ITEM CA8E
CABINET– 15 JANUARY 2008
OXFORDSHIRE WASTE TREATMENT PROCUREMENT – SELECTION OF PARTICIPANTS TO BE INVITED TO SUBMIT DETAILED SOLUTIONS
Report by Director for Environment & Economy
Introduction
1. On 19 September 2006, the Cabinet approved the start of procurement of residual waste treatment facilities to help meet Oxfordshire’s targets under European and UK legislation for reducing the amount of biodegradable waste that is sent to landfill. The contract was advertised in the Official Journal of the European Union in March 2007, and subsequently eight companies were selected and invited to submit outline solutions. Their submissions were received in October 2007. The purpose of this report is to present the results of the evaluation and to ratify the selection of participants to be invited to submit detailed solutions.
Exempt Information
2. This report contains information in Annex 4 that relates to a competitive procurement process in progress and is commercially sensitive. The public should therefore be excluded during consideration of Annex 4 because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following categories prescribed by Part 1 of Schedule 12A to the Local Government Act 1972 (as amended): paragraph 3 – Information relating to the financial or business affairs of any particular person (including the authority holding that information) - and since it is considered that, in all circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that disclosure would distort the proper process of the transaction and the Council’s standing generally in relation to such transactions in future, to the detriment of the Council’s ability properly to discharge its fiduciary and other duties as a public authority.
Background
3. The procurement of residual waste treatment facilities is required to meet EU Landfill Directive requirements. This seeks to substantially reduce the amount of biodegradable municipal waste that is sent to landfill in order to reduce emissions of greenhouse gases and, in particular, methane. Failure to meet the tough reduction targets under the Landfill Allowance Trading Scheme (LATS) would result in the Council needing to purchase allowances from other authorities at a currently unknown cost, and/or significant financial penalties which could be as much as £150 per tonne.
4. The previous Executive resolved, at a meeting on 4 November 2004, to prepare for the procurement on a ‘technology neutral’ basis. The Waste Treatment Board was subsequently established to steer the procurement process. It is chaired by the Director for Environment & Economy and attended by the Cabinet Member for Sustainable Development, the Deputy Leader of the Council, representatives of the Oxfordshire Waste Partnership (OWP) and district councils and key stakeholders.
5. In 2005, the Environment & Economy Scrutiny Committee undertook a review of potential waste treatment options involving energy recovery. Their recommendations are set out in full in Annex 1 (download as .doc file) and overall recommended consideration of combined heat and power (CHP) as the most environmentally and economically sustainable option for future treatment of Oxfordshire’s waste. The Cabinet welcomed the report and resolved that energy from waste should be one option but not the only option that should be considered.
6. The Cabinet considered the outline business case on 19 September 2006, and approved the start of procurement on a technology neutral basis, a Public Private Partnership (PPP) style of contract, and using the Competitive Dialogue procurement process.
7. The procurement is taking place in the context of the Oxfordshire Joint Municipal Waste Strategy agreed by the OWP and all partner authorities in 2006. The strategy sets targets for increasing recycling and composting rates to 40% by 2009/10 and at least 55% by 2019/20, and to reduce waste growth to 0% per person per year by 2012.
8. Very good progress is being made towards achieving these targets, and Oxfordshire is amongst the best in the country at recycling with a rate of 38.5% in 2006/07 and is likely to exceed 41% in 2007/08 (i.e. two years ahead of plan). However, avoiding waste is the best solution of all, with Oxfordshire produces the second lowest total waste arising per person of any county council.
9. The OWP Strategy recognises, however, that waste reduction and recycling will not be sufficient of itself to meet the landfill diversion targets that are required of the county and hence to avoid fines. Policy 9 of the Strategy, which is set out in full at Annex 2 (download as .doc file), explains that treatment will be necessary, sets out the available technologies, and concludes that ‘Whatever we choose must be safe for the environment and human health, recover value from the waste, and not be a substitute for reuse, recycling and composting.’ The County Council’s procurement of waste treatment delivers this policy and is wholly consistent with it. It is also consistent with experience and best practice in countries in Europe which have been most successful in diverting waste from landfill. Even the very best countries in Europe that recycle 50-60% of waste need to develop additional methods of diverting waste from landfill and have therefore significant levels of waste treatment. This is illustrated by the table attached at Annex 3 (download as .doc file).
10. Residual waste treatment facilities will not be operational until 2012 at the earliest. In order to boost composting rates and help to meet LATS targets in the short term, the Council is also procuring food waste treatment capacity. The contract was advertised at the end of October 2007 and is expected to be awarded in March/April 2008 with capacity becoming available in April 2009 or earlier. This again is very much a Partnership approach, and will help district councils with their new collection arrangements.
11. Members have been kept informed throughout preparation and the first stages of the procurement. Members have had the opportunity to attend briefings and during 2007 quarterly email updates have been sent to all members. Some members have also visited a range of technologies. The Oxfordshire Waste Partnership has received regular updates and is supportive of the procurement.
Invitation to Submit Outline Solutions (ISOS)
12. The pre-qualification stage established that companies have sufficient technical and organisational experience and financial standing to be able to deliver the services required. Eight companies pre-qualified and in August 2007 were invited to participate in dialogue and to submit outline solutions setting out how they would propose to treat Oxfordshire’s residual municipal waste. The eight companies were – Cory Environmental, Covanta Energy, Global Renewables, Hills Waste Solutions, SITA UK, Veolia, Viridor, and Waste Recycling Group.
13. Participants were allowed to submit up to two solutions. Two participants subsequently withdrew, and eight outline solutions for residual waste treatment were submitted from the remaining participants.
