Agenda item

The Chairman introduced the item, summarised the recommendation and noted that the report was also due to be considered by the Overview & Scrutiny Committee, and Members should therefore focus on the risk elements of the report.

Questions and Discussion

       i.          Cllr C Cushing asked why the risk to collections had not been identified sooner, and referred to comments in the report that suggested that failure to purchase additional vehicles would result in risk to the reliability of existing collections. The DFC replied that since the introduction of the new target operating model, there had been issues with performance that had been exacerbated by recruitment difficulties and industrial action, however there had been considerable growth in garden and trade waste collections. As a result, Serco had identified a tipping point at which the growth in these services would begin to effect existing collections without the additional collection vehicles. It was noted that the decision to request additional vehicles was the culmination of discussions, which was why the request had not come sooner.

      ii.          The Chairman referred to additional income of approximately £700k generated by the growth in services, and asked whether the need for additional vehicles could not be identified until issues including industrial action had been resolved. The DFC replied that whilst industrial action may have delayed the decision to request additional vehicles, it was not the cause as there were tolerances within the contract that had reached their limit due to the growth in customers. Cllr C Cushing stated that the risk should have been identified some time ago, and it was no longer a risk as it had materialised, and now required funding outside of the budget framework agreed in February. The DFC replied that there were always risks present, and it was likely that the risk had not materialised at the time the budget was set, though he accepted that warnings could have been given sooner.

     iii.          The Chairman asked whether any additional income generated by the garden and trade waste collections had been ringfenced for use on matters such as purchasing additional equipment. The DFR replied that the income for charged services was held by the Council, but spending on additional vehicles could be seen as an investment in services. She added that going forward Members could consider establishing a reserve for this type of spending with funds generated by chargeable services. The Chairman reiterated that he sought to determine whether any of the additional income generated had been set aside for use on matters such as purchasing additional vehicles, given that the risk had been previously identified. The DFR replied that by placing funds received in the general reserve, the Council was in a better position to purchase additional vehicles, but the existing income and performance compensation payments would effectively cover the costs of any borrowing incurred to purchase the vehicles.

    iv.          Cllr S Penfold referred to p79 and noted that collections had struggled over the past six months and would continue to do so without the purchase of additional vehicles. He added that this suggested that the risk had materialised, and asked how the long the build time would be, given that service performance was already suffering, which created reputational risk for the Council. Cllr S Penfold asked how the Council would act to mitigate risks or issues during the build period, to ensure that services were delivered to an acceptable standard prior to receiving the new vehicles. The DFC replied that Serco were already providing an additional vehicle at their expense, however this was unsustainable and not within the terms of the agreed contract. He added that the decision had been taken for the Council to provide vehicles to avoid risks to the service and the contractor expected this to be the position going forward. It was noted that for trade waste, there were efficiencies in collecting smaller holiday home bins as part of domestic collections, however the increase in trade collections had placed pressure on the domestic service. The DFC stated that the additional vehicle would take pressure off domestic collections whilst adding capacity for continued growth in the service. He added that prior to delivery of new vehicles, Serco would continue to meet service demand with rented vehicles, but using Serco’s pre-booked build slots would bring forward the delivery date of new vehicles.  Cllr S Penfold asked whether the Council could continue to expect service disruption until the additional vehicles were delivered. The DFC replied that pressure was placed on Serco to continue to meet the required level of service despite the need for additional vehicles, and this would continue until they could be delivered. He added that if the Council did not make efforts to meet its contractual obligations and provide the required level of vehicles, then Serco may be inclined to revert to contract and limit service levels to the available resource. 

      v.          The Chairman referred to income generation forecasts from chargeable services and asked how this had been calculated. The DFC replied that in terms of trade waste customers, excluding the impact of Covid, the Council had seen continued growth in its income and this was expected to continue, with Serco recently employing a Commercial Waste Manager to focus efforts. He added that there were a number of other commercial waste service providers in the area, and it was important to remain competitive service to ensure continued service growth which would require increased capacity provided by the additional vehicles. The Chairman asked whether officers were confident that the increased revenue would cover the costs of the additional vehicles over their working life. The DFC replied that the budgeted income was £1.3m for garden waste services and £1.6m for trade waste, and it was therefore expected that income would far outweigh the cost of vehicles over their service life. The Chairman stated that it would have been useful for this information to have been included within the report to show that financial risks had been mitigated. The DFC replied that any figures of this kind would need to be provided in purple papers due to the commercial sensitivity of the information.

    vi.          Cllr A Brown stated that he felt there had been a shortfall on details in the report presented to Cabinet, and suggested that it would have been helpful to better understand how the cost of the additional vehicles would be covered by the income generated. He added that with any public borrowing, it was important to know how quickly this would be repaid, with risks outlined if this could not be guaranteed. Cllr A Brown asked whether the current waste contract would allow for the conversion of vehicles to HVO fuel, in order to help achieve net zero by 2030. He added that he was supportive of creating a contingency fund to purchase any future additional vehicles required. The DFC replied that HVO fuel was an alternate fuel source, and whilst there were discussions taking place with Serco, supply and sustainability was yet to be determined, but there was no contractual impediment. The DFR stated that creating a contingency fund for vehicle purchases was possible, if supported by Members. The DFC added that whilst the purchase of additional vehicles was the responsibility of NNDC, it remained Serco’s responsibility to specify the vehicles and plant required to deliver the contract, therefore it may be premature to create a dedicated reserve for this purpose that may not be required. The Chairman asked whether there was any mechanism in place to monitor the continued growth of the service to determine whether additional vehicles may be required again in the future. The DFC replied that the North Norfolk element of the contract was complicated and it would be better to maintain a level of officer control over the process in order to achieve the best outcomes for residents.

   vii.          Cllr L Shires stated that growth in the chargeable services was a result of the Council’s success, and whilst she did have concerns regarding risk when initially reviewing the report, she was satisfied that these had been mitigated. She added that clarification was needed on when borrowing costs would be incurred on the basis that Serco had preferential build slots available. The DFR confirmed that if the preferential Serco build slots were used, then the borrowing would be incurred in 24-25, the year after the assets were acquired.

  viii.          Cllr C Ringer stated that the growth in services over the past five years suggested that not purchasing additional vehicles would present the greatest risk to maintaining Council services.

    ix.          The Chairman noted that the Committee were satisfied that the decision to purchase additional vehicles did not present an unacceptable level of risk to the Council.

      x.          The recommendation was proposed by Cllr J Toye and seconded by Cllr J Boyle.

RESOLVED

1.     To recommend to Full Council an addition to the Capital programme of £385,000 to purchase two new refuse collection vehicles and that the £385,000 be added to the residual £65,000 that is left over from the original budget to purchase refuse vehicles from 2019 to date.

2.     To recommend to Full Council that the purchase be funded by borrowing of £335,000 and a revenue contribution of £50,000.