Agenda item

This report seeks approval to enter preferred bidder stage for the design, build, operate and maintain (DBOM) contract for the South Kilburn District Heat Network (“the SKDHN”) Main Contractor preferred bidder. The report summarises the procurement process undertaken along with the required financial modelling.

Cabinet RESOLVED:

(1)       To approve the selection of Vital Energi Utilities Limited as the South Kilburn District Heat Network (SKDHN) Main Contractor preferred bidder for the contract value of £37,768,947 following the completion of the Design, Build, Operate and Maintain (DBOM) contractor procurement process set out in the report.

(2)       To approve an increase in the total capital budget for the SKDHN of £36,000,000. The funding for the budget is set out in paragraph 5.3 of the report and includes £12,000,000 of external borrowing.

(3)       To note that there will be a preferred bidder stage as set out in paragraph 3.2.31 of the report following satisfactory completion of the standstill period.

(4)       To delegate authority to the Corporate Director Neighbourhoods and Regeneration in consultation with the Lead Member for Climate Action and Community Power to finalise the contract and toaward the contract to the SKDHN Main Contractor preferred bidder as required by Contract Standing Order 88 following satisfactory completion of the preferred bidder stage.

(5)       To delegate authority to the Corporate Director Neighbourhoods and Regeneration, in consultation with the Lead Member for Climate Action and Community Power, forapproval of agreements with off-takers for bulk (building-level) and retail (consumer-level) heat supplied by the SKDHN in perpetuity.

(6)       To delegate authority to the Corporate Director Neighbourhoods and Regeneration, in consultation with the Lead Member for Climate Action and Community Power, to change the allocation of Strategic Community Infrastructure Levy and Carbon Offset Fund according to available balances.

Eligible for call-in: Yes

Deadline for submission of call-in: 6pm on Monday 26 January 2026

Councillor Rubin (Cabinet Member for Climate Change & Community Action) introduced a report from the Corporate Director of Neighbourhoods & Regeneration seeking approval to enter preferred bidder stage for the design, build, operate and maintain (DBOM) contract for the South Kilburn District Heat Network (“the SKDHN”) Main Contractor preferred bidder on the basis of the procurement process undertaken and required financial modelling.

In presenting the report, Councillor Rubin began by highlighting the important milestone the proposal was felt to represent in the delivery of the South Kilburn Regeneration Programme, involving the provision of a council-owned and operated heat network that would provide affordable, reliable and low-carbon heat to residents across the South Kilburn estate.  Whilst committed to tackling the climate emergency, the need to ensure this was undertaken in a way that was fair and affordable had also been recognised with members advised this had been embedded as core principle at the heart of this scheme being presented for consideration.

In support of this approach, members noted the network had been developed on the basis of proven, modern technology and designed to meet high standards, with strong protections in place to ensure reliability and continuity of supply  and in a way that would be able to deliver real reassurance on cost at a time when it was recognised household budgets remained under pressure.  As a result, it was expected that 99% of homes included within the network would have the same or lower energy bills once connected, which it was felt demonstrated an important point in the move to greener, low-carbon heating being delivered without asking people to pay more.

As further assurance, members were advised that the council would retain control over heat tariffs, keeping them fair, transparent and properly regulated, so residents remained protected during the transition.  In addition, it was confirmed that access to the Energy Ombudsman along with clear performance standards would also be built into the contract ensuring the provision of a reliable, good-quality service that offered value for money as opposed to hidden costs.  Alongside the protections built in for residents, the opportunity was also taken to remind members of the significant environmental benefits that would be delivered through the network, with around 980 tonnes of carbon emissions saved every year which it was felt also highlighted the ability to reduce carbon and tackle climate change in a way that was fair, practical and equitable for working people, while supporting the Council’s ambition to be carbon neutral by 2030.

In commending the scheme, members felt it demonstrated the Council’s clear commitment towards tackling the climate emergency and investment in key local infrastructure, including the use of Strategic Community Infrastructure Levy and s106 funding in a way that would be able to deliver affordable low carbon heat for residents in buildings and developments across the network.  Support was also expressed for the way in which the scheme had been developed to provide the necessary protections for those more vulnerable residents and in recognising the ongoing impact on households arising from the cost-of-living crisis, with members further assured by the additional security provided as a result of the council retaining control of the scheme and heat tariffs.

In recognising the leadership being provided by the Council in the development and delivery of such complex infrastructure projects and wider initiatives in relation to tackling the climate emergency and the move towards net zero, members were keen to thank all those involved in the development of the scheme recognising the diligent approach and high level of challenge at each stage in the process.  Given the assurances provided and what was recognised to be the high-quality, resilient and affordable nature of the scheme which had been designed not only to reflect best practice but as a key measure in the long-term success of South Kilburn’s regeneration Cabinet RESOLVED, having noted the information contained within the exempt appendix to the report:

(1)       To approve the selection of Vital Energi Utilities Limited as the South Kilburn District Heat Network (SKDHN) Main Contractor preferred bidder for the contract value of £37,768,947 following the completion of the Design, Build, Operate and Maintain (DBOM) contractor procurement process set out in the report.

(2)       To approve an increase in the total capital budget for the SKDHN of £36,000,000. The funding for the budget is set out in paragraph 5.3 of the report and includes £12,000,000 of external borrowing.

(3)       To note that there will be a preferred bidder stage as set out in paragraph 3.2.31 of the report following satisfactory completion of the standstill period.

(4)       To delegate authority to the Corporate Director Neighbourhoods and Regeneration in consultation with the Lead Member for Climate Action and Community Power to finalise the contract and toaward the contract to the SKDHN Main Contractor preferred bidder as required by Contract Standing Order 88 following satisfactory completion of the preferred bidder stage.

(5)       To delegate authority to the Corporate Director Neighbourhoods and Regeneration, in consultation with the Lead Member for Climate Action and Community Power, forapproval of agreements with off-takers for bulk (building-level) and retail (consumer-level) heat supplied by the SKDHN in perpetuity.

(6)       To delegate authority to the Corporate Director Neighbourhoods and Regeneration, in consultation with the Lead Member for Climate Action and Community Power, to change the allocation of Strategic Community Infrastructure Levy and Carbon Offset Fund according to available balances.