Agenda Item No


The Vale of Glamorgan Council


Cabinet Meeting: 17 November, 2014


Report of the Cabinet Member for the Environment and Visible Services


Partnership project with Cardiff Council for the Treatment of Organic Waste - Appointment of Preferred Bidder


Purpose of the Report

1.         To advise Cabinet of the current position on the joint procurement project with Cardiff Council for the treatment of organic waste and to agree a preferred contract bidder.


1.         That Cabinet approves the appointment of Kelda Organic Energy Limited (K&E) as the Preferred Bidder for the long-term Organic Waste Treatment Project.

2.         That authority is delegated to the Director of Visible Services and Housing in consultation with the Leader, the Cabinet Member for the Environment and Visible Services, the Managing Director and the Head of Legal Services to finalise the procurement to a contract close.

3.         That the Final Business Case (FBC) is approved and subsequently submitted to WG for approval.

4.         That Cardiff Council act as Host Authority as defined in the Inter Authority Agreement (2) IAA(2). The IAA(2) is attached as Appendix 3 to the Part II report on this agenda.

5.         That authority is delegated to the Director of Visible Services and Housing in consultation with the Leader, the Cabinet Member for the Environment and Visible Services, the Managing Director and the Head of Legal Services to finalise and conclude the IAA(2) agreement, including any refinements necessary to the documentation.

6.         That subject to Welsh Government (WG) approving the FBC and confirming subsequent funding, conclusion of the IAA(2), and Cardiff Council agreeing to act as Host Authority; a relevant officer of Cardiff Council is authorised to sign the contract with  Kelda Organic Energy Limited, on behalf of both Cardiff and Vale of Glamorgan Councils.

7.         That subject to the recommendations 1-6 above and following consultation with this Council's S151 Officer, the S151 Officer from Cardiff Council be authorised to sign the certificate pursuant to the Local Government (Contracts) Act 1997 on behalf of both authorities.

8.         That Cabinet note the increase in procurement costs over those previously reported and the additional use of the Visible Services reserve to fund these costs.

Reasons for the Recommendations

1.         To permit selection of a preferred bdder.

2.         To allow progression of the procurement process to "financial close" and to agree entry into a formal contract.

3.         To accept the FBC and to permit the Senior Responsible Officer of the Project Board (in consultation with the Project Board) to finalise the procurement to contractual close (including any refinement of documentation).

4.         To allow, subject to their agreement, Cardiff Council to be designated as host authority (as defined in the IAA(2).

5.         To permit approval of the IAA(2) subject to any refinement.

6.         To allow, subject to WG funding approval, signing of the contract with Kelda Organic Energy, on behalf of both authorities.

7.         To authorise signing of the necessary financial certificate for the contract.  

8.         To update Cabinet.


2.         Cabinet were advised of the progress in respect to the future organic waste treatment procurement at their meeting on the 20th May 2013 (Minute no C1341 refers) and resolved.

(1)          T H A T the proposals contained within this report for the future delivery of recycling reprocessing, organic waste treatment and the management of Council’s Household Waste Recycling Centres (HWRC’s) be noted.

Reasons for decisions

(2)          To advise members and to assist them in making the necessary decisions on contractual arrangements for these services proposed within a further report on this agenda.

3.         Having previously resolved at its meeting held on the 1st October 2012 (Minute No C1844 refers)

(1)          THAT the Final Draft 'Outline Business Case' (OBC) described in this report and attached at Appendix 1, for an Organic Waste Treatment Solution, initially predicated by Cardiff Council, upon a technology neutral assumption to be submitted to WG and be approved.

(2)          THAT the level of financial support required to meet the affordability envelope as detailed in the OBC for the (organic waste treatment) procurement be noted and proposals for the provision of the same through the standard budget setting processes agreed.

(3)          THAT the urgency procedure under Article 13.09 of the Council Constitution to enable agreement of the affordability envelope defined in Appendix 1 and paragraph 11, committing funding for an appropriate solution up to the maximum limit quantified, the actual budget requirement to be confirmed in the Final Business Case, though the maximum additional increase in the base budget in 2016/17 would be circa £250k.

(4)          THAT delegated authority is granted to the Managing Director in consultation with the Director of Visible Services and Housing, the Leader and the Cabinet Member for Environment and Visible Services, to agree the Inter-Authority Agreement (IAA) proposed between Cardiff and the Vale.

Reasons for Decisions

(1) To enable the Vale of Glamorgan Council to initially enter into a formal joint procurement arrangement for the treatment of biodegradable wastes for the period 2015 to 2030.

(2) To ensure that future budgets are amended to reflect any increased financial demands of the new arrangements.

(3) To enable the joint procurement process to proceed during October 2012 with an agreed affordability envelope.

(4) To permit prompt agreement of the Inter-Authority Agreement between this Council and Cardiff Council on this project.

