Newcastle council bosses will not try to claw back any funding from a construction firm stripped of a multi-million pound building contract – and admit they face escalating costs to complete the unfinished developments.
A controversy has emerged this month over the local authority’s dealings with housebuilder Orca LGS Solutions, which has links to the city council’s leader. The North Shields-based firm had been appointed in 2019 to build modular homes in Gosforth and Throckley, but Newcastle City Council cancelled the deal last month due to the company “not meeting required contractual performance”.
The episode has sparked questions over the company’s ties to city Labour chief Nick Kemp, who is known to have lobbied civic centre officials on Orca’s behalf in the past, while opposition councillors have now called for an investigation to be launched. It can be revealed that the council already paid Orca more than £2m for the works, which include an incomplete housing development at Aln Crescent in Gosforth, none of which it will attempt to claim back.
A council spokesperson confirmed that the money paid to Orca represents the entire value of the contract first awarded three years ago, despite the developments being unfinished, though it had since been agreed that its total cost would have to increase given current inflation levels. The authority has admitted that finding new contractors to complete the houses will come at a greater cost than agreed with Orca in 2019, due to “site conditions” and the rising price of materials in the current economic crisis.
A council spokesperson said: “We can confirm that Orca were paid £2.247m for the works carried out on these sites. The council is satisfied that these payments properly reflect the cost of the works which have been undertaken to date and so these sums will not be subject to clawback.
“The council is taking steps to complete the development of these sites. This will involve appointing one or more contractors to carry out some elements of the remaining works and therefore the council cannot set out what the final total cost of this development will be. Whilst it will be greater than the price originally proposed by Orca in 2019, this reflects matters such as site conditions and increases in supply chain costs over this period.”
Coun Nick Cott, leader of the council’s Lib Dem opposition, branded the controversy an “extraordinary and most irregular situation” and has called for a “transparent and independent investigation” to be launched urgently. He added: “We have made senior council officers aware of our legal right to inspect confidential documents relating to this matter and we expect to do so at the first convenient opportunity."
Coun Kemp’s LinkedIn profile states that he has been Orca’s “Director of New Business and Housing Strategy” since 2018. However, he is not directly employed by Orca – they have instead been a client of his PR and lobbying agency, NKA Public Affairs, and the council has therefore concluded he was not required to declare the role on his register of interests and that no rules have been broken.
In emails seen by the Local Democracy Reporting Service (LDRS), Coun Kemp had told council staff in 2021 that Orca offered a “fantastic opportunity” and was “keen to develop a strong relationship” with the authority. He became council leader earlier this year, after former Labour figurehead Nick Forbes was deselected by party members in his ward.
The LDRS did attempt to contact Orca, whose website appears to have been taken down, for a comment.
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