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                                     PERTH AND KINROSS COUNCIL

                     Report to the Environment Committee – 1 June 2005

WASTE MANAGEMENT: STRATEGIC OPTIONS – CONCLUSIONS OF MEMBER
                  OFFICER WORKING GROUP

                  Report by Head of Environmental and Regulatory Services


This report provides the conclusions of the Waste Management Member
Officer Working Group in relation to future waste management facilities and
procurement arrangements.

1.        RECOMMENDATIONS

          The Committee is asked to approve the following recommendations in respect
          of:

          In-Vessel Composting

          (i)       That the Council enters into negotiations with its existing waste
                    disposal contractor to temporarily amend the current waste disposal
                    contract, to make arrangements for the provision of in vessel and
                    windrow facilities at Binn Landfill, to serve the Council’s composting
                    requirements in the short term pending the outcome of long term
                    facilities, to be determined by the Tayside Strategic Options Review.

          (ii)      That officers seek approval from the Scottish Executive, to have the
                    necessary increases in funding for the in-vessel composting proposal
                    provided by the Scottish Executive Strategic Waste Fund.

          (iii)     That officers also look for opportunities to utilise smaller scale local
                    composting facilities, particularly in locations where savings in transport
                    costs can be realised.

          (iv)      The Committee agree at this stage the facility at Binn Farm as a
                    preferred option, for long term treatment of garden/food waste, subject
                    to demonstrating best value, transparency of procurement, and
                    pending the outcome of the Tayside Strategic Options Review.

          Energy from Waste

          (i)       Early discussions be held with officials from the City of Dundee
                    Council, to clarify their intentions to step down their use of the DERL
                    Energy from Waste Plant, in order to allow capacity at the facility, to
                    meet Perth and Kinross Council’s interim energy from waste
                    requirements.


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          (ii)      That a “twin track” approach be approved to long term energy from
                    waste (EfW) requirements, by agreeing to 1) the potential of EfW
                    facilities in the Perth and Kinross Council area as a favoured option,
                    and 2) research being undertaken into the likelihood of new EfW
                    facilities which may be created in adjacent local authority areas, for
                    possible uptake by this Council.

          Materials Recovery

          (i)       That the Council make short term arrangements for materials recovery,
                    by negotiating an amendment to the existing waste disposal contract,
                    to have the Council’s dry mixed recyclates treated in temporary
                    facilities at Binn Landfill.

          (ii)      That the Council approach the Scottish Executive to apply for Strategic
                    Waste Funding for the temporary materials recovery measures detailed
                    above.

          (iii)     That a feasibility study be initiated to determine whether the Council’s
                    existing and future waste arrangement requirements in Perth, including
                    a Materials Recovery Facility (MRF) can be accommodated within the
                    site at the Friarton depot, or requires additional adjacent land.

          (iv)      Agree that the Council’s preferred option is to seek a partner
                    organisation to design and operate a MRF, preferably at Friarton
                    Recycling Centre, Perth with ownership of the facility retained by the
                    Council.

          Landfill

          (i)       Agree to the continuation of the existing landfill arrangements at Binn
                    Landfill, as the preferred landfill option.

          Procurement and Funding

          (i)       Arrange to meet with Scottish Executive officials to discuss the
                    Council’s proposals on procurement and clarify their position in relation
                    to future national waste management procurement. This meeting
                    should involve Elected Member representatives, with the outcome to
                    be reported back to the Environment Committee.

          (ii)      Agree that the establishment of an integrated joint venture, to 2020 is
                    the preferred procurement option for waste management infrastructure,
                    and instruct officers to start investigating this option further, including
                    the procurement process, and required levels of technical, legal and
                    financial consultancy advice, which may be needed.

          (iii)     Communicate the Council’s procurement proposals to the other
                    members of the Tayside Area Waste Group.


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          (iv)      Produce a further report for the Environment Committee, assessing the
                    risks and consequential implications involved in delays from waiting for
                    Strategic Waste Funding and detailing the possible consequential
                    financial and service delivery impacts.

          (v)       If necessary, convene an Executive Sub Committee of the Environment
                    Committee, should any issue arise which requires approval between
                    now and the next Committee. It is recommended that the Elected
                    Member representation on the Executive Sub Committee should be the
                    same as the Waste Management Strategic Options Member Officer
                    Group.


2.        BACKGROUND

          At the Environment Committee on 19 January 2005, approval was given to
          establish a Waste Management Strategic Options Member Officer Working
          Group (MOWG), to develop preferred options and procurement
          arrangements, for the provision of waste treatment and disposal facilities to
          meet the Council’s future requirements (Report No: 05/43). This was required
          in order to clarify the Council’s direction on these issues, to progress with the
          required waste infrastructure, and also to articulate the Council’s view to the
          proposed Tayside-wide review of large scale waste management
          requirements. The Tayside review is to be carried out by consultants, funded
          by the Scottish Executive during the summer/early autumn of this year, and
          will be a significant determinant of future Scottish Executive Strategic Waste
          Funding.

