Mareel - Cinema & Music Venue

[shetlandpeat]

The Mareels primary ffunction is not really in competition with anyone apart from food and drink. A loan does sound more acceptable. Perhaps a share system. That may need aditional Governance as public money is involved.

[MuckleJoannie]

 

Ower-weel idea of an interest free (or very favourable) loan is very good.

Probably the only thing the council could justify.....

 

How ever when such loans were given to local fishing vessels or fish processing units some years ago, it was declared illegal under E.U. laws as creating an unfair advantage against other businesses, surely that would apply again in this cases.

 

You could be right Gorgonzola, but as they have already given Mareel a large part if the costs I don't think E.U. Laws would be an issue. Plus the other financiers are saying their finance is on condition that the SIC put in their share.

 

As far as I see it there are, in my opinion, three options.

 

SIC just hand them the cash - Huge public backlash.

SIC give them a loan - More acceptable to public.

SIC refuse to help - what happens then?

 

Unfortunately the contract has not run well, being delayed and running over budget. Who's to blame?. I don't know! But this is the current position. Lets hope it can be resolved soon so that we can all enjoy using the building.

 

The Charitable Trust has given interest free loans to some voluntary organisations already. These were to tide them over until grant money came through.

[Symbister]

Mareel is a major asset we've invested a lot in, so it's not 'their' problem only, and we need to find a responsible solution, given the value it can bring to our community. A few people might be glad to see it go bust, but that attitude doesn't demand much respect.

 

I do hope our decision-makers don't think the sneering on here, or the spitting rants of Ian Tinkler are representative of 'general opinion'.

 

Neither is this a toon v country issue (that attitude is just pure bigotry anyway) - we subsidise lightly-used leisure centres in rural areas, we can also support a massively popular family culture hub sited in the most accessible area of Shetland.

 

Agreed. The only sensible way forward is for the Council to find a way to resolve the problem that will (importantly) not lose this community the £600K or so of external funding that's already been offered. There may be more than one way to do that, but it would be utterly irresponsible to walk away.

[max]

Mareel is a major asset we've invested a lot in, so it's not 'their' problem only, and we need to find a responsible solution, given the value it can bring to our community. A few people might be glad to see it go bust, but that attitude doesn't demand much respect.

 

I do hope our decision-makers don't think the sneering on here, or the spitting rants of Ian Tinkler are representative of 'general opinion'.

 

Neither is this a toon v country issue (that attitude is just pure bigotry anyway) - we subsidise lightly-used leisure centres in rural areas, we can also support a massively popular family culture hub sited in the most accessible area of Shetland.

 

Agreed. The only sensible way forward is for the Council to find a way to resolve the problem that will (importantly) not lose this community the £600K or so of external funding that's already been offered. There may be more than one way to do that, but it would be utterly irresponsible to walk away.

 

@ Ariel. We've invested in a lot of major assets throughout Shetland over the years that bring value to many communities in lots of ways. The time has sadly come when we can't support them all. Even those buildings that have been budgeted for are having to find other ways of continuing, due to recent decisions. Perhaps a 'massive popular family culture hub' could consider a commercial loan to bridge the gap between funding offers and the final amount required?

 

@ Symbister. I agree that a way forward needs to be found, but I think that it is up to the Shetland Arts Development Agency to find an alternative way to Council funding.

 

Many SIC members have made it clear recently that non-statutory spending has to cease. I am vexed that our finances have resulted in the need for this view by a number of our elected members, but if it is to be applied, it needs to be applied fairly.

[Spinner72]

^^ I agree with all points above, but what may be a critical problem is that the additional funding offered by the other investors is dependent on an equal commitment from the other party, which was the council. This may restrict SA's ability to go elsewhere for funding.

 

I have never held any doubt that Mareel was a sound investment and one of the few good investments the council has made over the years, at any other time the council would be made a mockery of for not ensuring the viability of that investment.

 

Not to do so would be an even bigger kick in the teeth to the smaller venues like local halls which are among the many financial beneficiaries of Mareel that can't be easily quantified.

