Peabody's BedZed soars £10m over budget

The Peabody Trust's eco-friendly BedZed development in Sutton, south London, has run £10.6m over budget.

The 82-home scheme, which has been showered with awards since its completion in May 2001, was expected to cost £14.168m. The trust has revealed that it now expects the overall cost to reach £24.821m.

The trust – which has also admitted that it will have to axe 51 development positions in order to raise the funds to meet the 2010 decent homes standard – has declined to reveal the reasons for the 44% cost overrun (HT 19 December 2003, page 7).

Dickon Robinson, the trust's group development director, said: "I can't go into detail as we are considering our position with the [construction manager and quantity surveyor] Gardiner & Theobald. There is no suggestion of legal action at this stage."

Responding to speculation that junior Peabody staff were able to authorise large payments without consulting senior managers, Robinson said: "It is fair to say that we have tightened our internal cost controls in the wake of our experience with BedZed. We have introduced a new system of authorising capital payments."

Robinson added: "The same year [2001/02], we made a £15m surplus from the sale of our stake in the joint venture Peabody Unite, so this financed the cost overrun. It is unfortunate that the surplus had to be eaten up in this way, but it meant that the trust was not impacted on financially."

He added that the decision to sell the 50% stake had been taken before the problems with BedZed.

A spokesman for Gardiner & Theobald said: "We are in discussions with Peabody and are attempting to get to the nitty gritty of what these cost overruns are and what caused them. Hopefully, these will emerge shortly."

Peabody also saw more modest overruns on one of its other flagship schemes, at Murray Grove in Hackney, east London (see "Budgets", left).

Bill Dunster, the architect of BedZed who is not involved in any cost discussions with the trust, said he was "surprised" at the figure. He said the final construction cost was £15.8m – still £1.7m more than the estimate.

He said: "BedZed is a prototype and these always tend to cost more before problems are ironed out in subsequent schemes."

Robinson responded: "The final [£24m] figure is an estimate of our maximum total liabilities. This includes land, staff time and the cost of the money borrowed to pay for the scheme."

Caroline Pickering, the trust's interim chief executive, also revealed that Peabody is in talks with another trust to merge their development departments.

She declined to reveal which one.