          The MOWG, under the convenorship of Councillor Michael Barnacle, covered
          a substantial workload in a short space of time. This work consisted of three
          meetings at which a “long leet” of options were successively reduced to a
          “short leet” followed by a single preferred option for each of the main facilities
          required in the future. The Group also considered various procurement
          options with the assistance of specialist consultants, KPMG. The Group
          undertook visits to the Council’s existing contractor’s facilities at Binn Landfill,
          and also to a modern Energy from Waste and Materials Recovery Facility in
          Huddersfield. Officers also undertook discussions and a site visit to the DERL
          Energy from Waste Plant in Dundee.

          The following paragraphs represent the conclusions of the MOWG, and
          highlights further areas of work required, to take forward implementation of
          the Waste Plan.


3.        ASSESSMENT OF OPTIONS

          Sections 4 to 8 below provide summaries of the facilities required to treat and
          dispose of the Council’s waste, in terms of the Waste Implementation Plan,
          and those provisions selected by the MOWG as the preferred options.


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4.               IN-VESSEL COMPOSTING

(a)              Background

                 The Council’s Waste Implementation Plan set out proposals for the kerbside
                 collection of garden and kitchen waste from up to 45,000 households across
                 the area, and subsequent treatment by an “in-vessel” composting system.
                 Treatment by an in-vessel system is required in order to meet requirements of
                 Animal By Products Regulations, to produce compost to a recognised
                 standard, to improve the marketability of the final product, and also to speed
                 up the composting process.

                 One of the features of waste management is the unpredictability of the waste
                 to be processed in the future. Figure 1 shows that for garden/kitchen waste,
                 the amount of waste may range from 9,000 tonnes to 21,500 tonnes by 2020
                 (hatched lines), depending on variables such as public participation, and the
                 growth in mass of waste produced by householders.

                 Figure 1:
                                                         Comparison of predicted garden & food waste

 25000




 20000




 15000
                                                                                                                                 kerbside garden & food -high
                                                                                                                                 kerbside garden & food - low
                                                                                                                                 centres & commercial -high
                                                                                                                                 centres & commercial -low
 10000




  5000




       0
             6


                     7


                             8


                                     9


                                             0


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                                                             2


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           /0


                   /0


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                                                                           /1


                                                                                   /1


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                                                                                                   /1


                                                                                                           /1


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        05


                   06


                           07


                                   08


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                                                                   12


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                                                                                   14


                                                                                           15


                                                                                                   16


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                                                                                                                           19
      20


                 20


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                 From the long list of alternatives, officers were asked by the MOWG to further
                 investigate the following options:

                 (a)            sending all waste to an in-vessel plant at Binn Landfill (including the
                                garden waste collected at transfer stations and Recycling Centres)

                 (b)            splitting the waste, with mixed garden/food waste going for in-vessel
                                processing, and uncontaminated garden waste going to cheaper
                                traditional “open windrow” composing.




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          Officers also investigated the option of establishing a separate food waste
          collection service, which would allow the garden to be processed by the
          windrow system.

          As can be seen from Table 1 below, when the transport and treatment costs
          of these alternatives were modelled, the option which indicated the best value
          was the method of using both in-vessel and windrow processes, as
          appropriate.


          Table 1: Comparison of Garden/Food Waste Treatment Options

                                   Option                         Relative Cost per tonne processed
                                                                                  (£)
           All garden/food waste to `in-vessel`                                   35
           Kerbside collected garden/food waste                                   30
           to `in-vessel` &      uncontaminated
           waste to windrow
           Separate food waste collection system                                48-63
                                                                  (depending on method of collection)

(b)       Conclusions of MOWG

          The MOWG concluded that, subject to demonstrating proper procurement as
          the processes, the in-vessel composting site at Binn Farm should be
          considered as the preferred option for processing the Council’s garden/food
          waste due to its advanced progress with approval under Animal By-Product
          requirements; the absence of other suitable facilities in the area; its close
          proximity to the Council’s waste generation areas in Perth, Crieff and Kinross;
          and also the minimal disruption to the Council’s current waste management
          contract arrangements. Binn Farm could also offer an open windrow facility
          for processing garden waste which has no food contamination (i.e. from
          recycling centres). Although establishing a centralised windrow composting
          provider should also be pursued, it was agreed that the Council should also
          (wherever possible) look to establish arrangements with local composting
          processors, particularly in the Highland and Eastern areas, to minimise
          transport costs for garden waste.

(c)       Recommendations

          (i)       That the Council enters into negotiations with its existing waste
                    disposal contractor to temporarily amend the current waste disposal
                    contract, to make arrangements for the provision of in vessel and
                    windrow facilities at Binn Landfill, to serve the Council’s requirements
                    in the short term pending the outcome of long term facilities, to be
                    determined by the Tayside Strategic Options Review.

          (ii)      That the Council seek approval from the Scottish Executive, to have
                    the necessary increases in funding for this in-vessel composting
                    proposal provided by the Strategic Waste Fund.


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          (iii)       That officers also look for opportunities to utilise smaller scale local
                      composting facilities, particularly in locations where savings in transport
                      costs can be realised.

