council, we conclude that in order to minimise slippage there needs to be full feasibility work including, inter alia, accurate and realistic estimation of delivery times of requirements as part of the stage 2 Capital Project Appraisal (CPA2) before it receives approval at this stage.

4.4 Part of Audit Scotland’s assessment of the Council’s capital slippage relating to the financial year 2017/2018 was as follows. “During the year delays were identified in the delivery of the approved programme of capital works for financial year 2017/18, including for example late revisions to project specification and design together with unrealistic timescales. This resulted in some projects being referred back to the relevant Service Committee for further consideration.”

4.5 In order to avoid the types of delays referred to at 4.4, thereby improving efficiency, and also to identify details of existing and forecasted service capacity constraints, it is recommended that an agreed Client Specification document, between Service Lead Officer and delivery agent, should be a mandatory requirement within the process, usually as an attachment to the outline stage 1 CPA along with any subsequent variations or changes in scope 5

documented as part of the detailed stage 2 CPA. In taking into account the factors identified at 4.2, engagement with the planning department and seeking pre – application advice on requirements should be obtained and detailed within the agreed client specification document, where planning consent will be required.

Recommendation 1

4.6 The Council’s guidance notes states at 3.8 “Projects should normally only be prioritised for addition to the capital programme for Year 3 and beyond. This is on the basis that the capital programme is typically fully committed over the short term, and as a result there is often limited capacity to include additional projects in Years 1 and 2. In any case, this period is typically needed to allow an appropriate lead-in time to plan adequately for the delivery of the individual capital project”. The guidance further states at 3.9 “Traditionally, Years 1 and 2 of the capital programme are considered to represent set or firm commitments to give clarity to both officers and contractors dealing with the detailed planning and delivery of contractual commitments, etc. By contrast, Years 3 to 5 commitments are still considered to be provisional in nature, recognising the need for some flexibility within the capital programme, to allow for changes in council priorities, variations in timescales, etc. as project planning details are refined.

4.7 For the eight projects with the highest slippage from the 2018/2019 financial year, the originally estimated period to reaching the contract award date was an average of approximately 10 months. Our estimate of the average actual time for the eight projects to reach contract award date is 32 months. It should be borne in mind the overall average of all projects would be expected to be a shorter timeframe than a focused selection of those projects where slippage has occurred.

4.8 It is therefore recommended that year 1 of the project’s estimated capital costs are limited to costs already incurred in bringing the project to Stage 2 CPA standard (stage 3 developed design as Per RIBA Plan of Work 2013 or equivalent for civil engineering projects) or design, planning and procurement costs. In other words, construction / improvement costs should not be forecasted to be expended before year 2 of the rolling capital programme unless this expenditure has already been committed to, or there is alternative robust evidence as to why this should be estimated.

Recommendation 2

4.9 The Council’s guidance notes at 3.5 also states that the focus of the pre-CPA feasibility stage review is to consider the rationale for or against investing any resources, and including staff time, into advancing the project beyond the initial concept stage.

4.10 We also emphasise the need of sufficient work to be completed as part of the feasibility study which should be included within the CPA2 submission for consideration, that realistically estimate resources and an achievable timeframe for the project and each of its stages, anticipate the risks and potential problems to the project, and to reduce the risk of redesign or returning of the design to Services at a later time. This may require either managing the flow of larger sized projects or capacity to undertake full feasibility work.

4.11 We therefore recommend that a completed full feasibility study be a requirement for at least medium and larger sized projects which should be incorporated into the detailed S2 CPA submission when they are put forward for consideration. We recognise that additional resource may be required to achieve this.

Recommendation 3 6

4.12 The Council’s Project Guidance Documents states at 8.6 that “In reviewing the Stage 2 CPA covering report, the Policy and Resources Committee should satisfy itself that an appropriate level of challenge has been provided for each project, and that the associated resource implications represent best value for the Council”.

