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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 19/04/2005
WASTE MANAGEMENT SERVICES CONTRACT – TENDER EVALUATION
AND PROPOSED AWARD OF CONTRACT



Summary & Purpose
The purpose of this report is to seek approval for the award of the Waste Management Services Contract in Waverley for a period of seven years, in the first instance, from 1st November 2005. This report outlines the tender process, the subsequent tender evaluation, and the officers’ conclusions and recommendation.

Quality of Life Implications
Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe Communities
Local Economy
Natural
Resource Use
Pollution
Prevention and Control
Biodiversity
and Nature
Local
Environment
Social
Inclusion
Safe, Healthy
and Active
Communities
Local
Economy
Positive
Positive
Positive
Positive
Positive
Positive
Positive


APPENDIX A
WAVERLEY BOROUGH COUNCIL

SPECIAL EXECUTIVE – 19TH APRIL 2005



Title:
WASTE MANAGEMENT SERVICES CONTRACT – TENDER EVALUATION
AND PROPOSED AWARD OF CONTRACT

[Wards Affected: All]


Note pursuant to Section 100B(5) of the Local Government Act 1972

Annexes to this report contain exempt information by virtue of which the public is likely to be excluded during the item to which the report relates, as specified in Paragraph 9 of Part 1 of Schedule 12A to the Local Government Act 1972, viz:-

Any terms proposed or to be proposed by or to the authority in the course of negotiations for a contract for the acquisition or disposal of property or the supply of goods or services.



Summary and purpose:

The purpose of this report is to seek approval for the award of the Waste Management Services Contract in Waverley for a period of seven years, in the first instance, from 1st November 2005. This report outlines the tender process, the subsequent tender evaluation, and the officers’ conclusions and recommendation.



Quality of life implications – social, environmental & economic (sustainable development):

Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe, Healthy and Active Communities
Local Economy
Positive
Positive
Positive
Positive
Positive
Positive
Positive

The Domestic Waste and Recyclables Collection and Environmental Cleaning Services are the most visible services provided by the Council and those upon which many residents judge the Authority for its environmental and quality of life credentials. All characteristics of these implications therefore score positive.


E-Government implications:

There are no direct e-government implications arising from this report. However, Waverley will be seeking to maximise the use of technology to improve communications and quality of information shared between the Council and the successful contractor. The evaluation process considered contractors’ proposals for developing such arrangements.

Resource and legal implications:

This report has significant resource implications for Waverley’s budget over the next 7 years which are detailed in the report. This report also has implications for Waverley’s staff. Members have agreed that the contract monitoring function be undertaken in-house having previously been included within the contract and undertaken by the contractor. These costs are shown in the report in the comparison to the current budget.



Introduction

1. The Council’s major environmental services contracts, Domestic Waste and Recyclables Collection, Environmental (Street) Cleaning and Grounds Maintenance are currently operated under three separate contracts, each of which expires on 31st October 2005. The Executive, at its meeting on 9th March 2004, resolved that Domestic Waste and Recyclables Collection and Environmental Cleaning be integrated into one Waste Management Services Contract and that the Grounds Maintenance functions be tendered separately under a Grounds Maintenance Services Contract. It further resolved that both contracts be tendered under the European Communities (EC) “Restricted” procedure.

2. The EC Public Procurement Directives and UK Regulations require public sector organisations to let contracts for works, supplies and services that exceed certain financial thresholds, in accordance with prescribed procedures contained in the Regulations. These contracts fall within those requirements. The “Restricted” procedure enables the Council to restrict the number of tenderers to those whose financial standing, technical capacity and experience are best suited to the nature and scale of the contracts. The Directives also prescribe the manner of advertising of the contracts, and the manner of the tender evaluations.

3. Waverley’s Strategic Risk Assessment in 2003/04 identified the potential for insufficient competition in the letting of these major contracts as being one of the greater risks facing the Council. Officers sought to manage this risk by consulting widely in the waste management and grounds maintenance industries, prior to preparation and advertising of the contracts, to raise awareness of the forthcoming contracts and to determine the terms and conditions and form of contract which would attract the greatest competition.