          (iv)        That the Committee agree at this stage, that the facility at Binn Farm
                      be considered as a preferred option, for long term treatment of this
                      waste, subject to demonstrating best value, transparency of
                      procurement, and pending the outcome of the Tayside Strategic
                      Options Review.


5.        ENERGY FROM WASTE (EfW)

(a)       Background

          Based on the Tayside Area Waste Plan and the Council’s Waste
          Implementation Plan, from 2006/2007 onwards, this Council is scheduled to
          send an incremental amount of waste to EfW, rising to 34,000 tonnes in
          2010/2011. These tonnage figures are based on the optimistic targets of the
          National Waste Plan, i.e. that there will be no growth in waste arisings from
          2010 onwards. However in Figure 3, the darker shaded bars depict the
          equivalent waste to EfW requirements if the Council’s waste arisings continue
          to grow at the annual average of 4% per annum. This shows that the Council
          may have to process, through EfW, around 20,000 more tonnes per annum
          than originally anticipated.

          Figure 3: Predicted Tonnages to EfW




             60000


             50000                                      based on waste plan
                                                        based on 4% waste arisings
              40000


              30000


              20000


                  10000


                      0
                          2003/04

                                    2004/05

                                              2005/06

                                                         2006/07

                                                                   2007/08

                                                                             2008/09

                                                                                       2009/10

                                                                                                 2010/11

                                                                                                           2011/12

                                                                                                                     2012/13

                                                                                                                               2013/14

                                                                                                                                         2014/15




                                                                                                                                                                                                     based on waste plan
                                                                                                                                                   2015/16

                                                                                                                                                             2016/17

                                                                                                                                                                       2017/18

                                                                                                                                                                                 2018/19

                                                                                                                                                                                           2019/20




          The importance of EfW to the Council’s landfill diversion targets cannot be
          over emphasised. As stated the National Waste Plan assumes that waste
          arisings will not increase after 2010. In reality, if the mass of waste rises at a


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          rate of 4%, (the average for Perth and Kinross in recent years) this would give
          us an extra 4,000 tonnes of waste per annum which we would have to divert
          from landfill. If we cannot divert this waste, we risk a financial penalty of
          £600,000 (at £150 per tonne), rising incrementally year on year (i.e. in the
          following year, the fine would be £1.2m, and so on). The Council would also
          have to landfill this waste, which (with landfill tax increases) would be around
          £70 per tonne by 2010, resulting in an additional annual cost increase of
          £240,000.

          Energy from waste is so significant because it would allow nearly 100% of the
          extra tonnage to be diverted from landfill after suitable waste reduction, reuse
          and recycling options have been exhausted. Other schemes such as
          recycling would, at best, remove 40-50% of waste leaving the Council facing
          financial penalties for the residual amount which has to go to landfill.

(b)       EFW Capacity - Local

          The Member Officer Working Group heard concerns from officers over the
          reliability of the EfW plant at DERL, Dundee which has been a concern for
          several years. We understand DERL is currently operating at 80% of
          operating capacity (in comparison, EfW plant in Huddersfield operates at 94%
          operating capacity).

          DERL’s design capacity is 120 kilotonnes per annum (ktpa) although the
          management confirm that the realistic capacity is 100ktpa. Therefore, based
          on this capacity and estimated current operating efficiencies, it is estimated
          that only 80,000 tonnes can presently be dealt with by the Dundee plant, per
          year.

          The current and projected usage for DERL is:

                                                  Current (tonnes)   Projected (2010) (tonnes)

           Dundee                                 Up to 70,000       35,000
           Angus                                  Up to 36,000       36,000
           Perth and Kinross                      1,000              34,000
           TOTALS                                 107,000            105,000

          The available capacity of DERL will depend on the success of Dundee and
          Angus Councils in their recycling efforts, and the increases in waste arisings
          in their own areas. If they are experiencing difficulties, then, like ourselves,
          they would almost certainly wish to put their excess waste to EfW, rather than
          pay the £150 per tonne fine, and landfill costs.

          When the Tayside Area Waste Plan was prepared, Dundee City Council
          proposed to substantially decrease from its current tonnage going to DERL.
          The basis for this is that they will be recycling substantial amounts of waste. If
          they do not achieve their recycling targets, then they are unlikely to give up
          the excess capacity at DERL, to accommodate the waste from Perth and
          Kinross Council.



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          Taking a “worst case” scenario, if Dundee fail to meet their recycling targets
          by 10,000 tonnes and waste arisings in both Dundee and Angus increase by
          4%, the requirements for EfW between the three local authorities could be as
          high as 230,000 tonnes by 2020. This is depicted as the `worst case` of
          several scenarios for EfW requirements, detailed in Appendix 1

          If capacity pressures arise at DERL, it is not clear where our Council would
          feature in DERL’s priorities to provide a service. The management at DERL
          recently advised officers that they could only take Perth and Kinross Council’s
          waste if either of the other Councils reduced their input to the plant.

