West of England Waste Management Strategy Phase 2 Contract Award

Transcription

1 West of England Partnership Joint Waste Management Committee 27 May 2009 Agenda item 5 ii) Report of the Chief Executive West of England Waste Management Strategy Phase 2 Contract Award Recommendation: That the Joint Waste Management Committee: 1. Notes and approves the outcome of the evaluation of the Phase 2 tendering process. 2. Awards the Phase 2 contract to the Tenderer detailed in the exempt Appendix 3 to this report on the basis of the Variant Bid tonnages, as their tender has been shown to be the Most Economically Advantageous Tender, subject to the satisfactory provision of the requisite Performance Bond. 3. Requests all four Partnering Authorities (Bath & North East Somerset, Bristol City, North Somerset and South Gloucestershire Councils) to formally seal the Phase 2 contract with the successful Tenderer. Summary of the Report 1. The report recommends the award of the Partnership s Phase 2 interim waste treatment contract to divert waste from landfill to meet the Authorities LATS allowances 2011/12 to 2015/ Details are given in the report on the outcome of the tendering process using the EU Restricted procedure and the approved tender evaluation criteria. 3. The report sets out the risks associated with contract award and provides details as to how these can be mitigated. Significant Issues in the report are: 4. The Phase 2 contract is intended only to be an interim 5 year contract which delivers a key component of the West of England Joint Residual Municipal Waste Management Strategy adopted by each of the four Authorities in June The contract can be extended by up to 4 years. 5. The Joint Waste Management Committee is empowered to award the Phase 2 contract through the Joint Working Agreement for the Development and Delivery of the Phase Two Waste Project, which was approved by each of the four Authorities in October 2008 Clause of the Agreement applies.

2 6. The Committee is not able to discharge any business unless there are three Members present. Decisions of the Committee shall be determined by a majority of the Members present and voting. In the event of an equality of votes, the person presiding as Chair shall have a second or casting vote. 7. All decisions taken by the Committee shall only take effect 5 clear working days after the date of the Committee and are subject to the further requirements of Clause 3.3 of the Joint Working Agreement, and the Call-in requirements of member Authorities. 8. Tender evaluation has followed the approved methodology agreed by the Member Project Board in October The Variant Bid, which provides for a higher annual tonnage to be treated than the Compliant Bid, delivers the best value-for-money to all the authorities. 10. The Net Present Value (NPV) of the contract is shown to be better value-for-money for both the Partnership and each of the individual Authorities than the equivalent cost of sending waste to landfill when landfill tax, landfill gate-fees, transport and predicted landfill permit purchase costs are taken into account. 11. There are a number of risks inherent in all the submitted tenders that have been evaluated. These are principally the ability to raise finance, site delivery, planning permission and performance bonding. These risks will be managed by the Contractor and overseen by assigning appropriate responsibilities to a Project Manager who will oversee the Pre-commissioning/Build period on behalf of the Authorities. These arrangements are described in further detail in another report to this Committee. In addition, a Performance Bond of 2m is required to be in place before the contract is to be executed 12. All Tenderers are proposing a Compost Like Output (CLO), or similar type output, to be used in land restoration, and similar projects, but which also has the potential to be used as an energy source. Land restoration is a viable option in the short term, but may be a risk should legislation/regulation restrict this use in the longer term. Policy 13. In June 2008, the four Authorities adopted the Joint Residual Municipal Waste Management Strategy, Phase 2 of which is to secure treatment capacity to divert waste from landfill to meet the Authorities annual LATS allowances over the period 2011/12 to 2015/ On 16th October 2008, the Member Project Board endorsed the tender documentation for the Phase 2 project and for the publication of a notice in the Official Journal of the European Union on 31st October The timetable for procurement is set out at Table 1 below. 15. On 11th December 2008, the Joint Waste Management Committee agreed the detailed evaluation criteria for the Phase 2 contract. These are shown in Appendix 1. 2

