Decision details

To vary the existing Gas Servicing, Maintenance and Installation contract with British Gas Social Housing Limited t/a PH Jones pursuant to Regulation 72(1)(e) of the Public Contracts Regulations 2015 to incorporate the installation of ground source heat pumps at Cummings Court.

In April 2022, CBH were successful in their application to the Government for £800k of funding from the social housing decarbonisation fund (SHDF) Wave 1 to part fund the cost of installing energy saving measures in support of CBC’s net carbon zero target.  The measures include installing external wall insulation on 34 dwellings and replacing the expensive and ageing underfloor electric heating at the 25 flats at Cummings Court with renewable heating from ground source heat pumps (GSHPs).  This report relates to the ground source heat pump element.

A condition of the funding is that these projects need to be completed before 31^st March 2023. 

Due to the specialised nature of GSHPs, the need for site specific design and the limited number of specialists available there is insufficient time to procure a new contract for these works and complete the installation before 31^st March 2023

Varying the existing £6m gas servicing contract with British Gas to incorporate the installation of GSHPs, in accordance with the Council’s Contract Rules (Part 4I of the Constitution) and Regulation 72 of the Public Procurement Regulations should enable the Government’s deadline to be met.

British Gas would engage market leading specialist, Kensa to design and install the ground source heat pumps.  Stroud District Council have been complementary of the work Kensa have done for them in a very similar scheme under a previous Government supported programme.

Procure a new contract in-house or via a framework: rejected due to the time to procure the works.

To return the funding to the Government: rejected as this does not assist with the policy for Cheltenham to be carbon neutral by 2030.

Publica Procurement & One Legal have been consulted.

Had there been time for a new contract to be put in place relying on a waiver to the contract rules, there would have been benefit to entering into a JCT design and build contract. Also, there would have been little to no procurement risk as CBC would not have been varying an above threshold contract and the new contract would not have required a tender under the Public Contract Regulations (the threshold for tendering works contracts is just circa £5m inc VAT).

Above threshold contracts can only be varied if permitted by Regulation 72 of the Public Contract Regulations. Following discussions with CBH officers, it was decided that CBC can make a good case for amending the contract in reliance of Regulation 72 (1)(e).’  

Any variations to above threshold contracts carry a risk of a challenge on the basis that the additional requirements should have been tendered competitively. A claim for damages is a potential risk, as is an application to declare the variation ‘ineffective’ i.e. cancelled. Whilst there are no reported cases of cancellation for a variation, it is still a possibility. The time limit for a claim of ineffectiveness is 6 months from the variation. Officers have been asked to confirm that the grant to the council does not require a new procurement and whether any grant terms need to be passed down to the contractor.’

Publica Procurement preference is for a new contract to be procured but they are in agreement that varying the British Gas contract is the best option to maximise the opportunity to utilise the Government’s funding.