4.         At its meeting held on the 29 July, 2013 Cabinet resolved (Minute No. C1448 refers):

(1)          THAT the progression of this procurement to the Invitation to Submit Final Tender Stage (ISFT) be approved.

(2)          THAT the report be referred to the Scrutiny Committee (Economy and Environment) for information.

(3)          THAT further reports be provided to Cabinet as necessary on this matter during 2014.

Reasons for decisions

(1)          To permit the successful bidders from the ISDS Stage to be invited to submit Final Tenders and for the procurement to then be taken to the Preferred Bidder Stage.

(2)          To apprise Scrutiny Committee (Economy and Environment).

(3)          To obtain the necessary authority to progress through the latter stages of the procurement process.

5.         Cardiff and the Vale of Glamorgan Councils are purchasing Anaerobic Digestion (AD) and Open Windrow Composting (OWC) facilities to treat their source-separated food and green / garden wastes respectively, over a 15 year period. This is being procured as part of the WG’s Food Waste Investment Programme, which supports Councils with procurement funding and revenue support ( equates to approximately 17% of food waste gate fees only) in order to meet their statutory recycling targets between now and 2024 / 2025.

6.         The procurement will provide a solid recycling platform for the Authorities to work towards WG’s Towards Zero Waste campaign. Both facilities have secured planning consents, which means they are deliverable. The AD facility will be constructed and operated on Welsh Water’s Tremorfa site in Cardiff and will not revert to the Councils upon expiry, whilst the OWC facility will be constructed and operated on Cardiff Council’s own site at Lamby Way (Cardiff) and will revert to them upon expiry.

Relevant Issues and Options

7.         Following reaching the 'Final Bidders’ stage with two bidders, Kelda and Shanks were invited to submit final tenders for the following treatment solutions:

(i) Anaerobic Digestion (AD) - Treatment of food waste at a purpose built treatment plant

(ii) Open Windrow Composting (OWC) - Treatment of garden waste at a purpose built treatment plant.

8.         Cabinet should note that, in line with Shanks' corporate decision to withdraw from all procurements for AD treatment in Wales, including two similar local authorities' procurements (South West Wales and Heads of the Valleys Hubs), they ultimately failed to submit a final tender.

9.         However, prior to the Call for Final tenders in August 2014 the Procurement Team had 'locked down’ the commercial position of the Kelda bid.  It was therefore not considered to be of material significance that the only Final Tender received was from Kelda, as any of the commercial, legal or contractual elements of their bid could not have been influenced or revised as a result of Shank's position.

10.      The single Final Tender received was evaluated by the Project Team (including external Technical, Financial and Legal advisors).  Following evaluation the recommendation is to select Kelda Organic Energy Limited (Kelda) as Preferred Bidder for the Organic waste treatment and recycling contract as it is economically advantageous to both partnering authorities. Further details of the evaluation methodology and results are provided for Cabinet’s consideration within Appendix 1 of the Part II report later on this agenda.

11.      Kelda’s proposed solutions located:

(i) Anaerobic Digestion (AD) for the Treatment of food waste at a purpose built treatment plant at Welsh Water's Treatment site in Tremorfa, Cardiff;

(ii) Open Windrow Composting (OWC) at Cardiff's Lamby Way Landfill Site, Cardiff.

The solutions strongly align with Cardiff and the Vale's respective waste strategies for the treatment of food and green waste. Specifically the high guaranteed recycling performance at 97% for both facilities and their low carbon production. The AD plant will also generate 1.5MW of electricity which is sufficient to power more than 1500 homes and gives the potential to sell heat from the AD facility to the neighbouring Welsh Water plant, making the solution even more sustainable.

12.      Cowbridge Compost Ltd is the Council's incumbent contractor providing both food and green waste treatment services (Minute no C1341 refers) with a contract, including a one year optional extension, until the 31st March 2016. They have to date provided the Council with an excellent sustainable service and advantageous gate fees and are located in close proximity to our collection points. Regrettably their treatment method of 'In Vessel' composting does not match WG's preferred 'AD' treatment technology which also has the advantage of being supported by WG with  a grant payment of approximately £2.3m NPV to off-set the higher gate fee costs of this specific treatment technology. Over the 15 year contract term this equates to approximately 17% of the gate fee for food waste treatment.

13.      The Senior Responsible Officer for the Project and the Project Board Team considered the recommendations within this report, the Final Business Case and the IAA(2) at its Board meeting on 29th September 2014 and were satisfied with the procurement process, recommending that each partner Local Authority sought approval to progress the recommendations detailed in this report via their Cabinet and / or Council.  Cardiff gained Cabinet approval to progress the project to its operational phases on the 9th October 2014.