4.13 Although the standard process includes, inter alia, evaluation of Stage 2 CPAs before submission to the Policy and Resources Committee, it should be recognised that a feature of the capital programme in recent years has been the number of exception reports, which due to their frequency have now perhaps become more the norm.

4.14 We therefore recommend it should be considered whether a suitable Officer body, such as SMT, evaluate Stage 2 CPAs to be submitted via the exceptions route, in order to add a stage of challenge to the robustness of the Stage 2 CPAs into the process which will facilitate the Policy and Resource Committee in making more informed decisions.

Recommendation 4

5.0 Stage – Procurement

5.1 Our analysis identifies that approximately 5% of slippage is attributable to the procurement processes stage.

5.2 Factors we have found attributable to this stage are, no tender returns within the authorised limit and an alternative design proposal submitted by the contractor.

5.3 The financial regulations of the Council require that expenditure on a project should not exceed the amount included in the Capital Programme. As an exception process and only “where tenders received exceed the approved estimate, by up to 5% of the approved estimate to a maximum excess of £100,000, the Chief Executive or Executive Director can proceed with the award of the contract after consultation with an agreement to proceed being obtained from the Chair and Vice Chair of the appropriate Committee and the Head of Finance. The overspend must be reported and explained in the next capital monitoring report to the Policy and Resources Committee, including how the overspend will be financed.

5.4 We are advised that tenders for projects have exceeded 5% which has caused a time- consuming re-tendering exercise and also redrafting of plans in an attempt to bring the project into line with that estimated. The role of the programme board is only to make minor variations to project specifications. More significant changes need to referred back to the Policy and Resources committee for further consideration.

5.5 Following the CPA guide should minimise re-tendering exercises that, in the past may have been caused from not fully defining the project from the outset.

5.6 There can of course be a variety of reasons, other to that referred to at 5.5 as to why the Council does not receive any tender returns within the approved estimate, one of which potentially is a lack of current capacity amongst potential contractors.

5.7 It is therefore recommended that capacity limitations of suppliers be considered when tendering projects within the capital programme. This may involve the sequencing of project activity and potentially the extension of capital planning greater than a five-year focus to facilitate such sequencing

Recommendation 5

6.0 Stage – Delivery

6.1 Our analysis identifies that approximately 10% of slippage is attributable to the delivery stage.

6.2 Factors we have found attributable to this stage are as follows: Delays from the contractor being able to secure a certified sub-contractor in installing a fire safety sprinkler system, a specified bespoke door manufacture going into liquidation and the commissioning of wet services being delayed awaiting main water supply. Our conclusion, within the context of c10% of slippage being identified at this stage is that project delivery is, by its nature, subject to some unpredictable factors, that will inevitably build in slippage.

6.3 In the light of the Findings at 6.2, some comfort may be obtained from the Council’s practice of incorporating Liquidated damages clauses into all capital construction work contracts.

6.4 The highest individual project affecting slippage attributable to the delivery stage was the ambitious Schools Investment Programme (SIP). In this instance liquidated damages were sought and received from the contract. The amount being calculated on a daily rate.

7.0 Stage – Project Change

7.1 Our analysis identifies that approximately 2% of slippage is attributable directly to project change. It is feasible that this understates a true position as the estimation was carried out to the finally defined specifications, that may have been completed after the project had been approved.

7.2 Factors we have found attributable to this stage were the project being place on hold while additional funding was sought, this increasing the benefit of the project with no extra cost to the Council, and agreed additional work carried out at the end of the project. This additional work also being approved by the Council.

8.0 Stage – Completion (including retentions)

8.1 Our analysis identifies that approximately 2% of slippage is attributable to the completion stage of capital projects.

8.2 The main factor of slippage found at this stage were retentions where, earlier in the programme expenditure was not phased in line to the date retention monies became due. We are advised that retention payments are now phased dependent on when they become due for payment.

