[....] Man U, on the other hand, are playing at an average level...
Yeah I would agree on that. They are far to be considered a strong team. They have dropped some easy matches and have been defeated quite heavily at certain times but if you check their matches in this season, they have maintained better consistency. Eriksen and Casemiro has brought some stability in midfield but their defence needs to improve still. Maybe next season they can perform much better ; well that's how improvement works as you can't expect the result right away.
It seems like that barcelona will be making an official announcement for gundogan after UCL final match. Some articles have confirmed that Barcelona has agreed with Gundogan to go to the club in summer.. Kovacic has been reaching agreement with manchester city.
You will able to see kovacic to replace gundogan very soon. Manchester just need to finalize the deal with gundogan at this moment. I think that you will be seeing kovacic to play in manchester city as soon as possible. The transfer fee for kovacic was not a problem for manchester city at this moment. City was a rich team that can pay everything as chelsea wants.
Anyone can proceed City for Gundogan but the question is still not clear where does Gundogan wants to go? City are preparing for contract extension which will be produced before Gundogan after the UCL finals; Barca, PSG and Arsenal are all interested in Gundogan and they will also start talks after UCL finals only. Right now nothing is clear but it will be clear soon.
About Kovacic, it does seem that City will be able to get him from Chelsea but it doesn't necessarily means that they are planning for Gundogan replacement. Well it does seems like it but maybe they are adding another player into their midfield. Also Kovacic to City hasn't been done yet so maybe that deal also depends on Gundogan answer to the contract extension that City is about to provide.