A council boss has faced questions over a controversial unfinished housing project in Newcastle after a builder had to be stripped of a multi-million pound contract.
Newcastle City Council cancelled a deal with Orca LGS Solutions last October over 14 homes in Gosforth and Throckley, amid worries about the North Shields firm not completing the scheme on time or on budget. There were calls for an investigation as controversy emerged over the company’s links to city council Labour leader Nick Kemp, who had previously lobbied the local authority on Orca’s behalf and was its “Director of New Business and Housing Strategy”.
Orca was awarded the contract without any competitive bidding process and was paid more than £2m for the incomplete works in Aln Crescent and Broomy Hill Road, which the council said last November represented the entire value of the contract first awarded in 2019 and would not be clawed back – with the housebuilder now understood to have entered insolvency. In an hour-long interrogation by a scrutiny panel on Thursday, civic centre director Michelle Percy told councillors that every development contained risk and that she would be be “really saddened if there was reputational damage” to the council from a scheme which “would have worked but for lots of different reasons that were out of our control”.
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She also denied that the council would have to hire Orca staff to finish the developments, which are “roughly 60% completed”, because of their specialist knowledge of the light gauge steel technology being piloted in the scheme. But she was not directly asked about the involvement of Coun Kemp, whose name was not mentioned in the questioning by the overview and scrutiny committee.
Orca was directly awarded the contract without a competitive process being held, which the local authority says there was no strict obligation to do because the value of the works did not hit a minimum legal threshold.
Ms Percy, the council’s director of place, told the committee on Thursday: “On every contractor in any development we undertake there is always going to be a high risk. There is always a challenge around those businesses. Even in recent weeks with the news we have received [on the collapse of Tolent] even large substantial businesses are subject to administration and liquidation. But we put as much [protection] into the contracts as possible.”
She added that the council does not yet know what the extra cost will be to finish the works, but that there “is that expertise in the marketplace” to fill the gap left by Orca’s demise.
Coun Colin Ferguson, the city’s Lib Dem opposition leader, said he was “not yet clear on the extent to which the financial exposure to the council was controlled to the best possible extent” in what was a “more risky than average venture”. Ms Percy responded that the only way to cut out risk was “to not build”.
Liberal Democrat Greg Stone said the committee spent its time “dancing around” things it could not ask and did not want to embarrass the senior officer by “asking that question because it involves her relationship with other senior people in the council and their involvement or non-involvement in this issue”. Coun Kemp’s LinkedIn profile stated that he was Orca’s “Director of New Business and Housing Strategy” from 2018, but he was not directly employed by them – instead, they were a client of his PR agency.
In emails seen by the Local Democracy Reporting Service (LDRS), Coun Kemp had told council staff in 2021, the year before he became council leader, that Orca offered a “fantastic opportunity” and was “keen to develop a strong relationship” with the authority. Coun Kemp was a member of the council’s Labour cabinet at the time the Orca contract was issued.
Asked if any members of the council’s cabinet, aside from the then housing portfolio holder Joyce McCarty, were involved in the discussions about the project in 2019, Ms Percy replied: “Not as far as I am aware.”
The committee agreed to have a further discussion on the Orca episode that will possibly be held behind closed doors.
A report to the committee states that the council will finish the two sites by this summer and is “currently concluding several new procurements and appointments”. The failure of the Orca contract is blamed on delays due to Covid-19, urgent drainage repairs, unexpected discovery of underground cables, and the need to remove extra street lights and other material.
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