Resource Implications (Financial and Employment)

14.      The report to Cabinet on the 20th May 2013 (Min No 1344 refers) detailed the level of financial support that the Council would need to contribute to the procurement stage as being 1/6th of £1.8m (£300k). This was to be funded via £144k of the Procurement Grant from Welsh Government with £156k from the Visible Services Reserve. In addition an amount of £21k was spent on producing the business case for the Vale of Glamorgan and the Inter-Authority Agreement between ourselves and Cardiff for the procurement stage. Up to March 2014 the Vale of Glamorgan has expended £228k of which £44k has been funded from the grant. The balance of £184k has been funded from revenue budgets therefore the VS Reserve has not been utilised as originally intended.

15.      As the joint procurement period has now been extended by several months, with 'Financial Close' now anticipated by the end of 2014 at the earliest, there will be increased expenditure related to 2013/14 and 2014/15 over that previously reported. The overall procurement forecast is now showing approximately £340k higher than the original estimate of £1.8m. The Vale share of the joint procurement cost is £356k. Therefore the total cost to the Vale is £377k (£356k & £21k), which is £56k higher than previously approved.  This additional expenditure was agreed utilising emergency powers on 2nd September 2014 and will be reported to Cabinet in due course.  As at March 2014, £184k had been funded from revenue budgets and £44k from grant therefore the remainder of £149k will be funded from the remaining £100k grant (providing the procurement milestones are met) and a £49k contribution from the VS reserve.  While every effort will be made to bring this forecast overspend back within original budget there is every likelihood that the final procurement cost will now exceed that previously reported to Cabinet.

16.      The price (Net Present Value) received at 'Final Tenders stage' is well within the Upper Affordability threshold and is competitive within the market. As highlighted in the report to Cabinet on the 1st October 2012 it was estimated that the maximum additional budget required in 2016/17 would be £250k. This is currently included as a cost pressure in the Medium Term Financial Plan. It is anticipated that the additional budget now required in 2016/17 will be in the region of £125k. This additional budget requirement is for additional gate fee costs over and above the current budget, plus additional transport costs due to the plant's location being further away than the current facility, which is within the Vale boundary. 

17.      Full gate fee price details for the Kelda solution are shown within Appendix 2 of the Part II report later on the agenda. The price is only partially indexed by inflation over the 15 years contract duration, giving the Authority some protection against potential inflationary increases to the gate fees in the future. Further details of the financial advantages of this are also shown in Appendix 2 of the Part II report on the agenda.

18.      The security package, underpinned by Kelda’s strong balance sheet, is considered by the financial advisors (GT), to be sufficiently robust for Kelda to stand behind the capital funding requirements of this project. The contractual arrangements in the Project Agreement (contract) reflect all of the risk evaluation and assessment of the original Outline Business Case published in 2011, which following dialogue with Kelda, are now reflected in the Final Business Case.



Sustainability and Climate Change Implications

19.      The recycling of municipal household waste is considered to be a major contributor to achieving sustainable waste management and climate change reduction. Any cessation of the Council's recycling services, no matter how short, would have a negative impact on the Council's policies to improve both sustainability and climate change.

Legal Implications (to Include Human Rights Implications)

20.      The procurement is being conducted in accordance with the Competitive Dialogue Procedure under the EU Public Sector Procurement Directive (2004/18/EC), implemented into UK law via the Public Contracts Regulations SI 2006/5 with effect from 31 January 2006. The Project Board and Joint Committee had previously considered and approved all procurement documentation (including the evaluation methodology) and short-listing of participants during the competitive dialogue. The competitive dialogue process has advantages in that it enables the two authorities to enter into dialogue with bidders as to the solutions available to meet their requirements, and disadvantages in that it is a resource intensive process can be is costly to both the authorities and bidders.

21.      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 itself and the other Partner Authority.

22.      The Council is already party to an Inter Authority Agreement IAA(1) pursuant to the powers in Section 101 of the Local Government Act 1972, which defines the parties’ responsibilities and obligations during the procurement process. It is now necessary to formally agree to a further joint working agreement IAA(2) which will enshrine contractually parties’ responsibilities and obligations during the term of the contract.

23.      For the avoidance of any doubt it is noted that any planning permissions, consents, permits or the like that may be required in respect of the Kelda solution are a matter for Kelda and relevant Regulatory Authority (including any of the partnering 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

24.      None.

Equal Opportunities Implications (to include Welsh Language issues)

25.      None.

Corporate/Service Objectives

26.      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

27.      This report is a matter for Executive decision.

Consultation (including Ward Member Consultation)

28.      As the matter is Vale wide no specific Ward Member Consultation has been undertaken in relation to this report.  However, Cowbridge Ward Members have been advised that the green waste treatment facility that Shanks originally proposed in Cowbridge is no longer an option within the procurement.

Relevant Scrutiny Committee

29.      Economy and Environment.

Background Papers



Contact Officer

Clifford Parish, Operational Manager Waste Management and Cleansing

Tel: 02920 673 220


Officers Consulted

Accountant, Visible Services

Legal Services - Committee Reports


Responsible Officer

Miles Punter - Director of Visible Services and Housing