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Agenda Item No

 

The Vale of Glamorgan Council

 

Cabinet Meeting: 14 July, 2014

 

Report of the Cabinet Member for the Environment and Visible Services

 

Waste Management and Cleansing - Interim Residual Waste Contract

 

Purpose of the Report

1.         To provide Cabinet with details of an Interim Residual Waste Disposal Contract offer from Viridor Ltd in order for Cabinet to take a decision on entering into an interim contract with Viridor, in partnership with Cardiff City Council (CCC), Caerphilly County Borough Council, Monmouthshire County Council and Newport City Council, for this service.

2.         To advise Cabinet of proposed arrangements for haulage, treatment and / or disposal of residual waste during the interim contract 3 month commissioning stage.

3.         To advise Cabinet of the requirement to exercise the Council's contractual break option, in part and fully, in relation to the existing contract with Biffa Waste Services for residual waste disposal.

Recommendations

1.         That Cabinet approve Viridor's offer of an interim residual waste treatment contract from September 2014 to August 2015 (subject to the fine tuning as per (4) below)

2.         That Cabinet approves that Cardiff City Council (CCC) act as the Host Authority and enter into all formalities for the proposed interim residual waste treatment contract with Viridor on its own behalf and on behalf of the other constituent authorities of Prosiect Gwyrdd (PG).

3.         That Cabinet grants delegated authority to the Director of Visible Services and Housing in consultation with the Head of Legal Services, the Director of Resources and the Cabinet Member for the Environment and Visible Services to approve the Inter-authority Agreement "IAA" (subject to the fine tuning as per (4) below).

4.         That Cabinet grants delegated authority to the Director of Visible Services and Housing in consultation with the Head of Legal Services, the Director of Resources and the Cabinet Member for the Environment and Visible Services to make minor amendments (fine tuning) to the Interim Contract and the "IAA" if required and to sign-off the final documents on behalf of the Council.

5.         That Cabinet grants delegated authority to the Director of Visible Services and Housing in consultation with the Head of Legal Services, the Director of Resources and the Cabinet Member for the Environment and Visible Services, to enter into contracts required to meet the 'ad hoc' contingency haulage, treatment and / or disposal arrangements with any PG partner or private contractor during the interim contract's 3 month commissioning stage (Sept to Dec 2014).

6.         That Cabinet approve the use of the contract break clause within the existing contract with Biffa Waste Services Ltd to part and fully terminate the existing landfill treatment contract with Biffa and grants delegated authority to the Head of Legal Services to issue Notices amending and then terminating the said contract.

7.         That the urgent decision procedure as set out in article 13.09 of the Council's Constitution be used.

Reasons for the Recommendations

1.         To allow the Council to enter into an interim contact with Viridor for the treatment of its residual waste between 1st September 2014 and the 31st August 2015 prior to the commencement of the PG contractual commission stage.

2.         To agree to Cardiff CC entering into a contract with Viridor on behalf of all the partnering Councils

3.         To ensure there are suitable arrangements in place to allow Cardiff CC to manage the contract and receive payments from the partnering Councils.

4.         So that any minor changes can be made without referral back to Cabinet.

5.         So that suitable alternative arrangements are in place to address the periods when the Council's waste cannot be delivered to the Viridor plant.

6.         To ensure that the Council's residual waste is available to be treated under the interim contract and the full PG contract.

7.         To ensure the earliest contract award taking into account the notice period for changes or termination of the existing Biffa contract.

Background

4.         Council resolved on the 6th March 2013 (min no's 947/950 PROSIECT GWYRDD PARTNERSHIP: RESIDUAL WASTE TREATMENT PROCUREMENT (DVSH) – refers).  

(1)          T H A T Viridor Waste Management Ltd (Viridor) is appointed as the Preferred Bidder.

(2)          T H A T authority is delegated to the Council Leader and Managing Director to instruct the Senior Responsible Officer of the Project Board (in consultation with the Project Board) to finalise the procurement process to successful contractual close (including any refinement of documentation as referred to in the Common report, Appendix 1).

(3)          T H A T the FBC is approved, including the improved affordability position in terms of:

(i)           the large reduction compared to the original Outline Business Case (OBC), affordability threshold:

(ii)          the significant costs saving relative to continuing to landfill residual waste; and

(iii)         the Net Present Value (NPV) of the Viridor solution, including costs directly incurred by this Council, £38m, which represents a reduction of £31m compared to the original OBC Upper Affordability Threshold of £65m approved by this Council in 2009.

The projected cost to this Council of the Viridor solution, including directly incurred costs, of £69m to the expiry of the contract in 2040/41 which represents a saving of £62m for this Council compared with the projected costs of continuing to landfill residual waste. This position is illustrated in Figure 1 (as amended) in paragraph 21 of this report.

(4)          T H A T, subject to Cardiff Council agreeing, Cardiff Council acts as Host Authority (as defined in the Joint Working Agreement 2 JWA2.

