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Summary:
Options considered: |
This report summarises the negotiations that have recently been carried out by the Norfolk Waste Strategic Officer Group on behalf of all of Norfolk’s Councils with Norse Environmental Waste Services Ltd (NEWS) on proposals to amend and extend the existing Material Recycling Facility (MRF) contract to 2027.
The contract for the processing of recyclables is delivered by NEWS, which is a joint venture company with all seven Waste Collection Authorities in Norfolk (i.e. the District, City and Borough Councils), the County Council in its role as a Waste Disposal Authority and Norse Commercial Services Ltd.
The contract expires on 30 September 2024 and costs are currently paid based on a fixed gate fee (subject to annual increases). To secure a three-year extension to 2027 which had been allowed for in the contract, payment for the service would have to change from the existing fixed gate fee basis to a variable gate fee, which would be based on actual costs and which would apply from October 2021.
The existing arrangement with NEWS as a Joint Venture Company is in alignment with Teckal principles, which gives the opportunity of a contract extension using Teckal exemptions. Legal advice on this has been secured to ensure that changes to documentation made to facilitate the amend and extend option would maintain this alignment.
Evidenced by soft market testing, an extension would allow better value to be secured in the longer term and also provide stability of arrangements during a period where national waste policy and legislation on waste is expected to lead to changes on the volume and composition of waste collected by Councils.
Option 1 - Extend the current joint venture company contract with NEWS for three years from 2024 to 2027 and amending the contract to a variable gate fee based on actual costs from October 2021.
Option 2 - Extend the existing contract for the extension period available (3 years) maintaining terms and conditions as previously agreed. The existing gate fee is below market value and the average gate fee paid by local authorities in England. However, the contractor would retain associated risks with fluctuating market commodity values and would not agree to the proposal.
Option 3 - Tender for a new contract from 2024 – soft market testing was undertaken to establish the likely response from potential bidders if a procurement exercise was undertaken. This showed that current market conditions along with future uncertainty over Government waste policy would see higher gate fees than the fee the Council is currently paying to NEWS and higher gate fees than the Council would pay to NEWS under the variable gate fee proposal.
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Conclusions:
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The proposal to amend and extend the contract with NEWS offers the best value to NNDC over the extended contract period, as demonstrated by the soft market testing exercise that was undertaken. In addition, the uncertainty around changes to waste services that may be required from 2023/24 in response to new national waste policy and legislation, creates foreseeable but unknown risks about the future volumes and the mix of recyclable materials that NNDC may be collecting in the medium term, making a contract procurement exercise extremely difficult at the current time.
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Recommendations:
Reasons for Recommendations:
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That Cabinet agrees to amend and extend the current joint venture company contract with NEWS for three years from 2024 to 2027, accepting a shift to a variable gate fee based on actual costs from October 2021.
The proposal to extend the contract with NEWS offers the Council the best value over the full term of the remaining contract and proposed extension period. |
LIST OF BACKGROUND PAPERS AS REQUIRED BY LAW
(Papers relied on to write the report, which do not contain exempt information and which are not published elsewhere)
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Cabinet Member(s) – Cllr. Nigel Lloyd
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Ward(s) affected - All |
Contact Officer, telephone number and email:
Scott Martin, 01263 516341, scott.martin@north-norfolk.gov.uk
Minutes:
The DFC introduced the report and informed Members that it outlined the proposed extension of the existing joint venture contract with other Norfolk authorities and NEWS, in order to process the co-mingled recycling collected by the Council. The ESM added that whilst market conditions would determine gate fees, these had been very favourable in recent months, meaning that the Council could expect an immediate saving of £20 per tonne when compared to existing gate fees.
Questions and Discussion
i. Cllr T Adams stated that in the absence of other viable options he would propose approval of the recommendations.
ii. Cllr N Lloyd commended officers for their work in helping to negotiate the contract extension. The DFC added that the ESM should also be commended for his work in securing additional funding for the service, and added that whilst the value of recyclable materials was at a record high, the process was reliant on recycling remaining a profitable exercise. It was noted that the price of recycled glass had varied dramatically in recent years, and it would therefore be helpful for the Committee to maintain oversight of how the recyclable commodities market would impact gate fees going forward on a periodic basis.
iii. Cllr A Brown stated that the volatility of prices in the recyclable commodities market was similar to the energy market, and it therefore made sense to second the recommendation at this time.
iv. Cllr N Pearce stated that the work of officers was exemplary, given the continued increase in recyclable material being produced and the volatility of the market. He asked whether this form of contract could be marketed to other areas in the Country, to which the DFC replied that Norfolk was in a unique position and it was unlikely that the service could be made viable elsewhere. The DFC added that funding from WRAP also encouraged sharing good practice between local authorities free of charge, and it was therefore inadvisable to attempt to market the County’s methods.
RESOLVED
1. To support Cabinet’s decision to amend and extend the current joint venture company contract with NEWS for three years from 2024 to 2027, accepting a shift to a variable gate fee based on actual costs from October 2021.