procurement of waste treatment services - plymouthprocurement of waste treatment services outline...

Procurement of Waste Treatment Services Outline Business Case

April 2008

Version 15

S o u t h W e s t D e v o n W a s t e P a r t n e r s h i p P r o c u r e m e n t o f W a s t e T r e a t m e n t S e r v i c e s O u t l i n e B u s i n e s s C a s e


Page i

Foreword

Creating a long term, sustainable waste management solution is the starting point for the South West Devon Waste Partnership. Formed by three local Authorities – Plymouth Council, Torbay Council and Devon County Council, the Partnership’s priority is to manage our community’s waste in the most cost effective, environmentally sensitive and socially responsible way.

Underpinning this goal is our work to reduce the amount of waste produced and sent to landfill. We are proactive in our approach to educate and promote reuse, recycling and composting initiatives, aiming to achieve rates in excess of government targets.

All three partners and our stakeholders are committed to achieving a successful and sustainable waste management system. By working together, across our boundaries, we can establish economies of scale, benefit from mutual expertise and share experience to create the best possible outcome for all concerned.

In order to realise our plans, we will need to develop new infrastructure to manage our waste – and this will require external support through the Private Finance Initiative (PFI). This document presents our Outline Business Case for this support. It has been approved by all the partners, endorsed by members and supported through each Authority’s own Municipal Waste Management Strategy.

Plymouth and Torbay, as designated New Growth Points, will need to provide significant amounts of new housing and employment over the next twenty years. The particular challenge is to ensure that growth is managed sustainably and that the infrastructure to do so is provided in a timely and appropriate manner.

We accept that changing the way we manage our waste in south west Devon requires substantial commitment, investment and will to address some significant challenges. With support from Government, the Partnership is capable of delivering an effective and sustainable system that meets the needs of the region.

In conclusion, the South West Devon Waste Partnership is united in its ambition to make this project a success; we look forward to your support.

Councillor Brian Greenslade Leader, Devon County Council

Councillor Vivian Pengelly Leader, Plymouth City Council

Mayor Nick Bye Mayor, Torbay Council


Page ii


Page iii

Executive Summary Contents 1.1 Introduction i

1.2 Background i

1.3 Strategic Waste Management Objectives iii

1.4 Procurement Strategy and Reference Project v

1.5 Risk Management, Risk Allocation and Contractual Structures vii

1.6 Project Team and Governance viii

1.7 Sites, Planning and Design ix

1.8 Costs, Budget and Finance xi

1.9 Stakeholder Communications xiii

1.10 Timetable xiv

1.10 OBC Approal xv


Page iv


Page i

1. Executive Summary

1.1 Introduction The three Authorities of Plymouth City Council, Torbay Council and Devon County Council have formally joined together to create The South West Devon Waste Partnership (SWDWP) to procure a shared solution to their future residual waste disposal needs.

This Partnership Authorities have built on over 15 years of joint working on waste to establish a close and highly collaborative formal arrangement to achieve their common objectives and deal jointly with residual waste. Plymouth is designated as the lead Authority as the likely solution will be within or near to Plymouth.

The Partnership benefits from having an excellent waste planning policy framework in both the Plymouth and Devon County areas. In particular, Plymouth has an adopted Waste Development Plan Document (WDPD) which identifies two strategic waste management sites capable of accommodating the proposals in this OBC. One of the sites is owned by Plymouth City Council. And a further site, just outside the city boundary, is allocated in Devon’s Adopted Waste Local Plan.

This Outline Business Case (OBC) includes a fully costed Reference Project that will meet the Partnership’s objectives for a solution that is deliverable, bankable and affordable. The Partnership’s proposed Reference Project is a single shared energy from waste (EfW) facility located in Plymouth along with improved waste minimisation, recycling and composting such that the Partnership achieves a combined recycling which exceeds 50 per cent by 2020.

The detail presented in the OBC demonstrates the clear direction and objectives of the Partnership and its total commitment to deliver on them. This Partnership will have a major influence on the sub-region’s future waste management arrangements for the next 30 years or so and will build on the recent improvements, successes and exceptional performance of all the Devon Authorities.

This OBC also meets both the Defra and Project Review Group (PRG) Private Finance Initiative criteria as can be seen from the cross-referenced checklist included at Appendices 1A and 1B.

1.2 Background

1.2.1 Devon Area Profile

Devon, Plymouth and Torbay are located on the South West peninsula. While much of the region is rural in nature, Plymouth is the largest urban area west of Bristol and a major conurbation providing jobs, facilities and services to a hinterland covering large parts of Devon and Cornwall. Torbay, best known as a resort, is a large urban centre providing a range of commercial and community services. Plymouth and Torbay have been designated as New Growth Points by the Government and are expected to


Page ii

accommodate significant housing growth over the next 20 years. Over 70,000 new homes will be built in the area to be served by the facilities the Partnership is planning. These growth pressures, together with those that come from the existing and growing visitor population in the area, add to the already significant challenges posed by the need to manage our existing waste sustainably.

Local government administration within Devon comprises a two-tier administration of Devon County Council with eight districts, and the two separate Unitary Authorities of Plymouth City Council and Torbay Council. The three Authorities of Plymouth, Torbay and Devon are each responsible for waste disposal functions and each have a need to find alternative forms of waste disposal that divert waste from landfill as landfill availability is rapidly diminishing within the region. The three Authorities have joined together in partnership to procure a joint solution for their residual waste disposal needs.

1.2.2 Analysis of Waste Arisings

Plymouth is the largest waste producer followed closely by the combined Devon County administered Districts of South Hams, Teignbridge and West Devon. The smallest producer is Torbay which generates approximately half that of Plymouth. Total waste arisings are forecast to grow year on year in the region as a result of a projected population expansion and a growing economy.

Historic waste composition information is available, although each of the Authorities has benefited from a Defra funded waste compositional analysis over the four quarters of 2007. The results of this analysis, when finalised, will provide invaluable data for future initiatives and bidders with up to date information on the composition of the residual waste stream that they will be expected to manage.

1.2.3 Current Waste Management Arrangements

Each partner Authority and associated Districts (in the Devon County area) provide slightly different collection and civic amenity services, although all have made significant investment and improvements in recent years. The Authorities have varying contract and service arrangements but all provide kerbside recycling and garden waste collection services to some or all of their residents. The three contributing Devon Districts also operate a food waste collection service.

Each of the partner Authorities is currently totally reliant on landfill as a means of disposing of their residual waste. Landfill capacity and availability is diminishing in the Devon and Cornwall area and there is currently only consented capacity until the year 2023. Other than landfill, there are no large-scale waste treatment or disposal facilities in the South West region. As a result of the relative peripheral nature of the peninsula, low population density, lack of industry and the relatively few and dispersed major urban areas, there has been little waste management infrastructure investment from the commercial sector other than that stimulated by local authorities.


Page iii

1.2.4 Performance of Existing Services

In terms of recycling and composting performance, Devon County and its constituent Districts are amongst the highest performing in the UK. Plymouth City Council has seen a rapid improvement in its performance in recent years and Torbay continues to see a year on year improvement.

An analysis of waste growth over the last four years shows a volatile picture in that waste has reduced in recent years in the Plymouth and Torbay areas while Devon has experienced some growth following a preceding period of reduction.

1.3 Strategic Waste Management Objectives

1.3.1 Joint Municipal Waste Management Objectives

Each of the Partnership Authorities has developed its own Municipal Waste Management Strategy and associated objectives. However, these have not been developed in isolation. The Partnership, as part of the OBC development process, has carefully reviewed and considered these strategies to determine individual and common waste management objectives and has also compared and, where appropriate, updated these against the National Waste Strategy for England 2007.

This has resulted in a Joint Municipal Waste Management Statement (JMWMS) which has defined common objectives and targets that steer the Reference Project solution. This includes improved waste minimisation, increased recycling and composting, and treating the residual waste in a shared sub-regional energy from waste (EfW) facility.

1.3.2 Waste Minimisation, Recycling and Composting

The Partnership Authorities have, over many years, worked together successfully through the long-standing Devon Authorities’ Waste Reduction and Recycling Committee (DAWRRC) to support waste re-use and encourage waste minimisation, recycling and composting. Strong leadership, the sharing of good practice and joint arrangements have produced some of the highest recycling and composting rates in the UK.

Such joint initiatives will continue through DAWRRC, and each partner Authority will continue to promote and deliver its own initiatives as set out within the Reference Project and to which each Authority has committed as part of the OBC approval process.

Table 1.1 shows that the Reference Project modelled Partnership recycling and composting performance will exceed the national WSE 2007 targets in each of the target years.


Page iv

Table 1.1 Partnership Modelled Recycling/Composting Performance Compared to WSE2007 Targets

Target Year National Waste Strategy target (%)

Reference Project Performance (%)

2009/10 40 42

2014/15 45 49

2019/20 50 51

1.3.3 Landfill Objectives

While the JMWMS seeks to minimise the quantity of waste to landfill in future years, it recognises that there will always be a need for some form of landfill. The Partnership conducted an options appraisal at an early stage and concluded that an EfW led residual waste treatment technology was most appropriate in removing the biodegradability of the treated waste and minimising the tonnages of waste sent to non-hazardous landfill.

In terms of meeting landfill diversion targets and remaining within allocated Landfill Allowance and Trading Scheme (LATS) allowances, Table 1.2 shows that once the residual treatment facility is operational (estimated from 2014), the Partnership will be comfortably within its LATS allowances. However, the partner Authorities recognise that to varying degrees they will have shortfalls in the medium term and this will be addressed through LATS trading.

Table 1.2 Reference Project Partnership LATS Performance in Target Years

Year LATS Allowance for Partnership (note only part of DCC*) BMW sent to Landfill with Reference Project

Tonnes Tonnes

2009/10 155,644 151,860

2012/13 103,670 146,277

2019/20 72,541 22,948

* The diversion from landfill achieved by the Partnership proposal would offset LATS liabilities arising elsewhere in the County


Page v

1.3.4 Sustainability and Environmental Objectives

The Partnership intends to incorporate and build on recommended and established sustainability assessment processes such as the Environment Agency’s WRATE software and the Carbon Trust’s Local Authority Carbon Management Programme.

A WRATE assessment has been conducted by the Partnership in the appraisal of the waste options. It is anticipated that additional modelling of environmental impacts will be undertaken when bids are received, particularly in respect to CO2 carbon equivalent emissions. Each partner Authority is proposing to adopt the new national indicator for CO2 emissions (NI186) in their Local Area Agreements and specific targets are currently being determined for agreement. Each of the partner Authorities has participated in the Carbon Trust’s Local Authority Carbon Management support programme and has adopted associated action plans.

1.4 Procurement Strategy and Reference Project

1.4.1 Overall Procurement Strategy

Given the differences of existing collection arrangements and in seeking value for money through local competition, the Partnership decided to proceed on the basis of a disaggregated procurement and delivery approach, with a shared residual waste treatment solution delivered as a joint procurement. Other associated activities and procurements relating to the Reference Project, such as increased recycling and composting initiatives and related infrastructure, have been explored for potential partnership working opportunities. However, it has been concluded that these should be progressed separately by the partner Authorities and not through a long-term private finance contract.

1.4.2 Output Specification

The Partnership has reviewed the latest Defra Waste Infrastructure and Development Programme (WIDP) Output Specification drafting and intends to base its drafting on this model documentation. The Output Specification will define the required Partnership outputs including the receipt and treatment of all municipal waste from household kerbside collections, Household Waste Recycling Centre (HWRC)/ Civic Amenity Recycling Centre (CARC) residual waste and Authority trade collection services.

The Contractor will be encouraged to receive third party waste to utilise spare capacity at the residual treatment facility subject to contract waste having priority. The Partnership is fully aware that the lack of landfill capacity in the south west presents an opportunity for the inclusion of other waste streams such as commercial or industrial waste. Subject to meeting Defra Private Finance Initiative (PFI) criteria, it will therefore invite bidders to propose solutions that will accommodate non-contract waste if it secures a better value for money solution for the public sector.


Page vi

1.4.3 Long and Short-listing of Options

Within the last three years, each partner Authority has considered a long-list of technological options and scenarios as part of developing its Municipal Waste Management Strategy. Each Authority independently arrived at the preferred solution of energy from waste (EfW) for the treatment of residual waste. Consequently, in considering a joint solution for the OBC, the Partnership has taken forward options that performed well in their individual strategy options appraisals and created a short list of ‘joint procurement options’ for detailed analysis.

The short-list of six residual treatment options examined (with improved waste minimisation and increased recycling as a component of each) were:

• Continued landfilling of residual waste (do-minimum);

• three individual EfW facilities in each Authority;

• a single shared EfW facility;

• a single shared EfW with a shared Anaerobic Digestion (AD) facility for food waste;

• three Mechanical Biological Treatment (MBT) facilities with a shared Refuse Derived Fuel (RDF) burner; and

• three Mechanical Biological Treatment (MBT) facilities and a merchant RDF burner.

Sub-options were also analysed assuming the EfW facilities were utilising combined heat and power (CHP).

These options were assessed and modelled in detail and were evaluated and scored by the Partnership against a range of technical, environmental, financial and planning criteria to assess their relative performance. The results of this evaluation showed that two options performed similarly well and more detailed financial analysis and wider consideration was then undertaken to determine the Reference Project.

1.4.4 Reference Project

Following the detailed option appraisal and analysis, the Partnership decided that the preferred residual treatment option, which would form the Reference Case for this Project, was a single EfW facility which would ideally incorporate CHP. Details of the required infrastructure are given in Table 1.3. This residual treatment technology solution alongside additional waste minimisation, recycling and composting initiatives forms the Reference Project. This will achieve a Partnership recycling and composting rate in excess of 50 per cent by 2019/20 and meet the Partnership’s landfill diversion objectives.

To progress the opportunity for CHP, the Partnership has undertaken a high-level assessment that has identified several possible small-scale users local to the available strategic sites and also larger potential users located further afield. The Partnership will analyse and investigate these opportunities in more detail and will work with Plymouth City Council’s Planning Service Department to encourage, as far as practicable, future developers near strategic sites in Plymouth to consider and make use of the heat potential from the treatment facility.


Page vii

Table 1.3 Required Infrastructure for Reference Case

Proposed Facility Number of Proposed Facilities

Nominal Capital Expenditure

Annual Capacity of Facility (tonnes)

EfW (with CHP) 1 £196m 225,000

1.5 Risk Management, Risk Allocation and Contractual Structures

1.5.1 Risk Management and Risk Allocation

The Project Team has a clear understanding of risk management and is familiar with the risk identification process and the need to use this proactively to minimise adverse impacts and maximise the successful delivery of the project.

Representatives from each of the partner Authorities carried out an initial procurement risk identification exercise before the Expression of Interest (EoI) was submitted to Defra and well before the Partnership was formalised. The resultant risk register has been reviewed and updated by the Project Team regularly and several critical Partnership related risks e.g. waste strategy objectives, timescales, Authority commitment, resourcing and management capacity have been significantly reduced.

Alongside these internal risk management tools, the Partnership is also utilising the 4ps Gateway Review process to provide external review, verification and challenge. The Gateway 0 review held in late 2007 was highly successful in accelerating the establishment of the Partnership and the development and agreement of the OBC. A Gateway 2 review will be held later in 2008 before procurement commences.

The Partnership intends to reflect the Government’s Standard PFI Contract (SoPC4) and Office of Government Commerce (OGC) risk positions within its Project Agreement. However, it will continually review this approach throughout the competitive dialogue process, in discussion with government advisory bodies (WIDP, PUK and 4Ps), to ensure value for money is obtained.

1.5.2 Project Agreement and Contractual Structure

The Partnership intends to develop a project agreement which will be signed by each Authority on a joint and several liability basis. The Project Agreement will be based on SoPC4, drawing on relevant available Defra WIDP, 4ps and Treasury guidance, and the wealth of experience available from within the Project Team and its advisors.

The associated Output Specification and Payment Mechanism will be based on Defra’s WIDP Residual Waste Procurement Pack model drafting and principles.


Page viii

The PFI transaction is intended to be structured such that a sufficient balance of property related risks is transferred to the PFI contractor to enable the transaction to be treated as “off balance sheet” by the public sector and meet the current criteria for PFI credit support. However, this position is subject to potential change as a result of recent Treasury revisions which are at consultation stage. Hence, it is currently not possible to be specific about the proposed accounting treatment required for the transaction under the International Financial Reporting Standards (IFRS). An initial assessment of the balance sheet treatment following the existing guidance indicates that the transaction could achieve “off balance sheet” treatment for the Authorities.

1.6 Project Team and Governance

1.6.1 Partnership Arrangements and Project Governance

The Unitary Authorities of Plymouth and Torbay and Devon County Council have, in a short period of time, successfully agreed a unique formal partnership arrangement with an efficient and streamlined governance structure. The three Waste Collection Authorities within Devon, namely South Hams, Teignbridge District and West Devon Borough Councils, have also made a formal commitment to the residual waste treatment solution.

The partner Authorities have jointly developed and formally signed a legally binding Joint Working Agreement (JWA) that defines the future governance structure and joint working arrangements. This agreement sets roles and responsibilities, cost sharing arrangements and the consequences of withdrawal during the procurement and operational phases of the contract.

The Partnership has decided on a Joint Committee arrangement with equal Councillor representation from each Authority including an observer from the leading opposition groups. This Joint Committee will monitor the procurement and contract on behalf of the Partnership and will be responsible for limited key decisions including the approval of preferred bidder. The approval of the Outline and the Final Business Cases and decisions relating to any amendments to the Joint Committee Constitution are retained by the three partner Authorities.

The Joint Committee will delegate the vast majority of its powers to the officer Chairing the Project Executive who, given Plymouth’s leading role in the procurement, will be the Chief Executive of Plymouth City Council. The Project Executive during the procurement phase will comprise Directors and senior Project Team officers from the three Authorities, Defra’s WIDP transactor and an internal-audit representative.

The Project Executive will delegate responsibilities to the Project Team which will be responsible for the day-to-day delivery and procurement of the project. The Project Team will be led by an experienced full-time Project Director and assisted by a full-time Project Manager and Project Office Support Manager. Other officers, who will represent their Authority and/or the Partnership in specialist areas such as planning, finance, communications and legal, will also be dedicated as required, and the Project Team will also be supported by specialist external advisors.

This governance arrangement during the procurement phase is intended to provide high level officer and elected member oversight of the project while facilitating rapid decision-making and shorter lines of


Page ix

communications. This will enable what will be largely practical, commercial, management and organisational issues to be dealt with at officer level. Stage plans will be developed throughout the procurement process to identify, control and monitor project activities. In appointing staff to the various roles and setting budgets, care has been taken to consider the need for flexibility and contingency should staff changes occur and to ensure continuity from procurement into the contract management phase.

Project governance will be reviewed and revised towards the end of the procurement stage to ensure that the future needs of contract mobilisation and contract management are adequately covered.

1.6.2 External Advisors

Nationally recognised and experienced waste PFI specialist advisors have been selected to assist in the delivery of this project. These advisors are:

• Financial – Ernst and Young;

• Technical – Entec UK Ltd; and

• Legal – Bevan Brittan.

In addition, the Partnership is using a specialist communications consultancy with particular experience in the waste field and specialist commercial PFI advisory support.

1.7 Sites, Planning and Design

1.7.1 Site Identification and Suitability

The Partnership believes that the existence of robust waste planning policy and waste site availability are major strengths of this project. This is particularly so, having agreed that any new treatment facility should be located in or near to Plymouth as it is the largest centre of population in the Partnership area and the largest contributor of residual waste amongst the partner Authorities.

In terms of planning policy, Plymouth City Council is currently leading the country in the adoption of its Local Development Framework (LDF). It has an Adopted Core Strategy and an Adopted Waste Development Plan Document (WDPD). These two documents set clear and robust planning policy which provide a degree of certainty for promoting the development of a waste treatment facility and subsequently for formulating and determining a related planning application.

The Adopted WDPD identifies four strategic waste management sites within Plymouth, two of which have been assessed as capable of readily accommodating a sub-regional facility. There are additional further sites identified in the Devon Waste Local Plan within 15 miles of Plymouth which could feasibly accommodate a strategic facility but which are subject to additional constraints and may be unavailable in the timescales required for this project.


Page x

1.7.2 Securing and Developing a Potential Site

Of the two potential sub-regional strategic sites in Plymouth, the one at Ernesettle is already in Plymouth City Council’s ownership and is currently unused. The other suitable site is located at Coypool and is in private sector ownership. The site is currently used for industrial china clay drying (although the operator and part owner of the site has announced its intention to cease operations in the near future). Both sites are relatively close to the major A38 trunk road network and have been subject to a range of assessments as part of the Local Development Framework (LDF) site identification process.

A further high-level assessment has also been made to review the potential for CHP at both sites. This assessment has indicated that there is some existing and future development potential although further analysis and investigation is required to assess how these opportunities can be brought to fruition.

The OBC has used the Ernesettle site as the assumed Reference Project site for cost estimating purposes. However, Plymouth City Council is in negotiation with the owners of the Coypool site to acquire an option or interest for waste and other strategic purposes.

The Partnership plans to undertake further site investigations and environmental studies on both sites during the next two years to understand and quantify the constraints at both locations. This will ensure that adequate information and data is available for planning and permit applications if these sites are required by the selected preferred bidder.

1.7.3 Facility Design and Sustainability

The Partnership has endorsed and is promoting the need for a high-quality and sustainable design for its future treatment facility and has incorporated these essential requirements in its Reference Project cost estimates.