14. The details of the solutions are commercially sensitive and therefore are not described in this report. However, overall the submissions showed that there is a high level of interest in the contract from participants, and the solutions proposed are realistic and technically feasible. They would all result in LATS targets being met and achieve high levels of diversion of residual waste from landfill. To fund their solutions, participants have proposed either project finance (investment from banks) or corporate finance (from their own balance sheet).
15. In terms of technology, all participants have proposed energy from waste (EfW) involving incineration with energy recovery.
Energy from Waste
16. Energy from Waste (EfW) is the name given to the incineration of waste under controlled conditions to produce heat. The heat produced is then used to produce electricity. The heat can also be used to produce steam or hot water for industrial or domestic use, and this is normally termed ‘Combined Heat and Power’. The amount of electricity produced depends on the size of the plant.
17. EfW is a proven technology. It is the main form of treatment used in Europe including in countries that achieve high recycling rates, and in UK. There are already 14 EfW facilities in Britain; 128 in France; 65 in Germany; 30 in Denmark; 29 in Sweden; and 28 in Switzerland. There is no evidence that use of EfW reduces priority given to waste reduction and recycling.
18. In terms of the safety of EfW for the environment and health, any treatment facility will need to be permitted by the Environment Agency who are responsible for regulating waste treatment plants. They have strict rules for such facilities and will not allow anything that is unsafe. The Health Protection Agency has a responsibility to protect human health and they also would not allow anything that is unsafe.
Evaluation Process
19. The solutions have been subject to a structured evaluation process carried out by the project team including technical and financial advisors. During the evaluation a clarification process was followed and participants were asked to clarify aspects of their submissions that were unclear.
20. Overall evaluation criteria and weightings were agreed by the Waste Treatment Board and at this stage of the procurement the evaluation has focussed on technical aspects of the solutions and the funding approach and proposed contractual structure. Approximately 80% of the scores are weighted on technical factors and 20% on commercial factors.
21. The technical evaluation has assessed the performance of the proposed solutions and how treatment residues will be recycled or disposed of, and has considered deliverability in terms of sites and planning. The Environment Agency’s life cycle analysis tool, Waste and Resource Assessment Tool for the Environment (WRATE), has also been used to assess the environmental impacts of solutions.
22. The commercial evaluation has assessed the robustness of the funding solution and the commercial structure proposed, but has not included prices as the outline solutions are not sufficiently developed to make this meaningful at this stage. However, during the clarification meetings prior to the submission of solutions the Project Team informed participants of the Council’s value for money limit and that to be viewed favourably at the next stage solutions are expected to cost less than the cost of continuing to dispose of waste to landfill. All participants agreed to this approach.
23. The results of the evaluation were reported to the Waste Treatment Board on 19 December 2007, which made a clear recommendation, based on the evaluation, on the number of participants who should be invited to submit detailed solutions.
24. The full Council will be discussing progress on the procurement on 8 January 2008, and the outcome will be reported orally.
25. In order to maintain flexibility and encourage competition the residual waste treatment contract was advertised in lots, one of which related to the final disposal of the residues following treatment. Three of the pre-qualified companies expressed interest in this lot and their submissions have also been evaluated in accordance with the agreed methodology.
Conclusions
26. Even with very low waste quantities per person and very good rates of recycling and composting, the amount of non-recyclable residual waste generated in the county in future will exceed our landfill allowance. Therefore, a method of treating non-recyclable residual waste is required.
27. The Council advertised the contract on a genuinely technology-neutral basis thereby giving the market the best opportunity of bringing forward the most economically and technologically viable solution for Oxfordshire. The market has responded by proposing EfW as the best way to meet our requirements for landfill diversion and meet the Council’s value for money limit.
28. The Council has said it will accept EfW if that is shown to be the best solution against evaluation criteria. The evaluation has indicated that the EfW solutions submitted are technically deliverable and safe, and that participants are capable of funding their proposals.
29. In recommending the selection of participants to Cabinet and proceeding to the next stage of the procurement, the treatment board has accepted and endorsed EfW as the technology choice.
Next Steps
30. The selected companies will be invited to submit detailed solutions. A dialogue process between the Council and participants will then take place to develop these solutions. These will be priced and prices will be taken into account in the evaluation. Dialogue will continue until the Board is satisfied that the detailed solutions meet requirements and all substantive issues between the Council and participants have been resolved. The dialogue will be closed and participants will be asked to submit final tenders. A preferred bidder will then be selected. A contract is expected to be awarded in Spring 2009.
Financial and Staff Implications
31. This project is very important in achieving the Council’s objectives of low taxes, value for money and the choice of a real alternative to landfill. Implementing residual waste treatment will divert substantial waste tonnages away from landfill and as such will reduce the future costs of waste disposal in Oxfordshire. The main cost reduction will be reflected in the total reduction of LATS fines as diversion to treatment should enable the Council to reach a point when our landfill tonnage is below the LATS allowance targets set.
32. Delay in the implementation of the treatment facility would have a substantial adverse financial impact on Oxfordshire County Council tax payers. Risks to achieving this have been identified and are being managed through a risk register for the project.
33. The costs of supporting this procurement, including professional fees for the technical, financial, legal and insurance consultants are funded through the revenue budget and most recently a bid requested through the star chamber process has been supported by the Cabinet, although a final decision on the budget will be made by full Council in February.
RECOMMENDATION
34. The Cabinet is RECOMMENDED to;
(a) note and support the progress made on the procurement of residual waste treatment for Oxfordshire’s municipal waste; and
(b) endorse the selection of participants to be invited to submit detailed solutions as set out in Annex 4.
RICHARD DUDDING Director for Environment & Economy
Background papers: Nil
Contact Officers: Andrew Pau, Head of Waste Management Tel: (01865) 815867 Frankie Upton, Waste Project Manager Tel: (01865) 815824
January 2007
|