 

The real questions are can the council afford to throw away almost 6 million already invested by themselves, 7+ million invested in the community from elsewhere, or risk wasting even more by adding yet another delay.

 

That said, I don't believe it should just be a hand-out. That sends all the wrong messages. If possible, a loan is easily the best option. And not just in this case.

[Ghostrider]

I would suggest that the Council need to avoid being rushed in to a decision on Mareel's request, time may be limited, but the bailffs aren't knocking on the door yet, as best we know.

 

Of course the other original funders are expecting the SIC to put their hand in their pocket too, that was the split on the original deal, and its common practice to expect the same split to stand for an extension on the original deal. Perhaps the Council should at this stage refuse the request, and Mareel go back and continue negotiations with the other financers on that basis.... What's the worst they can say after all.... and they might just be surprised.

 

I can see the sense of the "aetin da hale coo bit shokkit upoa da tail" argument of losing the £6 Million already invested for the sake of not spending another £500k, but going there should be an absolute last resort, not the first option that it seems to be punted as in the here and now. Its exactly what the anti camp predicted years ago would occur, insofar as no sooner it was built that the begging bowl would come out and the "its here, we can't not stump up, we can't lose whats already been spent" arguments would get trotted out, opening a door to the same thing happening over and over sucking the SIC drier and drier.

 

Many things puzzle me about this, and before the Council even consider the request answers need to be gotten. This was a fixed price contract, the delays and sub-contractors going bust should not be Mareel's problem or bill, that's all DITT's problem on a fixed price deal, unless of course the overspend is as a result of SA chopping and changing specs on the hoof, or they were foolish enough to sign a contract that permitted costs for certain "unforseen circumstances" to be legitimately added on to the final job price. In fact many contracts contain exactly the opposite, in that penalty clauses result in the contractor's having to pay the client a pre-agreed amount for late completion. Regardless, its common place for clients to have insurance to protect themsleves from the effects of contract overspends they may be legitimately billed for, did SA have such insurance for the Mareel contract? If they did why isn't it covering this, and if they didn't, why didn't they.

 

Must Mareel stay 100% in public ownership? Have they attempted to negotiate with their creditors a situation whereby the creditors become minority shareholders in the business in lieu of outstanding amounts due. Have they even attempted to negotiate a payment plan by instalments with their creditors? Have they made any attempts to attract private investment either as sleeping partner(s) to cover the debt or as business partner(s) taking over selected parts of the facility - I find it hard to believe that there wouldn't be at least some interest from local business people to take over the bar, cafe/snacks etc provisions.

 

Some very good points have been raised previously, insofar as what capital assets does SA hold title to? Why do they own the former Weisdale Hatchery, what purpose does it serve? Can retaining the old Weisdale Mill really be justified? Could art exhibitions not be held somewhere in Mareel, or jointly in Mareel and the Museum, can we in the present economic climate really justify a dedicated Gallery given the other facilities of a similar nature that exist? The mortgage, re-mortgage, sale to lease, or outright sale of either or both would cover a sizeable chunk of the SA outstanding debt. Then there's the Garrison - do SA own it or is it just a lease? Has it seen any use since Mareel's doors opened, can it be expected to see any real use as long as Mareel is there? If its going to revert back to the days of only being used for the Christmas pantomime and one or two occasional performances during the year, can Shetland justify afford to keep it on? Nice bit of real estate in a prime location that one....

 

Bills obviously must be paid, and everything reasonable should be done to maintain Mareel and what it offers "as is", but in the present economic climate additional funds from the Council should only be considered when every other potential avenue and arrangement has been fully investigated and exhausted, and the baliffs are knocking on Mareel's door.

[shetlandpeat]

Some of thatt may need the constitution changed. That would take time. The money would not be wasted. Treat it as an On Call deposit of a short term and the cost to the Mareel would be small in comparison of the expense of waiting long enough for enforcement how much more would that cost?

Any figures or comparisons to compare?