Contract Notices

4. Notices of the Council’s intention to tender the Waste Management Services Contract and Grounds Maintenance Services Contract were posted in the Supplement to the Official Journal of the European Communities, in accordance with the Public Procurement Regulations, and in national contract and trade publications and the local press, in accordance with the Council’s Contract Procedure Rules. Suitably qualified contractors were invited to confirm their interest in tendering for the contracts by completing a pre-qualification tendering questionnaire detailing their financial stability, experience, operational performance and proficiency. Contractors were required to provide referees for their performance on similar contracts, preferably in the local authority arena.

Selective Tendering

5. The objective of selective tendering is to ensure that tenders are received only from those contractors who have demonstrated an appropriate level of financial stability and technical competence, and to limit their number to a manageable level. Expressions of interest were submitted by 13 contractors representing most of the leading UK waste management operators. Following their evaluation, 9 of these were considered to be qualified to deliver the service required in Waverley’s contract.

Select List of Tenderers

6. The select list of those contractors to be invited to tender for the Waste Management Services Contract was determined by the Executive at its meeting of 4th October 2004. The tender documents were accordingly despatched to those contractors on 19th November 2004 with a date for submission of tenders of 21st January 2005. The tender period was subsequently extended to 2nd February 2005 following requests from tenderers.

7. Two contractors subsequently withdrew from the tender process quoting an over-abundance of tendering opportunities as their reason.

Contract Specification – Basis of Tenders

8. The contract was specified and tendered in accordance with the resolutions of the Executive at its meeting of 9th March 2004, in response to the Report “Re-Tendering Major Service Contracts – Policy Issues”. The primary specification was, therefore, based on the current service delivery level. However, the report also set out “options for savings” which might need consideration if the base service price proved to be beyond the Council’s financial resources. The report further described the need for the contract to have the flexibility to accommodate operational changes throughout its lifetime and to drive forward the Council’s recycling performance in pursuit of Government targets and environmental prerogatives.

9. Tenderers were accordingly invited to submit bids for the Domestic Refuse, Recycling and Street Cleaning base services, as defined by the existing service delivery level, on which the prime tender evaluation has been conducted. This includes the requirement for contractors to deliver waste collected in accordance with the existing agreements which, as many of the contractors pointed out, does limit their flexibility under the "as-is" service contract. Tenderers were further required to submit prices for 3 mandatory options:-

10. Under Option 1 tenderers were required to identify the savings on the refuse and recycling services which a change to an alternate weekly kerbside collection system would generate.

11. Under option 2 and option 3, tenderers were instructed to enter a cost per household based on the introduction of each service sequentially in whole-round equivalent numbers of properties.

12. Tenderers were also invited to propose and price their own (non-mandatory) options for innovative service delivery.

Tender Evaluation Process

13. The published invitation to express an interest in tendering for this contract and the subsequent instructions to the selected tenderers confirmed that the contract would be awarded to the contractor producing the “best value” proposal, i.e. the most economically advantageous tender taking into account price, quality and sustainability and not necessarily the lowest price submission. The successful contractor must be able to demonstrate both the understanding and the capacity to deliver quality, customer-focused services and must give confidence to the Council in its ability to deliver the service and adapt to its development and changing needs over the life of the contract.

14. The evaluation criteria was produced in the tender documents, in accordance with Waverley’s Contract Procedure Rules and EC Public Procurement practice. To further ensure the integrity of the process a consultant with expertise in the waste management industry and waste management services tendering in particular, was engaged to carry out an independent evaluation of the tender submissions and performance of the tenderers at interview.

15. The tender evaluations comprised the assessment of:-

(i) the initial tender submission with supporting information; (ii) the presentation by the short-listed contractors’ teams of their proposed service delivery and management thereof; (iii) the contractor’s response to:- (a) clarifications sought in the pre-submitted questions; (b) questions raised at the interview; (c) further questions raised in writing following the presentation and interview; and
Evaluation of Submissions

16. The Council has attracted an exceptional level of interest in its Waste Management Contract including that from most of the leading UK waste management operators. This has resulted in the submission of 7 proposals from reputable companies. 6 of those are competitive in price and 5 are close to, or within, the Council’s current budget for the service. Each tender represents a range of advantages and disadvantages but none is significantly inferior as to warrant exclusion without further consideration.


