Value of Belfast Met building questioned

Published Tuesday, 25 March 2014
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A damning report by the NI Audit Office has questioned the value to taxpayers of a multi-million pound contract signed by the Belfast Metropolitan College over its new campus in the Titanic Quarter of the city.

Value of Belfast Met building questioned
The decision to retain the city centre buildings was criticised by the auditor. (© UTV)

In 2009, the then management of the college signed off on a 25-year public-private partnership - meaning a contractor would build the new campus and lease it to the college for an annual fee - to the value of £211m for the entire project.

During the contract negotiations management also decided to sell its two campus buildings in the city's Brunswick Street and College Square East locations instead of handing them over to the contractor to be sold.

Between 2005 and 2008, the buildings value jumped from £8.8m to £22.5m, and officials believed that as property prices continued to rise it represented better value for money to sell the buildings themselves.

However, following the transfer to the new Titanic Quarter campus in 2011 and the property market collapse, the buildings remain unsold and the college has been forced to pay out more than £1m in maintaining and securing the two facilities.

The college has refused to comment on the current value of the two facilities because of "commercial sensitivities", however, the auditor has said their value has dropped "significantly" and both were valued in 2010 at under £5m.

Auditors found many failings in how the college negotiated its agreement with preferred bidder Ivywood Colleges Limited (ICL) to pay it £5.6 million a year for 25 years.

In early drafts of the deal, the ownership of the Brunswick Street and College Square East properties would have been transferred to ICL when the Titanic site was completed.

But with negotiations taking place at a time when property prices were rocketing, college bosses decided to change this clause, instead choosing to retain ownership of the buildings and pay a capital contribution to ICL - a sum that ended up at £15 million.

It also intended to use the money obtained from selling the buildings to cover a £5 million upfront outlay for subleasing the land at the Titanic Quarter.

The wider lessons emerging from this project are not new, however, they serve as a useful reminder and their application should help ensure that value for money is achieved in other public sector projects.

Auditor General Kieran Donnelly

The college is primarily funded by Stormont's Department of Employment and Learning (DEL).

Kieran Donnelly, comptroller and auditor general at the NI Audit Office, said: "The college injected £20m into the project which it expected to recoup from the sale of its Brunswick Street and College Square East properties.

"However, the value of these properties has fallen significantly and a large shortfall in the expected receipts is now likely.

"The college has also had to meet the cost of maintaining and securing the properties until they are sold.

"These costs must be factored into any meaningful assessment of the project's overall value for money."

This decision to transfer the risk associated with fluctuating property prices to the public sector was one of a number of issues of concern flagged up in the report.

It also noted that the original timetable for negotiating the contract was set at 12 months, but actually lasted for two-and-a-half years.

Auditors said this was "too long" and resulted in "significant changes" being made to the terms of the agreement which reduced its value for money.

"When the contract was signed in April 2009 the value for money benefit of using the public-private agreement as opposed to a conventional procurement route was marginal," said Mr Donnelly.

"According to the report, the value for money of the deal has further reduced since the contract was signed."

The report highlighted weakness in senior management and financial control in the period before the agreement was finalised.

However, auditors noted that the college's management team has since changed and suggested the present incumbents have helped to turn around the project.

The report said a number of audit reports on public-private deals have highlighted a need for the public sector to "act as a more intelligent customer in the procurement and management of such projects".

"Given the significant capital payments made by the department and the additional costs associated with the procurement, there was no clear advantage of going down that route for this project," it stated.

"On that basis and because of other additional costs, we cannot conclude that the overall project has delivered value for money."

The report stated that DEL officials do not share a number of the auditors' conclusions - for example, they claim the value of the Titanic project should not be linked to the market price of the former sites, as that was ultimately removed from the agreement.

However, both the department and the college declined to make an official comment on the findings, claiming it would be inappropriate to do so before the matter was discussed by members of Stormont's Public Accounts Committee in June.

© UTV News
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