Top

Top

Agenda Item No 13

 

The Vale of Glamorgan Council

 

Council Meeting: 6 March, 2013

 

Report of the Director of Visible Services and Housing

 

Prosiect Gwyrdd Partnership - Residual Waste Treatment Procurement

 

Purpose of the Report

1.             To agree the appointment of a preferred bidder for Prosiect Gwyrdd and to approve the joint working agreement (JWA2) and final business case (FBC) for the project.

Recommendations

1.             That Viridor Waste Management Ltd (Viridor) is appointed as the Preferred Bidder;

2.             That 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.             That 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 in paragraph 22 of this report;

 

4.             That, subject to Cardiff Council agreeing, Cardiff Council acts as Host Authority (as defined in the Joint Working Agreement 2 JWA2;

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

6.             That 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.             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.             That, subject to 1 - 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.             That Council authorise the Joint Committee, subject to recommendations 1, 2 and 3 above, to submit the FBC to WG for formal approval.

Reasons for the Recommendations

1.             To appoint Viridor as the Preferred Bidder so that the procurement process can be brought to a Close;

2.             So that the Senior Responsible Officer of the Project Board (in consultation with the Project Board) can finalise the procurement to successful contractual close (including any refinement of documentation);

3.             So that the FBC is approved, including the improved affordability position in terms of both (i) the large reduction compared to the original OBC affordability threshold and (ii) the significant costs saving relative to continuing to landfill residual waste;

4.             So that Cardiff Council can act as Host Authority (as defined in the Joint Working Agreement 2 JWA2);

5.             To approve the JWA2.

6.             To provide the necessary delegated authority so that the Council’s can finalise and conclude the JWA2 agreement (including any refinements pursuant to recommendation (2) on behalf of the Council in a timely manner;

7.             To permit the project agreement to be signed on behalf of the partnership.

8.             To permit the contract agreement to be signed on behalf of the partnership.

9.             To secure WG funding as outlined in the FBC.

Background

2.             Council held on the 30 June 2009 (minute 158 refers) received a report seeking approval to participate in partnership with the four other Prosiect Gwyrdd Partners to seek the procurement of a future residual waste treatment solution for all residual waste which could not be reused, recycled or composted.  Procurement decisions were to be overseen by a joint committee which would be taken forward by an Officer Project Board as detailed in Schedule 1 of the agreed JWA1 with a fully resourced project team to deliver the complex procurement stages.  Prosiect Gwyrdd has now reached the final procurement stage and requires the partnering Councils to formally agree to conclude the procurement and enter into a further Joint Working Agreement (JWA2).

Council previously resolved on the 30 June 2009:

 

T H A T the proposals of the Cabinet as set out in Cabinet Minute No. C463, 3rd June 2009, be approved:

 

(1)       T H A T it be agreed that the three conditions, as set out in Appendix A of the report dated 17th December, 2008 that approved the Outline Business Case (OBC) for Prosiect Gwyrdd, had been satisfied.

 

(2)       T H A T the OBC Health Check Addendum 2009, as appended to the report, which represented the revised Outline Business Case for Prosiect Gwyrdd be approved. 

 

(3)       T H A T the proposed strategic approach to procurement for Prosiect Gwyrdd be approved, which included:

 

(i)         proposals to develop the evaluation criteria and weightings that will be a matter for the joint committee to determine following stakeholder consultation

 

(ii)        is premised upon a publicly owned site being made available to bidders (note well that this does not preclude bidders putting forward proposals based at other locations/sites within their control) and that the site proposed be Tatton Road, Newport subject to:

  • Newport City Council agreeing to the same. 
  • All five authorities  agreeing to the terms and conditions pursuant to which such site is to be acquired or an option secured, which terms will address how the same is to be financed by the five authorities and what is to happen at the end of the project life.

(4)          T H A T the procurement costs as provided in paragraphs 62 to 68 of Appendix A - Common Report to Preferred Bidder stage for the Project be approved. 

