Suez won the contract in 2016, for an initial seven years with the option for a further three years, which has now been activated. The deal was valued at £3 million per year at the time.
However, during negotiations, a report which went before the council’s cabinet explained on 10 October that the terms of the contract would be changed.
The report explained that Suez wished to complete the contract extension term without incurring financial losses by moving to a more secure pay mechanism and return a 5% profit in the contract extension period.
This outlined that there is a likelihood that there would be an overall cost increase, along with a level of uncertainty and unpredictability.
The council will take on the “full risk of the volatility of the materials market”, meaning 100% of any income but also 100% of any losses against forecast budget.
Financial modelling using Suez actual profit and loss information from 2022/23 showed a range from £80,000 improved position for the council to a reasonably likely scenario of £124,000 over current budgets, to a reasonable worst of slightly more than £500,000 over current budgets.
In the medium-term financial plan work for 2024/25 a potential worst-case scenario of £600,000 above current market estimates was shown due to the level of risk and uncertainty in the materials market and possible inflationary movements in Suez’s costs. These figures would be planned for and managed going forward, the council said.
Contract
The extension until 2026 will mark a 20-year partnership between the local authority and contractor.
Suez collects on average 21,000 tonnes of recyclable materials, 6,400 tonnes of garden waste, and 18,000 tonnes of residual waste (waste that cannot be recycled) each year on behalf of the East Devon district council, which serves around 145.000 people.
John Scanlon, chief executive officer for Suez recycling and recovery UK said: “We’re pleased to announce the extension of our partnership with EDDC until 2026. This extension is testament to the trust and collaboration that has defined our relationship for nearly two decades. SUEZ is committed to continuing the shared goal of delivering an innovative, sustainable, and outstanding service to the residents of East Devon and we look forward to building upon our success throughout the next three years”.
Market
The council said the extension would allow it to be in a better place to better understand the future of the market when it next procures.
The East Devon report outlined that the extentsion will provide continuity to allow the waste team to “continue to appraise the forthcoming changes to the recycling and waste sector”. This would help build a “clearer specification for contract replacement in 2026”.
Councillor Geoff Jung, East Devon’s portfolio holder for coast, country and environment, said: “I am really pleased that we have agreed to continue with our SUEZ partnership. Recycling is now recognised as a “must do” for everyone. The successful working relationship between EDDC, SUEZ and our residents has resulted in one of the best performances in the recycling industry and I look forward to another 3 years of increasing our recycling performance.”
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