Planning policies and specific design criteria have been laid down within the adopted Core Strategy and WDPD. These documents stipulate onerous but achievable design standards such the Building Research Establishment Environmental Assessment Model (BREEAM) ‘excellent’ sustainability standard and a requirement to deliver ‘an iconic or landmark’ building design.

To ensure that the Partnership achieves these design ambitions, a design quality statement has been prepared. The merits of Design Quality Indicators (DQI) will also be considered that will enable local residents and other stakeholders to influence the design and appearance of the facilities. In addition, an information memorandum will be issued to the bidders to guide their development proposals which will be evaluated and used to inform planning discussions. The preferred bidder will eventually submit a planning application and this will be referred for comment to the Plymouth Design Panel which includes, amongst others, representation from the Commission for Architecture and the Built Environment (CABE) and the Royal Institute of British Architects (RIBA).


Page xi

1.8 Costs, Budget and Finance

1.8.1 Procurement Costs

Detailed budget allocations and contingencies have been drawn up in consultation with key members of the Project Team and the Partnership’s advisors and approved by the three Authorities. It has been agreed that, for work undertaken on behalf of the Partnership, actual costs for the shared internal Project Team and for external advisor support will be shared equally. Any revisions to the budgets and resources will be agreed by the Project Executive and, where necessary, the individual Authorities.

1.8.2 Value for Money Assessment

A stage 2 project level qualitative assessment has been carried out as part of the OBC development in accordance with HM Treasury’s Guidance. The results in terms of viability, desirability and achievability, clearly indicate that the Partnership is well positioned to deliver this PFI procurement.

The associated quantitative assessment has produced an indicative PFI value for money (VfM) margin of 7.2% against the conventional procurement base case scenario. The VfM quantitative assessment has also taken account of optimism bias through use of the HM Treasury model and has demonstrated the robustness of the solution through sensitivity testing.

These assessments have provided a clear indication that verifies the outcome of the programme level assessment that PFI can deliver VfM for the Partnership.

1.8.3 Reference Project Costs and Affordability

Detailed modelling as part of the OBC development has shown that the selected Reference Project offers the best Partnership solution when assessed against a range of technical, environmental, economic and deliverability factors.

The development of the Reference Case, which includes the EfW residual waste treatment facility for the project, demonstrates that the nominal cost of this solution over a 25 year operational period would be £796m.

The Reference Project, which includes associated additional recycling and composting initiatives, has also been fully costed for the Partnership and for each Authority. These costs, based on a range of assumptions, clearly show the economic benefits of progressing the Partnership solution based on the Reference Project as opposed to continuing landfill.

In terms of affordability for the Authorities, it is understood that waste management costs will rise significantly over future years in all scenarios when compared to current levels of expenditure.

The affordability analysis of the whole Reference Project including the impact of recycling initiatives, PFI credit support and a headroom allowance for adverse risks affecting the project, shows that there is a


Page xii

total project affordability gap for the Partnership of £423million over the life of the contract (2011-2039). Reference Project costs, cost apportionment for each Authority and a comparison to ‘do-minimum’ landfill option are summarised in Table 1.4.

Table 1.4 Summary of Projected Costs for Reference Project (2011-2039)

£m Do Minimum Continue Landfill

Reference Project

Partnership

Reference Project Plymouth

City Council

Reference Project Torbay

Council

Reference Project Devon

County Council

Reference Case (EfW facility) N/A 796 373 146 277

LATS cost 114 8 6 2 -

PFI Revenue Support Grant N/A (177) (83) (32) (62)

Other Disposal and Recycling costs 1,789 955 364 185 406

Nominal Cost to be funded 1,902 1,582 660 300 621

Existing budgets 1,225 1,225 479 231 515

Affordability Gap (pre headroom) 677 357 181 69 106

Headroom N/A 66 34 12 20

Total Affordability Gap (post headroom) 677 423 215 81 126

As part of the OBC approval process, described in more detail in Section 1.11, each Authority has explicitly acknowledged their share of the estimated costs of the Reference Project and has formally resolved to meet the total affordability gap, including a prescribed headroom level. This is considered a worst case scenario.

1.9 Stakeholder Communications

1.9.1 Communication Strategy

The Partnership has adopted a proactive approach to communications and stakeholder management and has developed a communications strategy that sets out the range of current and proposed activities against key dates and milestones. The aim is to provide timely, clear and readily accessible information across a wide audience that explains the need for a long-term waste solution, provides the rationale for


Page xiii

the proposed Reference Project and continues to promote enhanced waste reduction and recycling. It has drawn on Devon County Council’s recent experience of successfully obtaining planning permission for an EfW facility in Exeter and will build on the consultation each of the Authorities has undertaken on their MWMSs.

The Partnership will continue to identify, engage and communicate with key stakeholders to provide accurate information and take on-board issues and concerns in relation to the Partnership’s proposals, and with a particular emphasis on the potential development of sites. The planned communications on site related matters will build on the extensive community and stakeholder engagement work that took place in Plymouth in connection with the development and recent adoption of the Plymouth WDPD and which identifies the strategic waste management sites.

1.9.2 Market Interest

In early 2008, the Partnership carried out a soft-market testing exercise by advertising a Prior Information Notice (PIN) and by providing a briefing paper and questionnaire for completion to interested parties. This exercise generated a good response and confirmed firm market interest in the project. It also provided valuable information and feedback and confirmed the Partnership’s approach in several directions including its approach to procurement, sites and planning, technology and contractual and commercial matters. Contact with the market will continue and the information will be used to refine the Partnership’s development of the project. It has also confirmed the merits of holding a bidder day later in 2008 which will coincide with the commencement of the procurement process and the formal notice in the Official Journal of European Union (OJEU).

1.9.3 Engagement with Other Relevant Authorities and the Public

All Authorities in Devon are members of the long-standing and well established Devon Authorities’ Waste Reduction and Recycling Committee (DAWRRC). This Committee has been kept informed of the Partnership’s intentions and in February 2008 the Committee confirmed their support for the joint residual waste treatment proposals for Plymouth and Torbay and for the Districts within Devon County area, those of South Hams, Teignbridge and West Devon.

Each of the Authorities participated in a regional Peer Review of waste strategies undertaken through the South West Regional Assembly in 2007. The Government Office South West, which participated in the review, have received regular briefings on waste issues in the Plymouth sub-region and on the development of the Partnership arrangements and project proposals.

Public communication and engagement over the respective partner Authority’s waste management plans and proposals have also been extensive in recent years. This has included the development of Waste Management Strategies for each of the Authorities and the development and adoption of the Devon Waste Local Plan and the Plymouth WDPD documents which identify potential waste sites. Specific consultation with a Plymouth resident panel in summer 2007 also confirmed support for a partnership solution with neighbouring Authorities if this reduced overall costs.


Page xiv

1.10 Timetable The procurement will follow the competitive dialogue process. Plymouth City Council has recent experience of this process in seeking a strategic partner to manage and deliver many of its highway functions. The Partnership recognises that the most critical programme area relates to the timing and management of the planning application and its approval process. This area will be reviewed regularly and updated in discussions with potential bidders during the procurement.

Various timetable risks and contingency measures have been identified and allowed for in the programme and the operational commencement date of April 2014 is considered robust. The Partnership will keep its procurement and planning strategy under review so that milestone timings can be adjusted to secure the best possible outcome for the delivery of residual waste treatment services. An abridged version of the project timetable is shown in Table 1.5.

Table 1.5 Summary Project Timetable

Project Milestone Proposed Date

Business Case Approved by Councils 21/4/08

Submission of OBC 30/4/08

Defra Approval of OBC July 08

PRG Approval of OBC Sept 08

OJEU Published Oct 08

Descriptive Document and PQQ Issued Oct 08

Invitation to Submit Outline Solutions (ISOS) Issued Dec 08

ISOS Returned Mar 09

Invitation to Submit Detailed Solutions (ISDS) Issued Jun 09

ISDS Returned Nov 09

Invitation to Submit Revised Solutions (ISRS) Issued (if required)

Jan 10

ISRS Returned Apr 10

Call For Final Tenders May 10

Preferred Bidder Selected Jul 10

Submission of FBC Sept 10

Defra Approval of FBC Oct 10

Contract Award and Financial Close Oct 10

Planning Application Submitted Nov 10

Operational Commencement Apr 14


Page xv

1.11 OBC Approval and Commitment The Outline Business Case has been prepared jointly with input from the Partnership Authorities and has been formally approved by each Council.

To accommodate the timing and format of each Authority’s formal approval process, the OBC and the Joint Working Agreement were condensed into summary reports for the Cabinet/Executive and/or full Council in each Authority to consider. These reports summarised the key sections of the OBC including details of the Reference Project compared to the landfill alternative, estimated costs of the associated waste initiatives and the affordability implications for each Authority. Drafts versions of the full OBC and JWA were also available to Executive and Council members.

Each Authority was made fully aware of the magnitude and timing of their financial commitments to deliver the project and the consequences of withdrawal from the governance arrangements . The three Authorities have each individually endorsed the OBC and the JWA.

For practical reasons, the finalisation and sign-off of the Outline Business Case documentation was delegated by each Authority to their respective lead officer (Corporate Director or Chief Executive) in consultation with the relevant Councillor Portfolio Holder for waste services.

Authority approvals were granted as follows:

• Plymouth City Council – Cabinet approval 8th April and full Council approval 21st April 2008;

• Torbay Council – Cabinet approval 15th April and full Council approval 17th April 2008; and

• Devon County Council – Executive approval 8th April 2008.

In addition Section 151 Officers from each Authority have provided letters of comfort that the commitment will be recognised in each Authorities budget setting process.

The Partnership is confident that this Outline Business case is robust and that the team delivering this project has the requisite expertise and experience to ensure a successful outcome. With PFI credit support, the partner Authorities have confirmed that their affordability gaps will be met.


Page xvi


Page xvii

Contents

1. Executive Summary i

1.1 Introduction i

1.2 Background i

1.2.1 Devon Area Profile i

1.2.2 Analysis of Waste Arisings ii

1.2.3 Current Waste Management Arrangements ii

1.2.4 Performance of Existing Services iii

1.3 Strategic Waste Management Objectives iii

1.3.1 Joint Municipal Waste Management Objectives iii

1.3.2 Waste Minimisation, Recycling and Composting iii

1.3.3 Landfill Objectives iv

1.3.4 Sustainability and Environmental Objectives v

1.4 Procurement Strategy and Reference Project v

1.4.1 Overall Procurement Strategy v

1.4.2 Output Specification v

1.4.3 Long and Short-listing of Options vi

1.4.4 Reference Project vi

1.5 Risk Management, Risk Allocation and Contractual Structures vii

1.5.1 Risk Management and Risk Allocation vii

1.5.2 Project Agreement and Contractual Structure vii

1.6 Project Team and Governance viii

1.6.1 Partnership Arrangements and Project Governance viii

1.6.2 External Advisors ix

1.7 Sites, Planning and Design ix

1.7.1 Site Identification and Suitability ix

1.7.2 Securing and Developing a Potential Site x

1.7.3 Facility Design and Sustainability x

1.8 Costs, Budget and Finance xi


Page xviii

1.8.1 Procurement Costs xi

1.8.2 Value for Money Assessment xi

1.8.3 Reference Project Costs and Affordability xi

1.9 Stakeholder Communications xii

1.9.1 Communication Strategy xii

1.9.2 Market Interest xiii

1.9.3 Engagement with Other Relevant Authorities and the Public xiii

1.10 Timetable xiv

1.11 OBC Approval and Commitment xv

2. Background 1

2.1 Introduction 1

2.2 Key Characteristics of the Partnership Area 1

2.3 Analysis of Waste Arising 5

2.4 Details of Current Arrangements for Collection and Disposal 10

2.4.1 Introduction 10

2.4.2 Plymouth City Council 11

2.4.3 Torbay Council 11

2.4.4 Devon County Council 11

2.4.5 Civic Amenity Recycling Centres (CARCs) 13

2.4.6 Recycling and Composting Facilities 13

2.4.7 Landfill Disposal 14

2.5 Performance of Existing Services 16

2.5.1 Recycling and Composting Performance 16

2.5.2 WRAP and Rotate 18

2.5.3 Residual Waste Treatment 19

2.6 Waste Composition 21

2.6.1 Summary of Available Composition Data 21

2.6.2 Plymouth Compositional Data 21

2.6.3 Torbay Compositional Data 22

2.6.4 Devon Compositional Data 23

2.6.5 Combined Compositional Data 24


Page xix

2.6.6 Non-Household Waste Composition 25

2.7 Contracts 26

3. Strategic Waste Management Objectives 29

3.1 Introduction 29

3.2 Municipal Waste Management Strategy (MWMS) 29

3.3 Waste Minimisation 32

3.3.1 Introduction to Waste Minimisation 32

3.3.2 Devon Authorities’ Waste Reduction and Recycling Committee (DAWRRC) 32

3.3.3 Waste Minimisation in Plymouth 33

3.3.4 Waste Minimisation in Torbay 33

3.3.5 Waste Minimisation in Devon 34

3.3.6 Waste Minimisation Targets 34

3.4 Recycling and Composting 35

3.4.1 Introduction to Recycling and Composting 35

3.4.2 Recycling and Composting in Plymouth 35

3.4.3 Recycling and Composting in Torbay 36

3.4.4 Recycling and Composting in Devon 36

3.4.5 Future Initiative Programme 36

3.4.6 Trade Waste Recycling 38

3.5 Landfill Objectives 38

3.5.1 South West Devon Waste Partnership Joint Municipal Waste Management Strategy 38

3.5.2 Strategic Landfill Diversion Objectives 39

3.6 Appraisal of Technology Options for Residual Waste Treatment 40

3.7 Sustainability and Environmental Impact 41

3.7.1 The South West Devon Waste Partnership Approach 41

3.7.2 Plymouth City Council 42

3.7.3 Torbay Council 42

3.7.4 Devon County Council 43

3.7.5 WRATE 43

3.7.6 Local Area Agreement (LAA) Environmental Indicators 44


Page xx

4. Procurement Strategy and Reference Project 45

4.1 Introduction 45

4.2 Overall Strategy for Procurement 46

4.3 Output Specification for the Project 48

4.3.1 Contract Waste 48

4.3.2 Non Contract Waste 48

4.4 Options Appraisal - Long Listing of Technology Options 49

4.5 Appraisal of Short-listed Options to Identify Reference Project 51

4.5.1 Short Listed Options - Facilities 52

4.5.2 Performance of Short Listed Options 54

4.5.3 Review of Planning Criteria (Total Weighting: 15%) 55

4.5.4 Review of Technical Criteria (Total Weighting: 20%) 55

4.5.5 Review of Environmental and Social Criteria (Total Weighting: 25%) 57

4.5.6 Review of Financial and Economic Criteria (Total Weighting: 40%) 60

4.5.7 Landfill Tax and LATS Sensitivities 62

4.5.8 Bankability 64

4.6 Determination of the Reference Project and Reference Case 65

4.6.1 Analysis of Options 3 and 4 65

4.6.2 The ‘Reference Project’ and the ‘Reference Case’ Technology 68

5. Risk Management, Risk Allocation and Contractual Structures 71

5.1 Introduction to Risk Management 71

5.2 Procurement Risk Management 71

5.3 Project Risk Management 72

5.4 Risk Allocation Matrix 73

5.5 Project Agreement and Other Contractual Documents 74

5.5.1 Project Agreement 74

5.5.2 Other Contractual Documents 74

5.5.3 Joint Working Agreement 75

5.5.4 Local Government Boundary Review 75

5.6 Payment Mechanism 75

5.6.1 Payment Mechanism Principles 75


Page xxi

5.6.2 WIDP Payment Mechanism and Output Specification 76

5.6.3 Calculation of the Annual Unitary Charge 76

5.6.4 Performance Monitoring by the PFI Contractor 77

5.7 Markets for Process Outputs 78

5.8 Balance Sheet Treatment 79

6. Project Team and Governance 81

6.1 Introduction 81

6.2 Legal Context 81

6.2.1 Duties in Relation to Controlled Waste 81

6.2.2 Public Procurement and International Law 82

6.2.3 Land Disposal Powers. 82

6.2.4 Best Value 82

6.2.5 “Well being” Powers 82

6.2.6 General Powers 82

6.3 Project Governance 83

6.3.1 Joint Committee 83

6.3.2 Project Executive 85

6.3.3 Approval of Outline Business Case, Joint Working Agreement, Final Business Case and Project Agreement 86

6.4 Project Management 86

6.4.1 The Project Team 86

6.4.2 Project and PFI experience of the Project Team 89

6.4.3 Continuity from Procurement to Contract Management Phase 92

6.4.4 4ps Involvement 93

6.4.5 Budget for Internal Project Team 93

6.5 Advisors 93

6.6 Joint Partnership Arrangements 95

6.7 District Involvement 96

7. Sites, Planning and Design 99

7.1 Introduction 99


Page xxii

7.2 Site Identification 99

7.2.1 Identification of Strategic Waste Sites in Plymouth 99

7.2.2 Site Suitability for a Sub-regional Solution and Reference Project 100

7.3 Securing and Developing Potential Sites 103

7.3.1 Ernesettle Site 103

7.3.2 Coypool Site 103

7.3.3 Sites outside Plymouth 103

7.3.4 Suitability for Combined Heat and Power (CHP) 104

7.4 Planning Health Framework 104

7.5 Design and Sustainability Issues 105

7.6 Public Engagement 106

8. Cost, Budgets and Finance 107

8.1 Introduction 107

8.2 Procurement Costs 107

8.3 Value for Money Assessment 108

8.3.1 Value for Money Introduction 108

8.3.2 VfM Assessment of PFI and CP 109

8.3.3 Qualitative Assessment 109

8.3.4 Quantitative Assessment 112

8.3.5 Key Input Assumptions 112

8.3.6 Optimism Bias 113

8.3.7 Indicative PFI VfM Results 114

8.3.8 Outcome of Sensitivity Analysis Performed 115

8.3.9 PFI vs CP Project Level Assessment - Conclusion 116

8.4 Reference Project Costs 116


8.4.2 The Cost of the Reference Project 117

8.4.3 Cost of the Reference Case 117

8.4.4 Calculation of the PFI Credit 117

8.4.5 Cost of the Reference Case including PFI Credits 119

8.4.6 Services outside the Scope of the Reference Case 119


Page xxiii

8.4.7 Projected Cost of the Reference Project for the Partnership 120

8.5 Comparison of the Reference Project against the “Landfill” Option 121

8.5.1 Results of the Comparison 122

8.6 Affordability Analysis 124


8.6.2 Pre Contract Affordability 124

8.6.3 Post Contract Affordability 126

8.6.4 Affordability “Gap” – Comparison of the Partnership’s Budget to the Reference Project Costs 126

8.6.5 Sensitivity Analysis 128

8.7 Councillor Approval of Budgets and Affordability 129

8.7.1 Councillor Approval of Budget Requirements 129

8.7.2 Authorities’ Commitment and Approach to Meeting the Affordability Gap 131

8.7.3 Sinking Fund Analysis 132

8.8 The Partnership’s LATS Strategy 133

8.8.1 The Landfill Allowance Trading Scheme 133

8.8.2 Partnership’s LATS Position 133

9. Stakeholder Communications 139


9.2 Strategy 140

9.3 TUPE and Code of Practice on Workforce Matters 140

9.4 Market Interest 141

9.4.1 Introduction to Market Interest 141

9.4.2 Soft Market Testing 141

9.4.3 Summary of Soft Market Testing Responses 142

9.4.4 Soft Market Testing Conclusion 143

9.5 Other Relevant Authorities 144

9.6 Public Engagement 144

9.7 Community Sector/Non Government Organisations (NGOs) 145

10. Timetable 147



Page xxiv

10.2 Timetable 147

10.3 Managing Timetable Risks 149


Page xxv

Appendices

The following appended documents are referenced in this OBC – those appendices italicised and marked with asterisk are commercially confidential and therefore not included for general public release

Appendix 1A Defra Criteria Checklist

Appendix 2A PRG Criteria Checklist

Appendix 3A Plymouth MWMS and Supporting Documents

(hardcopy not supplied – electronic copy supplied on disk and available from web-links provided)

Appendix 3B Torbay MWMS and Supporting Documents


Appendix 3C Devon MWMS and Supporting Documents


Appendix 3D SWDWP JMWMS Statement

Appendix 4A* Options Appraisal and Technical Modelling Report (Entec)

Appendix 4B WRATE Technical Note (Entec)

Appendix 4C CHP Assessment (Entec)

Appendix 4D* Mass Flow Model (Entec)

Appendix 5A Project Risk Register

Appendix 5B Gateway Review Recommendations

Appendix 5C Risk Allocation Matrix

Appendix 5D Accounting Treatment (Ernst & Young)

Appendix 5E Authority Auditors Opinion Letters

Appendix 6A Comparison with 'WIDP 12 Touch Points for Effective Project Governance'

Appendix 6B Joint Working Agreement (JWA)

Appendix 6C Plymouth City Council JWA, OBC and Affordability Approval Meeting Minutes

Appendix 6D Torbay Council JWA, OBC and Affordability Approval Meeting Minutes

Appendix 6E Devon County Council JWA, OBC and Affordability Approval Meeting Minutes

Appendix 6F Advisors CVs

Appendix 7A Defra's Planning Health Checklist

Appendix 7B Design Quality Statement / Design & Sustainability Strategy


Page xxvi

Appendix 7C Waste Development Plan Document Consultation and Communications

Appendix 7D Inspectors Report on the Examination into the Waste Development Plan Document

Appendix 7E Adopted Waste Development Plan Document (WDPD)

Appendix 8A* Detailed Value for Money Assessment (Ernst & Young)

Appendix 8B Optimism Bias Inputs (Ernst & Young)

Appendix 8C* Shadow Tariff Model for calculation of the Unitary Charge (Ernst & Young)

Appendix 8D* PFI Credit and Revenue Support Grant Calculation (Ernst & Young)

Appendix 8E* Other Disposal Costs Assumptions (Ernst & Young)

Appendix 8F* Reference Project Costs (Ernst & Young)

Appendix 8G S151 Financial Officer Letters

Appendix 9A SWDWP Communications Strategy (Coast Communications)

Appendix 9B SWDWP Soft Market Testing Project Brief

Appendix 9C SWDWP Soft Market Testing Questionnaire

Appendix 9D* SWDWP Soft Market Testing Responses

Appendix 9E BBC Spotlight News Broadcast following Publication of Waste DPD and OBC


Page 1

2. Background

2.1 Introduction This section provides details brief contextual description for and details of the present performance of the waste management arrangements in the three Authorities constituting the South West Devon Waste Partnership.

