Suffolk councillors to decide on 612m PFI waste contract

Once the vote is taken, a tender process could begin at the end of March for a company to develop a £200 million residual waste treatment facility for the county.

Under the deal, around half the initial capital costs should be covered by government PFI credits, with January's improved offer from Defra suggesting around £102 million could be available to Suffolk.

The county's Outline Business Case to Defra has confirmed the case for one energy-from-waste incineration facility to be used. However, it would allow waste management companies to propose other technologies – the county has indicated it will only consider incineration or mechanical biological treatment producing refuse-derived fuel.

Tomorrow's cabinet meeting will give the final agreement to Suffolk using the PFI funding route, and should also agree that tenders should be invited.

Government approval for PFI credits is then anticipated for March 28, with the tender process itself expected to start at the end of the month. Under the current indicative timetable a preferred bidder could be selected around March 2010, for financial close in June 2010.

Risk

In deciding between the options of a PFI contract and a deal involving the county borrowing money, the PFI deal was seen as the more expensive at £612 million over 28 years compared to £522 million according to council papers issued ahead of tomorrow's meeting.

However, officers have recommended the PFI funding route because they believe it would transfer more risks to the private sector. “The prudential borrowing route leaves more risk on such items as long-term interest rates, cost over-runs and technological issues with the county council,” it warned.

Contract

The deal itself is likely to involve the successful contractor designing, building and operating the treatment facility, in a “traditional output-based contract”. It would not include collection or landfill activities, and would not see the company managing household recycling centres.

The residual waste facility – likely to be an incinerator – will have a planning application submitted around September 2011 for the operational start of the PFI contract around December 2014.

The county has said it will secure a site for the plant, although bidders will be free to suggest alternative sites, however. The preferred bidder for the PFI contract will carry out community consultation, planning application and environmental permitting required.

Bids will be determined by their commercial viability (with a 40% weighting), technical deliverability (60% weighting) and acceptability under current legislation, which is effectively pass or fail.

There will be a bidders conference in June, with the first deadline for expressions of interest to be set at July 2008.

Interim

In the mean-time, the county will have to implement interim arrangements to divert waste from landfill during the period up to 2014, when the new residual waste facility will be fully up and running under the PFI contract.

Without further action, the county will exceed its permitted landfilling levels under the Landfill Allowance Trading Scheme from 2009/10, officers warned. Suffolk needs to reduce its landfilling from current rates by 25,500 tonnes in 2009/10 and by 75,000 tonnes in 2012/13.

This, despite Suffolk's status as one of the best counties in England for recycling, with high-recycling districts like St Edmundsbury and Waveney. The county achieved a 42.9% recycling and composting rate in 2006/07.

An Inter Authority Agreement is expected to be signed between the county and its districts by the end of 2008. This will come ahead of a new household waste recycling centre deal being awarded January 2009, while new landfill arrangements will be secured later that year for the interim period.