17. Following examination and evaluation of the tender proposals and supporting information it was determined that 5 of the most competitive tenders warranted closer examination. The 5 contractors were accordingly invited to present their proposals, in person, to the Evaluation Team and to respond to matters of clarification and elaboration sought by the team. General questions concerning the proposed service delivery as well as questions specific to the respective contractor’s bid were tabled. Each contractor was tested on its understanding of the Council’s specified requirements and its ability to both provide a quality initial service and respond to the challenges of driving forward the Council’s ambitions in recycling performance and street-scene improvements.

18. An audio-visual record of the interviews was made so that clarification and assurances made during the interviews could be incorporated into any subsequent contract.

19. Each of the 5 contractors made competent presentations and responded confidently to the search for clarification, elaboration and reassurance by the Evaluation Team. The interviews brought a greater clarity and understanding of the proposals, in particular the variant options. However, there was a variety of advantages and disadvantages to each of the contractors’ proposals and no clear leader emerged from this process.

20. The "best value" proposal has been determined, in accordance with the European Public Procurement Regulations and the Council’s Contract Procurement Rules, after evaluation of the combination of price and quality scored in accordance with the pre-determined evaluation matrix, taking into account the factors set out in paragraph 15. The most economically advantageous tender, taking all factors into account, was revealed to be that of Contractor D.

Summary of Evaluation Scores

21. The evaluation was divided 50% quality assessment and 50% financial assessment. The main headings and weightings applied in the quality evaluation are shown at Annexe 1. The financial evaluation considered a number of factors including tender price, comparison of resources and risks associated with the tenders and the relative financial strength of the contractors. Table 1 below summarises the scoring for the waste management contractors.

Table 1 – Summary of evaluation scores

Contractor
Quality Score (out of 500)
Financial Score (out of 500)
Total Score (out of 1000)
Rank
Selected for Interview ?
A
292
344
636
3
Y
B
301
80
381
7
N
C
364
222
586
5
Y
D
340
334
674
1
Y
E
329
310
639
2
Y
F
280
293
573
6
N
G
339
272
611
4
Y


Tender Price and Budget Implications

22. The figures shown in (Exempt) Annexe 5 are the tender price for the base ("as-is") contract specification. As explained earlier in the report, contractors were also asked to price for a number of options which provide either a different service or provide additions to the service. The prices for options are also shown in (Exempt) Annexe 5 for comparative purposes. Whilst these option prices give a good indication of the costs for each contractor, the details and the timing of any such variation to the contract have not been agreed and will be the subject of further consideration by the Council once a contractor has been awarded the contract (see notes to (Exempt) Annexe 5). There are other factors associated with some of the options that are covered later in the report, which could also impact on the prices quoted. A full financial analysis will be presented to Members when options are being considered.

23. In addition to the mandatory options, officers gave contractors the opportunity to identify any alternative methods of service provision that they considered would provide a more economic and efficient service to Waverley to that specified. A number of contractors responded to this request and, whilst some of these options were attractive on service and price, there were some major risks and uncertainties. Consideration was given to any alternative proposals during the evaluation process.

24. In order to make a comparison of the cost of the tendered "as-is" service with that of the current service, three adjustments are necessary. Firstly, as referred to earlier in the report, the Council agreed to transfer the contract monitoring function from being the responsibility of the contractor to being undertaken in-house by Waverley staff. This cost is currently included within the existing contract price but, under the new arrangements, will become Waverley’s direct staffing cost. Secondly, there are some elements of work which have been transferred from the existing Street Cleaning contract to the new Grounds Maintenance contract. The estimated value of this work is included in the comparison against budget for both contracts. Thirdly, the current contract requires the contractor to pay an annual rental of 112,000 for the depot. The new contract replaces this with a peppercorn rent. Therefore, Waverley’s income reduces and the contract cost should reduce similarly. This adjustment is made in the comparison of costs with budget.

25. The estimated cost to Waverley of the Waste Management contract in 2005-06 and in a full year of the new contract, is included in (Exempt) Annexe 6 and assumes the preferred contractor (D) is awarded the contract. The total for 2005-06 is a combination of 7 months of the current contract cost plus 5 months of the new contract cost based on the "as-is" service, subject to the adjustments referred to above. The full year cost is based on the tendered contract costs for the "as-is" service, adjusted for the items referred to above.

