Council contractors wanted to "double their price"

EXCLUSIVE by EWAN LAMB

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."

"Dud" treatment plant stays shut till at least 2020

EXCLUSIVE - by DOUG COLLIE

The 'flagship' waste treatment facility near Bristol which convinced Scottish Borders councillors they were onto a winner after an expensive visit to the plant in 2014 will remain out of commission until at least 2020 having been completely closed down two years ago because of insurmountable technological issues.

No fewer than sixteen elected members and senior officers from Scottish Borders Council made the 700-mile round trip to New Earth Solutions Group's so-called cutting edge Avonmouth centre which was supposed to convert up to 120,000 tonnes of household refuse each year into electricity via advanced thermal conversion.

A much delayed smaller version using the same processes - it was to cost £23 million - was originally planned for Easter Langlee, Galashiels, to deal with garbage from across the Borders. It was part of a £80 million contract which SBC handed to NESG (now completely bankrupt and dissolved) and the company's offshore "funding partner" New Earth Recycling & Renewables [Infrastructure] - also insolvent and in the hands of liquidators.

Four months after being "impressed and excited" by what they were shown at Avonmouth SBC was forced to abandon their useless deal with NESG who could neither provide the council with a functioning treatment plant nor come up with the money to build it. The end result was a bill for at least £2.4 million for local taxpayers, most of the money having been squandered on costly legal firms and so-called experts. One Edinburgh law outfit trousered £679,000. Not a single brick was laid on site.

The fact finding mission to Bristol proved to have been a complete failure when the spluttering, misfiring flagship was transferred to different owners by NESG for no cash consideration together with accumulated debts running into tens of millions of pounds.

A source told Not Just Sheep & Rugby: "The Borders delegation had been looking at a complete dud while being sold a pup".

Yet Councillor David Parker, leader of SBC in 2014, told the Border Telegraph immediately after the jaunt to south-west England that the visit had been 'valuable and illuminating'.

He went on to claim: "The integrated WTF is a really big deal for our council as it will transform the way we deal with our waste and help us comply with our zero waste obligations.

“It also involves a major investment, in partnership with NES, which requires councillors to carry out due diligence and, in that respect, the trip was necessary. I am satisfied after our visit that we are on the right track and confident that the WTF will be up and running before the 2019 contract deadline, hopefully by mid-2017.”

The thermal technology flagship is now in the ownership of Avonmouth Bio Power Ltd whose latest annual report has just been published. The plant itself has not been operating since 2016.

According to the report: "From commencement the plant always operated at below its design point and this led to reduced thermal output and reduced availability. This lack of performance, and hence lack of revenue generation resulted in the decision to suspend operations at the plant with a view to implementing a major redevelopment programme".

Proposals for redevelopment have, it is claimed, been "materially progressed" over the last year.

"Detailed redevelopment plans are currently being finalised and it is anticipated that these works will commence during the first half of 2018 and that operations at the plant may recommence in early 2020". That target is said to "remain realistic".

Meanwhile the company's loss for the financial year is given as £6.146 million, ten times greater than the £620,000 deficit in 2016. Creditors are owed £16.480 million within 12 months (up from £13.171 million).

Avonmouth Bio Power has net liabilities of £12.490 million (£6.343 million the previous year), and there is a shareholders' deficit of £8 million (£4.035 million)

There is no doubt from that set of statistics that the flagship is proving to represent a considerable drain on financial resources although shareholders Aurium Avonmouth LLP have given an undertaking to bankroll the operation over the next 12 months.

Borders council taxpayers and users of the local waste disposal services may wish to contemplate - then shudder to think - what could have happened had a scaled down version of the Avonmouth "dud" been thrown up on the outskirts of Galashiels!

But unfortunately the regulatory bodies who revel in the title "guardians of the public pound" have repeatedly refused to investigate the catastrophic and disturbing affair.