The geographic area of Devon County Council is primarily an agricultural region with important areas of National Park and heritage coast. Plymouth is the largest conurbation west of Bristol and acts as a commercial, cultural and employment centre for a sub-region extending over large parts of neighbouring Devon and Cornwall. The south western parts of the County look primarily to Plymouth for higher order services, while mid and east Devon relate to Exeter as their main urban centre. The Torbay area is known as the English Riviera and retains an important role as both a coastal resort and commercial centre.

Plymouth and Torbay are unitary authorities created under the 1998 Local Government Review (LGR). Devon County is a two-tier authority with 8 District Councils – three of which will provide residual waste for the treatment facility in Plymouth

Overall, the reuse, recycling and composting performance of the Partnership has seen improvement year-on-year with a subsequent reduction in landfill. Landfill capacity within Devon and Cornwall is limited to a permitted life of 2023 so enhanced diversion is critical to the region. In addition to this project, Devon County Council has obtained planning permission for an EfW plant in Exeter which is currently at procurement stage. Devon is also investigating the feasibility of building a similar plant at Barnstaple.

This section therefore provides the background for the Outline Business Case.

2.2 Key Characteristics of the Partnership Area Devon lies on the southwest peninsula of England. The administrative area is currently divided between Devon County Council (DCC) and its District Councils, Torbay Council (TC) and Plymouth City Council (PCC).

Plymouth is a Unitary Authority and the largest city in both Devon and the south west peninsula. It has a current population of 246,100 people living in 109,504 dwellings and has a land area of 7,980 hectares. The City provides sub-regional services and facilities for a hinterland extending over large parts of Cornwall and Devon. It is bordered by the River Tamar to the west, to the south by Plymouth Sound and is constrained to the north by Dartmoor National Park. Plymouth has significant areas of environmental and heritage significance, much of the latter a legacy of its historic connection with the Royal Navy.

Plymouth City’s Economic Strategy seeks to build on strengths and opportunities in the marine and maritime, medical, advanced manufacturing, creative, business services and tourism sectors. The City’s


Page 2

role as the key urban centre in the far South West is recognised in the Draft Regional Spatial Strategy and through its designation by Government as a New Growth Point. The Draft RSS (and NGP proposal) anticipates the building of 47,200 new homes in the Plymouth area up to 2026. Of these 24,500 will be within the City (predominantly on brown field sites), 5,500 as an urban extension and 10,700 within other parts of Devon – a total of 40,700 new homes within the area served by the waste Partnership (in addition to those to be provided in the Torbay area)

Torbay is a Unitary Authority located on the south coast of Devon. There are three main towns with a total population of around 133,000 in 61,200 households: Torquay (population 63,998), Paignton (population 48,251) and Brixham (population 17,457). These three towns comprise what is commonly termed the English Riviera and is well known as a premier UK tourist resort. The sea forms an absolute barrier to the East and Torbay is characterised by a high-density development and steep topography. This has perhaps been forced by the natural constraints placed on the area by its surrounding geography. The area is bounded by beautiful and valued landscapes and rich biodiversity.

Torbay has suffered from a decline in traditional resort tourism, reflected in the area’s low levels of income. Torbay is 22% below the average for England in terms of ‘median workplace based gross annual pay by district’ and 19% based on ‘median residence based gross annual pay by district’1. The Borough has recently adopted a new vision for its regeneration linked with its designation as a New Growth Point that envisages an expansion of its role as a major tourism destination, as a commercial centre and centre for learning. The Draft RSS anticipates the provision of 20,000 new homes within the Torbay area by 2026.

Devon is the largest county in the South West Region with a land area of 656,407 hectares (1,622,017 acres). The population is currently 740,800 (ONS mid 2006 estimate) and there are 349,407 households. The County is predominantly rural with the major population centred on Exeter. The County is divided into 8 districts as indicated in Table 2.1. Over 50% of the County has designated landscape areas with Dartmoor and Exmoor National Parks accounting for around a third.

The Devon area has both negative and positive elements to its economy; there is currently underperformance and underutilisation of skills and incomes from all sources are generally below the average for England and the United Kingdom. The Devon economy has a higher than average reliance on self-employment as a means of generating income. Whilst this provides flexibility to adapt to changes in the economy, it is also a symptom of lack of employment opportunity. The area exhibits pockets of high deprivation as well as high house prices, creating serious problems of housing affordability in many areas. Devon’s economic strategy seeks to build on its strong identity as the ‘greenest county’, to build on priority sectors including environmental technologies, marine, food and drink, creative and tourism and to tackle problems of rural deprivation. In addition to the housing growth within the Plymouth and Torbay areas, the Draft RSS allocates 10,400 new homes within the area that will be served by the Waste Partnership, meaning in total, 71,700 new homes are anticipated in the waste partnership area by 2026.

Looking ahead, the three Authorities share and contribute to the regional aspirations for a low carbon economy and all have made positive commitments to the development of sustainable communities. The reduction of greenhouse gas emissions is a cornerstone of the policy to support local sustainability. The

1 Source: Devon Economic Context available at www.devoneconomy.co.uk under Reports and research.


Page 3

carbon footprint of waste is therefore recognised as a significant contributor to the baseline footprint of each local authority and to the sub region as a whole. Actions to reduce the carbon footprint of waste will be integral to the delivery of the proposals for future waste management, with resulting social, economic and environmental benefits.

The area suffers from higher than average charges for water, gas and electricity. Local residents have primarily been asked to pay for the improved water cleanliness measures introduced by South West Water. Gas and electricity prices are above average due to the lack of local supply and long transmission routes to the South West. An additional 800MW of gas powered electricity generating capacity is currently under construction in the South Hams which may reduce electricity costs over the longer term whilst Cornwall generates ‘green’ energy from wind turbines. However, green energy is unlikely to reduce energy costs locally in the short term. High energy costs have an impact on business costs and household disposable income, which in turn contribute to the low growth forecasts for Devon.

Devon is renowned for its high environmental quality and much of its future prosperity depends on taking advantage of this natural attribute. The proposals for cost effective and environmentally sustainable management of waste contained in this OBC will play an important part in maintaining high environmental quality and the promotion of economic well-being. The energy produced will contribute to local power generating capacity, contribute to the generation of lower carbon ‘green’ energy, reduce power distribution costs and contribute to a lower carbon footprint.

The map below shows the locations of the two unitary authorities and the Districts of Devon.


Page 4

Figure 2.1 Map of Devon, Plymouth and Torbay

Both Plymouth and Torbay became Unitary Authorities on 1st April 1998. The current structure for the County is shown in the table below.

Teignbridge

Exeter

East Devon

Torbay

South Hams

Plymouth

West Devon

Mid Devon North Devon

Torridge


Page 5

Table 2.1 County, District and Unitary Councils Comprising the Geographic Area of Devon

Council Status Area (Hectares)

Population (mid-year 2006)

Population Density (People

per Hectare)

Devon County Council WDA 656,407 740,800 1.13

East Devon Council WCA 81,438 131,100 1.61

Exeter City Council WCA 4,702 119,600 25.44

Mid-Devon District Council WCA 91,295 74,500 0.82

North Devon District Council WCA 108,588 91,500 0.84

South Hams District Council WCA 88,649 83,200 0.94

Teignbridge District Council WCA 67,390 125,500 1.86

Torridge District Council WCA 98,383 64,200 0.65

West Devon Borough Council WCA 115,962 51,200 0.44

Plymouth City Council Both WDA and WCA 7,980 248,100 31.09

Torbay Council Both WDA and WCA 6,288 133,200 21.18

2.3 Analysis of Waste Arising Each Authority has seen waste growth slow since 2000 compared to the growth rates experienced in the late 1990s. Figure 2.2 shows the municipal solid waste (MSW) growth rates from 2000/01 to 2006/07 for the Plymouth, Torbay and the whole of Devon County.

Within the sub-region, there is a strong trend towards reducing the proportion of waste going to landfill disposal and increasing the diversion to reuse, recycling and composting. Each Authority supports the waste hierarchy objective to reduce, reuse and recycle before energy recovery and disposal.


Page 6

Figure 2.2 Percentage Municipal Solid Waste (MSW) Growth by Authority from 2000/01 to 2006/07

-6

-4

-2

0

2

4

6

8

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07

Year

MSW

Ann

ual P

erce

ntag

e C

hang

e

Devon Plymouth Torbay

The graph shows that waste growth has been cyclical and volatile for each Authority. They have experienced different cycles of growth and contraction over the seven-year period. Devon’s growth in waste arisings was arrested during the first four years due in part to the success of the ‘Don’t let Devon go to waste’ campaign. This award winning promotion raised awareness of waste issues in Plymouth and Torbay as well as Devon although the impacts were delayed in Plymouth and Torbay as residents did not immediately pick up on the Devon branding. Each authority saw waste grow in 2004/05 but only Devon continued to see growth in the following years. This is due to population and demographic changes which have recently led to a temporary increase.

The total MSW arising in each Authority is given in Figure 2.3 below.


Page 7

Figure 2.3 Total MSW Arising by Authority 2003/04 to 2006/07

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Devon W. Devon, S. Hams &Teignbridge

Torbay Plymouth

MSW

Aris

ing

(Ton

nes

per A

nnum

)

2003/04 2004/05 2005/06 2006/07

The county of Devon produces the highest overall tonnage of MSW. The waste arising from the Devon District Councils of Teignbridge, West Devon and South Hams will be treated at the facility in Plymouth. It can be seen from the table that the major producers of waste within the greater catchment area are PCC and the combined three District Councils. Both have near equivalent MSW arisings.

The charts below subdivide the total MSW tonnage into landfill, reuse, recycled, composted and recovered for each Authority. It should be noted that the Devon figures only refer to municipal waste from Teignbridge, West Devon and South Hams as this is the feedstock for the proposed Partnership treatment facility.


Page 8

Figure 2.4 Analysis of Municipal Waste Arising for Plymouth City Council

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2003/04 2004/05 2005/06 2006/07

Year

MSW

Aris

ings

(Ton

nes

per A

nnum

)

Collected Household Waste Disposed to Landfill Collected non-Household Waste Disposed to Landfill Household Waste Reused, Recycled & Composted Non-Household Waste Recovered

Source: Plymouth City Council

It can be seen from the above graph for Plymouth that there has been a reduction in the amount of both household and non-household waste landfilled whilst the quantity of household waste reused, recycled and composted has increased. This reflects the investment in recycling and composting made by PCC over the same period. Waste arising in total rose slightly in the middle two years but has subsequently reduced below 2003/04 levels in 2006/07. This reduction reflects containerisation initiatives, improvements to the recycling and composting service and controls on trade abuse at the Civic Amenity and Recycling Centres (CARCs). Recycling and composting has improved from 16% to 27% over the period. Section 3 details planned and future improvements to the service.


Page 9

Figure 2.5 Analysis of Municipal Waste Arising for Torbay Council

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2003/04 2004/05 2005/06 2006/07

Year

MSW

Aris

ings

(Ton

nes

per A

nnum

)


Source: Torbay Council

Torbay has also seen a reduction in material landfilled and an increase in household waste reused, recycled and composted over the last two years compared to the first two years. Total waste arising rose in the middle two years but has now fallen below 2003/04 levels. Torbay experienced a fire at their Materials Recovery Facility (MRF) which curtailed improvement in landfill diversion in 2006/07. Whilst recycling and composting increased from 22% to a maximum of 28% in 2005/06, the fire caused recycling and composting performance to drop back to 27% in 2006/07. Section 3 details future service improvements.


Page 10

Figure 2.6 Analysis of Municipal Waste Arising for Devon (Teignbridge, West Devon & South Hams only)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2003/04 2004/05 2005/06 2006/07

Year

MSW

Aris

ings

(Ton

nes

per A

nnum

)


Source: Devon County Council

Generally the trend for the three District Councils shows a strong reuse, recycling and composting performance over the four years. The tonnage to landfill is relatively flat over the same period, which reflects the maturity of the diversion programme and the previous significant investment in infrastructure. Devon as a whole is recognised as one of the leading recycling and composting performers and this is reflected here. Previous investment has led to recycling and composting rates of 49% in 2003/04 increasing to 53% in 2006/07. Section 3 details future service improvements.

2.4 Details of Current Arrangements for Collection and Disposal

2.4.1 Introduction

The following section provides details of the current collection systems provided by each Authority. Each Authority has organized its collection systems depending upon the requirements of the area. All provide Civic Amenity Recycling Centres (CARCs), ‘bring’ banks at strategic points and bulky waste services. They also provide recycling collections although the ranges of materials vary as do the methods of collection and sorting. Each Authority is looking at ways to improve the service to residents to reduce costs and increase the range of materials to achieve greater diversion rates.


Page 11

Currently each Authority relies on landfill disposal for the residual waste collected although planning permission has been granted by DCC for an EfW facility in Exeter which should be operational in 2010. A summary of each Authority’s arrangements for collection is provided below followed by a section on landfill disposal:

2.4.2 Plymouth City Council

Currently Plymouth’s in-house service provides for the collection of residual waste on a weekly basis with mixed recyclables collected every fortnight. A collection of green garden waste is available for 36 weeks of the year to approximately half the City’s residents (to be expanded to cover most of the City in 2009/10). There are two Civic Amenity Recycling Centres in Plymouth receiving a wide range of materials for reuse, recycling, composting or disposal. Plymouth has a network of ‘bring banks’ across the City collecting newspaper and magazines, plastic bottles and food cans, glass bottles and jars as well as textiles. The Authority operates a chargeable bulky waste collection service. A recycling scheme for schools is in operation and recycling has been introduced in Council buildings. It operates a trade waste collection service and will introduce a trade waste recycling service from 2008/09.

2.4.3 Torbay Council

Currently Torbay provides for the collection of residual waste on a weekly basis to approximately one third of the area. Two-thirds of the area receives an alternate weekly collection of residual and recyclable waste. A chargeable collection of green garden waste is available. Torbay has a network of ‘bring banks’ across the City collecting newspaper and magazines, food cans, glass bottles and jars as well as textiles and books. It operates a chargeable bulky waste collection service and a trade waste collection service.

2.4.4 Devon County Council

As a WDA, Devon does not have a duty to collect waste from the household but does provide CARCs. Under the Partnership arrangements, Devon will direct Teignbridge, West Devon and South Hams to deliver residual waste for treatment at the facility in Plymouth.

The County Council has a contract for disposal with Viridor Waste Management Ltd, which runs to 2010 but with options to continue beyond. There are no tonnage obligations restricting diversion from landfill.

Devon has decided to adopt a disaggregated procurement strategy, with multiple treatment facilities located throughout the County. As a part of this strategy, the County has recently granted planning consent for a 50,000 to 60,000 tonne per annum residual waste treatment plant in Exeter. This plant is due to become operational during 2010 and will manage residual waste from the Exeter area. It is anticipated that, due to the location of the proposed Exeter facility, a small proportion (approximately 14%) of residual waste arising in Teignbridge will also be sent for treatment in Exeter. The plant proposed for Exeter will not have any impact on a treatment facility proposal for the Plymouth sub-region.


Page 12

The following information on collection infrastructure relates solely to the systems in place in Teignbridge, West Devon and South Hams together with the CARC sites adjacent to Plymouth.

Teignbridge District Council Collection

Teignbridge District Council offers a comprehensive in-house kerbside recycling service to residents. It comprises an organic wheeled bin collection (food, garden waste and light card) and a fortnightly kerbside sorted, dry recycling box collection, for newspapers, white paper, cans, plastic bottles, glass, mobile phones, printer cartridges and household batteries. Organic and residual collections take place on an alternate weekly basis. Landfill waste is delivered to Viridor Waste Management Ltd at Heathfield, Newton Abbot with organic waste delivered to the Viridor operated In-Vessel Composting (IVC) facility on the same site. The District has a network of bring banks collecting newspapers and magazines, food cans, glass bottles and jars as well as textiles. Street sweepings and specific green waste collections (including Christmas trees) are collected and shredded at Bickley Ball and subsequently composted on farm. Teignbridge also operates a clinical waste and chargeable bulky waste collection service. Recyclables are processed through the Teignbridge bulking facility in Newton Abbot.

West Devon Borough Council Collection

West Devon Borough Council has a contract with FOCSA for refuse and recycling collections. Refuse is collected weekly in black sacks. Recycling is collected weekly and includes glass, newspapers, cans and card via a box scheme. A fortnightly collection of garden waste is offered to four towns/villages. A food waste collection has been successfully trialled in Tavistock and a similar service will be introduced in Okehampton. The District has a network of bring banks collecting newspaper and magazines, food cans, glass bottles and jars and plastic milk bottles as well as textiles. It provides a recycling service for schools and composts leaf falls. A chargeable bulky waste collection service is available to residents.

South Hams District Council Collection

South Hams District Council operates an in-house collection service offering weekly collections of refuse alternating with organic (kitchen waste, garden waste, thick cardboard) in wheeled bins. Recyclables (newspapers, thin card, plastic bottles and cans) are collected fortnightly in sacks. The District has a network of bring banks collecting newspapers and magazines, food cans, glass bottles and jars as well as textiles. A chargeable bulky waste collection service is available to residents and it operates a trade waste collection service.

The three WCAs above are working to assess the merits of a joint waste collections contract.


Page 13

2.4.5 Civic Amenity Recycling Centres (CARCs)

Plymouth City Council

Chelson Meadow has provided access for residents to deposit material from the start of operations in the mid-1960s. In recent years, the site has provided the primary civic amenity (CARC) facility for Plymouth. Facilities are available for residents to recycle a range of materials including some special wastes. The site also enables white and brown goods to be reused. Plans have been developed to upgrade and modernise this site in 2008/09. A second civic amenity site is located at Weston Mill and operates as a satellite to Chelson Meadow. This site was upgraded in January 2007 to improve access and the range of materials for reuse and recycling.

Torbay Council

Torbay has one civic amenity recycling centre located at its waste transfer station at Yalberton in Paignton. The site receives a wide range of materials for reuse, recycling, composting or disposal.

Devon County Council

There are 19 CARC sites in Devon, of which three sites (Tavistock in West Devon and Ivybridge and Kingsbridge in South Hams) are likely to send residual waste to Plymouth for treatment. Residual waste from civic amenity sites in South Hams at Ivybridge, Kingsbridge and Totnes has been disposed of at Plymouth’s Chelson Meadow landfill site up to March 2008. Residual waste from the Tavistock civic amenity centre in West Devon is taken to the Lean Quarry landfill in Cornwall. Residual waste from the Newton Abbott and Buckfastleigh civic amenity sites located in Teignbridge is landfilled at Heathfield.

2.4.6 Recycling and Composting Facilities

The Devon Authorities Waste Reduction and Recycling Committee

Plymouth, Torbay and Devon enjoy a long-standing recycling Partnership through the Devon Authorities Waste Reduction and Recycling Committee (DAWRRC). The DAWRRC helps coordinate recycling and composting activities throughout Devon. Section 3.3.1 provides further details of the important role the DAWRRC plays in supporting recycling and composting.


Page 14


Plymouth City Council began its recycling programme in the mid-1980s with the introduction of a ‘Bring Bank’ scheme, which now extends to 62 locations collecting glass bottles and jars, newspaper and magazines, food cans and plastic bottles and textiles.

The Authority set up a pilot material recovery facility (MRF) in 1994 to evaluate the effectiveness of different recycling schemes. By 1997, the pilot MRF was at capacity and a new MRF was commissioned, becoming operational in April 2000 at the Chelson Meadow landfill site. This enabled the remaining recyclable collections to be phased in across the city by 2001. The MRF sorts newspaper and magazines, mixed paper, cardboard, steel and aluminium cans and various rigid plastic containers.

A green garden waste composting facility operates at Chelson Meadow where green waste from Plymouth and from Tavistock in West Devon is processed. A wood-chipping facility is also located at Chelson Meadow serving the sub-region for the recycling of municipal and commercial waste streams.

Torbay Council

Torbay has a network of 63 recycling sites for bring banks which collect a range of materials including glass bottles and jars, newspaper and magazines, food cans and textiles. It operates the Claylands recycling centre for highways construction waste.

Torbay had its own materials recovery facility (MRF) until a fire destroyed it in March 2007. It currently sends materials to Community Waste in Oxfordshire for sorting until a replacement MRF can be constructed. The collected garden waste is currently open-windrow composted on two local farms.


Recyclable materials captured from Teignbridge, West Devon and South Hams are dealt with in the respective Districts and will not require treatment in Plymouth. The main recyclable materials are bulked up at transfer stations within the Districts for onward shipment to reprocessors. Certain bring bank material is delivered to Plymouth for bulking and transporting to the reprocessor to achieve economies of scale and value for money.

