BES 17.07 Extension of Waste Management Contracts - Report

							                    NORTH YORKSHIRE COUNTY COUNCIL

                 BUSINESS AND ENVIRONMENTAL SERVICES

  REPORT TO CORPORATE DIRECTOR – BUSINESS AND ENVIRONMENTAL
                          SERVICES

                               3 DECEMBER 2007


  HOUSEHOLD WASTE RECYCLING CENTRE MANAGEMENT CONTRACTS



1.0   PURPOSE OF REPORT

1.1   To decide on the County Council’s approach to extending or tendering
      existing household waste recycling centre management contracts.



2.0   RESOURCE IMPLICATIONS

2.1   The decision to extend existing contracts will have no resource implications
      until 2010. The decision to tender a new contract will have resource
      implications in the form of staff time, advertising costs and in potentially
      increased contract costs. These are quantified later in the report.


3.0   BACKGROUND

3.1   The County Council as a Waste Disposal Authority (WDA) is obliged under
      Section 51-1 (b) of the Environmental Protection Act 1990 (EPA) to provide
      facilities at which residents can dispose of waste free of charge, and to
      dispose of the waste from those facilities. These sites are known as
      household waste recycling centres (HWRCs) in accordance with council
      policies relating to provision and operation of the centres. The Council
      provides 20 HWRCs across North Yorkshire.

3.2   3 contracts were awarded in 2005 for the management of HWRCs. The first,
      to Environmental Waste Controls Ltd (EWC), was to manage 16 HWRCs that
      were in the ownership of North Yorkshire County Council. When Burniston
      HWRC was taken over from Scarborough Borough Council, management of
      this site became part of that contract. Two further contracts, to Yorwaste Ltd,
      were to provide, manage and operate HWRCs to serve Scarborough and
      Skipton.




                                                                          NYCC – 03.12.07– Director
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3.3   Those contracts were originally for the contract period 1 July 2005 to 30
      September 2007, with options to extend in 3 month blocks upto 31 March
      2010. This approach was taken to give the council flexibility in end dates as it
      was then envisaged that HWRC management would form part of a single,
      long term, integrated waste management contract.

3.4   The mechanism for procuring the long term, integrated contract was changed
      during the term of the HWRC contract by central government, and original
      plans had to be redrafted. The outcome was that HWRC management would
      fall outside the scope of the integrated contract, so the HWRC management
      contracts were extended for the period 1 October 2007 to 31 March 2008 to
      allow further consideration of options. This report details the outcomes of
      those further considerations.


4.0   COMMENTS

4.1   There are a number of pros and cons to take into consideration when deciding
      whether to extend the contracts or to tender new contracts. These are set out
      below.

4.2   Links to the long term treatment contract are still valid and are considered to
      be the main driver for the timings for procuring and entering into a new
      contract. Whilst HWRC management will be a separate contract, waiting until
      the long term treatment contract partner is known should help to stimulate
      competition for the HWRC management contract. It is likely the preferred
      bidder will be known in early 2009, so extending the HWRC management
      contract to 31 March 2010 would allow the 6-9 months required to tender new
      contracts and also build in some slippage should the announcement of
      preferred bidder be delayed by upto 3 months. This indicates a preference to
      award the maximum possible extension period.

4.3   In relation to the larger HWRC contract, EWC have repeatedly told NYCC that
      they underpriced the transport element of their tender and have lost ~£100k
      per annum. Whilst they acknowledge that the overall contract is profitable,
      their profit element is much smaller than they would like. It is likely that a
      retender would inflate contract prices by at least this amount. As this is a year
      on year price effect, it would therefore be advantageous to award the
      maximum possible extension period.

4.4   Since the contracts were awarded there has been a number of improvements
      that have caused a significant improvement in performance on all HWRCs.

      •      Recycling/composting performance has increased from 34% in 2004/5
             to 58% in 2006/7 (BVPI calculations),
      •      Environment Agency inspections have shown an improvement in
             performance, resulting in an increased number of HWRCs qualifying
             for a discount on their annual Waste Management Licence Subsistence
             Fee

                                                                           NYCC – 03.12.07– Director
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      •      NYCC inspections have demonstrated a rapid and sustained
             improvement in tidiness and cleanliness, which has been consistently
             maintained throughout the contract period,
      •      The use of company employees on site (as opposed to the old sub-
             contracted totter system) has led to an improved appearance and
             improvements in customer care at the sites,
      •      The number of unplanned closures has been reduced almost to zero,
             and those that have occurred have been mainly due to staff being
             delayed on the way to work, not from servicing problems.
      •      A reduction in the number of complaints handled by NYCC
      •      The use of compaction equipment has enabled more waste to be
             collected on a smaller footprint, freeing up space on sites to allow a
             larger variety of recycling containers to be provided for customers.

