- How have we chosen Lendlease as our partner?
- What is the truth behind allegations of blacklisting by Lendlease?
- What about allegations of Lendlease paying massive fines in the US after admitting overbilling its clients for over a decade?
- What about Lendlease’s renewal of the Heygate Estate where only a small number of social homes were built?
- Have you undertaken a thorough financial check on Lendlease?
- What about Lendlease’s company structures and tax arrangements?
- Is it true Lendlease would charge Haringey Council (its 50:50 partner) fees?
- What does Lendlease actually put into the joint venture as its 50% stake?
- Can we work with other developers?
- Were Lendlease instructed to remove cladding from buildings, or undertake other fire safety related remedial work in Melbourne by the authorities?
- It's been claimed that Lendlease had not complied with building regulations requirements in Melbourne- what is your response to that?
- What approach has Lendlease taken to fire safety at the Heygate estate?
- It's been suggested that one of the issues that leads to reduced fire safety in buildings is chains of sub contracting and value engineering. Would this happen in Haringey through the HDV where Lendlease is the building contractor?
- What commitment can you give about how Lendlease will respond to any findings from the Grenfell tower inquiry?
- Can you give more detail on the ‘Contractor Framework Agreement’ with Lendlease?
- In light of the Carillion collapse, will you be looking again at the financial stability of proposed partner, Lendlease?
- What would happen if Lendlease declared bankruptcy?
In choosing our preferred partner, Lendlease, we assessed the bidders against a range of measures - each bidder has been challenged to describe its vision for Haringey in general, and for the first phase of sites in particular. Each bidder has been asked to explain how it would deliver that vision, alongside financial returns to the council, and how it would protect the council from risk in doing so. And each bidder has had to explain how we would work together to transform not only the physical face of the borough, but the social and economic opportunities of its people as well. Lendlease scored the best overall across all these criteria, and on 14 February 2017 the council’s Cabinet approved the recommendation that they be appointed as our preferred bidder.
This is Lendlease’s response to these allegations which is on its website: “Lend Lease EMEA was previously part of the Bovis group of companies and was acquired by Lendlease Corporation in 1999. It is acknowledged that in the past, prior to the acquisition of Lend Lease EMEA by the Lendlease Group, a company within the Bovis group of companies (now known as Lend Lease EMEA) was involved in the issue of construction industry vetting. However the involvement of Lend Lease EMEA in relation to this vetting was minimal. Lendlease has settled all claims made against it by affected individuals. Lendlease confirms that it does not tolerate this activity.”
What about allegations of Lendlease paying massive fines in the US after admitting overbilling its clients for over a decade?
Beginning in June 2009, Lendlease cooperated with an investigation by the United States Attorney’s Office of the Eastern District of New York (EDNY) and New York County District Attorney (NYDA) into certain past practices of Lendlease (US) Construction LMB Inc. (LMB), the Lendlease subsidiary company undertaking the construction business in New York.
The investigation initially concerned LMB’s past practice of paying labour foreman for overtime hours beyond those worked. The practice was used by LMB to retain and reward the best foremen, and was understood to have been an industry-wide practice in New York at that time. The cost LMB incurred in connection with these guaranteed overtime hours was charged to its clients; however, it was paid out to the relevant labour foremen and not retained by LMB. LMB had disclosed this past practice to the NYDA prior to the issuance of subpoenas. The investigation later included LMB’s use of minority business enterprises.
In April 2012, Lendlease agreed to a resolution to conclude those investigations by LMB entering into a Deferred Prosecution Agreement (Agreement) in respect of charges relating to conspiracy to commit mail and wire fraud. In reaching the Agreement, the EDNY expressly noted that both Lendlease Corporation Limited and the senior management of Lendlease Americas fully cooperated with the EDNY’s efforts and undertook numerous remedial actions including implementation of a comprehensive Ethics and Compliance Program.
LMB successfully completed the Agreement. All charges against LMB were dismissed in May 2014.
What about Lendlease’s renewal of the Heygate Estate where only a small number of social homes were built?
The approach to replacing social rented homes at the site of the former Heygate estate (now known as Elephant Park) was agreed between Southwark Council and Lendlease in line with the terms of Southwark Council’s procurement specification. Elephant Park is one part of Southwark Council’s wider provision of affordable housing across the Elephant & Castle opportunity area.
Given these locally specific circumstances, and the fundamentally different structure of the relationship between Haringey Council and Lendlease under the proposed HDV compared to the arrangement in Southwark, the issue of reprovided homes at the former Heygate estate has no bearing on recommending Lendlease as our preferred bidder.
For more information here is Southwark Council’s statement (external link).
As part of the first stage of procurement, prospective bidders filled in pre-qualification questionnaires, which set out clear thresholds to meet and the financial capacity needed to commit to the scheme in order to give confidence that they would be able to meet the obligations of this project. Bidders progressing to the long list and shortlist all demonstrated this financial capacity. The pre-qualification process also included disclosure of any relevant past convictions or violations. The Procurement Regulations clearly state what can be considered in relation to exclusion of suppliers and we found no reason to exclude any of the bidders during the procurement process.
The procurement process was governed by Crown Commercial Service requirements and we use the same checks as other councils and national government.
The Procurement Regulations are very clear that a company’s structure or tax arrangements are not in themselves sufficient reason not to award a contract. We looked closely at company structures during the procure process and found no valid reason that would prevent us from entering into an agreement with Lendlease. Provided a company is not in breach of its legal obligations in relation to its tax affairs, there are no grounds to exclude a bidder.
Fees would be agreed and paid as with any development or asset management arrangement. These costs would be payable in any of the other development options considered in the November 2015 Cabinet report.