 

(5)          T H A T that the Council proceed with the procurement on the basis of affordability range contained in appendix G and that the financing options set out in paragraphs B be approved.

 

(6)          T H A T the Council enters into a Joint Working Agreement (JWA1) with the other authorities, in the form set out in appendix D to this report and that pursuant thereto and amongst other things:

 

(a) a Joint Committee, with the delegated authority set out in the JWA1 be established and that the Cabinet Members with responsibility for the time being for waste management and financial matters be appointed to represent this authority on the Joint Committee;

 

(b) subject to Cardiff Council agreeing the same, that Cardiff Council will act and shall have full authority to act on behalf of all the authorities as Lead Authority for the procurement process;

 

(c) that the decision as to award of contract will be a matter for each authority, though it should be noted that the JWA contains provision that if the proposed solution meets the output requirements and is within the Affordability Envelope then damages will be payable should an authority withdraw from the procurement process or determine not to award a contract, with such damages being capped at £3,000,000;

 

(d) a Project Board comprising of officers from each authority will be established with the delegated authority set out in the JWA1.

 

(7)          T H A T stakeholder consultation on the Project be carried out in accordance with the approach set out in appendix OBC Health Check Addendum, appendix B.

 

(8)          T H A T the procurement for Project Gwyrdd be commenced subject to:

 

(a)          JWA 1 being concluded by all authorities;

 

(b)          the matters set out in recommendation 3 (ii) is agreed by all authorities;

and

(c)          Cabinet receiving confirmation from WAG that the WPPO Scrutiny panel is satisfied that the terms and conditions of the funding package (see WAG letter dated 30.3.09 appended to this report as OBC Health Check Addendum, appendix B.) have been met prior to posting OJEU Notice.

 

(9)          T H A T the matter be reported back to Council when a decision is sought to award the contract or before hand if the Joint Committee wishes to refer any matter back to Council.

 

(10)        T H A T the report be referred to the Scrutiny Committee (Corporate Resources) for approval.

 

(11)        T H A T the final commitment that will be required to achieve the recycling and composting levels approaching 65% be approved.

 

(12)        T H A T the report and all comments received from this Committee and the Scrutiny Committee (Corporate Resources) be referred to Cabinet and then Full Council for approval.

 

(13)        T H A T the Council's existing Waste Strategy be updated to reflect the Welsh Assembly Government's emerging policy.

 

(14)        T H A T a presentation on all technologies available to provide Residual Waste Treatments be made to all Members of the Council.

 

Reasons for decisions

 

(1)          To confirm compliance with the requirements of Minute No C269 resolved by Cabinet on 17th December, 2008.

 

(2)          To ensure that Cabinet/Committee are satisfied that the OBC Health Check represents the revised outline business case for Prosiect Gwyrdd.

 

(3)          That the proposed Procurement Strategy and land actuations proposals are accepted.

 

(4)          That the equal sharing of procurement costs is acceptable.

 

(5)          That procurement is carried out where it is consistent with the OBC affordability range and finance options.

 

(6)          That the Joint Working Agreement (JWA1) is acceptable and jointly entered into with the other Prosiect Gwyrdd local authorities.  With the setting up of a Joint Committee, lead procurement authority and compensation clauses for any partner authority deciding to not more to award of contract at the end of the procurement process.

 

(7)          That appropriate Stakeholder Consultation is carried out.

 

(8)          That subject to the specified conditions that the procurement of a residual treatment solution for the Prosiect Gwyrdd local authorities is commenced.

 

(9)          That a further report be brought to Council following or during the procurement process in order to consider Award of Contract.

 

(10)        To ensure consideration of the report details by the appropriate Scrutiny Committee.

 

(11)        To ensure that sufficient resources are available to meet WAG's future recycling and composting targets.

 

(12)        To obtain an Executive and Full Council decision, to enable this Council's involvement in the project to continue.

 

(13)        To ensure that the Council's information is updated.