(5)          T H A T the JWA2 is approved (on the understanding that it is subject to any refinement and finalisation as per recommendation 6 below).

(6)          T H A T authority is delegated to the Director of Visible Services and Housing in consultation with the Council Leader and Cabinet Member for Visible Services and the Environment to finalise and conclude the JWA2 agreement.

(7)          T H A T, subject to Welsh Government (WG) approving the Final Business Case (FBC) and confirming subsequent funding, conclusion of the JWA2, and Cardiff Council agreeing to act as Host Authority; that a relevant authorised officer of Cardiff Council on behalf of the Partnership signs the Project Agreement with Viridor.

(8)          T H A T, subject to recommendations (1) to (7) above, following consultation with the s151 Officers from each Partner Authority the s151 Officer from Cardiff Council signs the certificate pursuant to the Local Government (Contracts) Act 1997 on behalf of the other Partner Authorities.

(9)          T H A T Council authorise the Joint Committee, subject to recommendations (1), (2) and (3) above, to submit the FBC to WG for formal approval.

5.         On the 10th December 2013, PG formally closed the procurement for a 25 year residual waste treatment contract with Viridor Waste Management. The formal service commencement date is 1st April 2016 which is preceded by a 7 month contract commissioning period. PG waste will therefore start being delivered to the site in September 2015.

Relevant Issues and Options

6.         Viridor’s solution for PG, which is based on a merchant energy from waste (EfW) facility at Trident Park, Cardiff, is presently being constructed. Under the current construction programme the facility will be able to start receiving waste (initially for hot commissioning) in September 2014, a year before waste can be delivered to it under the PG contract.

7.         Officers within the PG Partnership have recognised that there would be clear environmental and, potential financial benefits, of sending their residual waste to the facility from September 2014 and there is also the probable public expectation for the PG Councils to utilise the facility if it were available, rather than to continue sending their waste to landfill.

8.         Substantive negotiations with Viridor concluded on the 15th May 2014 and Viridor were requested to submit their firm offer, based on the agreed positions (dated 4th June 2014).  The key aspects of the offer are as follows:

(i)           the contract period is expected to run from 1st September 2014 to 31st August 2015.  From the 1st September 2015 the full PG service commences when the PG contract commissioning stage commences.

(ii)          the contract has two distinct phases:

(a)          Hot Commissioning (programmed from 1st September 2014 to 31st December 2014); and

(b)          interim service (programmed from 1st January 2015 to 31st August 2015.

9.         A full copy of the Viridor offer, including contract prices, is included in the Part II report, which follows on this agenda.

10.      It must be noted however, that the start date of the hot commissioning is not guaranteed as during this phase the facility is still under the control of the construction contractor "EPC Contractor", and the initial supply of waste during the hot commissioning phase is for the EPC Contractor to test that the plant is working well before it is handed over to Viridor. If something needs checking during hot commissioning the EPC Contractor could close the plant down and stop the waste. Such disruption should be minimal and PG have had a 'Paper' from Viridor's site engineers (Fitchner) explaining the relatively low risk of extended disruption.  In such circumstances the Council would need to make alternative arrangements for the treatment or disposal of its residual waste.

11.      If during the Interim Contract period Viridor cannot accept waste at the plant, they will provide contingency disposal arrangements. Three sites have been identified and comprise two EfW facilities and a landfill site. Priority will be given to utilising any available capacity at the EfW facilities ahead of landfill and it is likely that if contingency arrangements kick-in, waste could, under the arrangement, be sent to all three facilities. The contingency sites are:

(i)           Ardley EfW in Oxfordshire;

(ii)          Lakeside EfW near Slough; and

(ii)          Calne landfill in Wiltshire.

12.      An issue that was raised, after the provisional offer was made by Viridor, was that some types of waste could not be delivered during hot commissioning because it did not meet the EPC Contractor’s defined waste criteria. This was predominantly material from HWRC sites and bulky collections that would need shredding prior to going through the plant. Shredding was not part of the commissioning contract.

13.      Currently all the Council's residual waste disposal is contracted to Biffa Waste Services until the 31st March 2016. It will therefore be necessary for the Council to agree terms for early part and total termination of this contract to allow the Council to enter into both the interim contract in September 2014 and the contract commissioning stage of the full PG contract in October 2015.

 

Resource Implications (Financial and Employment)

14.      Details of the gate prices and the assumption of possible saving are provided in the Part II report to be considered later on this Agenda.

15.      Details of the cost for the Viridor contingency services are also provided for Members' information within the Part II report, it is however more likely that the Council would enter into a joint agreement with our PG partners to provide our own contingency arrangements, as this is likely to represent better value for money.

Sustainability and Climate Change Implications

16.      EfW facilities can play a part in sustainable resource and waste management when used in an integrated waste strategy prioritising minimisation, reuse and recycling as well as generating energy from waste. It contributes to the principles of sustainable development should it be pursued in an integrated way through a sustainable, innovative and productive economy that delivers high levels of employment, and a 'just society' that promotes social inclusion, sustainable communities and personal 'well-being' in ways that help protect and enhance the physical environment and optimise resource and energy use. Resultant reduction in use of landfill also makes a positive impact on climate change and greenhouse gas emissions.

