REPORT TO: CABINET 10 December 2012

18/11/2013

CHESHIRE EAST COUNCIL
REPORT TO: CABINET
Date of Meeting: 10 December 2012
Report of: John Nicholson – Strategic Director, Places and
Organisational Capacity
Subject/Title: Major Change Project 6.4 – Determine Future
Delivery Model for Waste Management Services
Portfolio Holder: Cllr Rod Menlove
1.0 Report Summary
1.1 The identification of future service delivery options for recycling and waste is a
major change project for the Council. A specialist consultancy, AMEC
Environment and Infrastructure UK Ltd (AMEC) was commissioned to assess
potential future service delivery options for the delivery of the Authority’s
household waste and recycling services. The purpose of the study was to
identify a preferred option that had the potential to deliver significant savings (a
reduction of at least £2m from the service’s annual budget) and to highlight and
assess the risks, benefits, asset and procurement implications.
1.2 Four service delivery options were considered:
i) An integrated procurement including the collection service and disposal and
recycling processing contracts;
ii) A separate or combined procurement of the collection operation, residual
disposal and recycling processing contracts;
iii) Creating an arms length company to run the collection operation and
manage disposal and recycling contracts; and
iv) Retaining the in-house collection service and procuring new contracts for
disposal and recycling processing.
1.3 The report identifies that Option (i) could potentially deliver the highest savings
estimated at £3.1m compared to the 2012/13 forecast outturn position. They
highlight however that all of the options scoped are considered high risk with
respect to deliverability by 2014. Option (i) could not be delivered within the 31
March 2014 timescale with an earliest estimated delivery date of 7 May 2015.
1.4 The consultants report suggests that the timescales for Option (i) could be
mitigating by letter a short-term waste disposal contract and extending our
existing recycling processing contracts. They propose that the potential
additional cost increase through doing this could be covered by introducing a
chargeable garden waste collection service.
1.5 The report also then recommends the Council take the following steps to
commence the procurement process;
Agenda Item 8
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•
Commence work without delay on the Authority’s procurement objectives
and strategy;
•
Commence work without delay on the documents bidders will require to
inform their tender submissions;
•
Decide on any interim/short-term measures that are required to ensure
continuity of residual waste treatment/disposal arrangements;
•
Review existing contracts to assess the viability and impact of extending
them;
•
Instigate a waste composition analysis to inform the residual waste
procurement; and
•
Identify any procurement frameworks that may have secured residual
waste treatment/disposal capacity.
2.0 Decision Requested
2.1 Cabinet are required to approve Option i/ii as the preferred way forward and
request that the Strategic Director Places and Organisational Capacity, and the
relevant Portfolio Holders, work with the relevant members to commence the
procurement exercise immediately..
2.2 Request that the Strategic Director Places and Organisational Capacity, in
consultation with the relevant Portfolio Holders, appraise the Cabinet of the
outcome of the tender exercise, and seek their approval to proceed with the
contract award, at a future meeting of the Cabinet.
2.3 Authorise the Strategic Director Places and Organisational Capacity, in
consultation with the relevant Portfolio Holders, to procure an interim residual
waste treatment contract to run from April 2014 until the implementation of new
overall arrangements.
2.4 Authorise the Strategic Director Places and Organisational Capacity, in
consultation with the relevant Portfolio Holders, to extend the current dry
recycling and garden waste contracts to coincide with the implementation of the
new arrangements.
2.5 Authorise the Strategic Director Places and Organisational Capacity, in
consultation with the relevant Portfolio Holders, to procure external consultancy
support to deliver new arrangements.
2.6 Authorise the Strategic Director Places and Organisational Capacity, in
consultation with the relevant Portfolio Holders, to explore alternative
procurement routes to traditional procurement processes, including working
with other local authorities or local authority consortia to deliver the goals of this
project but in a more cost effective manner .
3.0 Reasons for Recommendations
3.1 In March 2014, the residual waste disposal contract expires and cannot be
extended further. The garden waste composting, recycalate processing and
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bulking contracts also expire in March 2014 but have more flexibility as they
can be extended for a period beyond 2014.
