A school that is being delivered in South Wales by Morgan Sindall has been given the go-ahead, despite a potential cost overrun of almost £5m.
The total construction cost for St Richard Gwyn High School in Barry was estimated at £59m when Vale of Glamorgan Council invited tenders last spring.
However, in the second-stage proposal provided by Morgan Sindall in March this year, which included the costs for all work packages on the project, the total returned by subcontractors came to £63.9m.
The contractor had issued the tender to the subcontractors on a ‘not-to-exceed’ rather than a competitive basis, the council said.
“This is over the £59m construction cost that we had originally anticipated,” cabinet member for education, arts and the Welsh language, Rhiannon Birch, told a meeting of the council this week.
She noted that the cost of building supplies and skilled labour had both increased.
“However, there is an opportunity to bring this figure down when undertaking value engineering throughout project delivery,” said Birch.
The revised cost estimate would see the council – which is funding the scheme jointly with the Welsh Government – borrow £3.9m.
This would result in a total revenue repayment cost of around £162,000 annually over the next 50 years, the council heard.
A competitive tender is expected to take place with the contractor’s supply chain to fine-tune price estimates once the design for the school has been completed, the council said.
“Morgan Sindall will be going out to the market over the next two months for all cost packages under a competitive-tender scenario,” Birch said.
“[Current] costs are based on worst-case scenario; from discussion with relevant stakeholders, the ‘not to exceed’ figure will reduce to align with the available budget.”
Other approaches would also be considered to ensure the project stayed within budget, she added.
The council gave its approval for the full business case for the scheme to be submitted to the Welsh Government.
Morgan Sindall has been approached for comment.