Agenda item

The report highlighted action taken in respect of corporate risk since the last Audit Committee meeting.  The latest review of the corporate risk register identified 1 new risk which warranted inclusion on the corporate risk register:

Increase in costs associated with major Property projects due to changes in Building Regulations

It was noted that a proposed upgrade of the Building Regulations was published as draft legislation in January 2021 which was subject to an on-going consultation. The construction industry was expecting a significant increase in the environmental standards for new buildings with a zero-carbon requirement anticipated, this had been confirmed in the draft legislation. However, the draft legislation also applied to existing buildings, whereby there would be a requirement to substantially upgrade the environmental credentials of existing buildings when a major refurbishment was undertaken.

This would potentially see a significant increase in upfront costs with more energy efficient heating/insulation being required, such as air-source heat pumps, PV panels, triple glazing etc, all of which were dearer than current standards.  In order to mitigate this, it was necessary to account for this in cost estimates for all major property projects and increase the contingency on projects to provide scope to meet potential cost increases.

Given the scale of the Authority’s Capital programme over the next 5 years this was considered a high risk at the present time, as if the legislation was implemented it would increase costs significantly on all projects commencing after June 2022, and this was not allowed for in the initial budget estimates.

An updated corporate risk register was considered by Members with changes summarised in the report.  The Director of Corporate Services highlighted the following key area: -

Risk no. 26 – Increase in costs of and/or lack of availability of goods and services, following Brexit

This risk had been expanded to include the pandemic.  An increase in the price of construction materials had been seen in the last few months as well as delays in obtaining them.  With the contractor on the Workshop/BA school project awaiting some metal stud partitioning to finish one section of the building internally, this was indicative of the supply market at the present time.  Furthermore, the cost of some raw materials was anticipated to increase further in the coming months: i) steel/copper up 30%; ii) sealants up 30%; and, iii) glass up 15%.  In order for this to be addressed, the contingency on construction projects would need to be increased to provide scope to meet potential cost increases.

County Councillor Shedwick queried whether Balfour Beatty selling 16 North West Fire Stations would be considered a risk.  The Director of Corporate Services advised that the Authority had 2 private finance initiative projects: i) Morecambe and Hyndburn which had been in operation for 18 years and was run by PFF Lancashire Ltd; and ii) together with Cumbria and Merseyside Fire and Rescue Authorities the 16 North West fire stations had been in operation for 8 years, of which 4 (Burnley, Blackburn, Chorley and Fleetwood) were in Lancashire.  It was noted that Balfour Beatty had sold that project to a third party who were already operating private finance initiative schemes in the UK, including fire stations.  Therefore, it was anticipated there would be minimal impact from the change of ownership.  He confirmed that this could be reviewed in due course to determine whether it warranted inclusion on the corporate risk register.

RESOLVED: - That the Committee noted the actions taken and endorsed the revised corporate risk register.