Food waste and green waste from Teignbridge and South Hams districts is taken to an in-vessel composter (IVC) located at the Heathfield landfill site near Newton Abbot. West Devon has recently introduced a food waste only collection with the collected material processed in the commercial Anaerobic Digestion (AD) plant at Holsworthy.

2.4.7 Landfill Disposal

Despite the strong improvement in minimisation, recycling and composting over the last couple of years, the sub-region relies on landfill as the primary means of disposal for residual waste. However, the number of non-hazardous landfill sites in Devon and Cornwall is declining with Chelson Meadow in


Page 15

Plymouth the latest site to close (March 2008). There is consented capacity in the region to 2023, although the number of sites will reduce from seven today to no more than three by 2023.

Landfill in Plymouth

The Chelson Meadow landfill site is situated within Plymouth adjacent to the River Plym estuary. It covers an area of 77 hectares (190 acres) and was a co-disposal landfill. The site can now properly be described as a land-raise rather than a land-fill and closed in March 2008 having failed to secure an IPPC permit. However, in any event, it has virtually reached full capacity. Currently there are no other operational non-hazardous landfill sites within Plymouth. Given this position, the Authority awarded a 7-year contract (with the option to extend for a further 5 years) to Viridor Waste Management Ltd in 2006, to operate a new Refuse Transfer Station at Chelson Meadow and to provide landfill disposal, using void capacity at their Lean Quarry landfill site, a 42 mile round trip from Plymouth. The contract began in March 2008.

Landfill in Torbay

Torbay Council has traditionally relied upon the use of landfill capacity within the Devon county area for the disposal of its residual waste. There are no operational non-hazardous landfill sites in Torbay and it has not identified sites for future development as a landfill. The Heathfield non-hazardous landfill site near Newton Abbot is due to reach capacity in 2016. No other arrangements are in place at the current time. Viridor accepts Torbay’s residual waste under a 6 month rolling contract.

Landfill in Devon

There are currently three biodegradable landfill sites in Devon that have planning consent for a combined capacity to 2020. There is scope, but no certainty, for further extensions to existing sites and the possible development of a new landfill site in South Hams at the New England quarry.

Teignbridge District Council’s residual waste is currently landfilled at the Heathfield near Newton Abbot. West Devon use Devon Waste Management’s transfer station at Crowndale to bulk refuse for landfill disposal at Lean Quarry in Cornwall. South Hams District Council operates a transfer station at Torr Quarry and refuse is disposed of at the Heathfield site. Heathfield and Lean Quarry landfill sites both operate gas recovery programmes producing electricity for the national grid system.

Landfill in Cornwall

Landfill availability for non-hazardous waste in Cornwall is limited. Cornwall County Council has recently awarded a 25-year PFI waste management contract, including landfill disposal, to SITA. There are currently three active waste landfill sites in the County. The site closest to Plymouth is at Lean Quarry and is operated by Viridor Waste Management. The Lean Quarry site is a new site and has an anticipated life of 15 years until 2023. The second site is at Connor Down and has an anticipated life of two years until 2010. The third site is St. Day and has a time limit imposed by planning requirements and will be closed by the end of 2010. The second and third sites are managed by SITA.


Page 16

Hazardous Landfill

There are no landfill sites in Devon, Cornwall or Plymouth licensed to take hazardous waste other than asbestos in defined cells within some non-hazardous landfills. The closest hazardous waste landfill is approximately 150 miles from Plymouth and located in Gloucestershire.

Inert Landfill

There are several inert landfill sites in close proximity to Plymouth. These sites tend to sort and grade inert materials for resale rather than landfilling the material.

2.5 Performance of Existing Services

2.5.1 Recycling and Composting Performance

The following tables indicate how the Authorities have performed against a range of BVPI measures over the period 2003/04 to 2006/07.

Table 2.2 Best Value Performance Indicators (BVPI) for Plymouth’s Waste – 2003/04 to 2006/07

BVPI no. BVPI Description 2003/04 2004/05 2005/06 2006/07

82a % household waste recycled 11.9% 12.3% 16.9% 19.9%

82b % household waste composted 3.4% 3.7% 5.6% 6.9%

Combined 82a and 82b 15.3% 16.0% 22.5% 26.8%

82d % household waste landfilled 83.7% 83.8% 77.7% 73.3%

84 Kg of household waste collected per head of population 527 kg 530 kg 519 kg 520 kg

86 Cost of waste collected per household £50.61 £52.68 £48.93 £47.76

87 Cost of waste disposal of municipal waste per tonne £14.50 £23.54 £28.35 £28.76

89 % people satisfied with cleanliness 50% N/A N/A 58%

90a % people satisfied with household waste collection 79% N/A N/A 75%

90b % people satisfied with recycling 69% N/A N/A 72%

90c % people satisfied with Civic Amenity sites 85% N/A N/A 81%


Page 17

Table 2.3 Best Value Performance Indicators (BVPI) for Torbay’s Waste – 2003/04 to 2006/07

BVPI no. 2003/04 2004/05 2005/06 2006/07

82a % household waste recycled 14.1% 15.3% 18.9% 18.6%

82b % household waste composted 6.6% 6.6% 6.8% 7.6%

Combined 82a and 82b 20.7% 21.9% 25.7% 26.1%



86 Cost of waste collected per household £31.38 £32.91 £35.94 £36.10


89 % people satisfied with cleanliness 51% N/A N/A 52%

90a % people satisfied with household waste collection 81% N/A N/A 78%

90b % people satisfied with recycling 75% N/A N/A 72%


Table 2.4 Best Value Performance Indicators (BVPI) for Devon’s Waste – 2003/04 to 2006/07

BVPI no. 2003/04 2004/05 2005/06 2006/07

82a % household waste recycled 17.7% 21.2% 23.9% 26.2

82b % household waste composted 9.1% 11.5% 16.7% 19.6

Combined 82a and 82b 26.8% 32.7% 40.6% 45.8%



86 Cost of waste collected per household N/A N/A N/A N/A


89 % people satisfied with cleanliness N/A N/A N/A N/A

90a % people satisfied with household waste collection N/A N/A N/A N/A

90b % people satisfied with recycling N/A N/A N/A N/A


The statutory BVPIs for household waste recycling and composting (82a and b) for 2003/04 to 2006/07 indicate that each Authority has made consistent progress to improve performance. The quantity of waste collected per head (BVPI 84) has exhibited some variability but remained relatively consistent over time for each Authority. Overall, each Authority is working consistently to improve recycling and composting and control the quantity of waste collected.


Page 18

The BVPIs also measure public satisfaction with the service. Although there are no statutory targets for the BVPIs, the Government expects that each Authority will aspire to achieve the same performance as the best performing 25% in each indicator. Satisfaction surveys are conducted independently every 3 years. Two surveys have been completed, one in 2003/04 and the second in 2006/07. Satisfaction with the service has generally remained consistent for Plymouth with a slight decline in satisfaction for Torbay. Devon only reports satisfaction with civic amenity sites and this has remained consistent.

This performance reflects the commitment of each Authority to invest in the infrastructure to encourage reuse, recycling and composting. The recycling and composting performance has had a positive knock-on impact on each Authority’s Landfill Allowance Trading Scheme (LATS) position.

The first trading year for the LATS was 2005/06. Currently each Authority has been able to meet its LATS obligations in the first two years of operation using their permit allocations. They anticipate that each have sufficient permits to carry through to 2008/09. Table 2.5 indicates the actual and projected permit surplus from 2005/06 until 2008/09.

Table 2.5 LATS Actual and Projected Permit Surplus 2005/06 to 2008/09

LATS Year Devon Plymouth Torbay

2005/06 33,797(act) 8,891 (act) 3,057 (act)

2006/07 76,967(act) 21,854 (act) 4,665 (act)

2007/08 101,790 29,413 5,364

2008/09 109,828 31,096 2,532

2.5.2 WRAP and Rotate

The Partnership is aware of the support available through the various Defra funded initiatives including the Local Authority Support Unit (LASU). Use has also been made of resources provided by WRAP and ROTATE.

Plymouth City Council and WRAP

LASU provided funding to support an analysis of non-household waste managed by PCC. PCC has submitted bids to WRAP in response to advertised initiatives. In particular, ROTATE has undertaken the following pieces of work for PCC in 2007:

• Review recent waste and recycling service changes and identify any further efficiency improvements;

• consider the feasibility of outsourcing the bulky waste service; and

• review MRF operations and identify improvements.


Page 19

Following these reports PCC has taken the following actions:

• Restructured the residual and recycling rounds for implementation in September 2008 to deliver greater efficiency and improve value for money;

• purchased a new vehicle fleet to deliver greater efficiency and improve value for money;

• increased diversion of bulky waste to reuse through enhanced engagement with third sector organisations; and

• developed a business case to improve the MRF performance.

In addition, PCC has also been in discussions with the Business Resource Efficiency and Waste Programme (BREW) and has recently received a grant of £26,000 to assist businesses recycle their paper and cardboard.

Devon County Council and WRAP

Devon County Council has worked with WRAP on a range of initiatives and has been successful in obtaining WRAP support for the following projects:

• Support from the Local Communication Fund of £160,000 for the award winning “Don’t let Devon go to waste” sort it campaign;

• support from the Local Authority Grant Scheme of £105,600 for enhanced recycling at the Brunel Road CARC; and

• support from the Local Communication Fund of £239,800 for the Devon Composting Partnership Communications Plan.

Future Engagement

The Partnership has been in contact with ROTATE to discuss future developments of the recycling infrastructure.

Details of proposals to improve and develop the services are outlined in Section 3.

2.5.3 Residual Waste Treatment

Historically, each member of the Partnership has relied upon landfill for the disposal of residual waste. Tables 2.6 to 2.9 present summary information on waste treatment for each Authority for the period 2004/5 to 2006/7.


Page 20

Table 2.6 PCC Waste Treatment Information

Year Thermal

Treatment MSW Landfilled Diversion Rate BMW Landfilled Landfill Allowances

Tonnage Tonnage % Tonnage Tonnage

2004/5 Nil 163,320 26 Not calculated N/A

2005/6 Nil 162,447 30 92,862 98,155

2006/7 Nil 156,336 32 79,899 92,862

Table 2.7 TC Waste Treatment Information

Year Thermal




2005/6 Nil 54,091 34 40,424 43,481

2006/7 Nil 54,715 32 39,996 41,604

Table 2.8 DCC Waste Treatment Information

Year Thermal




2005/6 Nil 240,589 42 183,386 217,183

2006/7 Nil 226,189 47 163,929 207,099

Table 2.9 Teignbridge, West Devon and South Hams Combined Waste Treatment Information

Year Thermal




2005/6 Nil 78,788 46 41,520 79,043

2006/7 Nil 74,066 51 36,425 75,374


Page 21

2.6 Waste Composition

2.6.1 Summary of Available Composition Data

Each of the composition studies shown below has been conducted using slightly different categories. The following charts have therefore been adjusted to provide comparable data between each of the Authorities using the lowest common denominator. This means that there has been a loss of detail for some material streams. To provide an indication of the Partnership composition, each of the individual compositions has been combined.

In addition, PCC has commissioned a compositional analysis on non-household waste and the composition of this is also included.

The compositional analysis for household collections has been updated in 2007 with the completion of four quarterly surveys. The final survey results have not yet been compiled for inclusion.

2.6.2 Plymouth Compositional Data

The following compositional data is based on an analysis of Plymouth’s waste conducted by Entec UK in 2006.

Figure 2.7 Plymouth Percentage Household Waste Composition Analysis 2006

26

3110

13

10

64

Paper & CardPutresciblePlasticsMiscGlassMetalTextiles


Page 22

2.6.3 Torbay Compositional Data

Torbay conducted a compositional analysis of its household waste in 2003. A new compositional analysis undertaken over four quarters in 2007 is currently being compiled along with other councils in Devon. The results of the 2003 analysis are shown in Figure 2.8.

Figure 2.8 Torbay Percentage Household Waste Composition 2003

44

27

12

5

64 2



Page 23

2.6.4 Devon Compositional Data

Devon has undertaken considerable waste analyses in partnership with the Districts, some of which are on-going. Teignbridge, West Devon and South Hams will have complete sets of data collected over 2006-07 covering four seasons to the end of 2007. In the meantime, the chart below has been produced from data extracted from an M.E.L. Report dated 2002/03 and relates to household waste.

Figure 2.9 Devon Percentage Household Waste Composition 2003

30.5

34.5

11.7

9

73.9 3.4



Page 24

2.6.5 Combined Compositional Data

Figure 2.10 shows the combined compositional analysis based on the three figures provided above for household waste. The categories have been reduced and combined to produce the composite chart.

Figure 2.10 Combined Composition Analysis for Devon, Torbay and Plymouth

33.5

30.8

11.2

9

7.74.6 3.1



Page 25

2.6.6 Non-Household Waste Composition

Little compositional analysis has been undertaken of non-household waste streams such as municipal buildings and trade waste operations. However, the following analysis of non-household waste was undertaken in Plymouth in November 2005. The non-household waste sampled was from the main Council office and a selection of retail, catering and office businesses.

Figure 2.11 Non-household Compositional Analysis

45%

31%

13%

4%2%

1%

1%1%2%

1%

Paper & cardOrganic non-cateringPlasticGlassMiscMetalOrganic cateringTextilesWEEE / HazardousFines

As with the household composition, the three significant components of the composition are paper and card, organic / putrescible and plastics.


Page 26

2.7 Contracts Plymouth, Torbay and Devon enjoy a long-standing recycling partnership through the Devon Authorities Waste Reduction and Recycling Committee (DAWRRC). The DAWRRC negotiates joint contracts for the main recyclable materials and some joint transportation contracts. This arrangement enables the partners to maximise income and reduce costs through economies of scale. Table 2.10 lists the current DAWRRC contracts.

Table 2.10 List of DAWRRC Contracts

Contract Contractor Contract Length Termination Date

Newspaper and Magazines Aylesford Newsprint 10 years 30th June 2013

Glass Represco 2 year with option to extend for 2 years Re-tendering for 1st October 2008 start.

Textiles Wilcox 3 years 31st March 2009

Transport of newspaper Gregory’s Distribution 2 year with option to extend for 2 years 1st November 2008 to 1st November 2010

Transport of glass Parsons Nationwide Distribution

2 year with option to extend for 2 years 1st November 2008 to 1st November 2010

Torbay operates the waste collection service in-house using the Direct Services and Waste Department through a service level agreement. The Authority has a six-month rolling agreement with Viridor Waste Management Ltd for the landfilling of residual waste at Heathfield. This landfill contract does not prevent Torbay from entering into a sub-regional residual treatment contract.

Plymouth operates the waste collection service in-house using the Waste and Street Services Department. It also operates the Materials Recovery Facility (MRF), main CARC and landfill facilities. The smaller CARC is operated under contract. There are arrangements for private sector companies to compost green waste, chip wood, recycle fridges and freezers and remove WEEE. Material and transport contracts are in place through DAWRRC for recyclate from the MRF. There is also a contract with a private sector company to produce electricity from the landfill gas.

The Authority has signed a contract with Viridor Waste Management Ltd to operate a Refuse Transfer Station, bulk residual waste and transport to Viridor’s landfill site at Lean Quarry near Liskeard in Cornwall. This contract runs for seven years from March 2008 and can be extended in up to two increments, making a maximum contract of twelve years. There are no tonnage guarantees or restrictions in this contract that would prevent the Authority from entering a sub-regional waste treatment contract.

PCC, TC and DCC, including the District Councils of Teignbridge, West Devon and South Hams have the following contract commitments.


Page 27

Table 2.11 Current Contract Position for PCC, TC, DCC and Three District Councils

Contract Plymouth City Council Torbay Council Devon County Council

Contractor Viridor Waste Management Viridor Waste Management Viridor Waste Management Contract length 7 years with 5 year option from

March 2008 Since 1998

Landfill

Termination date March 2015 6 month rolling arrangement

Ongoing, terminated by 2 year notice by either party

Contractor Electrolink Electrolink Contract length Annual agreement WEEE contract currently

under negotiation (April 2008)

2 year with 2 year option to extend WEEE

Termination date Ongoing 2009-2011 Contractor (Weston Mill)

Lee Hellings In-house operation of CARC

Viridor Waste Management, subcontracted to Devon Waste Management (DWM)

Contract length 2 years 8 years

CARC’s

Termination date July 2009 March 2012 Contractor Second time around Contract length Subject to review on

performance

Chelson Meadow Reuse

Termination date Ongoing Contractor Ecological Science Wildwoods Farm, Marldon Viridor Waste Management

subcontracted to DWM, Ecosci and Greencrop Ltd

Contract length Ongoing 2001-2003

Open-Windrow Composting

Termination date Subject to possible renewal in 2008/09

1 year rolling arrangement

Contractor Wood-Yew-Waste Included in recycling centre contracts

Contract length Ongoing

Wood Recycling

Termination date Subject to possible renewal in 2008/09

Contractor Viridor Waste Management subcontracted to DWM

Contract length 8 years

Rural Skips

Termination date March 2012 Contractor CLP Envirogas Contract length Started in 1997

Landfill Gas Recovery

Termination date Ongoing until landfill gas recovery becomes uneconomic

Contractor RPB Autos Olympus Recovery Sims Metals Contract length 5 years 2007 Ongoing

Abandoned Vehicles

Termination date 31st December 2012 March 2009, option for extension

Ongoing

Contractor H & A Waste Services Viridor Waste Management Viridor Waste Management and Peake GB

Contract length Ongoing on a as required basis Since 1999

Clinical waste collection / disposal

Termination date Subject to revision in 2009/10 Ongoing Contractor West Devon, FOCSA Contract length 7 years

Waste Collections

Termination date 2010 Contract Length 2 years Leachate

Haulage from closed sites

Termination date March 2009


Page 28


Page 29

3. Strategic Waste Management Objectives

3.1 Introduction Plymouth City Council, Torbay Council and Devon County Council have each produced separate Municipal Waste Management Strategies (MWMS): Plymouth in 2007, Torbay in 2008 and Devon in 2005. A Joint Municipal Waste Management Statement (JMWMS) has been produced which links the three strategies with the WSE2007 and the South West Regional Assembly Waste Management Strategy. The JMWMS also links the three strategies into the joint waste management options considered for the joint procurement. The JMWMS is attached as Appendix 3D, and electronic copies of each Authority’s MWMS and supporting documents are attached as Appendix 3A to 3C. Appropriate web-links are provided to access documents on each Authority’s website.

The following sections describe each Authority’s initiatives to minimise waste, enhance recycling and composting and divert waste from landfill. The Devon Authorities have a strong track record of partnership working under the Devon Authorities Waste Reduction and Recycling Committee (DAWRRC), which has focused on reduction, recycling and composting initiatives across the County. The role of DAWRRC is described below.

Each Authority considered at least six waste management options as part of the development of their own MWMS. These options are outlined below together with the six options evaluated for the Partnership. This section only discusses the options briefly as they are considered in greater detail in section 4.

This section discusses the environmental assessments carried out by each Authority on their own MWMS. PCC and TC conducted Strategic Environmental Assessments (SEAs) whilst DCC conducted a Best Practicable Environmental Options appraisal. The Partnership options were evaluated using the Environment Agency’s WRATE assessment tool and Section 4 discusses this assessment in more detail.

Finally, this section details the environmental National Indicators proposed for inclusion in the Authorities’ Local Area Agreements.

3.2 Municipal Waste Management Strategy (MWMS) Each Authority has developed an individual Municipal Waste Management Strategy (MWMS) although none has been produced in isolation. Each has worked with their neighbours and other key stakeholders to ensure that there is consistency between the national, regional and neighbouring waste management policies by employing an iterative approach to policy development. Each also recognised the need for joint working within their respective waste strategies and included reference to this as the following extracts testify:


Page 30

Plymouth City Council’s adopted strategy is supportive of a joint solution and states:

“….. the Council recognises that significant advantages could be gained through collaborative working between Plymouth and its neighbouring authorities in a sub-regional solution.” 2

Torbay similarly recognises the need for effective joint working. Torbay’s Headline Strategy 2008 states:

“Torbay will enter into Partnership with Devon County Council and Plymouth City Council to jointly procure a sub-regional energy from waste facility”. 3

The Devon strategy 2005 states:

“This document focuses primarily on the management of municipal waste within ….. Devon but both Torbay and Plymouth City are partners in the development of this particular document, as it is recognised that all the local authorities need to work together across administrative boundaries.” 4

Each of the three strategies involved considerable consultation with key stakeholders including the Environment Agency, Government Office South West, Regional Assembly, adjacent local authorities, local communities and councillors.

Each Authority has identified a need to divert significant tonnages of biodegradable waste from landfill to comply with their Landfill Allowance Trading Scheme (LATS) obligations. At present, landfill is the only means of residual waste disposal for municipal and commercial waste in the sub-region and this resource is diminishing. Plymouth City Council and Torbay Council are projecting to exceed their original LATS allocations from 2009/10 and Devon County Council from 2012/13. The limited landfill void capacity in Devon and Cornwall is seen as a key local driver with regard to waste policy.

Each strategy endorses the waste hierarchy and this is manifest in the initiatives outlined below. As explained is section 2, there has already been considerable investment in recycling and composting initiatives within the Partnership in line with the waste hierarchy. Details of further investment in recycling and composting are provided in section 3.4 whilst waste minimisation initiatives across the area are described in section 3.3.