9.0 Stage – Budget Savings

9.1 Our analysis identifies that approximately 1% of slippage is attributable to budget savings.

9.2 This relates to monies treated as slippage that ultimately is determined to be a saving against budget.

10.0 Overview of the overall capital programme for the previous four years

10.1 The variances between the original budget and actual capital expenditure in the previous four years have shown a consistent and relatively high trend over the previous 4 years. The variance has ranged between £11,207,000 to £14,370,000 over the period at an average of

£12,675,000. The percentage variance to original budget has been very consistent, ranging from 43% to 49% at an average of 47% (see table 5).

Capital Programme, comparison of original budget to expenditure.

Financial 2015/16 2016/17 2017/18 2018/19 4 year Year Average

Original 28,727 24,033 25,967 29,453 27,045 Budget £000’s

Actual 15,238 12,401 14,760 15,083 14,371 Expenditure £000’s

Variance -13,489 -11,632 -11,207 -14,370 -12,675 £000’s

Variance -47% -48% -43% -49% -47% percentage

Table 5

10.2 Similarly, both the original capital and actual expenditure has remained constant over the previous four years. The annual budget for the previous four years has ranged between -13% and plus 8% of the four-year average. Actual expenditure over the same period has ranged between -16% to plus 5% of the period average. (see table 6).

Capital Programme, comparison of actual expenditure to four year average.

Financial Year 2015/16 2016/17 2017/18 2018/19 4 year Average

Annual original 6% -13% -4% 8% 0% budget to average variance percentage

Annual 6% -16% 3% 5% 0% expenditure to variance percentage

Tables 6

10.3 Although overall analysis is no substitute for detailed estimation throughout the whole process of individual capital projects, tables 5 and 6 indicate that budget estimates for Year 1 activity within the rolling five-year capital expenditure plan has constantly been in excess of that achieved.

11.0 Conclusions

11.1 There are several reasons why historically the Council has experienced capital slippage. Forecasts have been overly ambitious, business cases take time to prepare, the project scope and detailed designs have not been firmly established prior to project commencement, statutory consent may be needed, agreement to land purchases may need to be reached, procurement is time consuming and sometimes in a remote island setting may not be successful in receiving tenders, funding also needs to be put in place. Even once capital projects are underway, they can hit delays with capacity issues within Orkney and dependence on other parties.

11.2 Whilst slippage may have an impact on delivering strategic priorities, the desire to invest in capital projects and seeking to maximise the amount and utilisation of external grant funding has significant benefits to Orkney’s citizens.

11.3 However the amount of slippage both in value and in proportion to the overall budget has been relatively high and in recent years has been showing an increasing trend.

11.4 Although long term capital programme planning is a vital activity as to management, prioritisation and on-going monitoring of individual projects, slippage has almost exclusively been due to re-profiling of the year 1 programme. More recent attempts to update the phasing of the capital programme mid-year has seen little improvement. This has been due to the lack of any better information than that within the Original CPAs. The need to reprofile should be the exception rather than the rule.

11.5 We have made five medium recommendations within this audit with the purpose of reducing the amount of annual Capital Slippage within the Council.

11.6 In order to further assist management we have also prepared an accompanying consultancy report entitled “Review of Major Capital Projects”.

Action Plan

Recommendation Priority Management Responsible Agreed Comments Officer Completion Date 1) Consideration Agreed noting that many All Directors with Next round of should be given as clients do rely on the approved CPA 2 to whether an delivery agents (property projects in the submissions agreed Client and engineering) to do capital October 2020 Specification this and this is fee based. programme (noting the Medium document be a Not all specifications are (2018 – 2023 capital requirement within worked up to a level of and beyond) programme is CPA2s. detail (in the past) to yet to be what is the CPA current finalised post level of detail 2023) 2) Year 1 of the This will vary depending All Directors with Next round of project’s estimated on the size and approved CPA 2 capital costs complexity of the project, projects in the submissions should not include but in general terms the capital October 2020 construction costs recommendation is valid. programme (noting the 2018- unless a There would be some (2018 – 2023 2023 capital construction flexibility needed to and beyond). programme is contract is in place consider each project on Noting that when predominately or there is strong Medium a case by case basis. In the project is allocated to reason to believe some situation there is allocated within project officers construction could an urgency that can each directorate already) commence in year mean a fixed cost is not there will be an 1 of the rolling the primary driver. individual client capital programme officer (e.g. D&I – for a road project the head of service) 3) A completed full The investment of time All Directors with Next round of feasibility study be and effort at this stage approved CPA 2 a requirement for will pay dividends as it projects in the submissions at least medium reduces the risk of a poor capital October 2020 and larger sized CPA 2 being pushed programme projects before through the process (2018 – 2023 that may be put resulting in some of the and beyond). forward for issues within this report. This would need consideration for Medium This would need greater to be self- CPA2 approval. fee investment to cover financing from delivery agent costs as a revenue unless service commitment or a agreed as a top slice of capital capital funded funding element from any top-slice process (i.e. CPAM) 11