[JohanofNess]

Many things puzzle me about this, and before the Council even consider the request answers need to be gotten. This was a fixed price contract, the delays and sub-contractors going bust should not be Mareel's problem or bill, that's all DITT's problem on a fixed price deal

 

Not necessarily, if the sub contractors were nominated and specified in the documents then DITT either have to use them or find a suitable alternative for approval. Fixed price is for the contract documents and known conditions at time of tender, it doesn't mean a Contractor would be held to that price if conditions or details were to change.

 

unless of course the overspend is as a result of SA chopping and changing specs on the hoof, or they were foolish enough to sign a contract that permitted costs for certain "unforseen circumstances" to be legitimately added on to the final job price.

 

Nothing foolish in that, the contracts are there to protect both parties, no construction contract these days is weighted heavily on one party over the other. Would you rather DITT went to the wall as well because a sub contractor went bust and held the contract up?.

 

In fact many contracts contain exactly the opposite, in that penalty clauses result in the contractor's having to pay the client a pre-agreed amount for late completion. Regardless, its common place for clients to have insurance to protect themsleves from the effects of contract overspends they may be legitimately billed for, did SA have such insurance for the Mareel contract? If they did why isn't it covering this, and if they didn't, why didn't they.

 

The contractor doesn't pay the client the damages are deducted from the contract sum unless the damages exceed the contract sum. The Contractor can also remove the threat of damages if they can provide evidence of reasonable cause requiring an extension of time, which I believe DITT have.

[Colin]

Not to do so would be an even bigger kick in the teeth to the smaller venues like local halls which are among the many financial beneficiaries of Mareel that can't be easily quantified.

 

 

Maybe they can't be 'easily quantified' because they are either immeasurably small or, they don't exist at all.

 

I claimed (right from the start) that Mareel would damage country halls by reducing their usage/income.

Nothing I have seen so far encourages me to think otherwise.

 

Halls can't even get a grant to fix a leaky roof but Mareel, apparently. only has to 'sniffle' and they jump to the front of the queue.

 

Instead of everyone trying to figure out ways to 'give' the place money, has anyone wondered why they haven't tried to take a full blown commercial loan to make up the shortfall.?

After all, it was supposed to be (according to the cash flow) commercially viable and a dead cert to be profitable.

[Ghostrider]

Many things puzzle me about this, and before the Council even consider the request answers need to be gotten. This was a fixed price contract, the delays and sub-contractors going bust should not be Mareel's problem or bill, that's all DITT's problem on a fixed price deal

 

Not necessarily, if the sub contractors were nominated and specified in the documents then DITT either have to use them or find a suitable alternative for approval. Fixed price is for the contract documents and known conditions at time of tender, it doesn't mean a Contractor would be held to that price if conditions or details were to change.

 

Point is, we don't know who chose the sub-contractors. If DITT chose them, then its DITT's problem, if they were SA chosen and contract specified, than how their going bust was addressed resulted in SA chopping and changing on the hoof, and apparently choosing to incur additional outlay which they did not have finance to meet = bad housekeeping.

 

unless of course the overspend is as a result of SA chopping and changing specs on the hoof, or they were foolish enough to sign a contract that permitted costs for certain "unforseen circumstances" to be legitimately added on to the final job price.

 

Nothing foolish in that, the contracts are there to protect both parties, no construction contract these days is weighted heavily on one party over the other. Would you rather DITT went to the wall as well because a sub contractor went bust and held the contract up?.

 

I'd rather no one went bust, I do contend though that if SA signed a contract either allowing for a maximum spend, or an "as much as necessary" spend to be added to the final job price to cover the costs of "unforseen circumstances", that they were foolish to do so without keeping a very close check on just how much the running total stood at at any given time, and if they were doing that, that they were extremely foolish not to have approached their finance sources long, long before that total hit the alleged £1.2 Million.