3 16. The Joint Waste Management Committee has delegated powers through the Joint Working Agreement for the Development and Delivery of the Phase Two Waste Project to award the Phase 2 contract. Consultation Internal: 17. The WoE Partnership Joint Scrutiny Committee; the Waste Directors Programme Board; Legal, Finance and Waste officers from each of the four Authorities and the Bristol City Council Procurement team officers. External: 18. Waste management companies via a soft market testing exercise undertaken in November 2007 and May External Financial Advisers undertook part of the financial evaluation. External Legal Advisers supported the procurement process. External Technical Advisers supported the Quality evaluation. Evaluation of Tenders 19. In June 2008, the four Authorities adopted a four phase Joint Waste Management Strategy, Phase 2 of which was to secure interim treatment capacity to divert the requisite quantity of waste from landfill to meet the Authorities annual LATS allowances over the period 2011/12 to 2015/16. This quantity of waste has formed the basis of a Compliant Bid, and is illustrated in Table 2. A Variant Bid option was also offered to the bidding contractors, which allowed them to bid for a larger quantity of waste which each of the Authorities would commit to, over the same period - see Table A key factor in the procurement process was to obtain treatment capacity as quickly as possible using the EC Restricted procedure. The Contract Specification did not specify the type of technology to be utilised, so long as the contractor is committed to meeting the required Contract Standard. 21. Five companies completed the Pre-Qualification Questionnaire (PQQ) documentation and were invited to tender. 22. Two companies withdrew before the tender return date of 16th March The three remaining companies returned compliant tenders by the deadline of 16th March The compliant tenders have been evaluated in accordance with the agreed evaluation criteria; site visits have been made to reference plants offered by the Tenderers and face-to-face interviews have taken place with technical / financial representatives of the bidding companies to clarify and better understand their submissions. Tender process 24. The tendering timetable is shown in Table 1 below. The Information To Tenders Document stated that the tender would be awarded on the basis of the Most Economically Advantageous Tender, which is defined as the tender that provides the 3

4 best overall result when evaluated against a pre-determined set of evaluation criteria. These were based on a Cost versus Quality split of 35% Cost and 65% Quality. The evaluation criteria agreed by the Joint Waste Management Committee were detailed in the Invitation to Tender and are shown in Appendix 1 to this report. Table 1 Phase 2 Timetable and Key Dates Approval to commence procurement June September 2008 Final contract package to the MPB 16 October 2008 Phase 2 Joint Waste Agreement signed 30 October 2008 OJEU Notice 31 October 2008 Bidders Day 17 November 2008 PPQ s returned 19 December 2008 Invitations to Tender 26 January 2009 Return of Tenders 16 March 2009 Bid Evaluation 16 March to 28 April 2009 Submit Outcomes to JWMC 27 May 2009 Contract Award May/June 2009 Pre-commissioning/Build period 2009 to 2011 Facility Operational Start Date 1 April Tenders were invited for both a Compliant Bid and a Variant Bid and for one or two Lots. These terms are explained below. 26. Compliant Bid : This is a bid based on the minimum tonnage profile indicated below in Table 2 which has been determined to meet the Authorities LATS liabilities 2011/ / Variant Bid : This is a bid based on a larger quantity of waste which the Authorities are prepared to commit over the same period. This is shown in Table Lots : Each of the above Bids was offered as two Lots, with each Lot comprising half of the quantity of waste stated in Tables 2 and 3. Tenderers were invited to bid for one or both Lots. If tendering for both Lots, a discount on the tendered price was requested. The intention of providing Lots was to encourage smaller companies to come forward and bid for at least one Lot. 29. The reason why tonnages fall away in 2015/16 (see tables below) for both the Compliant and Variant Bids is to reflect the expectation that a long-term contract associated with Phase 3 would commence in the 4th quarter of 2015/16. 4

5 Table 2: Minimum Compliant Bid Tonnages Year B&NES BCC NS SG Total 2011/2012 1,600 39,700 9,200 10,000 60, /2013 3,300 49,700 12,800 20,000 85, /2014 4,800 51,000 15,500 26,000 97, /2015 6,900 53,600 18,100 29, , /2016 9,100 42,100 15,600 23,100 89,900 Table 3: Minimum Variant Bid Tonnages Year B&NES BCC NS SG Total 2011/2012 9,100 53,600 18,100 40, , /2013 9,100 53,600 18,100 40, , /2014 9,100 53,600 18,100 40, , /2015 9,100 53,600 18,100 40, , /2016 9,100 42,100 15,600 23,100 89,900 Other Options Considered 30. Continuing to landfill residual waste in the long term is not a realistic option in terms of both cost and environmental impact. 31. If the Phase 2 contract is not awarded, the only option will be to purchase LATS permits until such time as the requisite amount of waste is diverted from landfill. This in itself carries a risk arising from a potential shortage of permits across England. Any future use of landfill for residual waste will also incur an increasing level of Landfill Tax. This will increase from its present level of 40 per tonne, in annual increments of 8, to 72 per tonne by 2013/14, with the potential for the Landfill Tax Escalator to be extended further. 32. If no award is made then further engagement with the market will be necessary in order to bring forward alternative treatment proposals. These could only be secured through a re-tendering process. 5