 

(14)        In order that all Members can be apprised of up to date technologies available to provide the service.

Relevant Issues and Options

3.             Prosiect Gwyrdd is a Partnership of five Councils within South Wales made up of The Vale of Glamorgan, Cardiff, Caerphilly, Newport and Monmouthshire Councils to procure a residual waste treatment plant.  Following close of dialogue and final assessment of the resulting final bids from Veolia and Viridor a "Preferred Bidder" was announced on the 1 February 2013.  The recommendations contained within this report are common to those being reported to the other 4 partner authorities, though they have been suitably amended to comply with this Council's constitution and scheme of delegations.

4.             The Prosiect Gwyrdd, Officer Board strongly supports the award of 'Preferred Bidder' status to Viridor Waste Management Ltd (Viridor) having carried out a procurement process that was highly competitive and firmly negotiated. This resulted in a very good price with evaluation scores showing that at the start of the new service (in April 2016) the tendered gate fees will be considerably lower than the price each Partner would be paying for their waste disposal if they had continued with their current arrangements.

5.             The 'Final Tenders' were evaluated in accordance with the agreed and published evaluation methodology and the Public Contract Regulations and Viridor was selected by the Project Board as recommended Preferred Bidder. This decision was approved at the Joint Committee on 7th February 2013 and recommended that it be put to each Partner Council during their Full Council meetings held between 26th February 2013 and 6th March 2013.

6.             The Council has already signed up to a Joint Working Agreement (JWA1), (see minute No. C463), that enshrined it in an Inter Authority Joint Working agreement, and details the parties’ responsibilities and obligations during the procurement process. It is now necessary to formally agree to a further Joint Working Agreement (JWA2) which will determine the contractual arrangements of the parties’ and their responsibilities and obligations during the contract stage. A copy of the JWA2 is attached for Council's consideration as Appendix 2 to this report.

7.             The overarching purpose of the JWA2 is to ensure that the five Prosiect Gwyrdd Councils are able to work effectively in true Partnership with Viridor to achieve the maximum benefit from the residual waste treatment contract. JWA2 accommodates the Host Authority structure described in paragraph 85 of Appendix 1, to ensure that the Host Authority isn’t exposed to disproportionate liability and that the contractual rights and obligations appropriately flow down to all the Partners.

8.             Following implementation of the JWA2 a Contract Manager will be appointed to oversee and manage the Contract and the JWA2 at an operational level. They will be the main interface with the contractor and the Partner Authority Representatives with a direct line into the Host Authority. A Contract Management Board will oversee and manage the Contract and JWA2 on behalf of the Joint Committee in the interests of the Partner Authorities at the directorate strategy and senior officer level. A Joint Committee will oversee the contract and JWA2 in the interests of the Partner Authorities and electorate at a strategic corporate and member level and will carry out those functions allocated to the Joint Committee in the JWA2 as "Joint Committee Matters".

9.             Further details relating to the JWA2 are contained within paragraphs 119 to 130 of Appendix 1' Common Report'.

10.        The Council has already signed up to an Outline Business Case (OBC) (see minute No. C463) and now needs to agree the FBC.  The purpose of the FBC is two-fold, firstly it provides a tool for the Partnership (and its stakeholders) to analyse the outcome of the procurement process and answer a number of questions about the proposed solution, including:

  • Does it address all of the Partnership’s requirements?
  • Does it represent good value for money?
  • Is it affordable?
  • Is it in line with national Waste Policy?
  • Is it a good fit with the Partners’ wider waste management strategies?
  • Is it environmentally sustainable?
  • Is the risk-profile appropriate?
  • Taking all the above into consideration, is it the right solution for the Partnership?

11.        Secondly, it is also a mandatory document, which forms part of the WG revenue-support award process (which is worth approximately 25% of the cost of the gate fee over the 25 year contract). The WG use the document to review issues such as those shown bulleted above, but also to ensure that the basis on which they allocate funding to the project at the beginning of the process (following the (OBC) has not changed. A redacted copy of the FBC is attached to the report as Appendix 3.  The redactions to the FBC are required to protect commercial confidentiality.