 

In fact many contracts contain exactly the opposite, in that penalty clauses result in the contractor's having to pay the client a pre-agreed amount for late completion. Regardless, its common place for clients to have insurance to protect themsleves from the effects of contract overspends they may be legitimately billed for, did SA have such insurance for the Mareel contract? If they did why isn't it covering this, and if they didn't, why didn't they.

 

The contractor doesn't pay the client the damages are deducted from the contract sum unless the damages exceed the contract sum. The Contractor can also remove the threat of damages if they can provide evidence of reasonable cause requiring an extension of time, which I believe DITT have.

 

Which amounts to one and the same thing, it matters none whether one party hand the other a cheque, and the other hands one back, or if the sum is deducted from the final bill and only one cheque is handed over, each party ends up with the same cash in their hands. Certainly a contractor can be protected from having to pay panalties by "get out" clauses in a contract, DITT may well have satisfied the requirements to do so in this case, I don't know, as far as I am aware confirmation of the situation regarding this is not currently publically available.

 

Bottom line, SA authorised, one way or another, an approx 10% overspend on the job, without knowing when or how they could pay for it. Now they're expecting the Council, who cannot find cash to pay its own bills, to bail them out after the fact. Their story as to how and why they authorised such an overspend needs to be exceedingly good, and they need to prove that they've investigated and exhausted all other avenues to covering their funding defecit before approaching the Council if they expect much sympathy or support from many. If they knew they didn't have the money to cover the bill, least they could have done was fess up and start talking the minute they were aware they were gonna hit the red, it would have been only respectful and polite. If they didn't know they were going to hit red until well after they'd done so, and after the job was done, they really cannot have been paying attention or caring, and should be left to find their way out of the mess of their own making.

[JohanofNess]

 

Point is, we don't know who chose the sub-contractors. If DITT chose them, then its DITT's problem, if they were SA chosen and contract specified, than how their going bust was addressed resulted in SA chopping and changing on the hoof, and apparently choosing to incur additional outlay which they did not have finance to meet = bad housekeeping.

 

Bryan can probably confirm this but due to the nature of the fittings and finishings I would be reasonably confident that the sub contractors or at least specific products were in the contract documents and not DITT's choice. Had Mareel been a design and build then DITT would likely be in a lot more bother.

 

I'd rather no one went bust, I do contend though that if SA signed a contract either allowing for a maximum spend, or an "as much as necessary" spend to be added to the final job price to cover the costs of "unforseen circumstances", that they were foolish to do so without keeping a very close check on just how much the running total stood at at any given time, and if they were doing that, that they were extremely foolish not to have approached their finance sources long, long before that total hit the alleged £1.2 Million.

 

I'm not sure you understand the nature of the contract, a fixed price is only fixed if the terms and scope of works don't change, they did change. DITT wouldn't carry out additional items without client approval, if they did they do so at the risk of not being reimbursed. If there are additional costs it's highly likely it was with SA's full knowledge and agreement at the time the instructions were issued. It would be surprising due to the amount of consultants involved that the overspend wasn't discussed at every progress meeting. In saying that final contract costs aren't necessarily agreed until up to a year after contract completion. Depends on the form of contract signed up to.

 

Which amounts to one and the same thing, it matters none whether one party hand the other a cheque, and the other hands one back, or if the sum is deducted from the final bill and only one cheque is handed over, each party ends up with the same cash in their hands. Certainly a contractor can be protected from having to pay panalties by "get out" clauses in a contract, DITT may well have satisfied the requirements to do so in this case, I don't know, as far as I am aware confirmation of the situation regarding this is not currently publically available.

 

There is no get out clause, there is no magical eureka aha we've gotten out of it moment. The Client has full knowledge of the contract as does the Contractor if the Contractor demonstrates that they are due additional monies it is because the contract document and method of measurement dictate they are. If the liquidated damages clause comes into effect it is only because the Contractor cannot sufficiently demonstrate the causes for the delay were outwith their direct control.

 

The fact that SA are even asking for the money would make me confident that their consultants haven't been able to argue that DITT aren't due the additional costs. I've been involved in enough adjudications and arbitrations to know that by the time a Client discusses getting money they've given up arguing they don't have to pay.