6 Risk Assessment 33. The key risks to the project have been identified in the Risk Assessment Matrix attached in Appendix 2. The following are considered to be the key risks: 34. Risk 1: There is a risk that the successful Contractor s management of risk is not sufficiently mature. Mitigation: The successful Contractor is required to provide the client with their Risk Register and this is to be monitored and reviewed regularly by the Phase 2 Project Manager. A Performance Bond of 2m is required to be in place before the contract is executed; this will help offset costs should the Partnership be required to take action. 35. Risk 2: There is a delay in obtaining title to the proposed site that adversely affects the project timetable. Mitigation: The Authorities Project Manager will present him/herself as the representative of the four Authorities thus demonstrating that the application for title is in no way speculative and has a sound commercial driver. Close monitoring of the successful Contractor s efforts to secure title will take place. 36. Risk 3: There is a delay in obtaining planning consent that adversely affects the project programme. Mitigation: Full support will be offered to the successful Contractor by the Authorities Project Manager and the Partnering Authorities. This support might typically include attending meetings to emphasise that the success of achieving consent is of vital importance to the sub-region. Close monitoring of the successful Contractor s efforts to secure planning consent against their programme will be undertaken. 37. Risk 4: There is a delay in obtaining the requisite funding that adversely affects the project timetable. Mitigation: Attendance by the Authorities Project Manager at key progress meetings with the various funding bodies (and/or their Technical Advisors) to both monitor progress against the programme and to indicate that the successful Contractor has part of their client base already established. 38. Risk 5: There is a delay to the build programme of the facility such that it adversely affects the project timetable. Mitigation: The Authorities Project Manager will provide a degree of construction management experience so as to monitor the build programme and to recognise the likely threats to the critical path of the project. 39. Risk 6: There is a delay in obtaining the Environment Agency (EA) authorisations that adversely affects the project timetable. Mitigation: The successful Contractor has already been scored on their ability to obtain EA permits as well as their environmental track record. The Authorities Project 6

7 Manager, if it was felt appropriate to do so, would explain this aspect of the selection process to the EA to add weight to the successful Contractor s permit application. 40. Risk 7: There is a delay to the commissioning process that adversely affects the project timetable. Mitigation: The Authorities Project Manager will monitor against programme, the progress of the commissioning process and provide the appropriate level of support to the successful Contractor. It should be noted that the each Contractor was scored during the evaluation process on their ability to undertake the commissioning process successfully. 41. Risk 8: There is an inability to secure sufficient markets for the output materials from their process such that the successful Contractor s Business Case cannot be delivered and the resulting risk threatens their ability to operate the contract with commercial success. Mitigation: The companies have already been evaluated on the strength of their existing ability to place their outputs into the market place. The Authorities Project Manager will monitor the market s appetite for materials, test the viability of the proposed markets and seek evidence from the successful Contractor that the organisations identified as market outlets intend to receive the materials in the required quantities and that they remain viable, so as to help contribute to mitigating these risks which are with the Contractor. Environmental Impact 42. The environmental impact of the proposed tenders has been assessed using the Environment Agency s Waste and Resources Assessment Tool for the Environment (WRATE). Whilst there are differences in the level of environmental impact and benefit between the solutions offered, each one improves upon the status-quo position of continuing to send waste to landfill. Each solution proposes to recover between 6-10% of additional recyclable material from the residual waste. Equalities Impact 43. Waste treatment services are offered to the residents of all the Authorities on an equal basis regardless of age, gender, or ethnic origin. Legal and Resource Implications Legal 44. The procurement and award of the contract must comply with the European procurement regime as implemented by UK Regulations. The participating Authorities also needed to decide which Authority s own procurement disciplines to follow, and agreed to follow Bristol s procurement procedures. 45. All four Authorities will need to seal the contract once it is awarded, and give each other cross indemnities in respect of any liabilities one may incur which are attributable to any failure by any other to bear their share of the gate fees, and 7