A site within Plymouth, or close to it, is considered to be the optimal location for a municipal waste treatment facility to treat non-recyclable waste arising from the sub-region of Plymouth and Torbay plus the Teignbridge, West Devon and South Hams Districts of Devon. A sub-regional solution has been recognised in the South West Regional Waste Management Strategy. Such a facility could serve over 500,000 people who are currently resident in the Plymouth, Teignbridge, West Devon, South Hams and

2 Municipal Waste Management Strategy 2007 – 2030, PCC MWMS Headline Strategy, Final Report, April 2007, Plymouth City Council, p22. 3 Municipal Waste Management Strategy for Torbay 2008-2025, Headline Strategy, February 2008, Executive Summary ‘A phased approach to waste management’ 4 Municipal Waste Management Strategy for Devon, Devon County Council, Exeter, March 2005, p6 para 1.5.2


Page 31

Torbay areas and whose Councils were responsible for collecting, recycling, composting and disposing of over 320,000 tonnes of municipal waste in 2006/07.

Plymouth, Torbay and Devon Councils have for some time considered how the municipal waste disposal needs of the sub-region centred on Plymouth can best be met. The Authorities recognise the significant benefits which could arise from a single shared residual waste treatment solution, including:

• Economies of scale;

• increased purchasing power;

• reduced environmental impact;

• enhance carbon management;

• sharing of information, knowledge and procurement costs;

• larger project enhancing market appetite in a competitive environment, and

• optimisation of use of limited available sites.

The sub-region faces some important key issues with respect to waste management, which also have knock-on effects for the economic welfare of the area. These issues are seen as:

• Affordability of waste management;

• diminishing landfill void capacity in sub-region;

• no commercial landfill within 22 mile radius of Plymouth from April 2008;

• LATS permit shortfall for each Authority from 2009/10 onwards;

• little reprocessing capacity in the south west resulting in high carbon footprint;

• lack of commercial waste companies offering recycling services to businesses; and

• demographic, second home and tourism impacts.

These issues are captured in the Joint Municipal Waste Management Statement (JMWMS) attached in Appendix 3D. The JMWMS sets out how a common procurement for South West Devon relates to the national, regional and local waste strategies and targets. The JMWMS also considers how a common procurement will enhance the Partnership’s ability to manage waste efficiently in the south west region of Devon.

In summary, the JMWMS shows that the individual waste strategies support the recycling / composting performance as set out in this section and the procurement of a sub-regional facility to manage the residual waste. Investment in recycling and composting infrastructure will be maintained and enhanced as detailed in this section to achieve the specified performance.


Page 32

3.3 Waste Minimisation

3.3.1 Introduction to Waste Minimisation

There is an extensive range of waste minimisation initiatives adopted by the Authorities, many of them sponsored through the DAWRRC. Each Authority believes that waste minimisation will play an increasing role in delivering the future waste management objectives outlined in the JMWMS. Devon County Council has taken the lead with their innovative and award winning ‘Don’t let Devon go to waste’ campaign, which continues to be supported and run across Devon and will be featured in the 2008 LARAC Conference. Each Authority has employed officers with responsibility to promote waste minimisation within their communities.

3.3.2 Devon Authorities’ Waste Reduction and Recycling Committee (DAWRRC)

In 1992, DCC were instrumental in setting up the Devon Authorities Joint Recycling Committee which held its own budget and had powers to introduce recycling initiatives across the County.

This committee was subsequently updated as the Devon Authorities Waste Reduction and Recycling Committee (DAWRRC) following the establishment of Unitary Authorities in Plymouth and Torbay in 1998. DAWRRC has played an important role in establishing links with a range of community projects and providing financial support to deliver key initiatives as well as aligning with the increasingly important waste minimisation work undertaken by the Committee. Community enterprises such as the nationally respected Devon Community Composting Network and Devon Community Furniture Forum have played important waste minimisation roles within the County. DAWRRC has also been instrumental in developing schools education programmes and utilise professional theatre groups such as Mo Mo to take the 3Rs message into schools.

DAWRRC negotiates contracts for the sale of recyclables such as newspaper and magazines. The DAWRRC is able to deliver economies of scale and was instrumental in stabilising the price received for paper at a time of great price volatility and thus minimising recycling cost for the members. DAWRRC now organises a range of contracts on behalf of its members as shown previously in section 2.7.

The DAWRRC is the mechanism that has enabled each Authority to work steadfastly together towards a common objective of moving waste management up the waste hierarchy through the promotion of reduce, reuse and recycle across Devon. The shared DAWRRC budget for the 2008/09 work programme is £160,000. This represents a significant financial commitment from the Devon Authorities and does not include the cost of officer and member time to deliver the work programme.


Page 33

3.3.3 Waste Minimisation in Plymouth

Plymouth City Council works with the DAWRRC to promote key minimisation messages and employs dedicated officers promoting waste minimisation and recycling. This is a core part of delivering sustainable waste management for the City and will continue into the future. The Council has recently or is currently implementing a number of initiatives aimed at reducing the amount of waste produced, including:

• A specialised roadshow vehicle, which is available to attend community events, schools and shopping precincts;

• targeting the abuse of CARCs by commercial users and non-residents. For example, the introduction of a van ban and permit system across all CARCs, designed to control unauthorised usage and a vehicle registration number recognition system at the Weston Mill CARC;

• the extension of containerisation for residual waste to replace black sack collections;

• upgrading and re-branding bring banks and introducing new sites;

• setting up of an enforcement team to control fly-tipping and side waste issues and implement provisions under the Clean Neighbourhood and Environment Act;

• promoting use of real nappies;

• charging for bulky waste collections;

• promoting the increased use of community furniture and white good re-use outlets;

• promoting home composting with subsidised compost bins and promoting sustainable living;

• introducing a recycling service for trade waste customers; and

• implementing a composting scheme in selected schools.

3.3.4 Waste Minimisation in Torbay

Torbay works within a number of partnerships, including the DAWRRC, to encourage waste minimisation, and has the following in place:

• Operation of an alternate weekly collection scheme to 64% of residents;

• working with the Devon Real Nappies Group to promote the use of reusable nappies;

• promotion of home composting in conjunction with West Country Worms;

• encouraging the reuse of furniture and white goods through local outlets such as Refurnish and MASH (Mutual Aid and Self Help); and

• engaging with schools and local groups to promote the ‘reduce, reuse, recycle’ message.


Page 34

3.3.5 Waste Minimisation in Devon

There are a number of waste reduction initiatives promoted throughout Devon under the banner of “Don’t let Devon go to waste”. This began as a waste awareness campaign in 2003 funded by Defra to the tune of £1.1million. The campaign work includes TV, radio, bus back, advertorials, roadshows and promotional work and has been instrumental in raising the recycling rate from 26% in 2003/4 to 45.8% in 2006/07. In addition to yearly funding provided by the County Council (circa £250-350,000) all District Councils and the Unitary Councils contribute to county-wide campaigns using funding allocated to the DAWRRC. Campaigns range from home composting, and real nappy promotion to reduced packaging and re-use initiatives. The current campaign endorses and supports the WRAP strap line of ‘Love Food, Hate Waste’.

South Hams District Council, Teignbridge District Council and West Devon Borough Council are represented on the DAWRCC and therefore contribute to and participate in waste minimisation initiatives driven by the DAWRRC. The Authorities also offer waste education to schools and community groups, which promotes the reduce, reuse and recycle ethic.

3.3.6 Waste Minimisation Targets

The WSE2007 sets a target of reducing household waste not recycled or composted to 225kg per head by 2020. Table 3.1 presents the population and household waste arisings data relevant to the WSE2007 target.

Table 3.1 Partnership Modelled Waste Minimisation Performance Compared to WSE2007 Targets

WSE2007 Waste Minimisation Calculation Authority

2000/01 2009/10 2014/15 2019/20

SWDWP Population5 623,000 655,900 675,100 695,900

SWDWP Total Household Waste (tonnes) 271,363 353,595 375,835 394,885

SWDWP Household Waste Recycled & Composted 64,496 147,418 183,999 202,648

SWDWP kg household waste not recycled or composted per person 332 314 284 276

WSE2007 Target (kg of household waste not reused, recycled or composted) 450 310 270 225

5 Source: The Office for national Statistics (ONS): 2004 (revised 2007) Sub-national Population Projections


Page 35

New National Indicators (NIs) have been introduced from April 2008. NI 191 deals with minimisation, although there is no statutory national target and local targets are in the process of development and ratification by GOSW.

3.4 Recycling and Composting

3.4.1 Introduction to Recycling and Composting

The projected performance of each Authority against the WSE2007 targets for recycling are set out in table 3.2. The recycling and composting performance quoted derive from the new modelling undertaken in January 2008 by Entec UK Ltd. The modelling considered the performance of the Partnership as well as the relative performance of each partner. The Devon results represent the combined performance of South Hams, Teignbridge and West Devon Councils as a Devon sub-region rather than the whole County.

Table 3.2 Partnership Modelled Recycling Performance Compared to WSE2007 Targets

Household Waste Recycling and Composting Rate Authority

2009/10 2014/15 2019/20

Plymouth 29% 39% 43%

Torbay 31% 46% 51%

Devon (sub-region) 58% 59% 60%

SWDWP Partnership Rate 42% 49% 51%

WSE 2007 40% 45% 50%

The above table indicates that the Partnership will exceed the WSE 2007 targets based on continuation of existing arrangements and the delivery of the Reference Project which includes a range of additional recycling initiatives to be undertaken by the partner Authorities. Investment in infrastructure by South Hams, Teignbridge and West Devon has already resulted in high recycling and composting performance and Plymouth has significantly increased its performance in the last four years as detailed in section 2.5. However, the modelling for the Reference Project indicates that additional investment is required for the Partnership if future targets are to be achieved.

3.4.2 Recycling and Composting in Plymouth

Plymouth City Council has invested in comprehensive recycling collections for residents supported by recycling banks located at key sites. Future investment in services includes the expansion of the garden waste scheme to most households and improvements to the doorstep recycling collection to include


Page 36

textiles and glass bottles and jars. It has already invested in upgrading its smaller CARC and will upgrade its main CARC site in 2008/09.

3.4.3 Recycling and Composting in Torbay

Torbay Council has invested in comprehensive recycling collections for residents supported by recycling banks located at key sites. Torbay is currently developing their MWMS action plan to implement the key components of the recently adopted strategy. This includes investment in a new CARC and a Material Recovery Facility (MRF), extending kerbside collection services for dry recyclables, collection of food waste, extending the garden waste bring sites and collecting paper and card from businesses for recycling.

3.4.4 Recycling and Composting in Devon

Devon County Council has invested in a comprehensive range of recycling facilities at their Civic Amenity Recycling Centres (CARCs). A programme to upgrade and modernise the CARCs is underway to make them easier to use and safer for the public. In particular a new recycling centre is sought to serve the Ivybridge area,

It has built two in-vessel composting facilities and has just let a design and build contract for a third which will come on-stream during winter 2008. A merchant anaerobic digestion plant is utilised for food waste from West Devon and an additional AD plant will be needed to service the East Devon food waste collection scheme.

Devon is investing in an EfW facility for Exeter and has obtained planning consent for a new plant to be built on the site of the old Exeter incinerator which closed in 1998. A feasibility study has been conducted into an EfW facility in Barnstaple. A treatment facility in Plymouth would complete Devon County Council’s requirements for treatment capacity within the County.

It also has a programme for increasing recycling within their offices and buildings. This initiative is backed under the ‘Don’t Let Devon go to Waste at Work’ campaign. Considerable effort is also put into the schools education programme to teach pupils to adopt sustainable lifestyles.

3.4.5 Future Initiative Programme

As stated above, the modelling has indicated that each partnering Authority has to invest further in additional initiatives to divert more material for reuse, recycling and composting to meet WSE2007 targets. This also serves to minimise residual waste requiring treatment.

Table 3.3 shows the timeframe for introducing the main service enhancements for each Authority together with the impact on recycling / composting performance and indicative costs.


Page 37

Table 3.3 Timeframe for Future Key Infrastructure for Each Authority

Costs Council Activity When

Capex / Set-up Costs

Opex

Performance

Increase (%)

Trade Waste Recycling 2008/09 Cost neutral

Cost neutral No impact on BVPI

CARC upgrade 2008/09 £1.2m Nil 1.5%

MRF Upgrade 2009/10 £0.9m Nil 1.5%

Garden waste expansion 2009/10 £0.05m £0.33m 2.0%

Glass kerbside collection

Textile kerbside collection

2011/12 £0.17m £0.62m 4.0%


Increase in recycling participation and awareness

2007/08 to 2019/20 Nil £0.08m 6.0%

Expansion of twin bin scheme 2008/09 to 2010/11 £0.31m £0.19m 3.5%

Food waste collection 2011/12 £0.54m £0.42m 8.9%

CARC upgrade 2011/12 £1.5m Cost neutral Increase CARC rate from 46.0% to 54.4%, increasing to 65% by 2019

BVPI improved by 5.6%

Torbay Council

Increase in recycling participation and awareness

2007/08 to 2019/20 Nil Nil 5.0%

Ivybridge CARC replacement 2011-12 £2.0m

Dawlish CARC replacement 2012-14 £1.0m

Woods Farm CARC replacement (East Devon)

2013-15 £1.0m

East of Exeter CARC 2007-10 £3.0m


CARC Improvements Ongoing £0.1m

Continue food waste collection Tavistock

2008/09 1%

Start food waste collection Okehampton

2008-09

£55k £0.05m

1%

Additional garden waste bring sites

2008-09 £0 £0 2%

West Devon Borough Council

New waste collection contract 2010 + N/K £200K pa 5-10%


Page 38

3.4.6 Trade Waste Recycling

The decline in landfill void capacity and closure of the Chelson Meadow landfill in Plymouth has waste management ramifications for the commercial sector in the wider sub-region. Currently, the closest landfill to Plymouth is twenty-two miles away. Businesses in and around Plymouth will face increased costs of managing their waste. A few local small-scale commercial waste management companies offer selected recycling for businesses. Larger national waste companies are separating out commercial and industrial waste they collect at their Refuse Transfer Station or commercial Materials Recovery Facility in order to comply with the Waste Acceptance Criteria requirements. However, there is little collection of recyclables from business premises.

Plymouth City Council is introducing a collection of paper and cardboard to their trade waste customers from April 2008. This service will be phased in over one year and it is estimated that the service will divert 4,500 tonnes from landfill. It is also anticipated that other materials will be added once the paper and card collection is established.

Torbay Council has a duty to collect commercial waste when requested to do so and charges for this service. The MWMS for Torbay recognises an increasing trend in requests for collection of recyclables from commercial customers and states that Torbay will look to provide such services where it is economically viable to do so. The Strategy identifies that collection of paper and card for recycling from commercial waste customers would increase the proportion of biodegradable waste diverted from landfill, ensuring that waste is managed in a more sustainable way. Options for commercial waste recycling will be explored in more detail during preparation of the forthcoming Waste Action Plan.

Devon County Council operates a scheme whereby traders may bring cardboard and garden waste to HWRCs for recycling. A charge is levied for this service which is set at a lower level than that for conventional landfill disposal.

Trade waste collections are the responsibility of the waste collection authorities. The DCC has agreed with the Districts that it may pass on LATS costs in respect of trade waste, should there be a county-wide LATS deficit. This agreement allows the District Councils to reduce their liability by recycling trade waste. In the Partnership area, trade waste is currently only collected by South Hams District Council and it is investigating ways in which trade waste may be incorporated into the existing domestic waste recycling scheme.

3.5 Landfill Objectives

3.5.1 South West Devon Waste Partnership Joint Municipal Waste Management Strategy

As described in section 2.4, the number of non-hazardous landfill sites in Devon and Cornwall is declining with Chelson Meadow in Plymouth the latest site to close in March 2008. Although there is consented capacity in the region to 2023, the number of sites will reduce from seven in 2008 to no more than three by 2023. There is scope for further extensions to existing sites and the development of a new landfill site in South Hams at Lee Mill.


Page 39

The JMWMS accepts that there will be a long-term need for landfill disposal of MSW. However, the strategy minimises the quantity of waste to landfill in future years. The treatment technology identified through the options appraisal will remove the biodegradability of the treated waste and minimize the tonnage of waste to non-hazardous landfill. There will be some collected waste that will require non-hazardous landfill as it is not suitable for treatment, such as street sweepings. The projected tonnage to landfill is detailed in section 4 and Appendix 4A. The availability of cost-effective treatments for such waste streams will be monitored to reduce the future landfill requirement and conserve existing capacity.

There are several landfill facilities for inert waste within close proximity to Plymouth. In the short term, inert material arising locally to Plymouth will be used to achieve final profiles and capping at the Chelson Meadow landfill site. After that, inert material will be processed for resale at one of the adjacent inert sites.

There will be a need for some waste to be landfilled at a hazardous waste landfill in the short-term. In the longer-term, the availability of cost-effective treatments for such waste streams will be monitored to reduce the future landfill requirement and conserve existing capacity.

3.5.2 Strategic Landfill Diversion Objectives

The procurement of a waste treatment facility in Plymouth is seen as an essential requirement to reduce dependency on landfill in the future. The previous section details recycling and composting initiatives that each Authority will introduce to reduce landfill dependency at least environmental and economic cost. Despite these important initiatives, there will still be circa 40% of residual waste needing to be treated to fully mitigate each Authority’s LATS position.

The modelling undertaken by Entec UK Ltd and summarised in section 4, clearly indicates the need for a treatment facility. The Partnership options appraisal identifies an EfW facility as the preferred option. Modelling of an EfW facility for the South West Devon Partnership indicates that this option will allow each Authority to meet its LATS obligations and be self-sufficient in permits post 2014.

As part of the wider county agenda to reduce landfill dependency, DCC recently granted planning consent for a residual waste treatment facility in Exeter, which will be commissioned in 2010. The Exeter facility is currently the only residual waste facility with planning permission in Devon.

However, in Cornwall SITA is currently engaged in securing planning permission for an EfW plant. This plant will serve the needs of Cornish residents and will help to reduce landfill dependency once the facility is commissioned in 2010.


Page 40

3.6 Appraisal of Technology Options for Residual Waste Treatment

In developing individual waste management strategies, each Authority considered a number of options. The options were appraised at the regional and local level to narrow the choice to suit the needs of the local community. Table 3.4 presents the residual waste treatment options that were evaluated in each of the individual waste strategies.

Table 3.4 Options Evaluated by each Authority as part of their Individual MWMS

Option evaluated Plymouth Torbay Devon Preferred option

Landfill based strategy, LATS purchase or continue ‘as is’

Use of advanced thermal treatment such as pyrolysis, gasification and / or autoclaving Devon

Thermal treatment using Energy from Waste technology (EfW) Devon & Plymouth

Mechanical Biological Treatment (MBT) with In-Vessel Composting (IVC) and Refuse Derived Fuel (RDF) / EfW

Mechanical Biological Treatment (MBT) with Anaerobic Digestion (AD)

Mechanical Biological Treatment (MBT) with Anaerobic Digestion (AD) and Refuse Derived Fuel (RDF) / EfW

Mechanical Biological Treatment (MBT) with In-Vessel Composting (IVC) and landfill of residue.

Mechanical Biological Treatment (MBT) with Anaerobic Digestion (AD) and landfill of residue.

Sub-Regional EfW treatment Torbay

Each authority produced detailed analyses of at least six options covering a range of possible solutions. Each identified a slightly different preferred option although all agreed there was a need for thermal treatment of the residual waste.

Further options appraisals and modelling has been commissioned by the Partnership. The appraisal was carried out by Entec UK Ltd on the following six options with respect to formulating a sub-regional solution:


Page 41

Table 3.5 Partnership Options Appraisal as part of Joint Strategy

Option Evaluated Partnership Options Preferred Option

Landfill based strategy, LATS purchase or continue ‘as is’ Devon, Torbay, Plymouth acting independently

Procurement of individual EfW treatment technologies Devon, Torbay, Plymouth acting independently

Sub-Regional Energy from Waste (EfW) facility in Plymouth Devon, Torbay, Plymouth as joint Partnership procurement

Sub-Regional Energy from Waste (EfW) facility plus Anaerobic Digestor (AD) in Plymouth

Devon, Torbay, Plymouth as joint Partnership procurement

Mechanical Biological Treatment (MBT) with Anaerobic Digestion (AD) and EfW in Plymouth


Mechanical Biological Treatment (MBT) with Anaerobic Digestion (AD) in Plymouth and Refuse Derived Fuel (RDF) sent to Runcorn, Cheshire


The results of the options appraisal indicated that the third option: the sub-regional EfW facility in Plymouth was the preferred joint option.

3.7 Sustainability and Environmental Impact

3.7.1 The South West Devon Waste Partnership Approach

The SWDWP intend to incorporate and build on recommended and established sustainability assessment processes such as the Environment Agency’s WRATE software and the Carbon Trust’s Local Authority Carbon Management Programme (which is shared by the three local authorities). As a consequence, a consistent approach to the strategic assessment of sustainability and environmental impacts of potential solutions will be sought. A WRATE assessment has been conducted by the Partnership in the appraisal of waste solutions and is detailed in section 4. It is anticipated that additional modelling of environmental impacts will be undertaken when bids are received from the private sector. Future work on options appraisals and bid evaluation will be tailored to ensure continuity with the approaches recommended in the Options Appraisal Guidance (April 08) and any subsequent proposals to align carbon emission and waste management accounting.


Page 42

3.7.2 Plymouth City Council

Plymouth City Council conducted a strategic environmental assessment / sustainability appraisal (SEA/SA) whilst developing the Municipal Waste Management Strategy. The SEA/SA evaluated the proposed options across a range of seventeen environmental and socio-economic indicators including landscape and biodiversity, pollution, climate change, resources, energy, waste, economy, work and incomes, health and well-being, local distinctiveness and transport and access.