4) It should be This is a reasonable CPAM initially CPAM meets considered expectation noting that recommending regularly and this whether a suitable the future capital reports to SMT should be Officer body, such programme will be for scrutiny. included on the as SMT, evaluate agreed shortly (i.e. 2024 agenda, noting Stage 2 CPAs to onwards) so the principal that there is also Medium be submitted via of a scheme proceeding scrutiny as the exceptions will not be in question, service route. the affordability, its committee level. sequence may well benefit from SMT scrutiny/approval 5) Capacity This will form part of the Capital March 2020 limitations process of agreeing the programme (anticipated amongst suppliers future capital programme management agreement date should be a factor prioritises. This will team in D&I. for the future considered as to Medium address the scale, years capital when tendering number, sequence and programme) projects within the affordability in capital programme cognisance of the market should take place. conditions

Key to Opinion and Priorities

Audit Opinion

Opinion Definition

The framework of governance, risk management and control were found to Substantial be comprehensive and effective.

Some improvements are required to enhance the effectiveness of the Adequate framework of governance, risk management and control.

There are significant weaknesses in the framework of governance, risk Limited management and control such that it could be or become inadequate and ineffective.

There are fundamental weaknesses in the framework of governance, risk Unsatisfactory management and control such that it is inadequate and ineffective or is likely to fail.

Recommendations

Priority Definition Action Required

Significant weakness in governance, Remedial action must be taken urgently risk management and control that if and within an agreed timescale. High unresolved exposes the organisation to an unacceptable level of residual risk.

Weakness in governance, risk Remedial action should be taken at the management and control that if earliest opportunity and within an Medium unresolved exposes the organisation to agreed timescale. a high level of residual risk.

Scope for improvement in governance, Remedial action should be prioritised Low risk management and control. and undertaken within an agreed timescale.

Appendix 1

Capital Programme Slippage – Notes

Notes extracted from Capital Monitoring reports, previously included in analysis presented to the Policy and Resources Committee are summarised below.

OES2 to OES4 Burial Grounds

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 405 318 338

[Nov 17] -Mainland -Works have not developed as programmed as issues have arisen with landowner where land purchase is required at a number of the sites, and archaeology has caused issues in Orphir. This was subject to a separate report to Development and Infrastructure Committee in March 2016. Archaeology survey works completed with a further report on matters presented to the Asset Management Sub-committee in November 2016. Major Improvement works have been undertaken and completed at St Peter's, Sandwick. The monies for Sandwick were higher than forecast due to additional works and the requirement for a wayleave through adjoining land.

[Nov 17] Islands - Works have not developed as programmed as issues have arisen with landowners where land purchase is required at a number of the sites. Technical issues with the depth of soil have arisen at the site in Sanday which has resulted in alternative options being investigated.

RD6 – Roads Asset Replacement Programme

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 327

[Feb 2018] -The Asset Replacement Programme for 2017/18 to replace road assets is underway but at the present time there is a potential underspend of approximately £200,000 at end of year.