8 administrative and other costs. The second report to the committee on contract management arrangements includes reference to the need to complete the agreement giving effect to these indemnities by the time the contract is executed. As the current joint agreement only deals with the procurement process, and other than identifying certain principles, does not relate to the contract once awarded, this further agreement will also need to set out how the Authorities intend to work together with the contractor over the contract period. 46. When considering a contract award based on an evaluation that measures both price and other elements, the contract must be awarded to the Tenderer who achieves the best score according to the evaluation method. It would be a serious breach of the process to award the contract to a Tenderer with the lowest price if the effect of their quality scores was that when the two elements were combined, their overall score was not the best. 47. There were no qualified bids for the Phase 2 contract therefore all the tenders have been assessed on the same basis. 48. Government advice allows Councils to programme their waste requirements on the basis that they may have to meet their landfill targets by buying some LATS permits, but should not do so on the assumption that they will simply incur and pay penalties. Legal advice given by Dru Brooke-Taylor, Senior Solicitor, BCC, for Stephen McNamara, Head of Legal Services BCC, Lead Legal Officer to the West of England Waste Projects. Finance and Financial Evaluation 49. The financial evaluation comprised a 70% element on Price and a 30% element on Financial Robustness and Deliverability, which together provided an overall 35% of the total score to be added to the 65% of total score from the Quality evaluation. 50. As indicated elsewhere in the report, three compliant tenders were submitted. Tenderers indicated various costs per tonne and a discount for being offered both Lots. The evaluation inflated the tendered prices using RPIx (Jan 2009) and discounted the cash values using the 5 year PWLB rate to establish the Net Present Value (NPV) for the 5 year contract period from April Comparisons were made on the Whole Life Cost NPV basis for the equivalent of a single Lot to contrast the Compliant v Variant Bids solutions which established that each Tenderer s Variant Bid was better value for money than their Compliant Bid. Both Compliant and Variant Bids from all Tenderers were better value for money than the projected costs of landfill. Estimated haulage costs were added to the tendered costs to determine the total costs of the contracts. 51. In addition to the Price factor, the tenders were evaluated on the basis of Financial Robustness and Deliverability to determine how well the Tenderers business models met the requirement to provide a fully commissioned and operative facility by April This involved considering the adequacy of the assumptions in the business models, the company structures and financial indicators, the availability and conditionality of capital funding, the extent of due diligence undertaken by funders, and matters such as the Performance Bond and Parent Company Guarantee. The 8

9 analysis was undertaken by external financial advisers to ensure independence, use of specialist expertise and commercial good practice. 52. The outcomes of the Price, and Robustness and Deliverability evaluations were combined on the agreed weighted basis to form the total Cost score. In turn, this was added to the total Quality score to determine the overall evaluation score. More details are set out in exempt Appendix The recommended tender is within the affordability limit assumptions for Phase 2 in the OBC modelling which were agreed by the Phase 3 Authority Cabinets in October The tender figures for Bath and North East Somerset are also within the assumptions used for their element of Phase 2 within the overall OBC modelling. The recommended tender therefore is affordable by all Partnering Authorities and represents good value for money for the 5 year contract period compared to landfill. 54. There is an option for an up to 4 year extension for the contract. This is not priced or evaluated in terms of awarding the contract for the initial 5 years. Consideration will need to be given to the potential exercise of that option at a later date in the light of conditions prevailing at that time. 55. Further financial comments on risk and the conditional award of contract are included in exempt Appendix 3. Financial advice given by: Chris Manvell, Corporate Finance Manager, SGC, as Lead Finance Officer to the West of England Waste Projects. Revenue: Capital: Land: Personnel: The cost of waste treatment falls to be dealt with within each of the partnering Authorities waste disposal revenue budgets. The award of the contract will represent a 5 year commitment for each of the Authorities. There are no capital implications for the Authorities arising directly from this report as Tenderers are required to finance facilities they propose. There are no land implications arising directly from this report as each Tenderer will provide the site on which to develop their solutions. There are no personnel implications arising directly from this report. A separate report elsewhere on the Agenda sets out how the contract administration will be undertaken. Conclusions from the Evaluation Process 56. It is recommended that the Phase 2 Contract is offered to the successful Tenderer identified in exempt Appendix 3 based on the Variant Bid tonnage. The Net Present Value (NPV) of the successful Tenderer s proposal is shown to be better value-formoney for both the Partnership, and each of the individual Authorities, than the equivalent cost of sending waste to landfill when landfill tax, landfill gate-fees, transport and predicted Landfill Permit purchase costs are taken into account. 9