12.        Although the decision as to award of contract will be a future matter for each Council, it should be noted that the JWA1 (minute C463 refers) contained the provision that if the proposed solution meets the output requirements and is within the Council's "Affordability Envelope" then damages will be payable should an authority withdraw from the procurement process or determine not to award a contract. With such damages being capped at £3,000,000. The Preferred Bidder's solution presented to Council within this report does meet these conditions and damages would be levied against the Vale of Glamorgan Council should the Council now decide to withdraw from the Prosiect Gwyrdd Procurement.

13.        Caerphilly and Newport Council considered the Common Report on 26 February, 2013 with Monmouthshire and Cardiff doing so on the 28 February, 2013.

14.        Due to the fact that this is still a "live" procurement process, there is commercially sensitive, legally privileged information that is not able to be circulated via either the Part I or Part II process.  This background data has however been made available to members via arrangements with the Council's Waste Management Office.  All Members were advised of these arrangements via email and letter, with the data able to be viewed electronically from 27 February, 2013. In addition Council are asked to consider the details of the Part II report on this agenda, concerning Prosiect Gwyrdd, prior to taking a decision on the recommendations with this report.

Resource Implications (Financial and Employment)

15.        At the start of the new residual waste treatment service (April 2016) the tendered gate fees will be considerably lower than the price the Council would be paying for their waste disposal if they continued with their current arrangements. The WG contribution reduces the price per tonne by a further 25%. Furthermore, only a proportion of the costs will be subject to indexation, which means that the cost of the service, will reduce on an annual basis, relative to inflation over the 25 year period. This makes the contract highly affordable to the Council, and significantly below the affordability thresholds approved at the OBC stage in 2009:

16.        Robust negotiation from the "detailed solution" stage to "call for Final Tender" resulted in Viridor’s tendered payments over the life of the contract reducing by an estimated £90m; more than a 17% reduction in price.  The contract therefore represents very good value for money.

17.        Vale of Glamorgan's contributions to the Prosiect Gwyrdd procurement to date is:                              

Year Cost £

07/08

10,353

08/09

43,293

09/10

4,873

10/11

128,479

11/12

229,237

12/13 projected

194,440

 

610,675

 

 

 

N.B. The Project was heavily financed by WG procurement grants in the earlier years.

 

18.        At Contract Commencement, the estimated saving to the Partnership as a whole (including the benefit of the WG funding) as compared to the cost of continuing with the current landfill disposal arrangements is greater than £11 million. This is equivalent to the Partnership’s combined residual waste disposal budget reducing by a half (see Table C of Appendix 1). For the Vale of Glamorgan only its Affordability saving is shown in Table 1 below.  The first year savings for 2016 / 2017 alone are shown as a percentage against its projected landfill costs in table 2. 

Table 1 –Affordability Analysis Nominal Costs

 

 

Preferred Bidder  Whole System Costs (PB)

Landfill (Do Min)

Budget

Affordability Savings (PB vs. Do Min)

 

£m

£m

£m

£m

Vale of Glamorgan

69

131

86

-62

 

Footnote: Whole Systems Costs include costs directly borne by the Partners such as transportation and contract management as well as payments to Viridor, plus the funding contribution from WG.

 

Table 2: First Contract Year (2016 – 2017) Cost Savings

 

Preferred Bidder 2016-17 Savings

Partner

Saving: Preferred Bidder vs. Landfill

 

£'000s

%

Vale of Glamorgan

-1,588

-47%

 

19.        Table 3 below shows our cost information presented as a Net Present Value (NPV) to reflect the impact of the devaluation of money over the life of the contract. This allows a direct comparison with the original OBC Upper Affordability Threshold (UAT) set when the Partners formally commenced this procurement in 2009. This table demonstrates the significant headroom in the NPV affordability calculation for all of the partners.

