Monday, 25 January 2016

£26 million in benefits lost by waste contract collapse


The development of a conventional treatment plant capable of processing 40,000 tonnes of Borders household waste each year would have delivered cost savings of at least £26 million over a 24-year period, according to documents seen by Not Just Sheep & Rugby.

Scottish Borders Council commissioned Dorset-based New Earth Solutions (NES) in 2011 to build a Mechanical Biological Treatment (MBT) facility at Easter Langlee after senior local government officers and leading councillors accepted in 2009 that a "do nothing" option - continuing to send most of the region's rubbish to landfill - was unsustainable 'going forward'.

But the cancellation of the amended deal with NES last February in the face of insurmountable technological and funding issues means the same "do nothing" scenario still exists seven years out from the start of the procurement process.

It has also been confirmed that those responsible for waste disposal at the council discounted the possibility of transporting all of the region's garbage out of the Borders by road before entering into discussion with potential bidders for the £65 million waste treatment contract. But following the total collapse of the SBC/NES partnership, carting the refuse in fleets of lorries for treatment elsewhere is firmly back on the agenda.

The shambolic failure of the contract to deliver any benefits has - according to SBC - cost taxpayers £2.4 million. But it would appear from the confidential statistics contained in several reports prepared for the council by consultants and officials that the real cost could be at least ten times that figure when land fill tax and other expenditure required to maintain the "do nothing" option is taken into account.

And the bill for waste disposal would have been even higher had the Scottish Government's system of landfill fines not been suspended. One estimate warned the penalties could have cost SBC upwards of £14 million.

There is also the small matter of £6 million in capital costs which will be needed for the construction of a waste transfer station at Easter Langlee to handle the rubbish before it proceeds on its final journey to a treatment plant, possibly in the Lothians. That money will have to be borrowed before being repaid over a period of years with associated interest added.

The council members were told of the potential for £26 million worth of savings in a confidential report submitted to them in March 2011. The proposed MBT plant was going to divert a guaranteed 80% of waste from landfill, believed at that time to be one of the highest diversion rates in the country. The forecast savings were calculated by comparing the MBT project against the "do nothing" scenario.

But before work on the MBT could begin SBC and NES entered into a so-called Deed of Variation during 2012 to include an energy from waste facility at Galashiels even though the brand of technology was not ready for commercial application. This highly ambitious and risky combination of functions proved impossible to achieve, and the entire scheme was ultimately abandoned.

It has also come to light that an accountancy firm working for Audit Scotland, the national public expenditure watchdog, has recently concluded an exercise which considered aspects of SBC's decision to award the waste management contract to NES in 2011.

KPMG, the company which acts as external auditors to SBC, has concluded that "the technology which has subsequently not been able to be implemented was not core to the original agreement with NES. The basis of award was not reliant upon delivery of the technology. However, to make the process more advantageous to both parties an amendment to the agreement was reached in 2012."

According to KPMG at this point the council protected their commercial position with the incorporation of 'no-fault break clauses' allowing them to walk away in the event of the technology not being able to deliver the anticipated benefits.

But it is understood the council already had a right to terminate in the original contract for the MBT facility. Some observers and critics claim the Deed of Variation to include the energy recovery technology severely diluted SBC's commercial position.

The KPMG assessment adds: "Progress has been made in addressing areas for improvement with appropriate procurement, governance and risk management arrangements in place".

The fact remains that despite spending at least £2.4 million and a great deal of staff time, and forfeiting potential cost savings of £26 million, SBC still does not have a fit for purpose waste treatment facility which could and should have been operational in 2012. It is difficult to see how auditors can consider such an abject and costly failure as a satisfactory outcome given the environmental impact and road haulage costs linked to the latest "solution".

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