Legal Implications (to Include Human Rights Implications)

17.      The procurement is being conducted in accordance with the 'negotiated procedure without notice' as set out in the Public Contracts Regulations SI 2006/5 with effect from 31 January 2006. 

18.      As an entity the Partnership does not have the legal power to contract with the successful bidder, so the contract will be made with one of the partner authorities (the Host Authority) pursuant to the Local Government (Contracts) Act 1997 on behalf of the other Partner Authorities.

19.      The existing Landfill contract with Biffa allows the Council to terminate the contract early using a partial or full break clause. The contract clause will be used to initially transfer the required residual tonnage from the Biffa contract to the interim contract and eventually to fully terminate the Biffa contract for the full PG contract in October 2015.

20.      Contract Standing Orders apply to all areas of Council activity and are made in accordance with the provisions of Section 135 of the Local Government Act 1972. They prescribe the minimum standards to be applied to contracts for the supply of goods or materials, the provision of services or the execution of works.

21.      Paragraph 11 of the Council's Contract Standing Orders requires terminations of contracts with the following values to be approved subject to legal advice in the following manner:

(i)           below £300,000 shall be approved by the Chief Officer and the Cabinet Member;

(ii)          over £300,000 shall be approved by Cabinet.

As the existing Biffa contract exceeds £300,000 (ii) above, Cabinet is requested to approve the partial and then full termination of the existing contract with Biffa in accordance with the following termination schedule;

 

(A)

From July 2014

 

Partial Termination

 

(i) 0 to 1,432* Tonnes per month for  Sept to Dec 2014;

(ii) 1,432* to 1,733 tonnes per month from Jan 2015 to Aug 2015.

* Excludes residual waste being delivered to Biffa at HWRC's

(B)

From July 2015

 

Full Termination

 

All residual waste arisings. 1643 tonnes from interim services period.

 

22.      The Council has already signed up to an Inter Authority Agreement (IAA) in pursuant to the powers in Section 101 of the Local Government Act 1972 for the main PG contract.  We are now required to enter into a separate IAA for the interim contract.  As this agreement is very much based on the previously accepted format for the main contract, it is proposed that acceptance of the terms be delegated to officers in consultation with the appropriate Cabinet Member.

23.      As with the full PG contract, it is proposed that CCC take on the role of ‘Host Authority’ acting as the contractual counterpart to Viridor. The new IAA would then be signed by the Partners to ensure that the contractual rights and obligations flow between CCC, other Partners and ourselves. This would also ensure that CCC is protected from any potential exposure resulting from taking on this role.

24.      The IAA will cover circumstances whereby some Partners might receive a different service at a different cost to others. Such circumstances might include hot commissioning ramp-up whereby not all partners are delivering all their waste to the facility resulting in a differential benefit across the Partnership. In such cases provisions have been included in the draft IAA to enable Councils to agree arrangements to effectively “trade†allowances between them, to ensure full use of capacity and a pragmatic solution to any waste capacity problems.  These sharing arrangements are defined within the IAA.

25.      For the avoidance of doubt it should be noted that any planning permissions, consents, permits or the like that may be required in respect of Viridor's facility are matters for the relevant Regulatory Authority (including any of the Partner Authorities in their capacity as local Planning Authority).  This report and recommendations proposed should not be seen as fettering the exercise of any Regulatory Authority’s statutory discretion or the exercise of any of their statutory functions.

Crime and Disorder Implications

26.      There are no crime and disorder implications associated with this report.

Equal Opportunities Implications (to include Welsh Language issues)

27.      There are no equal opportunity implications as a result of this report as treatment of municipal residual collection is offered at the kerbside to all municipal customers (householders and commercial customer contracted to the Council for collection).

Corporate/Service Objectives

28.      Outcome: Current and future generations of Vale residents and visitors enjoy the built and natural environments of the Vale of Glamorgan and actively protect and maintain them.

Minimising our impact on the environment:

E1 Work with a range of partners to provide appropriate residual and recycling collection treatment and disposal services and achieve national recycling target of 58%. (2015/16)

Policy Framework and Budget

29.      This report is a matter for Executive decision by Cabinet.

Consultation (including Ward Member Consultation)

30.      As this matter relates to the whole of the Vale of Glamorgan no individual ward Member consultation has been 0undertaken.

Relevant Scrutiny Committee

31.      Economy and Environment.

Background Papers

None

 

Contact Officer

Clifford Parish - Operational Manager Waste Management and Cleansing

Tel: 02920 673 220

 

Officers Consulted

Accountant - Visible Services

Head of Legal Services

Operational Manager - Committee Reports

Group Auditor

 

Responsible Officer:

Miles Punter - Director of Visible Services and Housing.

 

 

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