          One option which may be considered by the Tayside Strategic Options study
          would be to extend the capacity at DERL. Although there is little detailed
          information, the capacity could be increased by up to 50,000 tonnes at an
          estimated cost of around £50m. There are, however, major reservations over
          the success of such a venture, considering the problems the site has had
          using its existing technology.

          There is currently no other EfW plant in Scotland other than a small 30,000
          tonne facility in Orkney, therefore if DERL is unavailable to this Council, we
          face either transporting waste great distances for EfW elsewhere, or disposing
          of it locally by another means, and paying the financial penalties, mentioned
          above. The expected life of DERL lasts until 2020, therefore there is a
          significant need to have an alternative in place by that time, at the very latest.

(c)       EfW Capacity – North and East Scotland

          On a wider perspective, the pressure on the Tayside authorities is exactly the
          same with other Councils across Scotland. Table 2 below shows the need for
          EfW across other Area Waste Groups with a total requirement of 332,000
          tonnes per annum by 2020. There is currently virtually no capacity for EfW in
          Scotland, and the creation of any new EfW plant would probably take at least
          5 years. This suggests the benefits to a local authority which can secure a
          long term EfW arrangement, and the difficulties for those Councils which are
          unsuccessful.

          There would be economic considerations to locating a large scale EfW plant
          in the Perth & Kinross area. Information from SITA shows that for a facility of
          250,000 tonne/annum, 120 construction jobs would be generated (mostly from
          local contractors), as well as 30-40 long term operational jobs, including
          skilled engineering, process operatives, and administrative, financial and
          management staff. It is estimated that an EfW plant would represent an
          investment of £80m, and an annual maintenance budget of approximately
          £1m. An EfW plant could offer cheap electricity to the surrounding area, and
          provide a cost effective waste disposal option for local businesses, (as well as
          householders), thus keeping their costs down.




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          Table 2
          Energy from Waste Requirements from Area Waste Plans

                Area            2006          2010          2013    2020             Terminology

           Tayside                     0       97000       102000   111000   Energy from Waste
           Highland                    0       47000        49000    52000   Energy from Recovery
           North East                  0       73000        73000    73000   Energy from Waste
           Forth Valley                0           0        41699    46041   Other Recovery
           Fife                        0           0        15000    50000   Combined heat and power or
                                                                             thermal treatment
           TOTAL                       0     217000        280699   332041



(d)       Conclusions of MOWG

          The MOWG acknowledge that although EfW is essential for meeting the
          Council’s landfill diversion targets, the size and location of appropriate
          facilities is extremely contentious.

          Our research has shown concerns with the ability of DERL to accommodate
          this Council’s waste, even in the medium term, and we require early
          discussions with officials from the City of Dundee Council, to clarify their
          intentions to step down their use of DERL, in order to allow capacity at the
          plant, to meet our requirements.        We would also require instigating
          contingency options, should capacity at DERL not be forthcoming.

          In the longer term, DERL will not be able to cope with realistic projected
          increases in waste arisings.

          The creation of an EfW facility in the Perth and Kinross area would ensure a
          readily available outlet for our EfW requirements.             It would provide
          employment opportunities, and (depending on procurement options) open the
          possibility of lower gate fees for the Council, flexibility to provide additional
          capacity to meet our changing requirements, and possible savings to the
          Council, by supplying this service to other local authorities.

          However, in view of the concerns over locating an EfW plant in the Perth and
          Kinross Council area, the MOWG has proposed a “twin track” approach, by
          agreeing to the potential of EfW facilities in the area as a favoured option,
          pending research being undertaken into the likelihood of new EFW facilities
          which may be created in adjacent local authority areas, for possible uptake by
          this Council. Officers are currently investigating this issue.

          There is still the issue of the wider economic benefits to the Perth and Kinross
          area from having a larger scale facility serving more than this Council’s needs.
          The MOWG has agreed that waste service officers should work with the
          Council’s Economic Development team to investigate these issues further.




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(e)       Recommendations

          (i)       That discussions be held with officials from the City of Dundee Council,
                    to clarify their intentions to step down their use of the DERL Energy
                    from Waste Plant, in order to allow capacity at the facility, to meet
                    Perth and Kinross Council’s interim energy from waste requirements.

          (ii)      That a “twin track” approach be approved to long term energy from
                    waste (EfW) requirements, by agreeing to the potential of EfW facilities
                    in the Perth and Kinross Council area as a favoured option, pending
                    research being undertaken into the likelihood of new EfW facilities
                    which may be created in adjacent local authority areas, for possible
                    uptake by this Council.

          The outcome of the Tayside Strategic Options Review will also heavily
          influence the final position with regard to how the Council’s future EfW
          requirements will be met.


6.        MATERIALS RECOVERY FACILITY (MRF)

(a)       Background

          The Council’s Waste Implementation Plan identifies the need for a “clean”
          MRF to handle 10,000 to 13,000 tonnes of dry mixed recyclables, from
          2006/2007 onwards. This waste will be collected from households at the
          kerbside in wheeled bins. The intention is to collect and recycle materials
          such as paper, cardboard, textiles, metals, plastic and possibly glass.