The SEA/SA analysed each of the options and, as far as practicable given the available data, concluded:

“…. The SEA/SA recognises that all scenarios presented in the Strategic Options Evaluation Report are likely to offer benefits and impacts to sustainability.”6

and further:

“The eventual choice of Disposal Option is not clear cut, with Options …….. each associated with both sustainability benefits and potential negative sustainability effects.”7

Given the parameters and assumptions at that time, the SEA/SA favoured the Mechanical Biological Treatment (MBT) options in slight preference to the EfW options. None of the options appraised had a significant advantage across the evaluation criteria. However, the SEA/SA categorically states in its conclusion about PCC continuing with a landfill based policy:

“….continuation of current landfilling of waste, significantly contradicts a number of sustainability objectives. Therefore, the SEA/SA recommends that this waste management option is disregarded.”8

With regard to climate change, the SEA/SA indicates that the adopted MWMS of optimised recycling with EfW performs much better than continuing with landfill but slightly less well against MBT with AD.

3.7.3 Torbay Council

Protecting the environment, and in particular reducing the effects of waste management on climate change, is one of the 10 headline objectives within Torbay’s MWMS. A strategic environmental assessment (SEA) of the Torbay MWMS was carried out to evaluate the likely effects on aspects such as biodiversity, natural resources, climate, air, soil, water, landscape, heritage and public health and amenity. The scope of the SEA also incorporated some additional social and economic criteria, relating to issues such as access to services and supporting economic regeneration. The objectives, policies, waste minimisation proposals, recycling options and residual waste treatment options within the draft MWMS were all appraised using the SEA framework.

6 PCC MWMS SEA/SA Report Section 4.46 page 80 April 2007 7 PCC MWMS SEA/SA Report Section 4.47 page 80 April 2007 8 PCC MWMS SEA/SA Report Section 4.46 page 80 April 2007


Page 43

The SEA was informed by the results of options appraisal work carried out for Torbay Council by RPS consultants, which involved detailed modelling of the environmental, economic and technical performance of waste management options, including life cycle analysis of environmental impacts using the WRATE tool. The SEA Environmental Report was published for public consultation alongside the draft MWMS in November 2007. A SEA Statement was produced to accompany the adopted MWMS in February 2008, explaining how the findings and recommendations from the SEA had been incorporated into the finalised adopted MWMS.

The results of the SEA suggested that implementation of the Torbay MWMS is likely to have a number of positive environmental effects compared to a ‘business as usual’ approach where Torbay continues with its existing collection, recycling and disposal arrangements. The main environmental benefits are a reduction in greenhouse gas emissions and use of natural resources, through waste minimisation, increased recycling and the diversion of biodegradable waste from landfill. Uncertain and potentially negative effects identified in the SEA were mostly site specific issues which can be addressed through mitigation measures at the site allocation and design stages of waste planning. The SEA did highlight that the impact on climate change could be further reduced by maximising energy recovery from waste through the use of CHP. It also recommended that further assessment of transport impacts should be carried out as part of the development of a joint sub-regional treatment solution.

3.7.4 Devon County Council

The Devon County Council MWMS pre-dates the requirement for a SEA but a Best Practicable Environmental Option (BPEO) analysis was undertaken. The analysis tool used was the Environment Agency’s WISARD (Waste Integrated Systems Assessment for Recovery & Disposal), which was the industry standard assessment tool at that time. The BPEO evaluated the options against three main criteria including:

• Environmental;

• socio-economic; and

• operational.

Climate change was a factor assessed in the environmental category along with acidification, resource use, ozone formation and human toxicity.

The resulting analysis indicated that the EfW options ranked as the best performing across the range of parameters assessed. The MBT options, including AD, were the worst performing options, even ranking below continuing to landfill.

3.7.5 WRATE

As part of the Partnership arrangements, a WRATE analysis has been undertaken on the joint options taken forward by the Partnership. Section 4.5.5 provides details of the WRATE analysis and updates the work discussed above for each individual Authority.


Page 44

3.7.6 Local Area Agreement (LAA) Environmental Indicators

Devon has a particularly important natural environment. The County has two National Parks: Dartmoor and part of Exmoor National Park; significant areas of AONB; and other high quality landscape designations and an extensive heritage coastline with significant areas in the possession of the National Trust. Devon attracts visitors from across the world and tourism is a significant part of the local economy.

In the urban areas of Plymouth and Torbay: a rich built heritage; strong retail and cultural sector; important areas of greenspace; and significant visitor attractions are the key elements of the tourism economy. Maintaining a clean and safe environment is essential to maintaining the attractiveness of these areas. The quality of both the rural and urban environment is also a factor in attracting new industry and jobs into the area.

Each Authority in Devon is concerned about any change to the environment given the reliance placed on this resource to sustain economic well-being. As importantly, improvement of local environmental quality is regarded as a key element of quality of life by local communities, particularly in poorer neighbourhoods. Each Authority has, accordingly, included environmental indicators in its LAA programme. The National Indicators chosen relating to waste are presented in Table 3.6.

Table 3.6 Selected National Indicators

NI Number NI Description Plymouth Torbay Devon

NI 186 Per capita CO2 emissions in the LA area

NI 192 Percentage of households waste sent for re-use, recycling and composting

NI 193 Percentage of municipal waste land filled

NI 195 Improved street and environmental cleanliness (levels of graffiti, litter, detritus and fly posting)

It should be noted that the inclusion of these indicators is subject to agreement with the Government Office South West. The agreements will not be ratified until July 2008.


Page 45

4. Procurement Strategy and Reference Project

4.1 Introduction Plymouth City Council, Torbay Council and Devon County Council have, through the means of various studies and options appraisals, concluded that a jointly procured residual waste management facility will offer each of the Authorities a better value for money solution than individual procurement of facilities. Each of the respective MWMS’s, the South West Regional Waste Strategy and the recently published Waste Strategy for England 2007 support the idea of joint working and the economies of scale that can be achieved through larger scale facilities.

The Authorities have concluded that future waste management services should be procured on a non-integrated basis, with residual waste treatment services and infrastructure specifically procured separately from other waste management services such as recycling and waste collection. The rationale for this decision primarily reflects the wish to maximise competition for all contracts, keep contracts simple and to ensure that the procurement of additional services is not delayed by site or planning issues which could be associated with residual waste treatment. There is also little or no synergy between residual waste and other waste services and market testing indicates that potential service providers are either neutral on this matter or generally have little appetite for fully integrated waste management contracts.

The Partnership’s decision to procure residual waste treatment only through the Private Finance Initiative is in keeping with Defra’s Criteria number 10 for waste PFI contracts and supports the findings of the second Kelly report which investigated competition and waste PFI contracts. By only procuring residual waste infrastructure, competition from bidders should be maximised and smaller, new entrants to the market should not be excluded due to a lack of capacity or experience in the provision of ancillary services such as recycling or waste collections.

This section details the options appraisal undertaken by the Partnership to determine the ‘Reference Project’ and the ‘Reference Case’. Definitions are presented below:

‘Reference Case’: The ‘Reference Case’ is defined as the service and associated infrastructure to be provided by the PFI contractor. In this instance, the contract (and therefore the ‘Reference Case’) is for residual waste treatment only. Therefore costs referenced in section 8 for the ‘Reference Case’ relate to the capital, operational, lifecycle and maintenance costs of the residual treatment facility only. It must be stressed that the in presenting the Reference Case, the Partnership is not committed to the specified treatment technology (or site), as this will be determined as part of the procurement process.

‘Reference Project’: The ‘Reference Project’ is defined as all services delivered by each Authority, including the ‘Reference Case’. It is a fully costed solution that meets the Partnership’s needs and is deliverable, bankable and affordable. The ‘Reference Project’ therefore includes operation of recycling and composting services,


Page 46

CARC’s, on-going landfill, and bulking and haulage, in addition to the ‘Reference Case’ (the PFI contract).

Figure 4.1 provides an overview of the Reference Case and the Reference Project. The Reference Project includes each element of the Partnership’s waste management investment programme.

Figure 4.1 The ‘Reference Case’ and ‘Reference Project’

Torbay Council

Recycling Collection Upgrade

CARC Operation

AD (Gate Fee Contract)

Landfill Contract(s)


Recycling Collections Upgrade

CARC Operation



Residual Waste Treatment

'Reference Case' (PFI Contract)

MRF (Gate Fee Contract)

MRF Upgrade

TLS & Haulage

New CARC

Windrow Composting

CARC Operation

IVC Contract


WindrowComposting

AD (Gate FeeContract)

Bulking & Haulage

Contract(s)

Bulking & Haulage

Contracts

SWDWP Reference Project

4.2 Overall Strategy for Procurement The scope of the procurement strategy for each of the partner Authorities includes the entire waste management cycle. It covers the period 2008-2039 to reflect the significant investment required in waste processing facilities across the three Authorities.


Page 47

It is the Authorities’ intention that additional waste infrastructure requirements, including the need for transfer stations, landfill, CARCs, IVCs, ADs, MRFs and Green Waste Composting (GWC) facilities will be outside the PFI procurement. In procuring these additional elements, consideration has been given to other forms of funding, including prudential borrowing and revenue funding via ‘gate fee’ arrangements with private sector providers.

The Authorities are seeking support from the Government through Defra to enter into a PFI transaction for the residual waste treatment facilities. The Authorities consider that the characteristics of this project indicate that the PFI procurement route is appropriate.

Section 2.4 details the current arrangements in each Authority for waste collection and treatment. It is anticipated that, with the exception of residual waste treatment, all other activities will remain broadly as they are, with separate contracts and arrangements for each authority. However, it is acknowledged that, to achieve a Partnership recycling and composting rate of 50% by 2020, significant investment in recycling infrastructure and associated services will be required. Details of the wider procurement activities anticipated for each Authority are presented below.

The SWDWP Partners will work together under the formal structure detailed in section 6.3 to pursue a sub-regional residual treatment solution. However, each Authority will be responsible for the procurement of other facilities necessary to satisfy the input constraints of the treatment facility and enable it to meet its recycling commitments. To this end, the procurement strategy for the sub-region is proposed along the following lines:

• Waste and recycling collection contracts remain with the Districts or Unitary Councils;

• recyclate and transport contracts remain with Districts or Unitary Councils;

• Refuse Transfer Station (e.g. bulking and haulage) arrangements and contracts are agreed between Districts, Unitary or County Councils as appropriate;

• composting, anaerobic digestion (AD) and in-vessel composting (IVC) contracts are agreed between Districts, Unitary or County Councils as appropriate; and

• Devon County Council will procure additional residual waste treatment facilities for other areas of the County depending on identified need (notably an EfW located in Exeter, operational from 2010).

Although each Authority has the obligation to secure contracts for other necessary waste services independently, this does not exclude joint procurement where this is found to be advantageous. Currently, there are no contracts held by any of the Authorities that would prevent a joint procurement.

The current and proposed contract situation for each partner is as follows:

Teignbridge and South Hams both operate in-house collection services and neither have any contract ties that are likely to affect the sub-regional solution.

West Devon has a refuse and recycling collection contract with FOCSA which will be re-tendered by 2010 and before the procurement of a sub-regional facility. The contract does not restrict Devon’s ability to enter a contract to provide residual waste to a sub-regional facility.


Page 48

Torbay operates the waste collection service in-house using the Direct Services and Waste Department through a service level agreement. The Authority has a six-month rolling agreement with Viridor Waste Management Ltd for the landfilling of residual waste at the Heathfield. This landfill contract does not prevent Torbay from entering into a sub-regional residual treatment contract.

Plymouth operates the waste collection service in-house using the Environmental Services Department. The Department also operates the MRF and the main CARC site. A smaller CARC is operated under contract. There are arrangements in place for private sector companies to compost green waste, chip wood, recycle fridges and freezers and remove WEEE. Material and transport contracts are in place through DAWRRC for recyclate from the MRF. There is also a contract with a private sector company to produce electricity from landfill gas derived from the former Chelson Meadow landfill site

Plymouth has signed a contract with Viridor Waste Management Ltd to operate a refuse transfer station to receive and bulk its residual waste and transport it to Viridor’s landfill site at Lean Quarry in Cornwall. This contract runs for seven years from March 2008 and can be extended in up to two increments to a maximum contract length of twelve years. There are no tonnage guarantees or restrictions in this contract that would prevent the Authority from entering a sub-regional waste treatment contract.

4.3 Output Specification for the Project

4.3.1 Contract Waste

The Partnership welcomes the recent publication of the Residual Waste Procurement Pack Output Specification Drafting. The Partnership intends to base its Output Specification on the model documentation. It is accepted that the contractual Performance Requirements may change through the Competitive Dialogue process. However, this will only be on the basis of value for money considerations. The contractor will also be encouraged to receive third party waste to utilise spare capacity at the facility provided contract waste is given priority. This is especially the case in the early years of the contract where the facility may be under capacity as the facility will have been designed with enough capacity to allow for waste growth within the Partnership area over the life of the contract.

The service which will be provided by the successful bidder is to receive and treat all contract waste. This will include municipal waste from household kerbside collections, HWRC / CARC residual waste and Authority trade collection services.

4.3.2 Non Contract Waste

The lack of landfill capacity in the south west presents an opportunity for the inclusion of other waste streams such as commercial or industrial waste. The Partnership acknowledges that financial benefits can be realised through the economies of scale that a larger facility will achieve. It will therefore invite bidders to propose solutions that can accommodate non-contract waste on the basis of securing a value for money solution. However, in accordance with Defra’s criteria number 12 for securing waste PFI credits, the solution proposed by bidders must demonstrate that:


Page 49

• Value for money is maximised for each Authority within the Partnership in relation to the biodegradable municipal waste managed, and

• any cross subsidisation of the costs of disposing of non-municipal waste streams is transparent and acceptable to all stakeholders.

The mass flow modelling undertaken to date has projected that waste in the Partnership area will increase roughly in-line with the anticipated growth in household numbers. Therefore, the amount of contract waste in the early years of the contract will be less than the later years, resulting in insufficient contract waste to utilise the plant’s capacity. During its early period the Authorities will work with the contractor to secure third party waste to ensure the facility operates at full capacity. This waste will be processed subject to;

• Prior written approval, and

• contract waste given priority.

The payment mechanism will detail how the income from third party waste will be apportioned between the contractor and the Authorities.

4.4 Options Appraisal - Long Listing of Technology Options As mentioned in sections 3.4 and 4.1, each of the respective Authorities within the SWDWP has undertaken numerous detailed appraisals of waste management options, identifying waste treatment technologies capable of meeting their strategic objectives. Plymouth carried out a technology options appraisal in its updated MWMS (2007). Torbay has also recently conducted a similar exercise for its MWMS (2008), and Devon has carried out various options appraisals in support of its MWMS (2005) and other relevant studies. The Project Team concluded that a full ‘long list’ approach to the joint options appraisal was not required, as each of their respective MWMSs has included detailed options appraisals. Consequently, the Partnership has taken forward options that performed well in their individual options appraisals and created a short list of ‘joint procurement options’ for detailed analysis.

Figure 4.2 below summarises the options appraisal approach adopted by the Partnership.


Page 50

Figure 4.2 SWDWP Residual Waste Treatment Options Appraisal Process


Page 51

Table 4.1 below presents the technologies that have been appraised by each of the partnering Authorities. The solutions presented in Table 4.1 are the ‘short list’ of options. A wider range of solutions was appraised by each Authority prior to concluding the short list.

Table 4.1 Summary of Options Evaluated by Individual Authorities

Devon Plymouth Torbay

MWMS 2005 Multiple Sites Study 20069 MWMS 2007 MWMS 2008

• Landfill all residue

• EfW (Incineration)

• EfW (Pyrolysis / Gasification)

• MBT – AD

• MBT – RDF / Landfill

• MBT – RDF (EfW)

• 2 x 50,000 tpa EfW’s (for Devon only)

• 2 x EfW’s (for Devon, Torbay & Plymouth)

• 4 x EfW’s (for Devon only)

• 2 x EfW’s (for Devon & Torbay)

• 3 x EfW’s (Devon only)

• 100,000 tpa MBT-AD

• 2 x 50,000 tpa EfW


• MBT – RDF (3rd party thermal facility)

• MBT – RDF (purpose built thermal facility)

• MBT – AD

• EfW


• Regional EfW

• Advanced Thermal Treatment (ATT)

• EfW

• MBT – IVC – EfW

• MBT – AD – EfW

• MBT – IVC – LF

• MBT – AD - LF

4.5 Appraisal of Short-listed Options to Identify Reference Project

A project team workshop was held in December 2007 to determine the ‘short list’ of options that required detailed modelling. In attendance at the workshop were representatives from each Authority, including staff representing finance, legal, procurement and waste management. Also in attendance were the Partnership’s legal, financial and technical advisors. A review of the relevant waste strategies and supporting documents was undertaken to establish the strategic objectives of the respective Authorities. Using the individual MWMSs as guidance, the following short list of options was developed;

• Option 1 – ‘Do Minimum’ – disposal of residual waste to landfill;

• Option 2 – Individually procured EfWs (a facility for each Authority);

• Option 3 – A single joint EfW;

• Option 4 – A single joint EfW and a joint AD facility for food waste treatment;

9 Report titled ‘Assessment of Costs and Environmental Impacts of Multiple Facilities’ report produced by AEAT for Devon County Council, 2006.


Page 52

• Option 5 – Three strategically located MBT facilities (comprising AD for the organic fraction), producing an RDF which is combusted in a joint RDF burner (located in Plymouth); and

• Option 6 – Three strategically located MBT facilities (comprising AD for the organic fraction), producing an RDF which is combusted and a merchant RDF burner (located in Runcorn).

In their respective MWMSs, Plymouth identified EfW as the most appropriate technology in their MWMS, Devon identified either EfW or ATT as the most appropriate technology in their MWMS, and Torbay identified a regional EfW as the most suitable technology. As a result, EfW based solutions were the most prominent in the short list of options. However, additional options have been considered for completeness to reflect recent developments in the UK waste industry.

The Torbay MWMS concluded that a regional EfW would be its preferred option, and both Devon and Plymouth stated that economies of scale can be achieved through larger facilities. One of the key outcomes of this options appraisal was therefore to assess and compare the costs and benefits of individually procured facilities (Option 2) and jointly procured facilities (Options 3 to 6).

Section 4.1 of this OBC states that the Partnership had decided to adopt a disaggregated procurement strategy, with all other infrastructure requirements procured outside of the PFI project. However, WSE2007 strongly supports the use of anaerobic digestion as a means of energy recovery. With the possibility of receiving revenue support from central Government, the Partnership therefore decided to evaluate the costs and benefits of including an AD facility within the PFI procurement (Option 4).

South Hams and Teignbridge currently collect food waste in a co-mingled collection with garden waste, which is then processed in an IVC located at Heathfield. West Devon is currently undertaking food waste collections in Tavistock which is processed at a merchant AD facility located at Holsworthy. West Devon plans to expand this service to incorporate the remainder of the Borough over the next few years. Torbay has identified the need for food waste collections in their 2008 Waste Strategy, and therefore either requires additional infrastructure or capacity at a merchant facility (Holsworthy is the most likely facility as the Heathfield plant is operating at capacity). Option 4 tests the viability of Plymouth, Torbay and West Devon collecting food waste with processing in a new joint AD facility, procured jointly within the PFI contract. All other options assume that Torbay and West Devon collect food waste which is then processed at the Holsworthy AD facility. Options 4, 5 and 6 are the only options where Plymouth introduces food waste collections.

For joint procurements such as the SWDWP, the use of multiple MBT facilities, which reduce the volume and mass of residual waste prior to transport to a centralised facility, may have additional benefits over a single facility (namely reduced vehicle movements and a reduced capacity of the thermal facility required). Two MBT options were therefore modelled; one assuming that a purpose built burner is constructed within the Partnership area (Option 5), and the second assuming that the RDF is transported to a merchant facility outside of the Partnership area (Option 6).

4.5.1 Short Listed Options - Facilities

Figure 4.3 presents the six short listed options with the anticipated size and type of facilities required.


Page 53

Figure 4.3 SWDWP Short List Joint Procurement Options

Option 1

Plymouth Chelson Meadows TLS Lean Quarry Landfill

Torbay

Torr Quarry TLS

West Devon Crowndale TLS

Exeter TLS

Option 2

Plymouth PCC EfW - 105,381 tpa in 2038Holdsworthy AD

Torbay TC EfW - 41,511 tpa in 2038

South Hams

West Devon

Exeter TLS (16%) Exeter EfW/Landfill

Option 3

PlymouthHoldsworthy AD

Torbay Yalberton TLS

Torr Quarry TLS

Crowndale TLS

Heathfield TLSExeter TLS Exeter EfW/Landfill

Teignbridge

Teignbridge

Joint EfW - 224,013 tpa in 2038 (located in Plymouth)

West Devon

South Hams

Individually Procured Energy From Waste Facilities

Jointly Procured Energy From Waste Facility (Plymouth)

Teignbridge

DCC EfW - 77,121 tpa 2038

Do Minimum - Disposal to Landfill

South Hams

Yalberton TLS

Heathfield Landfill

Option 4

PCC/TCWDDC AD - 25,000 tpa in 2038Plymouth

Torbay Yalberton TLS

Torr Quarry TLS

Crowndale TLS

Heathfield TLSExeter TLS Exeter EfW/Landfill

Option 5

PCC/TC/WDDC AD - 25,000 tpa in 2038

Plymouth Plymouth MBT

Torbay

Exeter TLS Exeter EfW/Landfill

Option 6

PCC/TC/WDDC AD - 25,000 tpa in 2038

Plymouth Plymouth MBT

Torbay

Exeter TLS Exeter EfW/Landfill

South Hams

Devon MBTWest Devon

Teignbridge

Joint RDF Burner - 98,347 tpa in 2038 (located in Plymouth)

3 x MBT (ITS) and 1 joint RDF Burner in Runcorn

Joint RDF Burner - 98,347 tpa in 2038 (located in Runcorn)

Torbay MBT

South Hams

West Devon

Teignbridge

Torbay MBT & TLS

Devon MBT

Jointly Procured Energy From Waste Facility & AD (Plymouth)

3 x MBT (ITS) and 1 joint RDF Burner in PCC

South Hams

West Devon

Teignbridge

Joint EfW - 210,022 tpa in 2038 (located in Plymouth)


Page 54

4.5.2 Performance of Short Listed Options

All options identified in the short list underwent detailed modelling, with a full system Mass Flow Model developed for each one. The anticipated environmental impacts were modelled for each option using the EA approved WRATE Life Cycle Assessment model (full details of the WRATE assessment are provided in Appendix 4B). A total of 26 criteria were developed with each criterion allocated a weighting to reflect their relative importance to the Partnership. The criteria were grouped under the headings of ‘Planning’, ‘Technical’, ‘Environmental’ and ‘Financial and Economic’. Summary scores for the four criteria sub-headings are presented in Table 4.2 below (full details can be found in Appendix 4A, ‘Options Appraisal and Technical Modelling Report’).