 

What I would also say is SA haven't really done anything out of the ordinary, construction costs legitimately increase on jobs all the time, they were probably aware of it but due to the nature of their funding they can only get the additional monies once they know exactly how much they need.

[Ghostrider]

 

Point is, we don't know who chose the sub-contractors. If DITT chose them, then its DITT's problem, if they were SA chosen and contract specified, than how their going bust was addressed resulted in SA chopping and changing on the hoof, and apparently choosing to incur additional outlay which they did not have finance to meet = bad housekeeping.

 

Bryan can probably confirm this but due to the nature of the fittings and finishings I would be reasonably confident that the sub contractors or at least specific products were in the contract documents and not DITT's choice. Had Mareel been a design and build then DITT would likely be in a lot more bother.

 

Yes, I'd too expect that at least the specific products were stated in the contract documents. Whether or not specific contractors were, we don't know, and thats the point. If DITT chose their own sub-contractors and any went bust, that's DITT's problem to cover. If SA chose them, of course they're SA's problem, and any associated expenses due to any going bust is their responsibility. My point still stands though I believe, as if it was the latter option, SA were in full control of how they addressed the issue of any sub-contractor specified by them going bust, including the knock on costs involved, and should have been factoring that in to their overall budget and financial backing arrangements immediately it occured.

 

I'd rather no one went bust, I do contend though that if SA signed a contract either allowing for a maximum spend, or an "as much as necessary" spend to be added to the final job price to cover the costs of "unforseen circumstances", that they were foolish to do so without keeping a very close check on just how much the running total stood at at any given time, and if they were doing that, that they were extremely foolish not to have approached their finance sources long, long before that total hit the alleged £1.2 Million.

 

I'm not sure you understand the nature of the contract, a fixed price is only fixed if the terms and scope of works don't change, they did change. DITT wouldn't carry out additional items without client approval, if they did they do so at the risk of not being reimbursed. If there are additional costs it's highly likely it was with SA's full knowledge and agreement at the time the instructions were issued. It would be surprising due to the amount of consultants involved that the overspend wasn't discussed at every progress meeting. In saying that final contract costs aren't necessarily agreed until up to a year after contract completion. Depends on the form of contract signed up to.

 

Which only backs up my point that SA authorised and were quite likely aware they were heading towards an overspend situation quite some time ago. IMHO, SA were operating to a fixed budget of public funds, and had a duty to the public to come in on budget, or inform the public, or at least their representatives from whom the cash was sourced, and from whom they had to know they might very likely have to go back to for more, of the liklihood of an overspend at the earliest possible opportunity.

 

To come around asking for cash to cover an alleged £1.2 Million overspend only two months after getting the keys so to speak, smacks, on the face of it of having been aware that there would be a need to ask for a significant sum of additional finance. But keeping it quiet until the last possible moment so that the maximum number of customers could have the opportunity to visit, and hopefully be convinced to join the "you can't let it close now its here/you can't lose whats already been spent" bandwagon to help force through approval.

 

Which amounts to one and the same thing, it matters none whether one party hand the other a cheque, and the other hands one back, or if the sum is deducted from the final bill and only one cheque is handed over, each party ends up with the same cash in their hands. Certainly a contractor can be protected from having to pay panalties by "get out" clauses in a contract, DITT may well have satisfied the requirements to do so in this case, I don't know, as far as I am aware confirmation of the situation regarding this is not currently publically available.

 

There is no get out clause, there is no magical eureka aha we've gotten out of it moment. The Client has full knowledge of the contract as does the Contractor if the Contractor demonstrates that they are due additional monies it is because the contract document and method of measurement dictate they are. If the liquidated damages clause comes into effect it is only because the Contractor cannot sufficiently demonstrate the causes for the delay were outwith their direct control.