          As part of the Tayside Strategic Options Review for the Scottish Executive,
          there is broad agreement that a facility needs to be provided in the Perth and
          Kinross area due to its geographical location within Tayside, and also
          proximity to southern end point markets. Although Angus Council does not
          require the use of this facility, Dundee City Council has indicated it may need
          to use this facility – depending on the kerbside collection system, and trials
          and currently underway. If Dundee City does need this facility, it is estimated
          that its requirement would be for capacity of around 20,000 tonnes per
          annum.

          The options agreed at the Member Officer Group on 11 March 2005 were:

          (a)       Facility at Friarton, owned and operated by the Council
                    (option 1)
          (b)       Arrangement with existing waste disposal contractor, at Binn
                    Landfill (Option 3)
          (c)       Facility at Friarton, owned by the Council, but designed and
                    operated by a contractor (Option 6)

          The Group also considered the relative costs in terms of waste transport, and
          proximity to a waste transfer station (see Table 3)


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          Table 3 - Transportation Costs Associated with MRF/Transfer Station
          Options

           Option                                                       Estimated Annual
                                                                         Costs (Savings)

            (1)     MRF and Transfer Station at Friarton                      (£9,000)

            (2)     MRF at Binn Landfill and Transfer Station at              £64,000
                    Friarton

            (3)     MRF and Transfer Station at Binn Landfill                £141,000



          This demonstrates that with the MRF at Friarton, there would be a small
          saving from no longer having to transfer the processed material to Binn
          Landfill. The other options (involving facilities at Binn Landfill) incur significant
          additional transport costs.

          In the short term, the Council could either seek a temporary MRF service by
          competitive tendering, or through negotiation within the terms of the current
          waste management contract, for a facility to be established at Binn Landfill.
          The optimum method would be influenced by the decisions taken regarding
          the longer term option selected.

          In the longer term, waste officers favour the creation of an MRF at Friarton as
          opposed to one at Binn Landfill. The land is Council owned so the expense
          and possibly delay in purchasing/leasing land from a third party is avoided.
          There are concerns regarding the capacity of the land at Friarton to
          accommodate a MRF. However the MOWG has been advised that a MRF
          could be accommodated at Friarton, particularly if there are opportunities to
          extend into the adjacent `Green Hangar site`, owned by the Council. If the
          Council funds the construction of the MRF (via the Strategic Waste Fund), it
          would become a Council owned resource, on Council land. Therefore
          because the capital for construction has been externally funded, the unit cost
          to the Council for processing the material should be cheaper.

          It is difficult to see how the Scottish Executive would fund the construction of a
          MRF on behalf of a private sector company, on land owned by a third party. If
          the MRF is procured and constructed by a waste management company,
          these capital costs will be reflected in the ongoing gate fee to the Council,
          year on year.

          Having the MRF facility under Council ownership gives an element of security,
          for such a strategically important facility. If the MRF was owned and operated
          by a third party, in the event of a breakdown in the relationship, the Council
          would risk having nowhere to process this waste, or face major transportation
          costs transporting the waste elsewhere.



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          There are, however certain advantages in working with the private sector on
          this venture. The Council has no expertise in designing, building and
          operating an MRF. This could be overcome by a partnership agreement,
          where the private sector partner would design and operate the facility. The
          Council would fund the construction cost, and could pay a management fee to
          the company for operating the site with targets set for operational availability,
          and recycling performance. In this way, both parties have a vested interest in
          its success. The partner organisation is committed to its successful creation,
          as they will be operating the facility. If their operation is not satisfactory, the
          Council could remove them, and re-tender for another company to operate the
          plant.

(b)       Conclusion

          The preferred option is for a joint arrangement with a partner organisation to
          design and operate a Council owned MRF at Friarton. If this proposal is
          accepted we will need to embark on substantial work to establish an
          appropriate layout, identify whether and how much of the Green Hangar site
          may be desirable, and whether the Council would accept its use for this
          purpose. It is proposed that consultancy advice be secured on this important
          issue.

(c)       Recommendations

          (i)       That the Council make short term arrangements and negotiate with the
                    Council’s waste disposal contractor, for an amendment to contract, to
                    have the Council’s dry mixed recyclates treated in temporary facilities
                    at Binn Landfill.

          (ii)      That the Scottish Executive be approached to apply for Strategic
                    Waste Funding for this temporary measure.

          (iii)     That a feasibility study be initiated to establish whether the Council’s
                    existing and future waste arrangement requirements in Perth (including
                    a MRF) can be accommodated within the existing land footprint at the
                    current Friarton depot, or with additional adjacent land. This will involve
                    engaging waste management consultancy services.

          (v)       That the Council’s preferred option is to seek a partner organisation to
                    design and operate the MRF, with ownership of the facility retained by
                    the Council and located at Friarton Recycling Centre.


7.        LANDFILL

          The Council’s existing waste disposal contract for landfilling waste at Binn
          Farm expires in 2009. The site has planning permission to 2014. The current
          operators (SITA) have expressed a desire to extend the life of the site to
          2020.