Uncontested council contracts "extremely rare"

by DOUGLAS SHEPHERD

The decision by Scottish Borders Council to extend a lucrative waste recycling contract without going through the tendering process is "extremely rare in local government", Not Just Sheep & Rugby has been told.

And research suggests that in the five years from January 2013 to December 2017 only one other Scottish local authority announced its intention to award an uncontested contract. However, in that particular case the value of the work was below the threshold covered by European contract rules.

As we reported recently SBC has issued two so-called VEAT (voluntary ex ante transparency) notices via the Public Contracts Scotland website during the last twelve months, the second one earlier this month. On both occasions contract extensions have been handed to J & B Recycling Ltd., of Hartlepool without inviting rival bids.

The company has been hauling mixed dry recyclates from Borders waste transfer stations the 110 miles to Tees-side since 2011 when it was appointed as a sub-contractor to New Earth Solutions, the now bankrupt and dissolved waste treatment "specialists".

The arrangement continued following the collapse of the SBC New Earth deal in 2015. The mixed consignments of recyclable garbage are transported south after the council has collected the rubbish from communities throughout the region.

Critics argue that an alternative haulage firm might have been able to submit a lower tender while there are treatment centres in closer proximity to the Scottish Borders than the Hartlepool facility.

On the other hand the council claim in their latest VEAT notice that the selected award procedure for the £300,000 a year contract can be justified due to "extreme urgency brought about by events unforeseeable for the contracting authority and in accordance with the strict conditions stated in the Directive.

"Explanation - 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."

There were no VEAT notices issued by any local authority during 2013, 2014, 2015 and 2016. So the 2017 notice posted by SBC was indeed a rare event.

The second 2017 notice emanated from Aberdeenshire Council under the heading Laurencekirk Affordable Housing. As stated earlier, in that case the value fell below the European procurement regulations and directives.

A procurement expert told us: "VEAT notices are only used in very rare circumstances when directly awarding or extending contracts in exceptional circumstances. I see no justifiable rationale for directly awarding to J&B.

"They collect from waste transfer stations and do not do the collections; therefore any other operator could have done this without disrupting waste collections or strategies. It seems SBC have done this for convenience."

The expert explained it was open to anyone who felt aggrieved by the lack of competition to report the matter to Audit Scotland with a request for an investigation.

Objectors could highlight the alleged lack of regard for the procurement regulations (i.e. open, fair, transparent process). The consequences for the Borders public could be not obtaining best value.

"A couple of other points relate to potential disregard for air quality via carbon emissions through transporting such long distances when other facilities are available much closer to the Borders", added the expert. "A local company may have wanted to tender for this and have therefore been denied an opportunity."

Borders recycling contracts awarded without competition

EXCLUSIVE - by EWAN LAMB

The collapse of Scottish Borders Council's waste management strategy in 2015 when a £65 million contract with a debt-ridden treatment business had to be abandoned has apparently forced the local authority to award valuable recycling contracts without exposing the work to competitive tendering.

This month for the second time in a year SBC has published a notice confirming that their long-standing contract for dealing with so-called dry mixed recyclates will 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 that company became sub-contractors to New Earth Solutions, the now defunct firm chosen by councillors to solve the Borders' waste treatment problems, collections of domestic recyclable rubbish have been hauled 110 miles by road to the Tees-side facility. It seems this is the most cost efficient method even though there are treatment plants closer to the Borders than Hartlepool.

In April 2017 SBC published an extremely rare voluntary ex ante transparency(VEAT) notice.

This notice indicated that Scottish Borders Council intended to contract with J & B Recycling Limited for the continuation of the current service.The work has an estimated cost of £300,000 per annum (including haulage from the Council's Waste Transfer Stations to Hartlepool). The contract  duration would be up to 3 years.

So what was the justification for the selected award procedure?

According to the notice:"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."

The Borders council has been working on a waste strategy for well over a decade, and their decision to link up with New Earth Solutions in 2011 cost local taxpayers at least £2.4 million when a planned project to build a £23 million treatment facility at Galashiels collapsed in disarray without a single brick being laid.