RD14 – Scapa Link Road

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 354 291

[Feb 2017] - Project substantially complete in May 2016 with Foreland Road officially opened on 24 May 2016 and defects liability ending 23 May 2017.

RD15 – Replacement of Tar Plant at Cusiter Quarry

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 432

[Feb 2017] - Tar plant contract awarded in June 2016; design work in progress. A separate contract for civil works will be awarded in September 2016. Project completion is due in April 2017.

RD16 – Kirkwall Flood Prevention Scheme

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,297

[Feb 2017] -Project revised as per report to Development and Infrastructure Committee on 10 September 2015. The Scottish Government has included 80% grant for the project in a revised General Capital Grant offer for 2016-17. The Council contribution would be approximately £352k. Tenders forecast to be issued in September 2016 and construction to commence in January 2017.

RD23 – Kirkwall Places and Spaces

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 183

[Nov 2017] - There have been no site works yet as the initial tender was in excess of the available budget. An approach was made to Sustrans to secure the additional funding, however a delay in the appointment of the successful contractor has meant the time window for delivering the first phase of the project has been missed. Due to the scale of the project, careful consideration was taken with regards to the timing of works to ensure no risk to the WW1 commemorations and an operational decision was taken, after engagement with key stakeholders, not to start till later in the year with stage one from January – early May 2019 and stage 2 from September.

TR9 – Airfields Infrastructure

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 270

[Feb 2017] -North Ronaldsay airfield building reached practical completion in May 2016 with defects liability ending 20 May 2017. Eday, Stronsay, Westray and Papa Westray airfield building works are on-site and underway to budget and programme. Sanday airport building works have been out to tender with a contract awarded and works commenced in August 2016.

TR12 – Resurfacing runways

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 289 248

[Feb 2016] -Works completed on 13 October 2015 with defects liability ending 13 October 2016. Works costs have come in considerably under budget resulting in a £248k saving.

ED4 New Build KGS (Excluding Pool)

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,177

[Feb 2017] - The grass playing fields at KGS was the last phase to be completed with a final inspection undertaken in June 2016 and handed over to the Council. Final snagging works to be completed before the final acceptance certificate can be issued. The date for the Hard FM contract commenced on 8 September 2015 giving a project completion date for the 10 years maintenance contract as 8 September 2025. The construction defects liability period ends 12 months after the issue of the final acceptance certificate. Final retention due to be released in financial year 2017/18.

ED5 Stromness Primary School New Build

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 328

[Feb 2017] - The construction defects liability period ends 12 months after the issue of the final acceptance certificate.

ED6 KGS Halls of Residence

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 278

[Feb 2017] - The construction defects liability period ends 12 months after the issue of the final acceptance certificate.

ED7 Leisure Pool

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 352

[Feb 2017] - The construction defects liability period ends 12 months after the issue of the final acceptance certificate.

ED11 Evie School

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,200

[Nov 2016] As previously reported, the Contractor has had difficulties in securing a certified sub- contractor to carry out the sprinkler installation, which has caused a major delay to the internal finishing, in addition to the specified door manufacturer going into liquidation again resulting in a delay in the delivery of the door units.

ED12 Extension to St Andrews School 16

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,498

[Nov 2018] Design works are progressing however progress has been slower than programmed affecting the preparation of tender documents. It is envisaged that tender documents will be issued to contractors early in 2019 with construction work commencing in spring 2019. Completion of the new build items will be in summer 2020.

LC8 Stromness Pierhead Regeneration (projects 1,2,3)

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 177

[Feb 2016] Contractor has returned to complete final phase of paving with works due to be completed by the end of the financial year. Retention monies (estimated £15 000) for the final phase will be in financial year 2016/17.