Table 4.2 Summary Scores for Short Listed Options

Primary Criteria Option 1 Option 2 Option 3 Option 4 Option 5 Option 6

Weighted Score 0.33 0.29 0.54 0.57 0.22 0.28 Planning

Rank 3 4 2 1 6 5

Weighted Score 0.52 0.65 0.71 0.80 0.60 0.56 Technical

Rank 6 3 2 1 4 5

Weighted Score 0.53 0.97 1.01 0.94 0.87 0.84 Environmental

Rank 6 2 1 3 4 5

Weighted Score 1.21 1.22 1.72 1.69 0.89 0.57 Financial & Economic

Rank 4 3 1 2 5 6

Weighted Score 2.60 3.12 3.98 4.00 2.58 2.25 Total Score

Rank 4 3 2 1 5 6

The initial results of the options appraisal showed that options 3 and 4 scored the highest. This aligns with the findings of the previous options appraisals undertaken by each Authority and confirms that an EfW is the preferred technology, and that a single facility for the Partnership offers a value for money solution. However, due to the similarity in the scores for options 3 and 4, it was decided that further analysis of both options would be required to finalise which of the two alternatives would be the most suitable Reference Project. This further assessment is presented in section 4.6.

The following pages present a summary of some of the key features of the options appraisal and highlight a number of the evaluation criteria that were of particular importance.


Page 55

4.5.3 Review of Planning Criteria (Total Weighting: 15%)

The issue of the planning process, obtaining planning permission and the availability of suitable sites is key to any procurement process of this type. Plymouth City Council has an adopted Waste Development Plan Document and has identified two sites suitable for the type of proposed facilities. However, Torbay has a lack of suitable sites and a joint procurement where strategic facilities are located outside of Torbay is the most suitable option. Options 3 & 4 scored favourably for planning as both options only require one site. The number of sites required and the total landtake required for Options 2, 5 and 6 meant that these options scored less well.

4.5.4 Review of Technical Criteria (Total Weighting: 20%)

The technical criterion was broken down into a number of secondary criteria. Of these, the ‘technology track record’, ‘the absolute diversion of MSW from landfill’, and ‘material recycled and composted’ were the three most highly weighted options with 5%, 4% and 4% of the total score allocated for the criteria respectively. The Partnership aims to therefore deliver a robust solution which diverts waste away from landfill. Any proposed technology must have a good track record both in terms of the number of reference facilities and historical data on the performance of technologies. An overview of waste treatment technologies is presented in Appendix 4A. This overview was used as a guide when determining the score for ‘technology track record’.

The Partnership has identified that diversion of biodegradable waste from landfill is a key priority of any residual waste technology, as failure to do so may result in the Authorities facing large financial penalties under the LATS scheme. However, while BMW diversion is a key driver, the Partnership has also identified ‘absolute diversion of MSW from landfill’ as a priority. Landfill capacity in the south west is diminishing. As Chelson Meadow closed in March 2008 and Heathfield is due to close in 2016, the Partnership considers a solution that is heavily reliant on landfill for the disposal of any process outputs is not a suitable long term solution for the local situation. For this reason, Options 2, 3 and 4 scored well in ‘absolute diversion from landfill’.

Figure 4.4 illustrates the projected tonnage of waste requiring landfill for the period 2007/8 to 2038/39 for each of the modelled options. The chart shows that Option 1 is expected to require the most landfill capacity, followed by Options 5 and 6, with Options 2, 3 and 4 requiring the least landfill capacity. It should be noted that the modelling has assumed that EfW ‘bottom ash’ is recycled and used as a secondary aggregate, therefore not requiring landfill. This is assumed to be a fair reflection of the current market. It is also assumed that APC residue (air pollution control residue / flue gas treatment residue) is disposed of in a hazardous landfill. The MBT options (Options 5 & 6) assume that the digestate from the AD facility is sent to landfill. Under current guidance, digestate from plants that are processing mixed municipal waste streams (i.e. non source segregated waste streams) cannot be applied to land and used as a soil improver or fertiliser. The guidance does allow for the digestate to be used in restoration and remediation projects, therefore diverting it from landfill. However it is unlikely that this would be a long term sustainable outlet for the digestate.


Page 56

Figure 4.4 Absolute Diversion from Landfill for Short Listed Options

-

50

100

150

200

250

300

2007

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

Tota

l MSW

to L

andf

ill (k

tpa)

Option 1 Options 2 & 3

Option 4 Options 5 & 6

With the exception of Option 1 (‘do minimum’ with disposal to landfill), all short listed options meet each Authorities’ respective LATS targets once the proposed facility(ies) come on-line. Options that exclusively use EfW without pre-treatment for residual waste treatment (Options 2, 3 and 4) divert the most BMW from landfill as all waste sent to the facility is deemed to be diverted. The options comprising MBT facilities (Options 5 and 6) do not divert as much BMW from landfill, with Options 5 and 6 sending up to 60% more BMW to landfill than Options 2, 3 and 4. Table 4.3 presents the tonnages of BMW sent to landfill for each short listed option for key years during the contract.

Table 4.3 Partnership BMW to Landfill and LATS Allocation for Target years (tpa)

2009/10 2012/13 2019/20

Partnership LATS Allocation* 155,644 103,670 72,541

Partnership BMW to Landfill Option 1 151,860 146,277 145,975

Partnership BMW to Landfill Option 2 & 3 151,860 146,277 22,948

Partnership BMW to Landfill Option 4 151,860 140,323 22,932

Partnership BMW to Landfill Option 5 & 6 151,860 146,277 36,841

Table Note:*The Partnership LATS Allocation has been calculated by summing Plymouth and Torbay’s allocations, with South Hams, West Devon and Teignbridge’s proportion of Devon County Council’s total allocation.

Devon County’s strategy for meeting its LATS liability is dependent on treating all waste from some districts to offset continued landfill of waste in other districts. Although this document considers the waste from Teignbridge, West Devon and South Hams in isolation, it is necessary to take account of the Council’s requirement to meet its LATS liability for the County as a whole. For the purpose of assessing


Page 57

affordability, the cost of meeting a potential shortfall in the County’s LATS permits has been considered in comparing the relative costs of the options.

All short list options achieve Partnership recycling rates that meet the updated national Waste Strategy for England (WSE2007) targets, exceeding 40% by 2009/10, 45% by 2014/15 and 50% by 2019/20.

Figure 4.5 illustrates the modelled Partnership recycling rates for each of the short listed options.

Figure 4.5 Recycling and Composting Rate for Modelled Options

30%

35%

40%

45%

50%

55%

60%

BVP

I 82

a &

b

(Hou

seho

ld w

aste

recy

cled

& c

ompo

sted

)

WSE 2007 40% 45% 50%

Options 1, 2 & 3 37.7% 39.8% 40.8% 41.7% 43.2% 45.3% 46.7% 48.1% 49.0% 49.7% 50.2% 50.4% 50.5% 51.3%

Option 4 37.7% 39.8% 40.8% 41.7% 43.2% 45.3% 48.4% 50.6% 51.8% 52.6% 53.1% 53.3% 53.4% 54.2%

Option 5 & 6 37.7% 39.8% 40.8% 41.7% 43.2% 45.3% 48.4% 50.6% 53.7% 54.4% 54.8% 54.9% 55.0% 55.7%

2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Torbay introduce food collections in all ScenariosPlymouth introduce food collections in Scenario 4, 5 & 6

MBT comes online & increases recycling rate in Scenario's 5 & 6

Option 4, which incorporates a food waste collection in Plymouth, increases the Partnership recycling rate by approximately 3%. The use of an MBT facility to pre-treat waste prior to thermal processing (Options 5 and 6) could increase the Partnership recycling and composting rate by a further 1.5% over Option 4.

4.5.5 Review of Environmental and Social Criteria (Total Weighting: 25%)

The anticipated environmental impact of each of the short listed options has been evaluated with the Environment Agency’s WRATE model. Full details of the WRATE assessment, including system boundaries, key assumptions and presentation of results can be found in the Technical Note in Appendix 4B.

The WRATE model uses a variety of databases to generate environmental impacts for a range of potential waste management solutions. One of the databases used is the EA’s Waste Technologies Data


Page 58

Centre which uses performance data from existing facilities. When developing a waste solution to model, the user must therefore select a reference facility on which to base the modelling.

Entec’s experience of using WRATE has shown that not only does the type of residual waste facility (e.g. EfW or MBT) have a bearing on the environmental impact of a solution, but so does the specific reference facility selected (e.g. different EfW’s have varying degrees of process efficiency and therefore indicators such as Global Warming Potential can vary significantly between reference facilities). For this reason, where a thermal process was used, Entec modelled multiple reference facilities of varying efficiencies. Options that incorporated EfW were modelled using the Chineham EfW facility (representing a facility that produces electricity only) and the Sheffield EfW facility (representing a facility with combined heat and power).

Table 4.4 presents the summary WRATE results for the short listed options against to the EA’s Default Impacts.

Table 4.4 Summary Results of Default Impacts

Short Listed Options

Indicator & Unit of Measurement

1 Baseline

2 I 3 x EfW

2 II 3 x EfW (CHP)

3 I 1 x EfW

3 II 1 x EfW (CHP)

4 I 1 x EfW

& AD

4 II 1 x EfW (CHP) &

AD

5 MBT /

RDF to EfW

(CHP)

6 MBT /

RDF to EfW

(CHP) Runcorn

Abiotic resource depletion (tonnes antimony eq)

-141 -692 -739 -682 -730 -680 -726 -661 -600

Global warming (tonnes CO2 eq) 45,806 6,430 -32,860 7,539 -31,752 8,652 -35,047 -40,757 -32,988

Human toxicity (tonnes 1,4-dichlorobenzene eq.)

7,892 58 2,101 111 2,154 -2,101 107 -307 -1,461

Freshwater aquatic ecotoxicity (tonnes 1,4-dichlorobenzene eq)

296 -4,274 -5,663 -4,169 -5,558 -3,999 -5,229 -12,074 -11,836

Acidification (tonnes SO2 eq) 17 -27 14 -22 19 -10 28 -76 -39

Eutrophication (tonnes PO4 eq) 71 13 24 14 24 22 31 26 32

The results from the WRATE analysis were converted into preference scores and used in the options appraisal. Comparing the results of the modelling process, it is clear to see that great savings can be made in terms of the Environmental Impact associated with the management of wastes within the Partnership area by moving away from the reliance on landfill for the disposal of wastes.


Page 59

Of particular interest to the Partnership is the performance of each of the short listed options with regards to Global Warming Potential (GWP, measured in kg of carbon dioxide equivalent). Figure 4.6 presents the GWP (measured in CO2 equivalent per tonne of residual waste treated) for each of the modelled options.

Figure 4.6 WRATE Output for CO2 Equivalent Emissions for Modelled Options

Residual Waste - CO2 eq emissions (WRATE)

-300

-200

-100

0

100

200

300

1. LF 2i. Indiv EfW 2ii. IndivEfW (CHP)

3i. Joint EfW 3ii. JointEfW (CHP)

4i. Joint EfW& AD

4ii. JointEfW (CHP)

& AD

5. MBT RDFto JointBurner(CHP)

6. MBT RDFto Merchant

Burner(CHP)

Kg

CO

2 eq

/t R

esid

ual W

aste

The WRATE assessment showed that EfW facilities with CHP have a significantly better GWP result than EfW facilities without CHP. The GWP indicator was weighted highly in the options evaluation with 7% of the total score. This was the third highest individually weighted criterion, demonstrating the Partnership’s commitment to reducing emissions that contribute to global warming. As a result, the Partnership will ensure that the GWP / Carbon Footprint of the procured solution is suitably weighted in the tender evaluation and bidders that can demonstrate a maximised net GWP benefit will be favoured.

An additional assessment of the GWP has been undertaken based on the ‘Shadow Price of Carbon’ and is included in the cost comparison of Options in section 4.6.6.

The options which incorporate AD facilities show additional savings in terms of GWP and Human Toxicity but this effect is rather limited compared to the total Environmental Impact. The Abiotic Resource Depletion Indicator differs depending on the efficiency of the EfW process which may be more effective in terms of this impact. The other indicators in terms of Eutrophication, Aquatic Ecotoxicty and Acidification are slightly elevated compared to the baseline.


Page 60

The MBT options provide an improvement in terms of impact (although this is reduced for the option that requires the RDF to be sent further distances for processing). These improvements are due to the savings associated with the recyclate that is recovered from this process and the high thermal efficiency of the process used to combust the RDF.

4.5.6 Review of Financial and Economic Criteria (Total Weighting: 40%)

Capital Costs Table 4.5 presents the required capital infrastructure necessary to deliver each of the short listed options. The table presents the number, capacity (in tonnes per annum, tpa) and initial capital cost estimate of each facility required. The costs presented here are ‘real’ costs at Q1 2008 prices. The costs presented in this section are based on ‘rough order costs’ which have been sourced from Entec’s internal database of capital cost. These costs have been compiled from various sources, including recent waste procurement projects (PFI and non-PFI projects at various stages in the bidding process) and published literature. These costs do not include allowances for land acquisition or financing costs (further analysis of project costs, which include financing costs, is presented in section 8 of this OBC).

Table 4.5 Details of Proposed Waste Management Facilities for Short Listed Options

Facility Type

Option 1 Option 2 Option 3 Option 4 Option 5 Option 6

Capacity (tpa)

Capex Capacity (tpa)




Capex

EfW - 45,000 £52.6m 225,000 £140.4m* 210,000 £137.6m* - - - -

75,000 £67.0m

100,000 £91.9m*

EfW (RDF)

- - - - - - - 100,000 £102.1m* Merchant Facility

MBT - - - - - - - 100,000 £29.1m 45,000 £20.30

75,000 £24.50

100,000 £39.9*

AD - - - - - 25,000 £9.8m* 25,000 £9.8m* 25,000 £9.8m*

Total Capex

- - £211.5m - £140.4m - £147.40 - £185.80 - £94.5m**

Table Notes

*A Reference Site has been identified in Plymouth. The assumed Reference Site has known but resolvable constraints, including abnormal topography, proximity to an MOD explosive licensed area, and planning considerations relating to visual appearance (this is discussed in detail in Section 7). Therefore, the Capex estimates for facilities to be located at the Plymouth Reference Site have been uplifted accordingly and are likely to cover other unique costs if an alternative site were to be taken forward. However, until detailed site investigations have been undertaken, the full extent of the works required to deliver the project are unknown but will be identified during the procurement and included as part of the Final Business Case.


Page 61

**Option 6 has a low Capex as it is assumed that the RDF produced by the MBT facilities is processed in a third party merchant facility.

Cost of Each Option In addition to capital cost estimates, Entec have built detailed waste flow models for each of the short listed options. Unit operating costs and revenues are then applied to the mass flow model to estimate the annual cost of each option based on the tonnage of waste modelled for each year. Table 4.6 presents the full cost over the anticipated duration of the contract of the capital expenditure, operating costs, lifecycle maintenance and any other direct cost impacts which can vary between the option (including landfill costs and LATS). The costs are presented in Net Present Value (NPV) terms for the period 2007/8 to 2038/39.

Table 4.6 Comparative Net Prseent Values of Short Listed Options

NPV Option 1 Option 2 Option 3 Option 4 Option 5 Option 6

£m £m £m £m £m £m

Capital Costs 6.7 179.3 117.9 123.7 150.5 80.2

Land Acquisition - - - - - -

Life Cycle Costs 0.6 23.4 15.2 19.2 39.2 29.9

Operating Costs 198.1 302.1 287.5 296.4 296.9 382.8

Revenue - (56.8) (56.8) (55.5) (27.9) -

Landfill Costs 132.9 53.1 53.1 53.3 74.2 74.2

Landfill Tax 204.7 80.7 80.7 80.3 109.2 109.2

Tradable Allowances 18.9 6.3 6.3 5.4 6.3 6.3

Total 561.9 588.1 503.9 522.8 648.4 682.6

Table note: The NPV calculations are for the period 2007/8 to 2038/39, and a discount rate of 3.5% has been used to restate these costs at April 2008 prices. Costs presented in this table are for relative option comparison purposes as a subsequent more detailed financial analysis has been carried out on the Reference Project in section 8.

Shadow Price of Carbon In addition to the evaluation of environmental impacts presented in section 4.5.5, the Partnership has calculated the Shadow Price of Carbon (SPC), using the WRATE output for GWP, for each option. The SPC assigns a ‘cost’ to each tonne of CO2 equivalent. Therefore, for scenarios that have a net reduction in CO2 emissions (e.g. an EfW with CHP facility offsets more CO2 than it produces, therefore resulting in a net CO2 ‘benefit’) the total cost of the solution is reduced. For options with a net CO2 impact (e.g. a solution that produces more CO2 than it offsets), the cost of the solution is increased. Table 4.7 below presents the NPV of the modelled options (as presented in Table 4.6 above), along with the calculated ‘SPC’ and the ‘SPC Adjusted NPV of each Option’.


Page 62

Table 4.7 SPC Adjusted NPV of Modelled Options

Modelled Options Option NPV (£m)

Shadow Price of Carbon (£m)

SPC Adjusted NPV (£m)

Option 1 Landfill £561.90 £23.02 £584.92

Option 2i Individual EfW £588.10 £3.23 £591.33

Option 2ii Individual EfW (CHP) £588.10 -£16.51 £571.59

Option 3i Joint EfW £503.90 £3.79 £507.69

Option 3ii Joint EfW (CHP) £503.90 -£15.96 £487.94

Option 4i Joint EfW & AD £522.80 £4.35 £527.15

Option 4ii Joint EfW (CHP) & AD £522.80 -£17.61 £505.19

Option 5 MBT RDF to Joint Burner (CHP) £648.40 -£20.48 £627.92

Option 6 MBT RDF to Merchant Burner (CHP) £682.60 -£16.58 £666.02

Note: The SPC has been calculated using the Defra SPC template spreadsheet. The ‘cost’ of Carbon is assumed to be £25.40 per tonne of CO2 in 2007. A discount rate of 3.5% has been used.

Table 4.7 shows that when the SPC is combined with the NPV of each option, the NPV of those options with CHP (Options 2ii, 3ii, 4ii, 5 and 6) is significantly reduced. Option 5 (MBT with AD, sending RDF to a local energy recovery facility with CHP) has the best result in terms of GWP, and therefore has the largest net benefit against the SPC. However, the result of the SPC and the adjusted NPV’s do not change the ranking of options. The SPC exercise further highlights the Partnerships desire for an EfW facility with CHP.

4.5.7 Landfill Tax and LATS Sensitivities

The costs presented in this OBC are based on a range of assumptions. Two of the key assumptions that could alter the cost of solutions significantly are:

• Trade price of LATS allowances, and

• landfill tax (post 2010).

To assess the impact of these variables on each of the modelled options, various profiles have been developed for LATS and landfill tax costs (full details are provided in Appendix 4A). Table 4.8 presents the LATS profiles modelled and Table 4.9 presents the landfill tax profiles modelled.


Page 63

Table 4.8 Modelled LATS Profiles

LATS Profile Profile Description

LATS 1 - Options Appraisal LATS Profile Trade price of £0/t 2006/7 – 2008/9, £30/t 2009/10 – 2011/12, £75/t 2012/13 – 2013/14, £50/t 2014/15 – 2019/20, £0/t 2020/21 thereafter

LATS 2 - OBC LATS Baseline Profile Trade price of £0/t 2006/7 – 2008/9, £30/t 2009/10 – 2011/12, £75/t 2012/13 – 2013/14, £50/t 2014/15 thereafter

LATS 3 - OBC LATS Scenario 1 Trade price of £0/t 2006/7 – 2008/9, £30/t 2009/10 – 2011/12, £75/t thereafter

LATS 4 - OBC LATS Scenario 2 Trade price of £0/t 2006/7 – 2008/9, £30/t 2009/10 thereafter

Table 4.9 Modelled Landfill Tax Profiles

Profile Description

Landfill Tax Profile 1 - Options Appraisal Profile LF Tax increasing by £8/t until £48/t in 2010, remaining at £48/t thereafter

Landfill Tax Profile 2 - OBC Baseline Profile LF Tax increasing by £8/t until £72/t in 2013, remaining at £72/t thereafter

Figure 4.7 below illustrates eight modelled NPVs for each of the short listed options. The various NPVs present each option’s potential financial susceptibility to landfill tax and LATS costs.