 

Table 3 – Affordability Analysis - NPV

 

 

Upper

Affordability

Threshold

(UAT)

Preferred Bidder (PB)

Affordability Headroom

(UAT vs. PB)

 

£m

£m

£m

Vale of Glamorgan

65

34

-31

 

20.        The financial case for Viridor as compared with that of the OBC reference case and current landfill (do minimum) disposal option is very strong as demonstrated for the partnership in Figure C of Appendix 1 (page 22 and 41) to this report highlights the significant savings the Viridor solution offers the partnership compared to continuing to landfill residual waste.  The graph in Appendix 1 identifies an initial increase in residual waste disposal costs for the Partners which reflect the increased costs of landfill, particularly the impact of the landfill tax escalator, prior to waste treatment commencing.  The trend line on the graph from 1st September 2015 is then downward for the partners with the financial benefit of the Viridor facility accepting the Partnerships waste for commissioning purposes driving this decrease in costs. The contract will then officially commence on 1st April 2016.

21.        The graph for the Vale of Glamorgan alone is show below in Figure 1

Figure 1 VoG Affordability Analysis

 

[View Figure 1]

Sustainability and Climate Change Implications

22.        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 energy generation from waste. It contributes to the principles of sustainable development when 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.

23.        Compared to coal or oil-fired power stations, EfW emits less fossil CO2. EfW facilities actually help to reduce greenhouse gas emissions by diverting waste away from landfill (decomposing waste produces large amounts of the greenhouse gas, methane, which is 20 times more damaging to the environment than CO2). On average the treatment of one ton of municipal waste in an EfW facility results in a carbon saving of at least 232kg (CO2 equivalent).

24.        The WRATE (Waste and Resources Assessment Tool for the Environment) software to compare the environmental impacts of different municipal waste management systems has demonstrated that by adopting this treatment solution the proposal  will provide an annual net benefit predicted carbon saving of 51,392 tonnes.

Legal Implications (to Include Human Rights Implications)

25.        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. 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 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 that is costly to both the authorities and bidders. .

26.        As an entity, Prosiect Gwyrdd 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.

27.        The Council has already signed up to a Joint Working Agreement (JWA1) 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 necessary to formally agree to a further joint working agreement (JWA2) which will enshrine the contractual arrangements of the parties’ responsibilities and obligations during the term of the contract..

28.        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 Viridor solution are a matter for Viridor and 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

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

 

Equal Opportunities Implications (to include Welsh Language issues)

30.        There are no equal opportunity implications as a result of this report.

Corporate/Service Objectives

31.        It is a corporate priority.

To work with partners to develop a sustainable community which maximises opportunities for economic growth, social improvement and environmental regeneration and protection.

 

Improvement Objective 27:

 It is a Corporate Priority to:

Work with partners to develop a sustainable community which maximises opportunities for economic growth social improvement and environmental regeneration and protection.

Improvement Objective:

·protect and enhance the Vale’s natural and built environment.

ACTIONS:

·R5 Increase waste recycling rates to 50% and reduce levels of residual waste (2013).

·R6 Progress a regional residual waste treatment facility/facilities through Prosiect Gwyrdd (2014).

Improvement Objective 33:

To make best use of our assets and to procure good, sustainable services and facilities.

Policy Framework and Budget

32.        This report is a matter for decision by Council.

Consultation (including Ward Member Consultation)

33.        As the proposed Commitment is Vale wide and there are no solutions proposed within the Vale of Glamorgan no specific consultation has been carried out with Ward Members.

Relevant Scrutiny Committee

34.        Economy and Environment.

Background Papers

None.

 

Contact Officer

Clifford Parish, Operational Manager Waste Management and Cleansing Tel No.  02920 673220

 

Officers Consulted

Accountant, Building and Visible Services

Operational Manager Legal Services

Group Auditor Audit

 

Responsible Officer:

Miles Punter - Director of Visible Services and Housing

 

 

Share on facebook Like us on Facebook