3.2 There is an immediate need therefore to secure residual waste treatment and
disposal capacity from March 2014 as an interim measure to bridge the gap
between April 2014 and the implementation of a longer-term treatment and
disposal solution.
3.3 A savings target of at least £2m per annum has been identified for recycling
and waste from 2014/15 to realise potential revenue savings from the renewal
of the major recycling and waste contacts and possible service provision
efficiencies.
4.0 Wards Affected
4.1 All Wards
5.0 Local Ward Members
5.1 All Members
6.0 Policy Implications including - Carbon reduction
- Health
6.1 Our Sustainable Community Strategy and Joint Municipal Waste
Strategy seek to manage waste more sustainably promoting waste
prevention, reuse and recycling.
6.2 Objective 7 in the Councils 2012 – 15 business plan. This requires the
Recycling and Waste Service to review, assess and evaluate waste
collection, treatment, and disposal to provide information about future
options.
6.3 Outcome 4 of the Council’s 2013-16 three year plan identifies the
aspiration for Cheshire East to be a ‘green and sustainable place’.
6.4 Efficiencies in the alternative delivery of waste management services
may have carbon benefits.
7.0 Financial Implications (Authorised by the Director of Finance and
Business Services)
7.1 The report demonstrates that option (i) could potentially deliver the
highest savings estimated at £3.1 million compared to the 2012/13
forecast out turn position. However, full savings achievability will be
identified from the tenders received, this is unlikely to be known
precisely until Quarter 3 of 2014/15. AMEC highlight however that all
of the options scoped are considered high risk with respect to
deliverability by 2014. Option (i) could not be delivered by the end of
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March 2014 through the Competitive Dialogue process; the earliest
estimated delivery date is May 2015 (based on issuing an OJEU notice
at the start of January 2013).
7.2 Due to the timetable described in 7.1 above, mitigation needs to be
sought to provide a continued recycling, treatment and disposal service.
This can be achieved by letting a short term waste disposal contract and
extending our existing recycling processing contracts. Short term
contracts tend to be relatively more expensive than long term
arrangements and any extension of the existing contracts must be
mutually agreed by both the contractor and the Council.
7.3 The estimated financial implications of the proposed procurement, plus
the impact of interim solutions and one-off consultancy costs etc will be
reflected in the current medium-term financial strategy and budget
setting processes for 2013-16.
8.0 Legal Implications (Authorised by the Borough Solicitor)
8.1 The procurement process undertaken will be best served by use of the
Competitive Dialogue procedure. A procurement exercise of this scale
will require substantial external legal and procurement resource that
itself will need to be compliantly procured. The competitive dialogue
procedure would take at least a year to complete depending on how
many dialogue stages are required in order to refine the Council’s
requirements.
8.2 Whether the current contracts can be extended is a question of fact
and the necessary due diligence will need be undertaken to ensure
that the contracts can be extended without the Council breaching the
Public Contract Regulations 2006.
8.3 This procurement is certain to involve significant HR issues and raise
the possibility of TUPE transfer of the majority of Recycling and Waste
staff to a private sector provider. This will involve undertaking the
required consultation and the timescales for this need to be factored in
to the timetable to run concurrently with the procurement process
However, a client team will need to be retained by Cheshire East to
drive the strategic direction of the services forward and to continually
seek to improve services through careful partnership working, contract
monitoring and management.
8.4 Consideration should also be given to consultation requirements
should the ultimately procured service result in reduced waste services
to the public.
8.5 Alternative delivery options may involve transfer and or leasing of
capital assets such as vehicle fleet and depots currently supporting the
recycling and waste service.
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9.0 Risk Management
9.1 Insufficient time to procure, implement and mobilise new services by
May 2015 resulting in reputational damage to the Council.
9.2 A separate residual waste treatment/disposal contract will need to be
procured for the start of April 2014 to ensure the continuation of
frontline residual waste services. This contract would likely be short
and hence, potentially more expensive than that obtained through a full
outsourcing project.