10 57. The successful Tenderer s proposal represents the Most Economically Advantageous Tender. Their submission provides the best quality proposal in terms of their plans for obtaining planning permission at their proposed site. Their method statements for the development/commissioning and operation of the plant are well considered. Their planning and development team provided the greatest confidence of delivering on the project, and they have established outputs for their products. Contract Award and Contract Management Post-Award 58. The Joint Waste Management Committee is empowered to award the Phase 2 contract through the Joint Working Agreement for the Development and Delivery of the Phase Two Waste Project, which was approved by each of the four Authorities in October The Committee is not able to discharge any business unless there are three Members present. Decisions of the Committee shall be determined by a majority of the Members present and voting. In the event of an equality of votes, the person presiding as Chair shall have a second or casting vote. 60. All decisions taken by the Committee shall only take effect 5 clear working days after the date of the Committee and are subject to the further requirements of Clause 3.3 of the Joint Working Agreement, and the Call-in requirements of member Authorities. 61. If the Committee decides to award the Phase 2 contract, then the ALCATEL 10 day period will commence at the point at which the tenderers are informed as to the Committee s intentions. This is the period during which, by law, unsuccessful bidders can challenge the basis of the award. Following the closure of the ALCATEL period, Bristol City Council will arrange for the final legal documentation to be prepared and the contract sealed by each of the Partnering Authorities. This will bring the procurement process to a close and the project will move into the Pre-commissioning and Service Delivery phases. 62. Proposed arrangements for managing the Phase 2 contract during the Pre- Commissioning and Service Delivery Phases are the subject of a separate report to this Committee. APPENDICES Appendix 1 Phase 2 Cost and Quality Evaluation Criteria Appendix 2 Risk Assessment Matrix Appendix 3 Detailed Cost and Quality Score Evaluation: Not for publication by virtue of category 3 of part 1 of Schedule 12 (A) to the Local Government Act 1972 as amended by Section 1 of the Local Authorities (Access to Information) (Variation) Order 2006 This appendix includes confidential details relating to the award of the contract. 10

11 ACCESS TO INFORMATION Report to the Joint Waste Executive Member Meeting 16 th October 2008 Phase 2 of the Waste Strategy: Procurement documents and tender evaluation Report to the Joint Waste Management Committee 11 th December Joint Waste Management Contract Phase 2: Criteria for evaluating tenders and assessing contractors Authors Steve Gill, Project Director, West of England Waste Management. Contact Tel: ; e mail: steve.gill@westofengland.org David Wright, Project Manager, West of England Waste Management Contact Tel: ; e mail: d.wright@westofengland.org 11

12 APPENDIX 1 Phase 2 Cost and Quality Evaluation Criteria as stated in the Invitation to Tender Cost Evaluation: 35% of overall score split between Price (24.5%), and Financial Robustness and Deliverability (10.5%). Quality Evaluation: 65% of overall score split equally between Sites & Planning (25%), Timescale & Programme (25%), Performance (25%) and Sustainability (25%). Phase 2 Quality Evaluation Criteria & Weightings (65% of overall score). Each section will require a minimum score of 10% i.e.: 40% of the overall available score to proceed. ID ref. Level 1 Criteria Weighting % S Sites & Planning 25 T Timescale & Programme 25 P Performance 25 E Sustainability 25 Total 100 ID ref. Level 2 Criteria (S) Sites & Planning: 25% S1 S2 S3 S4 S5 S6 Explain how you will obtain tenure for the site being offered and the timetable involved How does the proposed use of the site comply with local planning policy? Is the contractor experienced in securing planning and has a similar plant been granted planning permission at another location? Is the site setting and ground conditions within the site well characterised? Are the plans to carry out environmental impact assessments and other site investigations well considered? Are arrangements to engage and secure regulatory planning approval comprehensive? Un-weighted score Relative weighting Max. Score Contribution % % % % % % Total % 12