26. The variation on the contract cost and the total impact on Waverley’s budget, assuming that the preferred contractor (D) is awarded the "as-is" contract, is shown in (Exempt) Annexe 7.

27. For comparison, the table in (Exempt) Annexe 8 shows the full year impact on Waverley’s budget of the tender price of each contractor interviewed.

Other Financial Issues

28. One of the financial uncertainties that Waverley faces each year is contract inflation. The current contracts allow for an annual price uplift based on a number of price indices which, in recent years, have varied year-on-year and been significantly

above the rate of inflation. The new contracts allow for an RPI based uplift which gives Waverley more certainty throughout the period of the contract and, based on past evidence, produces reduced year on year price increases.

Risk Analysis

29. The following table identifies the key risks associated with the procurement of the Waste Management contract and details the actions that have been taken to mitigate the risks as far as possible during the procurement process. It must be noted that many of the risks are not within the Council’s control. Therefore, whilst reasonable steps have been taken to avoid these risks materialising, risk cannot be prevented completely.

Risk
Action taken to reduce risk
Risk of insufficient competition resulting in Waverley not securing the best value service proposal- Officers met with potential contractors in advance of the tender process to discuss potential interest
Risk of uncertainty of the year-on-year contract uplift and the impact on Waverley’s budget- The new contract now allows for a RPI-based annual uplift
Risk of challenge from unsuccessful contractor- Evaluation criteria were set prior to the tender return date and in accordance with the Council’s Contract Procedure Rules
- Evidence for all stages of the evaluation has been recorded
- External expertise was employed to assist with the evaluation process
Risk of contractor having financial difficulties during the contract- A full financial assessment was undertaken at the pre-qualification stage and this was updated if possible at the post tender stage. All contractors invited to tender were in a sound financial position
Risk of contractor not performing to the contract conditions- The contract requires the contractor to provide a performance bond
- The contract provides for action to be taken in the event of service defaults
- The contract monitoring has been brought in-house to enable much more effective monitoring
Risk of the contractor’s tender being unsustainable throughout the period of the contract- The tender prices for all items were examined individually and in total and contractors tested at interview if necessary
Risk that the contract is under-resourced - The tender required contractor to provide a detailed breakdown of resources and these have been examined in detail by officers
Risk that the prices of the options will increase significantly if the options are not exercised early in the contract period- Contractors interviewed have indicated a "reasonable" approach to negotiating variations in the future. However, the start date may impact on prices if the price is affected by the financing of vehicles or equipment over the life of the contract.


30. In addition to the procurement risks, this is a complex contract and each tender presented its own risks and opportunities in terms of the proposed service and the costs of that service. These factors have been assessed in the evaluation process and reflected in the scoring where appropriate.

31. All of the contractors have made certain assumptions in their quoted prices for the mandatory options. These include potential changes to the disposal arrangements of recyclate and any implications that this may have on waste management agreements, assumptions on the provision of additional premises within the Borough and assumptions on volumes and frequencies.

32. With all service change options, there are potential financial risks to Waverley associated with all contractors in terms of the potential for staff costs and/or vehicle lease disposal costs for the vehicles that Waverley is requiring contractors to use under the "as-is" contract. Contractors were questioned at interview and, other than a "best-endeavours" commitment to minimise the impact on the Council, no guarantees have been given.

33. All contractors were required to price their options based on a 1st November start. Although certain assurances were given at interview that a reasonable approach would be taken to negotiating variations during the contract period, these prices can not be guaranteed if the start date is not 1st November 2005.

34. With some of the contractors’ proposals, there is a risk that if the level of recycling increases under the "as-is" contract, there could be a resulting stepped increase in the contract price being requested by the contractor. This factor has been included in the evaluation and is not an issue with contractor D.

35. Therefore, on the strength of the financial appraisals and the quality appraisals, your officers propose that the best advantage to Waverley, including financial advantage, is to be obtained from appointing the company which achieved the highest combined score which was contractor D. The particular advantages associated with Contractor D are set out in (Exempt) Annexe 4.