9.3 The current garden waste and dry recyclables contracts will need to be
extended by mutual consent from April 2014 until June 2015 to ensure
continuation of service. This requires agreement by both CEC and the
private sector provider over the length and nature of the extension.
9.4 Planning permission not obtained in time/denied to provide a waste
transfer facility in the north of the borough resulting in either the
services in the north not being able to be delivered in an economic
or environmentally sustainable manner or, a monopoly of private
sector provision as currently exists, increasing the contract costs to
the Council.
9.5 Anticipated savings not being achievable from the tenders received.
This is unlikely to be known precisely until Quarter 3 of 2014/15.
9.6 There are significant implications for the existing work force and their
Trade Unions. Early and continued engagement with staff and Trade
Unions is of paramount importance in such a large, transitional project.
10.0 Background and Options
10.1 A report was considered by Cabinet on 20 August 2012 that outlined potential
service options for the recycling and waste service, post April 2014. It asked
for an indication of a preferred delivery option at that stage and sought a
decision to appoint consultants to carry out a more detailed analysis on the
preferred option.
10.2 Following a competitive procurement specialist waste consultant AMEC was
duly appointed to assess four potential future service delivery options for the
delivery of the authority’s household waste and recycling services. The
purpose of the study was to identify a preferred option that had the potential to
deliver the required savings (a reduction of at least £2 million from the Service’s
annual budget) and to highlight and assess the risks, benefits, asset and
procurement implications.
10.3 Four service delivery options were considered:
i) An integrated procurement including the collection service and disposal and
recycling processing contracts;
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ii) A separate or combined procurement of the collection operation, residual
disposal and recycling processing contracts;
iii) Creating an arms length company to run the collection operation and
manage disposal and recycling contracts; and
iv) Retaining the in-house collection service and procuring new contracts for
disposal and recycling processing.
10.4 As part of the study, the consultant undertook an exercise with Members and
key officers to identify financial, strategic, political and environmental criteria
against which each option could be ranked to identify a preferred service
delivery option. A prioritisation exercise was undertaken to score the relative
importance of these criteria. Each option was then assessed against each
criterion to measure the level of applicability. This process identified that option
(i) was the preferred option with option (ii) close behind.
10.5 The potential savings for each option are detailed in the bar graph below
demonstrating that all of the options could to a greater or lesser extent provide
savings against the recycling services projected 2012/13.
10.6 The report demonstrates that option (i) could potentially deliver the
highest savings estimated at £3.1m compared to the 2012/13 forecast
outturn position. They highlight however that all of the options scoped
are considered high risk with respect to deliverability by 2014. Option
(i) could not be delivered within the 31 March 2014 timescale with an
earliest estimated delivery date of 7 May 2015.
10.7 The consultancy suggest that the timescales for Option (i) could be
mitigated by letting a short term waste disposal contract and extending
our existing recycling processing contracts. They propose that the
additional cost increased through doing this could be covered by
introducing a chargeable garden waste collection service.
10.8 Option (i) would see all the contracts (residual waste treatment/ disposal,
waste collection (with fleet provision and maintenance), HWRCs, garden
waste processing, dry recycalate processing and waste bulking) let as
an integrated bundle. This could reduce the number of possible bidders
but competition would still be present.
10.9 The key benefit of this option is that the contractor is in control of
contract interfaces i.e. where the different contract elements interact.
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This reduces or eliminates the risk of disputes arising between
contractors and also reduces the number of points of contact between
the contractor and Council.
10.10 The report also investigates other service options such as food waste
collection and nappy recycling. They indicate that on there own food
waste and nappy recycling would add to the cost of delivering the
service. If introduced alongside other service changes such as a
chargeable garden waste service or a changed frequency of wheeled
bin collections however these could be introduced at little or no cost to
the Authority.
11.0 Access to Information
The Executive Summary of the AMEC study is appended to this report (Appendix A). The
full study can be provided by contacting the report writer:
Name: Ray Skipp
Designation: Waste and Recycling Manager
Tel No: 01270 686815
Email: ray.skipp@cheshireeast.gov.uk
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