Now another VEAT notice has appeared on the Public Contracts Scotland website indicating the "award of a contract without prior publication of a call for competition in the Official Journal of the European Union".

The reasons cited on this occasion: "Extreme urgency brought about by events unforeseeable for the contracting authority and in accordance with the strict conditions stated in the Directive Explanation - 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 public procurement expert contacted by Not Just Sheep & Rugby offered the following opinion on the April 2018 VEAT notice: "Looking at the notice I do not believe the reasons are justified for the application of section 6 of the Procurement Regulations (Scotland) 2016. Paragraph (1)(c). The Regulations go on to state: (3) For the purposes of paragraph (1)(c), the circumstances invoked to justify extreme urgency must not, in any event, be attributable to the contracting authority.

"The circumstances stated in the notice do not comply with the regulations.This is simply poor planning.The council would have known for some time the strategy would not have been ready.

"In addition any strategy would have included a requirement for an interim arrangement during a transition period. (i.e. if they were going to build their own facility or use a third party, they would have needed to continue to dispose of the recyclables with a provider; therefore requiring a tender process). They could simply run a tender process for a short period of time."

COMING NEXT: How often have Scottish councils used VEAT notices in the last five years?

Borders taxpayers at least £500 better off!

by OUR INVESTIGATIONS TEAM

A widening gap between average Scottish and English council tax bills means residents in Band D properties in Coldstream will be more than £500 better off this year than their near neighbours in Cornhill village across the Tweed.

The council tax comparisons for 2018/19 give the lie to recent claims in the Right Wing press, and by Conservative politicians that taxpayers north of the Border were about to be hammered by Scotland's SNP Government.

Much has been made about new Scottish income tax rates which will see those earning £40,000 having to pay an extra £70 a year (that equates to £1.34 pence per week).

In an article in this Friday's Scottish Daily Mail, the leader of the Scottish Conservatives Ruth Davidson wrote: "From today anyone earning over £26,000 will see a rise - and that's before you take into account council tax hikes too".

But someone should have pointed out to Ms Davidson that average council tax rises in Northumberland - governed by her party from Westminster - will hammer hard working families to the tune of up to £88, even more than the SNP's additional income tax demands for those on £40,000 per annum.

It is also highly unlikely that residents of Band D properties in rural Northumberland will be in the £40,000-a-year bracket, so their budgets will be stretched even further after Westminster allowed English local authorities to let rip with inflation-busting council tax increases.

Research shows that householders in Coldstream, where council tax rises for 2018/19 have been restricted to three per cent by the SNP Government face a Band D "hike" of £35 to £1,150. Less than a mile away in Cornhill, governed from Westminster by the Conservatives, Band D bills have been increased by £88 to £1,764. The difference of £614 is equivalent to around £12 per week!

Similar rises have been imposed by Northumberland County Council across their territory. In Berwick-on-Tweed the new Band D level is £1,821 (+£87, and in the parish of Carham, close to the Scottish border, the bill will be £1,762 (also +£87).

While the Scottish Government has strictly controlled council tax rises in each of the last two years after a series of 'freezes' which saved taxpayers hundreds of pounds, the situation is starkly different in England.

There the 2010/11 average Band D figure of £1,439 was already higher than the current Scottish bill. And average "hikes" of £61 (4%) in 2017/18 and £80 (5.1%) in 2018/19 have taken the demands on a typical Band D property in England to £1,671.

A local government expert told us: "People living in Northumberland and elsewhere in England will be outraged if they realise they are paying over £500 extra each year for their shrinking council services. English council taxpayers do not enjoy a superior service to their Scottish counterparts so they deserve to be told why they are having to fork out so much more."

This month English residents also face another "hike" in NHS prescription charges. The new charge of £8.80 per item is 19% higher than it was in 2011 when the Scottish Government abolished the charges.