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          European legislation will also require the closure of many landfill sites that do
          not meet modern environmental standards. It is anticipated that by the end of
          2006, there will be a small core of large modern landfill sites available in
          Scotland; and that supply shortages will result in increased gate fees.

          The Member Officer Working Group agreed that further reports be prepared
          on negotiations with the existing partner to extend the contract to 2020. I
          understand that SITA’s intention is to extend the life of this site, however the
          company would be looking for at least one local authority to agree a long term
          agreement for their landfill, to increase the attractiveness of this proposal to
          them.

          The single option in this case is continuation with the existing landfill
          arrangements. The issue is how to procure this Service in a manner which is
          fair, transparent and meets best value principles. This issue is covered in
          section 9 of this report.


8.        WASTE TRANSFER STATIONS AND COMMUNITY RECYCLING
          CENTRES

          The location of the main transfer station is linked closely to future MRF
          proposals, and has been dealt with in Section 6.

          The MOWG has accepted that Community Recycling Centres be retained
          under Council management and control. This would be consistent with the
          Council’s Procurement Policy, to provide services “in house”.


9.        PROCUREMENT ISSUES

(a)       Existing contract issues

          As mentioned previously in the report, the Council has an existing waste
          disposal contract with SITA, to 2009. This contract requires the Council to
          deliver a minimum of 70,000 tonnes of waste for landfilling, per annum. In
          2004, the Executive Director (Environment Services), acting with the approval
          of the Environment Committee, negotiated a temporary variation to the
          contract, where SITA would process an increased tonnage of garden waste to
          produce compost, and also process `civic amenity` waste in their recycling
          centre. SITA has agreed that the minimum tonnage requirements for the
          contract would be satisfied by the combined tonnages processed and
          landfilled on site by these combined methods. This variation expires on 31
          December 2005, at which time the terms of the original contract come into
          effect, unless further variations are negotiated.

          European and Scottish Executive targets placed on the Council to reduce the
          amount of waste going to landfill are incompatible with the waste disposal
          contract. However, Legal Services advise that the requirements of the
          Scottish Executive do not render the waste disposal contract unlawful. In


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          other words, the way the legislation is framed, it is not illegal to landfill more
          than our legal targets, and it simply means that we face substantial financial
          penalties. This means that the contract cannot be considered as void,
          because of these new requirements.            We therefore have the choice of
          incurring liabilities for not meeting our contracted minimum tonnages, or
          renegotiate with SITA to allow us to comply with the Scottish Executive’s
          targets for reducing landfill, within the terms of the contract. It is anticipated
          that SITA would be more amenable to negotiation, if this involved them being
          involved in the recycling/composting of waste which otherwise would have
          gone to landfill.

(b)       Procurement Options

          Whatever options the Council chooses to fulfil its future waste management
          needs, the selection of service provider(s) must be carried out in accordance
          with European and national procurement legislation, the Council’s Scheme of
          Administration and Tender Rules, as well as demonstrating best value, and
          transparency.

          The Council could either choose to procure elements of its waste
          management requirements in isolation (e.g. separate tenders for elements
          such as MRF or in-vessel), or as an all-encompassing service, covering all
          aspects.

          A broad range of procurement methods are available, including:

          (i)       Work within the existing waste disposal contract, with suitable
                    negotiations to modify the contract to take account of recycling
                    requirements. Re-tender for this work in advance of expiry of the
                    contract in 2009.
          (ii)      Immediately put out a revised tender for the Council’s future waste
                    requirements including in-vessel, EfW, MRF and landfill.           The
                    successful tenderer will have to take on the Council’s existing waste
                    management contract obligations.
          (iii)     Investigate a negotiated arrangement such as Public/Private
                    Partnership (PPP) and proceed on this joint basis. PPP arrangements
                    may take several years from invitation, to selection of partner, to
                    commencement of necessary works. This would mean a further delay
                    in securing long term waste management facilities for the Council. The
                    Council may also wish to consider some kind of joint venture or
                    partnership arrangement.
          (iv)      Continue with the existing waste disposal contract until 2009. This
                    would allow the Council time to develop a PPP selection process, to
                    commence in 2009.
          (v)       Explore the possibility of a negotiated tender with a single provider
                    under European procurement legislation.

          The preference of the MOWG would be for a procurement method which
          gives the Council security and confidence in its waste management
          arrangements for the length of the Council’s Waste Implementation Plan (to


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          2020) and beyond. If an option is chosen which entails procuring a service
          around the time of the expiry of the current contract (2009), this would be at a
          point when the Government’s landfill allowance scheme is likely to be having
          significant impacts on local authorities and waste service providers. That may
          be too volatile a time to be considering major changes in our service provider.

          The MOWG took advice from the management consultancy from KPMG. This
          advice suggested that traditional contracts are too inflexible for a dynamic
          environment such as waste management, where it is virtually impossible to
          predict the exact nature of service required due to the impact of public
          participation in recycling schemes, increases in waste produced, and changes
          in technology. KMPG suggest a more flexible, collaboration approach, with a
          “management board” between the local authority and the service provider.
          The MOWG observed this type of arrangement in practice during the visit to
          Kirklees, where the local authority is involved in a joint venture with a waste
          management company, and has a representative on the joint management
          board. Issues are dealt with on an “open book” basis, and problems such as
          variation in waste tonnages, or changes in regulation are dealt with jointly,
          with risks (and costs) being shared by the partners.

