Suez originally secured the seven-year contracts in 2019 which were worth more than £1 billion (see letsrecycle.com story).
This involved the management of 1.1 million tonnes of municipal waste per year from over 1 million households across nine districts: Bolton, Bury, Manchester, Oldham, Rochdale, Salford, Stockport, Tameside and Trafford.
In a document that went before the committee on 15 December the GMCA discussed potential options regarding the contract that is set to end on 31 May 2026. The document stated a decision would need to be made by the end of 2023 as at least 2 years would be needed to complete the procurement process.
The options available to the council were set out as followed:
-To extend the contract for a period of 3 years running from 2026 to 2029
-To extend the contract for a further period of 5 years running from 2029 to 2034
-To seek out a new contractor
– Or to move its operations in house after a 3-year extension with Suez
Extension
Speaking in favour of extending the contract the Authority said in the document it recognised that any change within the 2026 to 2034 period held the potential to disrupt service quality, emphasising the importance of sustained operations and minimising transitional disruptions.
Moreover, the authority believes that this prolonged contract period provides a settled environment for GMCA and contractors to assess emerging technologies, policies, and strategies. Furthermore, this decision effectively addresses concerns regarding market capacity between 2025 and 2029, circumventing potential delays that could arise from rewriting procurement processes.
The GMCA also said of a review exercise was held with the advisory team to assess the capacity of the market and potential bidders for a future GMCA procurement exercise.
This concluded that there are a “very small number of waste operators that have the capacity and experience to do this”.
The continued uncertainty over the Resources & Waste Strategy requirements and timeframes is also “affecting the capacity in the market to bid and also the approach to risk allocation”.
In-house
A workshop was held by the advisory team and district officers aimed to evaluate a particular option and assess the viability of an in-house waste service. The workshop found that in order to set up an in-house service the establishment of an arm’s length operating company would be necessary, with the GMCA acting as a guarantor, effectively underwriting all associated risks.
It also found that substantial risk transfer to GMCA would occur concerning recyclate and commodity markets, pricing, industrial relations, compliance with necessary consents and more.
The assessment by Willis Towers Watson, GMCA’s insurance advisors, concluded that necessary insurance levels for the network of facilities wouldn’t be obtainable in the market. Consequently, self-insurance by GMCA would be required, demanding significant reserves to cover potential facility loss due to fire, for facility reinstatement, and business interruption costs.
Due to the substantial risk transfer and unavailability of insurance, the in-house option was dismissed and excluded from further consideration by the Authority.
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