Saturday, 2 June 2018

Council contractors wanted to "double their price"


Officials at Scottish Borders Council extended a valuable £300,000-a-year waste recycling contract under delegated powers without inviting competitive tenders even though the existing suppliers demanded a near doubling of their prices at one point during discussions.

Not Just Sheep & Rugby has already reported on the "highly unusual" decision by SBC that their long-standing contract for dealing with 10,500 tonnes of so-called dry mixed recyclates (blue bin rubbish) would continue to be in the hands of J & B Recycling Ltd, of Hartlepool without rival firms having the opportunity to bid because of "special circumstances".

Since 2005 that company which later became sub-contractors to New Earth Solutions - the now dissolved firm chosen by councillors to solve the Borders' waste treatment problems - has handled collections of domestic recyclable rubbish which are hauled 110 miles by road to the J & B Tees-side facility.

One of two so-called transparency notices published by SBC set out to explain why other firms had been denied the chance to bid for the work when J & B's contract expired in March 2017. The notice claimed: "Scottish Borders Council is in the process of reviewing future requirements for all Waste Management Services. During this period the highest priority for the Council is existing service delivery.

"Therefore until the new Waste Management Plan is fully implemented and to avoid a disproportionate impact on current waste operations it is necessary that existing arrangements relating to service provision continue. A detailed options appraisal has been conducted which confirms that this approach is the most appropriate solution delivering best value while meeting the necessary requirements of the Public Contracts (Scotland) Regulations 2015."

Then a second notice gave this reason for the deviation from normal procurement procedures: "Extreme urgency brought about by events unforeseeable for the contracting authority".

Additional details of what led up to the contract extension have now emerged in a heavily redacted (censored) version of an internal council briefing note. The 21-page document was released following a Freedom of Information request, but unfortunately virtually every figure in the report has been hidden from view.

The note records that a firm of consultants had been called in to carry out an appraisal of options available once the contract came to an end.

"The Options Appraisal concluded that extension of the current contract with J&B Recycling Ltd was most likely to achieve the Council’s short-term procurement objectives and achieve the lowest price given the current market conditions. The negotiation with J&B regarding the contract extension progressed well until January 2017 when J&B changed position and requested a significant price increase i.e [redacted figure]."

The Council requested J&B reconsider their position and revisited the other viable options available: J&B subsequently proposed two alternative options with increased risk share but at significantly reduced rates.

 A review of the pros and cons of each of the options by officials concluded that J&B’s option one (costs redacted) represented the best way forward for the following key reasons:
1. The price is competitive 2. The Council is exposed to additional risk compared to the current contract; however break clauses built into the contract provide an element of protection. 3. J&B have a proven track record of managing the Council’s refuse since 2005. 4. The public will see no changes to the service which is not the case if the Council was to enter into a contract with [redaction]. 5. It is likely to present the quickest way of putting a contract in place and minimises the costs the Council would be exposed to during an interim arrangement.

On the other hand the Briefing Note warns: "The main risks of entering into the contract are: 1. The Council is exposed to additional risks and price fluctuations compared to the current contract. 2. The Council may receive a challenge during the 10 day standstill process. If this occurs it will need to go out through a full procurement exercise. This is likely to result in additional cost whilst the procurement project is undertaken."

More detailed background to the discussions between SBC and J & B shows how the contractors came to request a sizeable price increase.

 On 19th January 2017 J&B’s Commercial Manager confirmed that they had taken the proposal to their Board and they had indicated that terms and price did not deliver the required return on investment.

"The main justifications were as follows: J&B’s paper contract was due to expire and it was unlikely they would be able to negotiate a fixed price at the level of their current arrangement. The paper contract was likely to require card to be extracted and this would need significant additional investment into their plant. Their haulier had recently lost a back haul contract and J&B were expecting a price increase.

"An emergency meeting was arranged with J&B’s Managing Director and Commercial Manager on 23rd January 2017. At this meeting J&B outlined that they required [redacted figure] if they were to continue to provide the contract on similar terms as had been discussed. 

"It was now clear that the extension of the current contract with J&B may no longer represent the best option. The Council outlined to J&B that they were unable to enter into a contract at [redacted figure] nearly double the current price, and asked them to rethink their proposal."

However, as reported, the range of possible alternative solutions were assessed, then discarded.

The Briefing Note concludes: "The Council has been put in a difficult position as a result of J&B changing their position and the fact that the current contract expires at the end of March 2017. Following a review of the viable options available to the Council, at the 1st March 2017, the following options are considered to represent best value in terms of price: 1. New contract with J&B 2. Partner with [redacted] Council."

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