          It is also considered preferable to look for an integrated waste management
          solution with a single provider, rather than pursue individual contracts for each
          element (e.g. in-vessel, EfW, MRF). An integrated solution would simplify the
          tendering process, create clarity of operation (i.e. the Council would have a
          single supplier, rather than multiple contractors), and give flexibility (for
          example, if one facility is temporarily unavailable, it would be relatively easy
          within an integrated arrangement, to divert the waste to another facility). An
          integrated solution also fosters a partnership ethos, where the Council and the
          supplier can work closely across all waste streams to deliver best value and
          maximise diversion from landfill.

(c)       Scottish Executive and Strategic Waste Funding

          There have been developments in this area, which have a significant
          bearing on the Council’s future approach.

          Committee members are aware from previous reports, that there have been
          delays in determining the Council’s application for Scottish Executive
          Strategic Waste Funding (SWF), for these large infrastructure projects.
          Report No: 05/140 of March 2005 detailed that the Scottish Executive
          required the local authorities in Tayside to engage consultants to review the
          strategic options, with a view to submitting a joint bid for SWF prior to the
          Scottish Executive’s deadline of 16 December 2005. At the time, waste team
          officers understood that these applications would be determined in the spring
          of 2006.

          However, at a recent conference, a speaker from the Scottish Executive
          advised that the deadline for bid submissions has been put back to January
          2006, and that bids would not be assessed until Autumn 2006. Apparently the
          Scottish Executive wish to collectively look at all bids from the Area Waste


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          Groups, in relation to future spending reviews. The outcome of the spending
          review will determine how much SWF funding is available for each group.

          There is therefore a perceived change in approach from Scottish Executive
          officials, in terms of funding. When SWF applications were first submitted by
          Council’s in 2002/03, the view was that the SWF fund was sufficiently robust
          to finance Council’s wide ranging requirements for waste management. Now
          Scottish Executive officials are talking in terms of local authorities having to
          pursue a mix of funding, including public private partnerships, to achieve their
          requirements, thus indicating that SWF would not be sufficient to meet all
          funding requirements.        In the latest round of strategic waste options
          assessments, the Scottish Executive is requiring the local authority groupings
          to develop Outline Business Cases, which is a further indicator that we are
          being channelled down a joint public/private finance route, for each of our
          area waste groupings.

          The Scottish Executive has not been clear in communicating any change in
          approach, and therefore it is considered very important to seek an early
          meeting with their officials, to clarify the situation. If perceptions are correct,
          the new arrangements have the following significant implications on this
          Council’s ability to arrange appropriate waste infrastructure.

          (i)       The Council’s Waste Implementation Plan states that in-vessel
                    composting, materials recovery and energy from waste arrangements
                    would take effect from 2006/07. This further delay with SWF means
                    that our application will not be assessed until well into the period that
                    we need these facilities to be operational.

          (ii)      There are concerns over the implications of Area Waste Group bids
                    being assessed in relation to future spending reviews. The bid from
                    Tayside will be considered along with those from major population
                    centres and large waste generating areas such as Glasgow,
                    Edinburgh, the Lothians, Fife and the Lanarkshire authorities. If SWF
                    funding is in short supply, the Scottish Executive may choose to award
                    funding to those authorities with high tonnages of waste and poorer
                    historical recycling performance (to help meet national landfill diversion
                    targets), and this may be to the detriment of the authorities in Tayside.
                    Our infrastructure plans, could be delayed for strategic waste funding,
                    which ultimately will not materialise.

          (iii)     The Scottish Executive may manage this funding in a manner similar to
                    the recent schools Private Finance Initiative (PFI) (which included the
                    Council’s Investment in Learning programme). Because of the size of
                    these projects, there are relatively few waste management companies
                    and financial institutions available to participate. Therefore the Scottish
                    Executive may establish a “dealflow” where Council groupings will be
                    placed in a queue and given a time slot to submit their PFI bid. This
                    allows the private sector an opportunity to phase their involvement in
                    projects.



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                    This could mean yet more delays for Perth and Kinross Council,
                    possibly well beyond the Autumn 2006 scheduled period for
                    assessment of SWF bids, especially if priority is given to Councils with
                    greater potential to divert larger tonnages of waste from landfill.

          This national process also has implications at local level.

          In some respects, the Councils in Tayside may suffer from being too well
          organised. Each authority in Tayside has stable long term arrangements for
          landfill and treatment of waste and all have high diversion from landfill rates.
          Therefore the amount of waste available to a waste management company to
          process (and profit from) is relatively limited. This would therefore make our
          area less attractive for companies to submit a tender, compared to large
          urban Councils with poor landfill diversion rates, and a significant requirement
          for the private sector to treat their waste.