4.5   We have seen a drop in the total tonnage delivered to the HWRC network of
      approx 10% since the contract was let. This is due in part to improved
      commercial waste controls brought about by using paid staff rather than self-
      employed subcontractors who used to pay for the rights to operate a site.

4.6   The use of compaction equipment on HWRCs managed by EWC has led to a
      reduction in the number of vehicles servicing NYCC HWRCs. EWC currently
      operate 7No. 4-axle hooklift vehicles compared to modelling that showed
      11No. 4-axle REL would be needed without compaction. The compaction
      equipment is owned by EWC and would be removed if they were
      unsuccessful in winning a new contract. This obviously contributes to overall
      transport efficiency and reduces contributions to carbon footprint caused by
      delivering the council’s services.

4.7   The use of Closed Circuit Television (CCTV) and Automated Number Plate
      Recognition (ANPR) systems has helped to reduce the abuse of HWRCs by
      commercial operators, and has also provided evidence for use in insurance
      claims. It will also form the basis of enforcement of implementing waste
      acceptance policies over the next 6 months. These systems are currently
      owned by EWC and would be removed at the end of the contract.

4.8   EWC had a year of severe financial difficulties that resulted in
      underinvestment in the HWRCs. However, the company is now in a stronger
      position and the remainder of investments are being made. In addition, a
      schedule of further improvements has been agreed and, to date, this has
      been adhered to. A longer extension will give EWC more security with which
      to continue to fulfil their contractual obligations and work with the council to
      implement further improvements.

4.9   Running a tender exercise is a very time intensive process. External costs
      are typically less than £20k – limited to the cost of external legal advice,
      advertising at relevant times and postage. Internal costs are more difficult to
      quantify, however it is estimated that an average of 30%FTE of a Band 12
      member of staff is required to complete the process. There is also a
      significant investment on the part of industry in tendering for contracts.


                                                                           NYCC – 03.12.07– Director
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4.10   A decision to extend the contract could be classed as a Gershon efficiency
       saving – avoiding the cost of tendering and avoiding increased contract costs
       (see item 4.3).

4.11   Yorwaste and EWC have consistently been willing to listen to new
       requirements and new ideas.

4.12   It is possible to extend the contract in 3 month blocks, however on balance it
       is in the Council’s interests to use the full extension possible. In particular,
       items 4.2, 4.3, 4.6 and 4.8 would all point to the longest possible extension
       whereas there are no compelling reasons to offer short extensions. Also, will
       take you six to nine months to tender new contracts (see 4.9) which makes
       such an incremental approach to extension unsustainable.


5.0    CORPORATE PRIORITIES

5.1    The HWRC service is a front line service that contributes to a number of
       corporate priorities. The decision whether or not to tender for a replacement
       service, however, does not impact on any corporate priorities directly as the
       service will continue to be provided irrespective of the decision taken.


6.0    CONSULTATION

6.1    The County Council consulted with EWC and Yorwaste in formulating the
       recommendations. Both companies are keen to enter into an extension,
       however it must be pointed out that the decision is a unilateral one on the part
       of the Council and the Contractors’ desire is only a minor consideration in the
       decision making process.

6.2    North Yorkshire Legal Services has been consulted to advise on the contract
       extension mechanism.

6.3    Financial Services has been consulted in relation to the financial aspects of
       extending the contract.


7.0    COMMUNICATIONS

7.1    This matter could provide positive media coverage in partnership with EWC
       and Yorwaste. Based on previous experience, both companies would be
       keen to do so.




                                                                            NYCC – 03.12.07– Director
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8.0   RECOMMENDATIONS

8.1   That approval is given to extend the existing contracts between North
      Yorkshire County Council and Environmental Waste Controls and between
      North Yorkshire County Council and Yorwaste Ltd be extended to an end date
      of 31 March 2010


Gordon Gresty
Corporate Director, Business and Environmental Services



Glossary
ANPR Automated Number Plate Recognition
BVPI     Best Value Performance Indicator
CCTV Closed Circuit Television
EPA      the Environmental Protection Act 1990
EWC      Environmental Waste Controls Ltd
FTE      Full Time Equivalent
HWRC Household Waste Recycling Centre
NYCC North Yorkshire County Council
WDA      Waste Disposal Authority




                                                                         NYCC – 03.12.07– Director
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