 

The fact that SA are even asking for the money would make me confident that their consultants haven't been able to argue that DITT aren't due the additional costs. I've been involved in enough adjudications and arbitrations to know that by the time a Client discusses getting money they've given up arguing they don't have to pay.

 

What I would also say is SA haven't really done anything out of the ordinary, construction costs legitimately increase on jobs all the time, they were probably aware of it but due to the nature of their funding they can only get the additional monies once they know exactly how much they need.

 

I used "get out clause" as a generic term, as in its simplest terms, that is what it is, something the contractor or client can do (or not do) and the other party either has to put up with or pay for, as appropriate. Obviously both parties are (or should be) fully aware of such "small print", and behave accordingly.

 

I don't think there's any doubt Mareel accept they owe, given their and DITT publically reported spats in Court and at adjudication, just how much they owe may not be quite so clean cut. From press reports they owe an unspecified portion of £200k they were ordered to pay back in the summer, plus up to "hundreds of thousands" more, upon which allegedly neither DITT or SA are happy with the adjudication decison, and which both are allegedly likely to challenge.

 

I'm not necessarily saying Mareel has done anything "wrong", apart from possibly not being the greatest at keeping tabs, doing sums and taking what I would consider a "responsible" stance with their "backers", ie. us, the public. Known unknowns and unknown unknowns (to paraphrase Rummy) affect the final bottom line of any project, large or small, their downfall IMHO has apparently been to continue regardless to achieve completion, while very probably being aware for some time that they were spending money they did not have, yet probably choose to keep that information from the very people they had to know they would soon have to approach begging bowl in hand. I have a problem with the ethics of that.

 

Maybe I'm just old fashioned or something, but when you're given a set budget for a job, you covet every penny like it was your last one to ensure you come in within it, or you get back to your backers at the earliest possible opportunity and explain why you can't come in on bedget, give your best estimate of how much extra funds will probably be needed to complete to plan, and let them decide if they're amenable to upping finance. Given the timing of the additional funding requests, I do not believe Mareel weren't aware of an overspend situation months ago while construction was still ongoing, and if they genuinely weren't they just weren't paying attention IMHO.

 

You do not crash on to completion regardless, then hand your backers a bill representing 10% of the original budget, telling them to pay it, or the bailiffs will be coming to cart the moveables away. Not if you expect a friendly and favourable reception in my world anyway.

[JohanofNess]

Shetland Arts would have been aware of the overspend, in their defence they probably didn't know to the last penny what that was likely to be until the DITT argument was settled. I've seen claims go from over £300k to under a hundred at adjudication. If SA had come back seeking funds too early they could very well have ended up in the situation they had to go back again for more.

 

From memory they did suggest they would need more than the contract contingency as much as a couple of years ago. You're right to a degree they have a responsibility with public money to try and not overspend but at the same time the issues that came up on that job made it difficult for that to happen. If they hadn't overspent there would be a £12million building sitting incomplete and not able to create revenue which in my eyes would be worse than trying to seek £1.2m additional funds. Also it is worth bearing in mind that SA do have recourse against their consultants if they've proven to be ineffective in their roles of the management of the contract.

[EM]

Shetland Arts ... From memory they did suggest they would need more than the contract contingency as much as a couple of years ago.

No, it was not so long ago. In September 2011 they were still adamant the project would come in within budget:

Shetland Times[/url]"]

But Shetland Arts director Gwilym Gibbons insisted this week that the organisation would not have to seek extra funding.

...

Speaking from London on Wednesday, Mr Gibbons said: “I’ve no intention to look for additional funding, which is what we’ve said all along.

 

“I’m not going to predict the future but what I will say is that we are striving to deliver this building on budget and there is nothing that has changed in recent months that is suggesting we are going to do otherwise.â€

...

"There will be costs for the contractor and there will be costs for us but that does not mean that we can’t deliver it within budget.â€

[shetlandpeat]

He did not intend to look for additional funding. He was right at that time. However, things change. I remember being told by my MP that the Gov had no plans to close Coastguard Stations, at the time she was right. They didn't. Then things changed. As they have in this case...