13 ID ref. Level 2 Criteria (T) Timescale & Programme: 25% T1 T2 T3 T4 Programme overview, deliverability of key elements, capacity/resourcing to deliver programme in timescales, proposed date for commencement of services How has the contractor programmed and mitigated programme risks? How will the project be financed and under what terms and conditions? Proposals for obtaining EA regulatory permits? Un-weighted score Relative weighting Max. Score Contribution % % % % Total % ID ref. Level 2 Criteria (P) Performance Risk: 25% P1 P2 P3 P4 Ability to meet EA standards in operation. Ability to consistently meet wider requirements of the output specification, ability to meet or exceed BMW diversion, final outputs of the process- affect on BMW diversion, available and proven markets for products. Track record and reliability of solution at scale offered. Operational evaluation, planned downtime, contingencies. Un-weighted score Relative weighting Max. Score Contribution % % % % P5 H&S issues in operation % P6 P7 Contract interface dealing with complaints/public/ea, record keeping and reporting. Risks to operational process fully considered by Tenderer and appropriately dealt with % % Total % 13

14 ID ref. Level 2 Criteria (E) Sustainability using WRATE model: 25% E1 E2 Global Warming Potential of each solution within WRATE. Site proximity (proximity principle/self sufficiency) waste tonne miles. Un-weighted score Relative weighting Max. Score Contribution % % E3 Recycling performance % E4 Ability to recover other resources % E5 Local Environmental Impacts % E6 Health Impacts % E7 Flexibility of solutions to accommodate changes in waste volume and composition % Total % Scoring Evaluation Rating Guidance 0 No information provided or wholly unsatisfactory response 1 Insufficient or inadequate information provided; major concerns 2 Achieves a basic minimum standard, some concerns 3 Satisfactory, acceptable, no major concerns 4 Good, full and robust response, gives confidence 5 Very good, exceeds expectations, adds value, full confidence 14

15 Risk Assessment Matrix APPENDIX 2 Overall Scoring: High risk = 20-25, Medium Risk = 9-19, Low Risk = less than 8 Likelihood and Impact: 1= lowest risk score and 5 = highest risk score Risk Likelihood Impact Overall Score before mitigation 1. Contractor s management of risk is not sufficiently mature 2. Delay in obtaining title to the proposed site that adversely affects the project timetable. 8. Delay in obtaining planning consent that adversely affects the project programme Contractor is required to provide the client with their Risk Register, which shall be monitored and reviewed regularly by the Phase 2 Project Manager. The contractor will also be asked to provide a Performance Bond to a value of 2M (this protects the Partnership for LATS purchase for 6 months) and allows for re-tender Project Manager to support Contractor in negotiations with landowners to encourage closure of site purchase Project already assessed on ability to obtain planning. Project Manager to support contractor in obtaining planning permission in consultation phase where appropriate to do so. Mitigation Likelihood Impact Revised Score after mitigation

16 Risk Likelihood Impact Overall Score before mitigation 8. Delay in obtaining the requisite funding and financial bond that adversely affects the project timetable Project Manager will attend key meetings with project funder where appropriate and encourage wherever possible project funding closure. Mitigation Likelihood Impact Revised Score after mitigation Delay to the build programme of the facility such that it adversely affects the project timetable 6. Delay in obtaining the Environment Agency (EA) authorisations that adversely affects the project timetable. 7. Delay to the commissioning process that adversely affects the project timetable. 8. Inability to secure sufficient markets for process outputs such that the successful Contractor s Business Case cannot be delivered Project management to provide construction expertise to monitor critical path in build programme Contractor already chosen on their ability to obtain EA permit. Project Manager to support the application process as appropriate Contractor already chosen on their ability to commission their process. Project Manager to monitor and support the commissioning process as appropriate Contractor already chosen on their ability to place their output in the market place. Project Manager to monitor plans for the commercial placement of products as appropriate and to test their continuing viability throughout the contract

17 APPENDIX 3 Detailed Cost and Quality Score Evaluation Not for publication by virtue of category 3 of part 1 of Schedule 12 (A) to the Local Government Act 1972 as amended by Section 1 of the Local Authorities (Access to Information) (Variation) Order 2006 This appendix includes confidential details relating to the award of the contract. 17