A previous Derby News article “Market Hall transformation: Council needs at least another £15m to complete it” ( Nov 2020) summarised the on-going cost escalation of the Market Hall project:
- 2017 – whole Market Hall Transformation project was due to cost £11.4
- Nov 2020 – Phase 1 ( repairs) had escalated to £14.26m with an expectation that Phase 2 “Transformation” would cost “around” £10m – £25m (total)
- Feb 2022 – Phase 2 costs escalate to £21m – resulting in a planned £35m (total)
An eye-watering £24m over the original planned budget!
Advice on the project design was sought from Cllr Barker’s colleagues at NABMA ( National Association of British Markets). Details in an earlier article “Despite Cllr Barker’s “personal interest” in the Market Hall project, there is still dithering and lack of vision” from January 2021
It’s not clear what brief “NABMA Market Place” were working to but delivering to budget seemingly wasn’t one of them.
The February 2022 Cabinet papers include the business case – this is an extract:
A few points to note:
- The project will generate over £0.5m of losses ( funded by Council Tax) before it starts to create a surplus.
- It will take around 8 years to payback those initial operating losses.
- By Year 3 ( 4 years away) the £75k pa profit will be the “steady state”.
- The “Operating model” (above) does not consider the £35m cost of making the transformation.
- At a rate of £75k pa (net income) it will take over 450 years before the investment of £35m is paid back.
- This rate of return on a £35m investment is an insignificant 0.2% pa.
Whilst it is correct to say that nearly £10m of the cost of Phase 2 is being funded by the UK Government this is still public money.
It is laudable that Derby aspires to have a top quality Market Hall and the pictures do look impressive. It does feel that it has been designed with an obscene level of lavish ostentation that is more akin to a “vanity project” than a sensible commercial proposition.
The Council maintains that it has a Project Management Office with routine Senior led governance reviews. The question should be asked ( one for the External Auditor?) how was this level of cost escalation allowed to happen? This is the Tories “A52 moment”!
The business case is equivalent to a daily Derby city bus user buying a £300k Ferrari sports car and then driving to town and back each day…. although that would pay itself back in more like 300 years!