By establishing the HDV, both partners would make a legally binding commitment to provide equity of equal value to the HDV; this is fundamental to the structure of the joint venture. In other words we contribute land and Lendlease matches this with cash. We would only give land to the company when it is needed, and Lendlease would contribute cash when it is needed.
Where the HDV does not need a cash contribution from the private partner of equivalent value to the council’s contribution of land at the time that the land transfers, rather than have unneeded cash sitting unused in the HDV accounts the private partner would instead make a binding commitment to provide that cash when it is needed. In the meantime, the council would receive interest on the difference between the value of its land contribution and the cash contribution already made by the private partner. More details on the HDV's financial arrangements can be found in the July 2017 Cabinet report.
Yes, the HDV would only cover buildings and land specifically transferred into to it. There would be nothing in the HDV agreements to stop us working with other developers on other schemes or projects.
Were Lendlease instructed to remove cladding from buildings, or undertake other fire safety related remedial work in Melbourne by the authorities?
Lendlease has not been instructed to remove external cladding or undertake other fire safety-related remedial work as part of the audit findings by the authorities in Australia.
It's been claimed that Lendlease had not complied with building regulations requirements in Melbourne - what is your response to that?
All projects undertaken by Lendlease are inspected upon completion by the Relevant Building Surveyor. The Relevant Building Surveyor issues an Occupancy Permit when they are satisfied that the works comply with the approved building permit documents and the building is safe to occupy.
The Building Act (Vic) does not permit the Relevant Building Surveyor to issue an Occupancy Permit unless they are satisfied that the works will comply with the building regulations, including the National Construction Code Series, Volume One - Building Code of Australia.
All Lendlease buildings received an Occupancy Permit upon completion.
At Elephant Park none of the buildings use the type of aluminium cladding which is currently assumed to have been used at Grenfell. The specific fire strategy will vary depending on the building type but do include enhancements such as water supply - namely a 60min water supply, as opposed to 30 min, dual pumps, as opposed to single and dual power supply, as opposed to single power supply.
It's been suggested that one of the issues that leads to reduced fire safety in buildings is chains of sub contracting and value engineering. Would this happen in Haringey through the HDV where Lendlease is the building contractor?
Safety is Lendlease’s number one priority and is embedded at every stage of the development and construction cycle. Lendlease’s internal procurement processes involve checking all potential, and current sub-contractors, who are all required to meet its safety standards which can be higher than what is required by law. This is enforced through the terms of their contract and involves safety inductions, training, daily safety briefings and regular quality audits.
All works undertaken by Lendlease are inspected throughout the construction process and on completion by the relevant Building Control Inspector. Practical Completion can only be achieved when the Building Control Inspector has issued a Building Control Certificate.
What commitment can you give about how Lendlease will respond to any findings from the Grenfell tower inquiry?
Lendlease like the rest of the industry welcome the public inquiry, and will adopt any learnings which come from it.
The Lendlease bid was based on the company’s construction arm fulfilling a specified share of construction contracts coming through the HDV. This is set out in the ‘Contractor Framework Agreement’, which describes how Lendlease Construction would fulfil 60% of the HDV’s ‘vertical build’ contracts plus the site infrastructure works for any phase of work where Lendlease Construction is awarded a ‘vertical build’ contract on that phase. ‘Vertical build’ is a term used to describe buildings above ground, to distinguish from construction of below-ground infrastructure that supports development.
This offers benefits to the council including supply chain security by having guaranteed access to the services of a major, proven construction firm and an ability to ensure that local firms are in a prime position to win sub-let contracts. We can also secure other wider benefits from construction including commitments to fair employment and the London Living Wage throughout the supply chain, and local employment and training.
To ensure this arrangement provides value for money there would be an 'Independent Verification Team' (IVT) – a professional advisory team that provides reports and recommendations to the HDV on the procurement and awarding of contracts to Lendlease Construction and via them to a range of sub-contractors. Decisions on the appointment and remit of the IVT would be made only by the council nominees to the HDV Board, as the Lendlease nominees would have a clear conflict of interest.
Where the HDV – on the advice of the IVT – determines that Lendlease Construction's offer for a specific contract is not providing 'value for money' and/or that Lendlease Construction is performing poorly against the key performance indicators set out in the Contractor Framework Agreement, then the HDV can decide not to award the contract to Lendlease Construction (even if this ultimately means that the agreed maximum of 60% of contracts to Lendlease Construction would not be reached) and other procurement means can be pursued.
In light of the Carillion collapse, will you be looking again at the financial stability of proposed partner, Lendlease?
Lendlease has been in existence for 60 years and is a very different organisation to Carillion – its core business is property development and it does not deliver other public services. As of 30 June 2017, Lendlease had net assets of £3.5bn and cash (or cash equivalent) of £700m.
As part of the HDV partner procurement process all bidders, including Lendlease, were tested for their financial strength and security. Bidders were required to submit a financial model, which we assessed thoroughly in line with government guidelines. This is the approach we would take for all major council contracts.
Since Carillion’s collapse, we have re-run this assessment based on Lendlease’s current position. We looked again at the company’s financial strength and security and found no issues or areas of concern.
The HDV is a joint venture meaning that we are an equal partner in all decision making with Lendlease. Each individual site proposed for development by the HDV must be assessed and approved by the council, including the site’s financial viability, before any work can start.
As part of our planning for the HDV, we have considered risks the HDV could face including both the insolvency of Lendlease or a reduction in its asset value.
In the unlikely event that Lendlease’s financial position is weakened, the council has the ability to protect its interests by acquiring Lendlease’s interest in the HDV or by nominating a third party to acquire that interest. We could also choose to do neither and the HDV would be wound up, according to an agreed procedure set out in the HDV’s legal agreements.
In short, our contingency planning regarding potential risks to the HDV protects our financial position and provides us with a range of options to ensure that our assets and projects are not put at risk.
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