Waste Management Special Interest Group

36. The Council’s current recycling rate is approaching the 2004/2005 target of 24% of the total domestic waste stream. The revised Government imposed target is 30%, but the Surrey Districts have jointly pledged to aim for the previous 2005/06 target of 36%. That will require a "step-change" in domestic waste collection management. The re-tendering has provided the opportunity to engage with industry leaders operating a wide range of domestic waste and recyclables collection systems. It has also presented the opportunity to acquire competitive quotations for a range of variations to the current service delivery regime. It is considered that decisions on the fundamental changes in service delivery that will be required to meet future waste management objectives can best be developed and proposed through the reappointment of a Waste Management Special Interest Group (SIG). The draft terms of reference of the proposed SIG are shown at Annexe 2.

37. It will be particularly important that the SIG addresses the opportunities and consequences of implementing the various options, which have been included in each tender submission. These are the change to an alternate week collection service, the inclusion of a green/garden waste collection service and the inclusion of plastics as a recyclable material. Such considerations will require full financial analysis based on the timing, frequency and method proposed for any changes to the service and contract. The SIG will also need to consider the potential of a shift from kerbside-sorted recyclable collection to mixed dry recyclables, potentially with the provision of a second wheeled bin for reception and collection. In the absence of any

effective initiatives from the Waste Disposal Authority, the SIG might also consider if Waverley should promote and assist in developing alternative methods of recovering further recyclable material from the residual domestic waste stream such as mechanical/biological treatment and the impact that this may have on the contract will need to be considered. The SIG will also need to undertake some further visits to reference sites of the preferred contractor to see the options in operation. But, most importantly, the SIG will need to meet soon, to meet frequently and to conclude its business in time for a report through the Portfolio Holder, to be considered by Council in July. This will permit changes to the service to be introduced early in 2006 if required.

Town and Parish Council Participation

38. A report was presented to the Executive, at its meeting of 12th July 2004, following consultation with Town and Parish Councils, in response to some requests to be involved in the management, monitoring and augmenting of the major service contracts. In accordance with the resolutions in relation to that report, the contract has been structured to identify, by description and cost, items of work, which could be assigned to the Town/Parish Councils or augmented at their cost if they elect to do so, e.g. a daily cost of a dedicated street cleaning operative (barrow person) has been included as a provisional item to be called upon by the Council as required.

39. The revised contract monitoring arrangements will allow direct access by Town and Parishes for reporting local street-scene conditions, cleaning standards and performance, and incidents of fly-tipping and graffiti.

Conclusion

40. The evaluation has revealed close competition for the most economically advantageous tender, in terms of quality and price, from 4 of the tenderers. However, the highest score resulting from the Evaluation Matrix was achieved by Contractor D (identified in the (Exempt) Annexes). This contractor provides the greatest confidence in its ability to provide the most advantageous service to Waverley initially and its ability to provide the most economically advantageous service delivery options selected, for future implementation by the Council.

41. Some minor contractual matters remain to be clarified between the Council and the selected contractor, which will be resolved before formal signing of the contract, as reflected in the recommendations.

42. The mandatory service delivery options were included in the tender invitation to provide costs to Council to inform its deliberations on the future of the service, which will need to be determined through the democratic process. Advice from tenderers confirmed the officers’ view that changes to service delivery may best be introduced subsequent to the commencement of a new contract. It is therefore proposed that the contract is operated on the primary ("as-is") specified service from 1st November 2005 with any changes recommended by the SIG and resolved through Council being introduced subsequently.

Recommendation

That the Executive recommends to Council that:-





CONTACT OFFICERS:

Name: Peter Maudsley Telephone: 01483 523398
E-mail: pmaudsley@waverley.gov.uk

Name: Robin Ellks Telephone: 01483 523411
E-mail: rellks@waverley.gov.uk

Name: Martin Shorten Telephone: 01483 523434
E-mail: mshorten@waverley.gov.uk

Name: Paul Wenham Telephone: 01483 523238
E-mail: pwenham@waverley.gov.uk

Name: Graeme Clark Telephone: 01483 523236
E-mail: gclarke@waverley.gov.uk

Name: Malcolm Bookham Telephone: 01483 523256
E-mail: mbookham@waverley.gov.uk




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