Agenda item

(1)      The extent to which the WMCA’s transport capital programme had been impacted by cost pressures was noted.

(2)      It was noted that in respect of one scheme, the cost control issues had resulted in a breach of financial regulations.

(3)      A formal independent investigation was commissioned through the Chair of the Audit, Risk & Assurance Committee in respect of the scheme referred to in (2) above, and the results of this investigation would be reported to the WMCA and constituent authority Leaders.

(4)      The limited funding options open to the WMCA to meet these additional pressures were noted.

(5)      The approach towards dealing with the most urgent budgetary pressures, including the release of capital funding allocated within the Transforming Cities Fund programme, was approved.

(6)      It was noted that approval for immediate budget increases to three specific project budgets (totalling up to £17.8m) was requested within item 17 below.

(7)      Subject to the Department for Transport’s approval and following the WMCA’s Single Assurance Framework process, it was approved that a number of projects previously funded by the Transforming Cities Fund and the WMCA’s capital investment programme should subsequently be funded from the City Region Sustainable Transport Settlement programme.

(8)      The early warning of further capital pressures was noted.

(9)      Authority was delegated to the s151 Officer and Executive Director of Transport for West Midlands (in consultation with the Mayor and the Portfolio Lead for Transport) to make a formal change control application for the City Region Sustainable Transport Settlement programme to the Department for Transport in parallel to the WMCA’s Single Assurance Framework process.

(10)    The risk was noted that in a worst-case scenario where no funding alternatives could be identified or costs avoided, a levy increase or corresponding transport budget savings to the value of approximately £11m to £20m would be required to meet the full extent of the capital cost pressures, and that any precise levy increase, should this be required, would be subject to a further report to this board.

(11)    The work being committed to enhance the robustness of management and reporting of capital projects in the WMCA’s transport capital programme was noted.

The board considered a report from the Executive Director of Transport for West Midlands and the Executive Director of Finance & Business Hub providing an update on the current budget pressures being experienced on transport capital projects in delivery, the reasons for these and to advise on potential solutions to ensure that they could be completed successfully within a managed way which prevented any revenue cost exposure to the WMCA and the local authorities.

Over the last couple of years, there had been a number of projects increase in costs due to scope changes and construction challenges which had emerged on site. Standard practice was to allow for programme and budget contingencies to accommodate these pressures and this had been the case in all Transport for West Midlands projects. However, the last few years had thrown up a number of extraordinary further challenges, notably in relation to hyperinflation which was a national and global issue. The potential scale meant that Transport for West Midlands was unable to contain this within the existing capital resources and were therefore required to take some actions to mitigate any cost exposure to the WMCA.

The WMCA was heavily constrained in terms of the discretion it could exercise over its capital funding. Whilst the overall programme was substantial, many projects were funded on a project specific basis. The Transforming Cities Fund was the only pot of funding which was fully devolved to the region for local leaders to make the ultimate investment decisions. Whilst the City Region Sustainable Transport Settlement was also a devolved pot, the Department for Transport and the Treasury did retain some influence in how the funding was used to deliver clearly documented deliverables and outcomes.

Councillor Ian Ward requested that the findings of the investigation to be undertaken by the Chair of the Audit, Risk & Assurance Committee should be reported to the constituent authority Leaders. The Executive Director of Finance & Business Hub explained that immediately she was notified of the breach of financial regulations in one of the transport schemes she had initiated an investigation and then notified the Mayor of this within 24 hours.

Resolved:

(1)      The extent to which the WMCA’s transport capital programme had been impacted by cost pressures be noted.

(2)      It be noted that in respect of one scheme, the cost control issues had resulted in a breach of financial regulations.

(3)      A formal independent investigation be commissioned through the Chair of the Audit, Risk & Assurance Committee in respect of the scheme referred to in (2) above, and the results of this investigation be reported to the WMCA and constituent authority Leaders.

(4)      The limited funding options open to the WMCA to meet these additional pressures be noted.

(5)      The approach towards dealing with the most urgent budgetary pressures, including the release of capital funding allocated within the Transforming Cities Fund programme, be approved.

(6)      It be noted that approval for immediate budget increases to three specific project budgets (totalling up to £17.8m) was requested within minute no. 80 below.

(7)      Subject to the Department for Transport’s approval and following the WMCA’s Single Assurance Framework process, it be approved that a number of projects previously funded by the Transforming Cities Fund and the WMCA’s capital investment programme should subsequently be funded from the City Region Sustainable Transport Settlement programme.

(8)      The early warning of further capital pressures be noted.

(9)      Authority be delegated to the s151 Officer and Executive Director of Transport for West Midlands (in consultation with the Mayor and the Portfolio Lead for Transport) to make a formal change control application for the City Region Sustainable Transport Settlement programme to the Department for Transport in parallel to the WMCA’s Single Assurance Framework process.

(10)    The risk be noted that in a worst-case scenario where no funding alternatives could be identified or costs avoided, a levy increase or corresponding transport budget savings to the value of approximately £11m to £20m would be required to meet the full extent of the capital cost pressures, and that any precise levy increase, should this be required, would be subject to a further report to this board.

(11)    The work being committed to enhance the robustness of management and reporting of capital projects in the WMCA’s transport capital programme be noted.