Agenda item

Report of the Director of Environment and Resident Experience.  To be introduced by the Cabinet Member for Resident Services and Tackling Inequality.

 

The Cabinet Member for Resident Services and Tackling Inequality introduced the report which sought approval for the extension of the current waste and cleansing contract to allow for the Council to explore how services should be provided in the future.

 

In response to questions from Councillor da Costa, the following was noted:

-               The education and outreach service had been cut from the contract, which made it difficult to help with educating residents on how to recycle and change behaviours.  This made it hard for Veolia to meet recycling targets.  This resource had now been brought in-house, and work was underway to raise awareness and education in regards to recycling.

 

RESOLVED to

 

1.            Agree to exercise the Council’s option to extend the current contract for a value of £21.6m per annum, based on 2023/24 costs and subject to indexation and variations with Veolia, on the same terms, by 2 years through to 16 April 2027, in accordance with CSO 10.02.1 b) (Cabinet to approve contract extensions above £500,000), and

 

2.            Agree to vary the contract with Veolia to in-source the Education, Communications and Outreach service on 17 April 2024 and undertake the necessary TUPE process for the 3 staff members.

 

Reasons for decision - Veolia Extension

With the current contract expiring in April 2025, the Council has 18 months to agree how the services will be delivered and, if required, undertake the relevant extension, re-tendering or in-sourcing exercise.

 

The commissioning programme is currently underway to determine how waste and recycling collections and street cleansing services are delivered from April 2025.

 

Eunomia Research and Consulting Ltd and Plan B Management Solutions have provided the Council with specialist advice, support, and modelling to inform the recommendations across three key areas, which will impact on the cost and deliverability of services in the coming years:

·           Service delivery approach (whether the services are in-sourced, re-tendered, or Veolia contract extended)

·           Waste collection and street cleansing methodologies (the approach and service design required to improve quality and performance against targets)

·           Fleet strategy (the approach, costs, and feasibility to support the implementation of Zero Emission (ZE) vehicles)

 

The support provided across each of these areas has resulted in a detailed review of the associated costs, benefits, and risks across a range of options. Each of the three key areas has implications for each other, and as such, a holistic review is required to fully understand the implications for the Council.

 

Between December 2022 and February 2023 engagement with residents, business and other stakeholders was undertaken as part of the Haringey Deal, to understand views and aspirations of services provided within the current contract. The engagement received over 8,000 responses, which will be incorporated into the future options and recommendations.

 

The Political, Economic, Social, Technological, Legal and Environmental (PESTLE) analysis (Appendix 1) has shown that there are several significant areas which are currently impacting, or are likely to have a future impact, on the services in the coming years. Due to these factors the commissioning programme is unable to fully determine the needs of the Council presently without significant operational and financial risks. It is expected that with additional time, the market may start to stabilise and requirements under the Environment Act will become clearer, allowing properly informed planning for the future of the services both financially and operationally.

 

In addition, high-level mobilisation timelines provided as part of the service delivery review indicate that a 2-year extension will allow the Council sufficient time to implement its chosen option   including   any re-tendering, in-sourcing exercises and an associated required mobilisation period. The extension builds in sufficient contingency to mitigate against financial, commercial and operational risks associated with the sheer size and complexity of the services.

 

The existing fleet and maintenance arrangements provided by Veolia will continue in place to deliver services until 2027 as future fleet requirements cannot accurately be confirmed without the finalised service design. This approach provides additional time for the cost of low emission vehicles to reduce, and advancements in technology to develop. The Council is currently reviewing the strategy for procurement of its future fleet, and how to transition to a ZE fleet.

 

The only long-term option which does not require a significant implementation or mobilisation period is to extend the current contract with Veolia for a further 7 years. At this stage the Council is unable to make this decision, as the review of service delivery options is still in development.  As previously stated, this review needs to happen holistically with consideration to the implications on the future waste collection and street cleansing methodology and future fleet strategy, to ensure that best value service is provided.

 

If a long-term extension is determined to be the best option from April 2027, the Council can further extend the contract for up to an additional 5 years, to April 2032, in line with the maximum 7 years extension period.

 

The 2-year extension period impacts on the Council’s ability to deliver significant changes to the contract. This is because the extension would be on the same terms as the current contract, with no change in the scope of services permitted.  Any changes would have to go through the same change procedure as has been in place since 2011. The MTFS savings were based on the ability to re-scope services during the potential process of negotiating a 7-year extension to the contract, re-tendering or in-sourcing the services. Subsequently the current £1.3m MTFS savings target for 2025/26 will addressed in the MTFS process for 2024/25 – 2028/29.

 

The additional time provided during the extension period will allow the Council to further understand the impact of the external PESTLE factors on services. This will enable intelligent and informed decision-making incorporating benefits of technology advancements, changes to the legislative framework of waste and cleansing services and greater economic stability.

