Minutes of a special meeting of the board of Leicester College corporation: Finance and general purposes committee

Held on 11 July 2024 online via MS

Present: Danielle Gillett (Chair), Chan Kataria, Lesley Giles, Lee Soden, Verity Hancock

In Attendance: Louise Hazel - Director of Governance and Policy, Shabir Ismail - Deputy Principal/CEO, Shaun Curtis - Director of Estates and Campus Services

1. Declarations of interest

   • Verity Hancock declared an interest as a member of the Office for Students (OfS) Board.

2. Apologies for absence

   • Apologies for absence were received from Robert Radford

3. Capital projects update - Aeronautical

   • 3.1 The Deputy Principal and Director of Estates and Campus Services presented

     an update on the aeronautical project. The following points were highlighted.

     • 3.1.1 The budget remaining for the project, funded by the OfS, was £4.34m

       after other projects had been completed. Tenders had been invited from

       six potential contractors, two of which had withdrawn. The four remaining

       tenders had come in at between £4.38m and £5.02m net.

     • 3.1.2 Value engineering had brought prices down with GF Tomlinson’s tender

       at £4.124m and it was proposed to proceed with GF Tomlinson as the

       best priced tender. The company had recently completed a £15m

       aeronautical and space institute for Lincoln College.

     • 3.1.3 Taking into account gross costs and a contingency of £125k, the total

       cost of the project would be £5.074m. A further £125k of furnishings

       fittings and equipment could be saved leaving a shortfall of £859k.

     • 3.1.4 It was proposed to vire £374k from the capital budget set aside for

       roofing works to this project; the roofing works could be deferred. This

       meant an additional £475k was needed from reserves to cover the

       shortfall and enable the project to proceed. The Committee was asked to

       agree the additional capital expenditure.

     • 3.1.5 The College would now be contributing 20% of the project cost with the

       remaining 80% from the OfS.

   • 3.2 Governors asked a number of questions including:

     • 3.2.1 What the original planned College contribution was. It had been

       10%.

     • 3.2.2 What would happen if the additional capital expenditure was not

       agreed? The Committee could choose not to agree it but this would

       restrict growth and the ability to enter an area of delivery which was

       lucrative and would be a genuine USP for the College. There was no

       Level 4/technical pathway for space. It was frustrating that the LLEP

       and other local bodies had not seen the benefits and supported the

       plans with funding.

     • 3.2.3 The College should push for more funding from the OfS. It would

       continue to do so although the OfS had indicated that no additional

       funding was available.

     • 3.2.4 The cost increases were always going to be likely given the current

       market but the project should go ahead. Noted. It was possible that

       more funding might become available.

     • 3.2.5 The new government’s approach looked promising with the

       potential for an industrial strategy, priority sectors including high

       level engineering, strengthened devolution and local investment, all

       of which might unlock opportunities for further funding.

     • 3.2.6 The College should make it known to anyone who might be able to

       provide funding that additional funding was needed so that should

       funding become available the project was an obvious choice. There

       was nothing to lose in doing so. The College was working with the

       University of Leicester. It would also make clear to the OfS that not

       getting additional funding might mean the project needed to be scaled

       down. The Vice Principal would be meeting with Phoebe Dawson

       (Leicester and Leicestershire Business and Skills Partnership) soon and

       would raise it with her.

     • 3.2.7 Was there any scope for working with Leicester University to

       identify a named sponsor? This could be explored.

     • 3.2.8 The short term versus the long term needed to be considered.

       There was a good case that this was integral to growth although

       there were no guarantees. What would the impact be on the bottom

       line, the EBITDA and the financial rating? This was capital

       expenditure so there would only be a small hit on the bottom line in

       terms of depreciation. The EBITDA would be slightly weakened but not

       to any significant extent and the financial health would still be good.

     • 3.2.9 Previously the College had been bold and taken decisions to invest

       out of a position; this was a similar situation and there was the

       potential for access to funding which might not be available again.

       Agreed.

     • 3.2.10 Based on previous experience, was there confidence that the

       contingency was sufficient? The greatest point of uncertainty was

       usually at the tender stage; once the contract was awarded, the

       architects who had worked with the College before and knew the market

       well would be critical in helping control costs. Having previously built the

       motor vehicle block next to site of the new building, there was also

       confidence that there were unlikely to be any unknowns in respect of the

       land. There were no archaeological issues. Since it was a new building

       here would be no need to decant which could add to delays.

     • 3.2.11 Why was a decision needed now? The preferred contractor required a

       purchase order to be raised by 12 July in order to commit to the project

       and start work. A meeting with the architect would also be taking place

       on 12 July. The Committee needed to approve the proposed expenditure

       above the previously agreed capital budget.

     • 3.2.12 Had sufficient due diligence been undertaken on the contractor and

       did they have the capacity to deliver? There had been some issues

       with the company’s delivery of reactive work in other sectors. The

       company had two divisions and the building division was considered low

       risk. Its recent work at Lincoln College on a similar project provided

       some reassurance of its capacity to deliver.

   • 3.3 The committee:

     • 3.3.1 Noted the tender prices received for the aeronautical project.

     • 3.3.2 Approved the additional spend of £859k on the project through

       cash reserves, £384k of which would be vired from another project.

     • 3.3.3 Requested a report back at the next meeting.

4. Date of next meetings

   3 October 2024