LC9 Refurbishment, improvements in Scapa Flow Visitor Centre and Museum

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 2,390 175 2,928

[Feb 18] - The Development Phase of the project has now been completed which enabled the project to progress to RIBA stage 3 (Developed Design). The Highlands and Islands Enterprise grant and the Leader Programme grant have now been approved and confirmed. The Heritage Lottery Fund Committee met to consider the Council's application and has confirmed its approval for the grant at the level of £1,155,000. Historic Environment Scotland have recently confirmed an indicative grant based on the current budget costings for the works. It is still – at this stage – only an indication of the potential grant offer. A firm offer will not be received until tender prices are received and the Council make a formal request at that stage for further consideration. Therefore, any final offer may differ (higher or lower) than the indicative grant amount. Formal permissions to start have been obtained from appropriate funders for the Delivery Phase of the project with RIBA stage 4 (Technical Design) activities due to be completed very shortly to enable all works tenders to be issued this financial year (2017/18).

SC5 New Children’s Home

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 399 374

[Feb 2017] Project completion was delayed due to late completion of water main by Scottish Water which delayed final commissioning of wet services.

SC9 Replacement Facilities St. Peter’s House

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 758 2,414 1,490

[Feb 2018] - RIBA stage 4 (technical design) design works now completed with Planning permission obtained on 11 April 2017 and Building Warrant stage 2 application submitted 11 July 2017 (following the Stage 1 application submitted 22 December 2016). Contract for the construction works awarded in September 2017 with construction works commenced in October 2017.

SC10 New Care facility, Kirkwall

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,136 505

[Feb 2018] -The Soulisquoy Infrastructure activities delayed the Planning application submission for the new Care Facility, however the Planning Application Notice (PAN) has now been submitted with a public exhibition event held at the St. Magnus Centre, Kirkwall on 23 January 2018. The programme has been revised to reflect the current position with final completion in 2021 still the target.

CA12 VAO _ Travel Centre Extension

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 550

[Nov 2017] - Project was originally to extend the Kirkwall Travel Centre to provide new premises for VAO, however, a revised Capital Project Appraisal (CPA) was submitted to Policy and Resources Committee on 19 June 2018 and subsequently approved by Council, changing the location to Garden House with work due to commence once the facilities are vacated by NHSO.

CA13 Disaster Recovery and Business Continuity Suite

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 194 230

SF5 Pilot Vessel

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,026 1,267

[Feb 2018] - Tender documentation has been completed with the associated procurement process underway and therefore projected spends have been re-profiled accordingly. 18

SF7 Replacement Tug

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 500 3,395 3,655

[Feb 2018] - Tender documentation has been completed with the associated procurement process underway and therefore projected spends have been re-profiled accordingly.

MP11 – Gill Pier Refurbishment

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,172 972 1,629

[Feb 2018] - Revised Capital Project Appraisal Stage 2 for £2,500,000 to include raising of the deck approved by Policy and Resources Committee on 29 November 2016, with the budget further increased to £2,960,000, under emergency powers on 9 May 2017, following additional funding to be met by a grant from the European Maritime and Fisheries Fund. Construction start delayed due to contractor's alternative design proposal to use precast concrete for edge beams instead of the concrete in situation. Re-profiling of project budget has taken place to address this issue. MP12 – Partial RoRo Graemsay

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 290

[Feb 2015] - Project considering further options, in addition to further consultation with the local Community council. A revised Stage 2 CPA, if appropriate, will be submitted to Policy and Resources Committee. Budget to be reprofiled.

MP13 – Low carbon Transport and Activity Travel Hub

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 577

[Feb 2019] - Detailed design of the various elements of the project progressing with the EV chargers been procured.

HRA8-16 Social Housing Development Programme

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,673 1,192

[Feb 2017] retention monies held to 2017 /2018.

HRA17 Social Housing Development Programme - Carness 19

Financial Year 15/16 16/17 17/18 18/19 Slippage 000’s 1,256 1,027 284 2,301

[Feb 2018] Programme delays due to Planning concerns still to be concluded with the main concern relating to the potential noise impact of the sewerage pumping station on the development but tenders have now been received and are currently being assessed. Report for additional funding approved by Council on 12 December 2017 with confirmation of Government grant funding received on 18 January 2018. Project budget has been reprofiled as a result of programme delays.