Basingstoke and Deane borough council and Hart district council awarded jointly a seven-year waste and recycling collection contract to Veolia in 2011.
While Veolia already handled Basingstoke’s collections, the decision involved the transfer of operations from Hart’s in-house team in a deal that would save both authorities a combined £1.1 million per year (see letsrecycle.com story).
The contract is due to expire in October 2018 but it contains an option for a seven-year extension between Veolia and the two local authorities.
Administration of the contract is carried out by Hart district council. Now, cabinet papers from Hart reveal that the councils were considering retendering the contract rather than just negotiating an extension.
In February, Hart allocated £50,000 from the 2016/17 waste budget to provide initial match funding for the procurement process with Basingstoke.
The council report continues that with the exception of 12 months of poor performance in Hart during 2013/14, services delivered by Veolia in both districts have been good. And, it was initially agreed that the extension would be preferred option.
In April 2015 council officers began negotiations with Veolia, but the waste firm “stated they were losing money on the contract, and would only agree to an extension to the contract if it could be made financially viable”.
Top-up payment
The council reports that Veolia has asked for a ‘top-up payment’ for the remaining years of the contract plus a revised contract sum for the extension.
When asked to provide a breakdown of the costs incurred by the contract extension, Veolia provided confidential details to council chiefs.
But the report adds: “Despite numerous requests for additional information and a high level meeting between the councils and Veolia executives, it has not been possible for the joint management team to fully verify that the alleged cost of the contract are accurate.”
As it has not been possible to verify Veolia’s contract costs, the council has commissioned environmental consultancy White Young Green to prepare a shadow bid.
Market value
According to the council’s report, the consultants are confident that the market value of the extension is ‘broadly in line’ with the sum currently being paid, while the amount that the contract is costing Veolia to operate is ‘significantly higher’.
It is estimated that retendering of the joint contract will cost between £60,000 and £120,000. Benefits of retendering, according to WYG, include a ‘greater opportunity’ for cross boundary working and a saving in the number of spare vehicles which the contractor holds, as well as the opportunity for the contract to be managed with a smaller client team resource.
The councils have since informed Veolia that a top-up payment on the existing contract is not an option they would consider, and have notified the company that a new procurement will be launched after July 2016 if they do not receive an ‘improved’ offer.
When contacted by letsrecycle.com, a Veolia spokesperson said: “Discussions are continuing with Basingstoke & Deane and Hart councils regarding the possible extension of the contract. We have nothing further to add at this stage.”
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