Meanwhile Scottish students attending Scottish universities will continue to benefit by being exempt from tuition fees. Their English counterparts will continue to pay up to £9,250 a year for their education.

Tapestry project £1.4 million cheaper this time

by EWAN LAMB

The cost of developing a visitor centre to house The Great Tapestry of Scotland in Galashiels is expected to be £4.6 million - considerably cheaper than the estimated £6 million needed to provide the now abandoned custom-built facility at nearby Twedbank.

A new set of tender documents for the town centre project was published by Scottish Borders Council on the Scottish public procurement website on Easter Saturday. The same notice also appears in the Official Journal of the European Union (OJEU).

Bidders have until May 14 to submit prices for the work with the council hoping to attract bids from five contractors.

The contract notice says Scottish Borders Council (SBC) has recently committed to the delivery of a new high quality and permanent visitor attraction in a strategically important area of Galashiels (Channel Street/High Street, linking the old and new town developments that will provide the permanent home for the Great Tapestry of Scotland (The Tapestry).

The Tapestry is described as a unique community arts project to stitch the entire story of Scotland from pre-history to modern times. The Tapestry is a linear pictorial history of Scotland depicting key events going back 12,000 years. It is also the world’s longest tapestry at 143 metres (469 ft) and consists of 160 separate panels.

Description of the procurement

The new Great Tapestry of Scotland will be an internationally important visitor attraction and a strategic asset of architectural importance to the Borders. It will provide a bespoke solution for the display of the Tapestry and become an instantly recognisable setting to local, national and international audiences.

The design proposes that existing retail premises at 14-20 High Street (which will be demolished through an advance works contract) become the primary site for the new 2 storey tapestry gallery is constructed on this prominent site at the corner of Channel Street and Sime Place linked back to the refurbished former B Listed Post Office building.The proposed site is a prominent key nodal point within the town of Galashiels, and is located at the corner of Channel Street and Sime Place.

An existing retail property (located at 14-20 High Street) will be demolished through an advance works contract which will commence in April 2018. On this cleared site, a new two storey tapestry visitor attraction will be constructed, comprising the main tapestry gallery (located at first floor level) with associated café, shop, temporary gallery space and ancillary support areas located at ground floor level. 

In addition, the adjacent Grade B listed former Post Office building, will be refurbished and brought back into productive use to supplement the Tapestry proposals. An active Post Office sorting office and operational depot will remain in use throughout the duration of the contract.

The site sits within a Conservation area that will require the design to provide a considered and positive response to the surrounding environment. Overall, the design will deliver a high quality finish that takes account of the built environment, and also improves the quality of the town centre environment.

Value and duration of the contract

Estimated value excluding VAT: £4 600 000.00 Duration in months: 16.

The original contract notice for the Tweedbank site, published in September 2015 declared: "Scottish Borders Council (SBC) has recently committed to the delivery of a new building on land owned by Scottish Borders Council at Tweedbank that will provide the permanent home for the Great Tapestry of Scotland.

"The new Great Tapestry of Scotland Museum will be a high class visitor attraction and an asset of architectural importance to the Borders. It will provide a properly designed solution for displaying the Tapestry and be an instantly recognisable setting to hold Local and International events.Estimated value excluding VAT: £6 000 000. 

Borders textiles and the missing Chinese tariffs

by DOUG COLLIE

The fraudulent avoidance of United Kingdom customs duties - estimated at 1.87 billion Euros - by a tidal wave of Chinese imports of clothing and footwear may have caused economic harm to textile and knitwear businesses in the Scottish Borders and the rest of Scotland.

A set of disturbing results from investigations by the European Commission Anti-Fraud Office (OLAF) and by the European Court of Auditors has received scant attention from the mainstream press and media.

But the apparent lack of financial controls by the UK Government on shipments of textiles from China does not generate confidence over what might happen post-Brexit. Britain is already being asked to make good the missing duties and VAT to EU coffers.