 

In-source Education, Communications and Outreach

As part of the contract, Veolia have a Service Performance Indicator (SPI) target for increasing the council’s household recycling rate, which has not been achieved since 2014/15.

 

Haringey’s recycling rate has decreased from a high of 37.3% in 2014/15 to 30.4% in 2021/22, having reached a low of 30.1% in 2019/20. Changes in resident habits influenced by the cost-of-living crisis and post pandemic living, is impacting on tonnages as residents work to ensure they reduce the amount of food waste, and the amount that they purchase as well as changes in traditional life/work arrangements. Others may be moving towards more sustainable choices such as like re-using and re-filling containers for essential items, recycling plastic film at supermarkets, or making use of services such as postal coffee pod recycling. In addition, Manufacturers are also investing in packaging and switching to lighter materials, which has a negative impact when using weight-based metrics. All these factors have contributed to Veolia not achieving the contract target for percentage of waste recycled since 2014/15.

 

Veolia are incentivised to meet this target via the risk of a financial deduction for non-performance, however this has not resulted in delivery against the targets.   In line with current market conditions, Veolia will not agree to any contract change which would increase the value of this deduction for factors largely outside their control. As a result, the current performance mechanism will discontinue in 2025.

 

Following a reduction in service request by the Council as part of savings in 2018, the communication and outreach function delivered by the team is  focused on services within the scope of the contract and does not include promoting all the additional services provided by the Council, such as recycling hubs at libraries, anti-litter campaigns, school outreach work or communications produced by the North London Waste Authority (NLWA) which is focussed on promoting waste reduction.

 

The team will transfer over to the Waste Team in Environment Neighbourhoods and Residents Experience who have responsibility for the contract, continuing to deliver key education, communications, and outreach functions, in line with a newly developed Outreach Plan.

 

This will provide the Waste Team a stronger ability to control the output and scope of the ECO work to deliver against the Council’s RRP, ensuring the communications programme is more seamlessly supported with the Council’s own communications team and agenda.

 

Over the coming years there is likely to be significant changes in how the Council delivers these services, due to changes in legislation and a need to drive improvement across the services. The ECO team will be vital to ensure residents understand the changes coming.

 

Considering the Haringey Deal, the ECO team are also key to ensuring residents are involved and listened to in relation to how we design and manage the service.

 

Veolia have proposed an annual contract price reduction, for Haringey to take on the services. The Council would use this reduction in contract price to fund the in-sourced function, including the staff as well as a dedicated communications budget, and therefore no saving or additional cost would result from this change. Please refer to the exempt part of this report for further details on the contract price reduction.

 

As part of the proposal, to assist the Council with their recycling targets, Veolia have agreed to continue with the contract target for recycling until 2025 despite the function transferring to the Council.

 

The transfer of this service would be subject to TUPE, as there are 3 staff members who currently deliver these services. This process will require support from Haringey HR, which has been included in the in-sourcing plan.

 

Alternative options considered

Veolia Extension

The Council could do nothing, which would result in the contract with Veolia expiring without any service delivery plans, and the Council unable to deliver its statutory services. This is not an option as the Council has a statutory duty to provide waste and recycling collection services, and so must have some form of service in place to deliver this from April 2025.

 

The Council could continue without a short-term extension to the existing contract, and plan to deliver the services through an alternative service delivery approach. This would include re-tendering the services through a procurement process or mobilising a new in-house service.

 

Any in-sourcing or re-tendering exercise would have to be undertaken within 18 months, ahead of April 2025. If the Council chose to re-tender or in-source the services within such a limited window it would represent a significant risk to the Council’s ability to deliver quality and affordable services from the expiry of the current contract.

 

If the Council chose to re-tender for services now, there is a further risk that due to the current economic conditions, and the current volatility of staff and fuel costs, that the price may be higher than current or if services are tendered after the economy has had time to stabilise.

 

To meet the changes required under the Environment Act the scope of services under the current contract would need to change through a variation. This is unlikely to provide value for money, due to how the contract is currently costed. Making changes through a re-tender or via in-sourcing at an appropriate future point is likely to provide better value for money.

 

The changes coming under the Environment Act remain ambiguous, with recent updates being delayed by Defra again. It is therefore not currently possible to adequately prepare and allow for these ahead of undertaking an extension, in-sourcing or re-tendering.

 

Alternatively, the Council could decide to award Veolia a 7-year extension, however this option is being considered alongside other service delivery options, and as such the Council is unable to make this decision at this stage.

 

In-source Education, Communications and Outreach

The Council could do nothing, and Veolia could continue to provide this service; however, this would mean that Veolia continue to have direct control over the Council’s ability to engage with residents, and directly influence the overall recycling rate.

 

For some of the reasons set out in Section 4.14, it is likely that Veolia will be unable to meet the contract recycling targets, which directly impacts on Haringey’s Destination 50% target, and other commitments set out in the corporate plan.