SeaChange has been trying to get yet more public money for the Queensway Gateway Road – but this time, it has been refused. In this post we’re looking at the funding application: does it show dishonesty on SeaChange’s part, or merely clever business practice? And what are the implications for the completion of the road?
QGR doubles in price
We reported in March 2018 that the cost of the Queensway Gateway Road had doubled, from £6m to £12m. The extra cost was going to be covered by moving £4m from other Local Growth Fund projects in East Sussex (including taking £2m out of the walking and cycling budget), and requiring SeaChange to come up with £2m from their ‘reserves’.
SeaChange asks for another £3m
SeaChange, however, wasn’t happy about having to raid its piggy bank. At a Team East Sussex meeting in September 2018, it was reported [p3] that SeaChange had applied for another £3m for the QGR from the Local Growth Fund (LGF). This is central government money, and in our region is allocated by the South East Local Enterprise Partnership (SELEP). The £3m would be on top of the £10m already allocated from the LGF to the road.
£1m for ‘contingencies’
Curious to know whether the cost of the road had risen yet again, or whether SeaChange was simply trying to avoid having to pay the £2m, we put in a Freedom of Information request. The response was that the £3m applied for was indeed to cover the £2m, with an extra £1m thrown in for ‘contingencies’.
The application was unsuccessful – so SeaChange will have to come up with the £2m itself.
We also asked to see the funding application (referred to as an ‘expression of interest’) put in by SeaChange for the additional £3m. It revealed some interesting details:
1. Original cost
In the document, SeaChange says:
The original business case, as reviewed by Steer Davies Gleave in March 2015, was based on a scheme cost of £15m. Only £10m of LGF has been committed to date.
This statement is – at best – disingenuous. It makes it sound as if SeaChange is bringing the QGR in under budget – the original cost was £15m, but SELEP has only committed £10m, so even if it awards SeaChange another £3m, the total cost will still be below the original estimate.
What SeaChange fails to mention is that in November 2015, it told SELEP that the cost of the QGR had gone down from £15m to just £6m [p40]. It asked for the remaining £9m of the £15m allocation to be reallocated to the (hugely underfunded) North Bexhill Access Road (NBAR). So far from the QGR coming in under budget – as Seachange implies in this document – it is in fact 100% over budget.
So here’s how it looks to us: SeaChange is allocated £15m for the QGR. It subsequently claims that the road is only going to cost £6m, and asks for the remaining £9m to be reallocated to the NBAR. Then the cost of the QGR doubles to £12m, and SeaChange is ordered to pay for £2m of the overspend out of its own reserves. It doesn’t want to do that, so goes back to SELEP to ask for another £3m, implying that even with the extra funding, the road is still coming in considerably under budget.
Dishonest, or merely clever business practice? You decide.
SeaChange’s funding application includes the following paragraph:
The delivery partner has committed its remaining £2m of regeneration reserves in the absence of any previously identified further LGF to make up the funding difference. The delivery partner is also proceeding with minimal contingency reserves when a requirement for £3.7m was agreed in the original ITE approved appraisal.
It’s not clear what the first sentence mean: does it mean that SeaChange (the ‘delivery partner’) has got the £2m set aside in case SELEP doesn’t come through? Or that it has ‘committed’ its £2m reserve fund to some other project? We can’t find out since SeaChange is a private company and as such has no obligation to answer any questions.
The second sentence would appear to imply that SeaChange does not have the required £3.7m in contingency which was agreed in the original funding application. If that is what it means, it’s pretty concerning: at what point will SeaChange be coming back to SELEP to say that the road is over budget, and they’ve got no money left?
3. Finish date
The funding application also says:
The scheme originally approved in 2015, has managed to overcome major engineering challenges and is now 60% complete.
According to the QGR consultation report from 2014, the QGR was scheduled to open “around a year” [p6] after the Bexhill Hastings Link Road. The link road opened in December 2015. Even allowing for a few months of delay caused by legal challenges to the planning application for the QGR, it should surely have been ready by the summer of 2017. Instead, we’re at the end of 2018 and the road is only “60% complete”.
As an aside, the road cannot be completed until the car showroom at the end of Whitworth Road – bang on the route of the QGR – has been relocated. It’s going to be moved to SeaChange’s white elephant ‘North Queensway Innovation Park’ – but as SeaChange only put in the planning application in August 2018, and it has yet to be decided, the showroom won’t be moving out of the way of the road for some time yet.
In summary, the whole process of constructing the QGR has been an utter shambles. Costs rising and falling and rising again, SeaChange wanting more and more public money, and the completion date receding ever-further into the future.
Will the refusal of another £3m push SeaChange into the red? Will it threaten the completion of the QGR? We’ll just have to wait and see.