Questions asked over Boutique Modern contract

By Rebecca Maer

Rigorous credit checks and a risk assessment were carried out on a company which went into administration just as a £45 million building project was starting, a council meeting heard. 

Eastbourne Borough Council’s director of housing Nathan Haffenden insisted the procurement process for awarding the contract for the Bedfordwell Road site was fully compliant.

He was questioned at length by opposition Conservative councillors on the scrutiny committee (December 8) of the Liberal Democrat-controlled authority. 

Mr Haffenden said tight deadlines to spend nearly £10 million of Government funding meant that a contract to build 100 affordable homes had to be signed within six months of the money being confirmed.

Modular building company Boutique Modern, based in Newhaven, was awarded the contract.  

The funding – £7.62 million in an affordable homes grant and £2.2 million from a brownfield sites fund – was crucial to the development of the site which contains a Grade II-listed Victorian pump house.

The other £35 million required was to be listed on the council's balance sheet as debt.

Funding for the site, which was bought by the council in 2017 for £1.45 million, was confirmed in October 2024.

But the scheme had to be awarded to a contractor by March 2025 so the money could be used by a deadline of March 2027, Mr Haffenden said, adding that it was arguably an unrealistic timescale. 

Boutique Modern had already secured a tender in a public sector procurement framework in 2021 to build homes across East Sussex, West Sussex and Brighton and Hove for a total of £110 million. This process is known as ‘pre-procurement’.

"If this was in the private sector, heads would roll" - Conservative group leader Robert Smart

Mr Haffenden told the committee that the council had not incurred any losses after Boutique Modern went into administration in October this year. 

He said the money spent so far – about £6 million – was on groundworks, site preparation and design aspects which could be used by any contractor which eventually built the homes. 

But the procurement process, which attracted eight bidders, was questioned by opposition Conservative councillors.

Committee chair David Small (Con) said that at the time Boutique Modern secured the contract, it had revenues of £2 million. “You wonder if this company was capable of delivering this site,” he said. 

Conservative group leader Cllr Robert Smart said he had previously queried a project valued at a total of £45 million to build 100 affordable homes because that equated to £450,000 per home. 

He said that Boutique Modern accounts showed a deficit of £3.9 million in 2021, £4.4 million in 2022 and £5.8 million in 2023. Cllr Smart said the company had also reported £19,000 cash in the bank. 

“I would like to see the credit report you received and how you got to a position where Boutique Modern scored the highest out of eight bidders. If this was in the private sector, heads would roll,” he said. 

Cllr Smart added that the Conservatives were fully behind building houses, but the issue was the choice of Boutique Modern as the contractor.

“What happened to Boutique Modern is a symptom of wider challenges in the building industry" - council leader Stephen Holt 

Mr Haffenden told the meeting Bedfordwell was “an incredibly complex site”. But, he said, Boutique Modern had successfully built on sites in Eastbourne and elsewhere in Sussex.  

“There was a lot of discussion about the contract and risks associated with it, as with any contractor. There was thorough diligence and risk assessment. It is completely procurement-compliant,” he said. 

He said that to reduce the risk to the council and manage the project, it was split into five phases of 20 homes at a time to be built off-site and brought to Bedfordwell Road for assembly. This would have limited the disruption on nearby access roads.

Cabinet lead member for housing Peter Diplock (Lib Dem) had been asked to attend the meeting but was unavailable due to work commitments. Council leader Stephen Holt attended in his place. 

Cllr Holt told the meeting that at least two other contractors had tried to develop the site over the last 15 years and were unable to do so. 

“What happened to Boutique Modern is a symptom of wider challenges in the building industry. We are determined to re-procure to see housing targets met,” he said. 

“I have absolute confidence and faith we will have 100 affordable homes on the site.”

He said several mitigations were put in place, such as phased delivery and fixed pricing, and external independent specialist advice was sought.   

Finance director Homira Javadi told the meeting: “There were no red flags when we carried out the checks.” 

Cllr Small asked how much councillor oversight there had been about the contract. 

Mr Haffenden said that the full business case went before the Cabinet in July 2024 where it received approval. It had also previously been before the scrutiny committee. 

The development was to have included 80 affordable rent properties comprising two and three-bedroom houses and one and two-bedroom flats.

Eastbourne Borough Council said in a press release earlier this year when work started: "The Grade II-listed pump house, a familiar sight for train passengers near Eastbourne railway station, will also be sensitively renovated to accommodate 20 shared ownership flats and a commercial unit." 

According to Construction Index, building modular homes in factories has been suggested as the solution to UK construction industry's problems. However, over the past couple of years several similar companies have closed their factories. 

:: Rebecca Maer is a qualified journalist with 30 years’ experience in the UK and overseas as a news reporter, feature writer, columnist and business editor at organisations including the Press Association and The Observer. Rebecca started the Eastbourne Reporter in 2022 to interview people and revive genuine journalism in the town

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