The Commons European Scrutiny Committee has expressed concern over the contents of the European documentation, and has been less than satisfied by explanations tendered by Westminster politicians, including Treasury minister Liz Truss.

According to the Committee, the most important element of the Commission’s Report is its description of a two-year investigation into HM Revenue and Customs by OLAF. It concluded that HMRC had enabled importers of Chinese textiles and footwear to evade customs duties totalling €1.87 billion between 2013 and 2016. 

In response to these findings, it asked HMRC to take “all necessary actions” to stop the fraud from reoccurring, and to take “all appropriate measures to recover the customs duties evaded to the extent possible”. Separately, the European Commission has asked the Government to compensate the EU for the loss of these customs duties.

After being told of the European allegations, the Commons Committee declared: " The Commission has publicly warned that the UK may face an infringement procedure before the European Court of Justice for its failure to apply EU customs law and compensate the EU for the customs duties that were allegedly evaded.

"In view of the background to the allegations against HMRC, the potential implications of this dispute for the UK’s public purse (including any compensatory payments into the EU budget for the missing customs duties), and setting it in the wider context of possible negotiations on a new UK-EU customs partnership , we are asking the Minister to clarify [a number of matters].

From the documentation made available by OLAF and the European Commission, it appears HMRC was warned repeatedly from 2014 onward about the weaknesses identified in the valuation of imports from China without the necessary measures being taken to address the problem. A spokesperson for OLAF said: “Despite repeated efforts deployed by OLAF, and in contrast to the actions taken by several other Member States to fight against these fraudsters, the fraud hub in the UK has continued to grow.” 

In a letter to the committee Ms Truss claimed that, while not disputing (widespread) undervaluation fraud at UK ports, the Government "does not recognise OLAF’s estimate of total customs duties evaded but is unable to provide a different estimate until 'individual cases' have been pursued to their conclusions based on their own facts”. The Minister also argued that the dispute would not have an impact on any forthcoming negotiations with the EU on a post-Brexit customs partnership,  as it related to “historic transactions”. 

In response the committee stated: "We thank the Minister for her response to our questions on OLAF’s allegations. It still leaves questions unanswered about the scale of undervaluation fraud on imported goods at the UK border. 

"We are also concerned that the European Commission by November 2017 was still of the view that widespread undervaluation fraud at UK ports had not been addressed. The Court of Auditors also found that HMRC’s approach to Chinese textiles imports had led to trade diversion, apparently to benefit from the opportunities to avoid duties when seeking customs clearance at UK ports."

And the committeeIn a blunt warning the committee continued: "As we have noted before, the dispute could give rise to a considerable payment from the UK public purse to the EU budget to compensate for the duty loss. In addition, after the UK leaves the EU Customs Union and ceases to make direct contributions to the EU budget, undervaluation of imports would present a direct loss to the Exchequer as customs duties collected by HMRC would be retained entirely by the Government. It is unclear to what extent undervaluation fraud at UK ports has been able to take root precisely because the fiscal losses accrue to the EU budget, and not the UK Exchequer."

The serious issues revealed by the investigations have now been referred to the influential Public Accounts Committee and to the Treasury Committee.

The sheer scale of the problem was highlighted in the special report from the European Court of Auditors.

It claimed: "The values declared on the basis of fake invoices were undervalued from 5 to 10 times with a significant impact on customs duties and taxes collected. From the period 2007-2016 on the five Member States selected by the Court. Member States which implemented thorough release controls on undervaluation of textiles and footwear from China saw an increase in the average declared import prices but experienced a decrease in the volume of imports.

"The increase in the volume of imports in the UK was 358 000 tonnes, while the overall decrease in the other four Member States was 264 000 tonnes. According to OLAF, “the UK should have made available an estimated amount of 1.9874 billion euro (gross), or 1.5736 billion euro (net), more than it did from 2013 to 2016.