          It should be noted that there is a limited market of private waste management
          companies. They are all becoming involved in substantial waste management
          projects across the UK (as the landfill diversion targets become more
          imminent). For example, during the visit to Kirklees the MOWG members
          heard that SITA are involved in a project to process 1.5 million tonnes a year
          for the next 25 years, with a total value of £25 billion, for a large English city.

          There are therefore concerns that with this level of demand across the UK,
          the capacity of waste management companies may soon reach saturation,
          and should the Council delay in going out to tender for a private sector
          partner, the companies with the quality we would require, may no longer be
          available. Again, this could have a major detrimental effect on this Council’s
          ability to meet its landfill diversion targets.

(d)       Procurement – next steps

          As mentioned earlier in this report, an integrated joint venture partnership
          approach with a private sector waste management company would appear to
          be a pragmatic and reasonable procurement route for this Council to explore
          in detail at an early date. This model appears to be successful in Kirklees, as
          members of the MOWG discovered during their recent visit.

          We have to be conscious at this stage that whatever route we take does not
          exclude us from accessing future Strategic Waste Funding. The advice from
          consultants KPMG, is that the joint venture approach could evolve into a wider
          management board involving other partners if the Scottish Executive made it
          a requirement of SWF funding that bids would only be received from the
          Tayside Area Waste Group, via a public/private funding application process.
          KPMG have suggested a model for this type of approach (see Appendix 2),
          which is based on work they are currently undertaking in England.




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(e)       Recommendations

          That an integrated joint venture partnership approach be investigated and
          appraised, and in particular:

          (i)        Arrange to meet with Scottish Executive officials to discuss our
                     proposals and clarify their position in relation to future national waste
                     management procurement. This meeting should involve Elected
                     Member representatives, with the outcome to be reported back to the
                     Environment Committee.

          (ii)       Establishment of a long term joint venture is the Council preferred
                     option which would require a tendering approach under European
                     procurement law. This important action would require a level of
                     technical, legal and financial expertise which is not currently available
                     within this Service, or perhaps even within the Council. It is therefore
                     proposed to ascertain the level of assistance available within the
                     Council and if necessary engage consultants to assist with this
                     procurement process.

          (iii)      Communicate our proposals to the other members of the Tayside Area
                     Waste Group.

          Despite the relative clarity of the above approach, there is concern about the
          risks involved in pursuing a joint Tayside – based model to access Strategic
          Waste Funding.

                 Firstly, the likely delays in approval of strategic waste funding will impede
                  the Council’s ability to finalise its long term waste management
                  infrastructure.

                 Secondly there are potential issues in relation to energy from waste (EfW).
                  Because Dundee City Council is interlinked with the plant at DERL, it may
                  insist that any future EfW developments take place at DERL. In view of
                  the plant’s previous history in terms of reliability, this may not be in the
                  best interests of Perth and Kinross Council

          At this stage, it is difficult to speculate how these arrangements will work out.
          However, the Committee is asked to note that it may be in this Council’s best
          interests to proceed with its waste management infrastructure requirements
          independent of the Tayside Group, even if that means foregoing the
          opportunity of Strategic Waste Funding. This is not a decision to be taken
          now and a report will be submitted to a future Committee providing more
          details of the risks involved with each course of action.


10.       CONSULTATION

          Consultation on the issues involved was part of the Working Group’s process,
          therefore no formal consultation on this report has taken place at this stage.


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11.       RESOURCE IMPLICATIONS

          The resource implications for certain elements have been described at the
          relevant sections of the report. Further investigation of resource issues will
          form part of the Working Group’s deliberations.


12.       COUNCIL PRIORITIES AND PRINCIPLES

          Priorities

           Economic Growth: working towards ensuring Perth and Kinross has a
            prosperous, sustainable and inclusive economy.

           Environment: protecting and enhancing the environment of Perth and
            Kinross

          Principles

           Accountability and Transparency: ensuring that we are accountable and
            transparent to the community, the Community Planning Partners and the
            Scottish Executive in our decision-making, planning and delivery of
            services.

           Continuous Improvement: ensuring that we use Best Value principles in
            all our service planning and delivery decisions

           Sustainability: ensuring that we consider the long-term sustainability of
            our decisions.


13.       CONCLUSION

          The MOWG has made great strides in clarifying the desired approach that the
          Council should be taking with its future waste management arrangements,
          and giving the Waste Service officers direction in terms of future actions. I
          wish to record my gratitude to the members of the Group for taking the
          substantial time required to contribute to this work.

          This is a dynamic situation, and it is important to keep the momentum on
          these issues. I would therefore seek the Committee’s agreement to convene
          a Management Executive Sub Committee, should this be necessary during
          the summer recess, if any issues arise which require a Committee decision.

          Progress on these issues will be reported to the Committee on a regular
          basis.


                                      DONALD STEWART
                         Head of Environmental and Regulatory Services



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Contact Officer:                        Keith McNamara, Waste Services Manager, Extension
                                        6470, kdmcnamara@pkc.gov.uk
Address of Service:                     Pullar House, 35 Kinnoull Street, Perth, PH1 5GD
Date of Report                          9 May 2005
Note:




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