Page 64

Figure 4.7 Cost of Short Listed Options – Landfill Tax and LATS Sensitivities (£m NPV 2007/8 to 2038/39)

0

100

200

300

400

500

600

700

800

Option 1 Option 2 Option 3 Option 4 Option 5 Option 6

Cost

of O

ptio

n (N

PV £

m)

LF Tax 1, LATS 1LF Tax 1, LATS 2LF Tax 1, LATS 3LF Tax 1, LATS 4LF Tax 2, LATS 1LF Tax 2, LATS 2LF Tax 2, LATS 3LF Tax 2, LATS 4

As would be expected, the options that have a greater reliance on landfill (e.g. the ‘do minimum’ Option 1, and the MBT Options 5 and 6) report the greatest range of costs when the sensitivities of landfill tax and LATS costs are tested. The EfW options (options 2, 3 and 4) report the narrowest range for landfill tax and LATS costs sensitivities, illustrating that these options present the least risk options to the Partnership with regards to the unknown costs associated with the increasing cost of landfilling waste. Option 3 is the least cost option in all scenarios modelled.

4.5.8 Bankability

A successful waste management solution relies on the development and commercial delivery of individual capital projects. There are a number of key considerations for the successful delivery of a capital project, not least of which are:

• Planning permission for the facility;

• operating licences or permits;

• contractors and equipment providers able to deliver and operate the hardware, and

• capital finance to pay for it.

There is a wide range of waste processing technologies, both ‘established’ and ‘new’, that can contribute to the diversion of BMW away from landfill. Indeed, the word ‘new’ encompasses those in various stages of technical maturity. These range from technologies that have yet to pass beyond the pilot or bench-scale, to those that have seen widespread commercial application, but on feedstocks other than ‘typical’ UK MSW.


Page 65

The more established technologies include mechanical processing technologies, such as magnetic separators, eddy current separators, pulverisers and screens. Such technologies separate and sort mixed waste streams into different component parts. In addition, there are numerous waste combustion technologies that have long track records of successful commercial operation, including grate-based combustion plant, rotating or oscillating kilns, and fluidised beds. In each of these technologies, however, any one specific application may have some degree of novelty – for instance a fluidised bed combustion technology may have seen application on one particular type of waste stream, but may be commercially untested on another. Any project development process must, therefore, carefully consider not only the level of ‘novelty’ in a particular technology, but also how the technology is to be applied, in order to identify project-specific technical risks.

With respect to technology supply, the most notable features of a bankable process are:

• Robustness and security of financial projections (capital costs, operating and maintenance costs, and revenues);

• the technology supplier/contractor’s ability to warrant performance and provide necessary guarantees and financial cover for performance failure; and

• technology track record.

The size, financial position and experience of the contractor and technology supplier are important in determining whether a particular project will be delivered on time, to budget and to specification. More importantly, however, these factors are absolutely critical in determining whether unanticipated technology problems that might arise will be resolved.

Technology track record is critical to providing confidence to the investors that the performance projections on which the financial model is based are achievable. Lenders usually require seeing at least 24 months of successful operating history (throughput and plant reliability) for any technology to demonstrate that key financial model assumptions such as waste processing rate and availability can be achieved.

In summary, the ‘bankability’ of the various waste technology solutions has been a key consideration of the Partnership’s options appraisal. A detailed review of existing facilities has been undertaken to establish the track record of each technology. The current evidence base suggests that conventional EfW technologies are the most bankable, as they have the longest track record and therefore a greater degree of confidence on the performance and costs associated with these technologies. The review of technologies is provided in Appendix 4A.

4.6 Determination of the Reference Project and Reference Case

4.6.1 Analysis of Options 3 and 4

The result of the options appraisal suggested that Options 3 (a single EfW) and Option 4 (a single EfW and a joint AD facility) were the two options that best met the Partnership’s criteria. The similarity in the scores for the two options meant further evaluation of both options was required. This further evaluation


Page 66

included detailed financial modelling of both Options 3 and 4, and a review of the key considerations and risks of both.

Financial Modelling of Options 3 and 4 Option 3 is the procurement of an EfW plant in Plymouth, operational from April 2014. Option 4 is the procurement of an EfW plant in Plymouth, operational from April 2014, together with an AD plant operational from April 2013.

The estimated real capital cost of the AD facility in Q1 2008 is £9.8m (costs provided by the technical advisors). The Partnership’s financial advisors modelled both options to demonstrate the effect of including the AD facility in the PFI contract and Reference Case. The additional ‘nominal’ capex required for this AD facility is calculated to be £12.6m (assuming construction inflation of 5.5%). The effect this has on the reference case model is as follows:

Reference Case Cost for Contract Duration - Option 3 - £796m

- Option 4 - £836m

It can be seen that once financing costs are calculated for the additional capital of the AD facility, the Reference Case costs increase by a total of £40m.

However, as the Partnership would incur this higher capital expenditure, an increase in PFI credit support should be available. The Revenue Support Grant (RSG) for Option 4 is calculated as £10m greater than that available for Option 3. Therefore, taking into account the effect of the RSG, the additional procurement of the AD facility would result in an increase of £30m for Option 4.

In addition to the extra costs resulting from the increased capital expenditure modelled in the Reference Case, there is also the impact of the increased costs associated with recycling collections, bulking and transport costs. The net effect of these costs is that Option 4 incurs approximately a further £20m in additional costs.

The combined effect of the other additional costs of £20m and the additional costs of the Reference Case of £30m means that Option 4 is £50m more expensive than Option 3 over the operational life of the contract.

Key Considerations and Risks of Options 3 and 4 Table 4.10 summarises some of the key considerations and risks associated with Options 3 and 4.


Page 67

Table 4.10 Summary of Options 3 & 4

Option 3 Option 4

Cost Option 3 was the least cost option. Including an AD to treat food waste within the PFI contract may not deliver value for money. The capital cost of the AD facility would be repaid over the 25 year concession, therefore accruing significant interest. Current guidance from HM Treasury, Defra and PRG suggests that PFI is preferred as a procurement route for residual waste treatment only, with additional recycling and composting infrastructure procured through alternative routes.

Commercial and Operational Risk

A merchant AD facility already exists at Holsworthy in Devon. This facility is already operational and currently accepts small quantities of food waste from West Devon. The facility has capacity to accept food waste from Torbay, West Devon and potentially, if the need arose, Plymouth. Negotiating a gate fee based contract with an existing operational facility is regarded as significantly less risky than the construction and operation of a new facility.

If the Partnership were to include an AD facility within the PFI contract the partner Authorities would have guaranteed long term treatment capacity. This security could prove to be beneficial over the use of an existing merchant capacity where it is less likely that treatment capacity could be secured for such a long period.

Competitive Procurement Process

Recent changes in waste PFI guidance has seen a shift away from integrated contract and a movement towards residual treatment only contracts. The SWDWP Reference Project technology is EfW. By having a non-integrated contract the number of potential bidders capable of bidding for the project is increased, therefore increasing competition and ensuring Value for Money.

Recycling & Composting Rates

Option 3 achieves a Partnership household waste recycling and composting rate of 51.3% in 2019/20, therefore exceeding the WSE2007 target of 50% in the same year.

Option 4 achieves a recycling and composting rate 2.9% higher than option 3.

Operational Difficulties – Collection Vehicles

Both West Devon and Torbay are committed to the implementation of food waste collections. However, there are many logistical issues in Plymouth that would make the collection of food waste problematic. The topography and layout of streets in the City of Plymouth do not favour multiple collection vehicles and the narrow streets and back lanes which can become congested. Therefore additional dedicated food waste collection vehicles could exacerbate any congestion.

Operational Difficulties – Waste Receptacle Storage

Of the 110,000 households within Plymouth, only 55,000 of them have adequate space to store two wheeled bins, the current preferred collection scheme. Hence many properties are highly unsuitable for multiple container storage and access for collection and return including those multiple occupancy premises, high-rise accommodation, and terraced properties that have no front or accessible rear storage areas.

The Partnership has carefully and fully considered the advantages and disadvantages of including an AD facility in the PFI Reference Project and in particular the foreseeable operational issues of collecting food waste in Plymouth. In light of these issues and in an attempt to maximise value for money through a competitive procurement process, the Partnership has decided that the PFI contract will not include a new AD facility. However, West Devon and Torbay will pursue food waste collection, and envisage


Page 68

utilising spare capacity at the merchant facility at Holsworthy. It should be highlighted that omitting an AD facility and a Plymouth food waste collection from this PFI solution is not seen as a constraint to future enhanced recycling and composting performance. To ensure that this is the case, the Partnership will seek flexibility as part of the procurement and contract agreement to be able explore and draw in alternative waste streams to replace any MSW that is diverted through enhanced recycling in the future.

4.6.2 The ‘Reference Project’ and the ‘Reference Case’ Technology

The Partnership has concluded that a single joint EfW facility with potential CHP is the selected residual waste treatment technology for the Reference Case.

An initial assessment has been carried out to review the potential for CHP assuming the new facility is located within Plymouth. Details of the assessment discussed further in section 7.3.4 and are given in Appendix 4C. This assessment has highlighted several possible small-scale users local to the available strategic sites and also larger potential users located further afield. The Partnership will analyse and investigate these opportunities in more detail during 2008 to maximise the potential for CHP as part of the project. In addition, the Project Team will work with Plymouth City Council’s planning service to encourage, as far as practicable, future developers near to the strategic sites in Plymouth to consider and make use of any heat potential from the treatment facility.

Each of the partner Authorities will continue with their individual activities, including enhanced recycling and composting operations, to ensure a combined recycling and composting rate of at least 50% is achieved by 2020. Table 4.11 presents details of the infrastructure required in the PFI Reference Project.

Table 4.11 Required Infrastructure for Reference Case

Proposed Facility Waste Stream Number of Proposed Facilities

‘Nominal’ Capital Expenditure

Capacity of Facility

EfW (with CHP) Municipal Residual Waste

1 £196m 225,000

Table Note: The nominal capital cost of the facility has been calculated by inflating the ‘real’ capital cost taken at Q1 2008 by 5.5% per annum until the costs occur, e.g. the construction of the facility.

Figure 4.8 below illustrates the anticipated waste arisings and flows for the Partnership over the life of the contract. The full Mass Flow Model has been submitted in electronic format in Appendix 4D, and Appendix 4A presents a summary of all technical modelling assumptions.


Page 69

Figure 4.8 SWDWP PFI ‘Reference Project’ Waste Flow Graph

Recovered Inert

Landfill

Recovery

Recycling

Composting

-

100,000

200,000

300,000

400,000

500,000

600,000

2009

/10

2011

/12

2013

/14

2015

/16

2017

/18

2019

/20

2021

/22

2023

/24

2025

/26

2027

/28

2029

/30

2031

/32

2033

/34

2035

/36

2037

/38

Tonn

es P

er A

nnum

(MSW

)

Recovered Inert Landfill Recovery Recycling Composting

The Reference Project assumes that, once on-line, approximately 86% of the residual waste that cannot be recycled or composted will be processed through the facility, with the remaining 14% disposed of in landfill. The facility is anticipated to process approximately 40% of the total MSW waste stream. Table 4.12 presents summary data for the Reference Project.

Table 4.12 Reference Project Summary Table

Year National Recycling

Targets

Reference Project

Recycling Performance

Partnership LATS Allowance

Reference Project – BMW

Landfilled

LATS Surplus / (Deficit)

% % Tonnes Tonnes Tonnes

2009/10 40 41.7 155,644 151,860 3,784

2012/13 - 46.7 103,670 146,277 (-42,607)

2014/15 45 49.0 94,776 22,288 72,488

2019/20 50 51.3 72,541 22,948 49,593

2038/39 51.3 72,541 27,130 45,411


Page 70

The figures are based on assumptions about the suitability of waste streams for processing in any given facility, and the proportion of residual waste that may have to be disposed of into landfill during planned and un-planned facility downtime. Details of these assumptions are given in Appendix 4A. While the Reference Project facility capacity has been sized based on these technical assumptions, the Partnership will expect bidders to maximise the percentage of residual waste that is processed through the facility, and thereby minimise the waste to landfill.


Page 71

5. Risk Management, Risk Allocation and Contractual Structures

5.1 Introduction to Risk Management The Project Team has identified ‘Procurement Risks’ (risks associated with the procurement process), and ‘Project Risks’ (risks associated with the delivery of the services, which will either be retained by the public sector, transferred to the private sector, or shared between both parties).

5.2 Procurement Risk Management An initial risk workshop was undertaken by the Project Team with the Partnership’s technical and financial advisors in September 2007. The workshop, attended by representatives from each Authority and WIDP, established a comprehensive project definition statement that was then used as a basis for identifying, evaluating and developing response plans to risk events that have the potential to threaten the success of the project. The propensity for risk events to materialise and their potential impact upon the project objectives was assessed to permit comparison and prioritising of the project risks and their commensurate response action plans. The resultant risk register with associated action plans have been integrated into the overall project plan and responsibilities have been assigned. This risk register is continually under review and updated and the latest version of the procurement risk register is presented in Appendix 5A.

Whilst over 50 risks were identified at this initial workshop, several of the highest rated risks reflected the relative infancy of the project and the Partnership and required immediate attention. Since their identification it has been possible to mitigate and reduce these risks proactively. Examples of some of the key initial risks identified and how they have been reduced are listed in Table 5.1 below.


Page 72

Table 5.1 Key Risk Areas Identified and Mitigated Since Project Inception

Risk Area Risk Description Risk Rating and change

(max 25)

Actions undertaken to reduce or mitigate risk

Project Delivery

Councils and senior officers are not sufficiently engaged in the project in terms of time, resource and effort

25 to 15

1. WDIP has engaged with each Authority and has secured high-level support. 2. A legal Joint Working Agreement has been drafted and was approved in April 2008. 3. Project Governance principles and details have been established and agreed. 4. Gate 0 Gateway Review has been undertaken 5. Project Lead Officers (champions) meet on a regular basis 6. Resource requirements have been identified, agreed and allocated 7. Meetings have been held with councillors

Partnership

Partners inadequately resource procurement effort

16 to 8

1. A high-level costed resource plan has been produced and apportionment agreed 2. Additional PFI project support has been recruited for OBC development 3. Approval has been given for additional staff at Torbay post April 2008 4. Additional officer staff involvement has been secured from each Council 5. An additional Project Manager has been recruited by PCC for the wider waste project programme

Partnership

Individual waste strategies have different timescales and objectives

15 to 6

1. Individual Authority waste strategies have been reviewed and are shown to be compatible with proposed solutions 2. Individual waste strategies and objectives are referenced and linked into a single summary section with common objectives in the OBC

The Partnership has adopted the 4ps Gateway review process to identify and assist in the management of project risks. A Gateway 0 review was held in October 2007, which identified and confirmed several important risks and areas for development. This Gateway review has greatly assisted the Partnership in driving the project forward and in consolidating the Partnership in the form of a formalised Joint Working Agreement. More details of the Gateway review recommendations and the subsequent actions undertaken are contained in Appendix 5B. A Gateway 2 review is scheduled for September 2008.

5.3 Project Risk Management Risk events that may occur over the life of the project should be identified (as far as is practicable), and either allocated to one of the contracting parties (e.g. the SWDWP or the private sector contractor) or shared between the two parties. It is an accepted principle of PFI projects that value for money will be maximised when risk is transferred to the party best able to manage it. The Partnership therefore intends to reflect the standard SoPC4 and Office of Government Commerce (OGC) risk positions. Deviation from the standard risk position (as a result of the competitive dialogue procedure) is acceptable only if the deviation clearly demonstrates a value for money benefit to the Partnership.


Page 73

5.4 Risk Allocation Matrix As noted above, the project risk register reflects standard SoPC4 and OGC positions. The project is considered a relatively straightforward residual waste PFI project with no unusual risk allocation issues and as such, the Partnership considers its position will be acceptable to the market.

Table 5.2 sets out the main risks associated with the SWDWP PFI contract and identifies who is likely to be best positioned to manage these risks.

Table 5.2 Risk Allocation Matrix

Risk Allocation Details

Planning delay Shared Individual Authorities will have a knock-on impact of landfill costs and LATS penalties; The Contractor will bear construction indexation and financing carry costs, subject to an agreed planning long stop date

Construction including ground conditions

Contractor The Contractor will be required to satisfy itself as to site conditions and take full risk on cost and time overrun

Commissioning and Technology risk

Contractor The Contractor will be fully responsible for ensuring that the technology is working effectively and on time, and bear costs of any breakdowns or teething problems

Service Commencement Contractor The Contractor will bear an element of landfill costs and LATS deductions if not operating on time (usually subject to negotiation to cap exposure)

Volume of residual waste Shared The Partnership (or individual Authorities) will have to guarantee a minimum tonnage; The Contractor will be expected to take risk of tonnage variations within a wide range including handling waste above the capacity of the plant (though not required to divert above capacity) subject to an overall maximum cap

Diversion of tonnage and BMW

Contractor Key benefit of contract: The Contractor bids a fixed diversion rate and is liable for additional landfill costs, and deductions or bonus to a different BMW performance

Energy income and other Third Party Income

Contractor

The Contractor will take commercial risk of changes to base electricity up to an initial guaranteed threshold. Any income above the guaranteed level is likely to be shared 50:50

Disposal of Residues Contractor The Contractor will be fully responsible for the volume and toxicity of any residues including finding landfill capacity and costs and associated taxes for disposal

Composition and delivery of residual waste

Shared The contract will specify parameters within which the Contractor is expected to still provide the agreed performance.

Change in law

Shared The Contractor will take the risk of general changes in law (subject to a capex cap). The Partnership retains the risk of waste specific legislation except where foreseeable at the time of contract close.

The risk allocation matrix is indicative at this stage and will be kept under constant review and developed once the Output Specification, Project Agreement and Payment Mechanism have been drafted. A detailed assessment of the risk allocation matrix is set out in Appendix 5C.


Page 74

5.5 Project Agreement and Other Contractual Documents

5.5.1 Project Agreement

The Partnership intends to develop one single contract based on SoPC4, Defra’s Standardisation of Waste Management PFI Contracts: Guidance on SoPC Derogations (May 2006) and the 4ps Waste Management Procurement Pack, together with other relevant HMT guidance (as appropriate) on PFI procurement (e.g. Operational Taskforce Notes). The Partnership is fully committed to using these standard terms and understands that derogations outside of those already permitted by Defra must be fully justified. The Authorities envisage the Partnership lasting throughout the procurement and service delivery phase of the project.

The Project Agreement will be drafted on the assumption that funding will be secured by the contractor by way of limited recourse project financing and that a special purpose vehicle (“SPV”) will be set up by the contractor. If the contractor does not propose limited recourse financing (e.g. it proposes to fund from an existing line of corporate credit or from balance sheet), the Project Agreement will be amended in accordance with SoPC4 following consultation with and approval by Defra to reflect an alternative funding structure.

The Partnership stance, as stated within the Joint Working Agreement, assumes that a single contract will be entered into by the three partner Authorities, and that each Authority will be jointly and severally liable. However, future engagement with the market may dictate a different approach e.g. one Authority acting as an agent for the others as well as principal for itself. If this situation arises, then the Partnership will consider the matter further at that time although it is anticipated that the approach will be confirmed early in the procurement process. The contract notice that will appear in the OJEU will need to allow flexibility in this respect. Whichever option is chosen, the contract negotiations will be undertaken in exactly the same way i.e. by one team representing the Partnership, led by the Project Director and Project Manager acting under the direction and delegation of the Chair of the Project Executive.

5.5.2 Other Contractual Documents

There are various other contractual documents with which the contractor and the Partnership will have to comply. An example of the type of documents to be included in the contract is presented below:

• Works period documents, including, for example, the contractor’s works delivery plan, works programme, commissioning programme, designs, acceptance tests, availability definition, and technical advisor appointment;

• service period documents, including, for example, the contractor’s service delivery plans, quality plans, delivery points and contingent delivery points for the WCAs;

• financial documents – including, for example, the Payment Mechanism, contract targets, unitary charge adjustment protocol, direct agreement, credit agreement;

• insurance documents – required insurances and insurance premium risk share schedule;


Page 75

• property documents – leases and underleases (as appropriate); and

• various miscellaneous documents – for example, environmental liabilities, waste law list, third party waste protocol (if applicable), vires certificates, collateral warranties, commercially sensitive information and guarantees.

5.5.3 Joint Working Agreement

The three Partner Authorities have entered into a legally binding Joint Working Agreement to regulate the relationship between them with regard to this Project. The Agreement epitomises the strength of the Partnership and gives it clarity of direction for the future. Details of this Agreement are summarised in section 6.6 and a full copy of the Agreement is reproduced at Appendix 6B.

5.5.4 Local Government Boundary Review

In late 2007, the Government announced that the whole of Devon would be subject to a Local Government Boundary Review. The potential implications of this review have and will continue to be considered although at this stage it is thought that there will be no adverse impact on the project.

This assumption is made on the basis that the potential grouping of authorities contributing to this project, both as unitary or continued two-tier working, is likely to remain the same and existing contractual arrangements will transfer and continue following any changes to the local authority arrangements.

5.6 Payment Mechanism

5.6.1 Payment Mechanism Principles

The Payment Mechanism is both a method for payment and a method of providing an incentive for high performance. As such, it will be linked to the service outputs defined in the Output Specification (Section 4.3) and deductions will be applied when Output Specification standards are not achieved. As discussed in greater detail below, the Payment Mechanism will be supported by an effective performance monitoring system to ensure performance meets the required standards.

Payment will be made monthly in arrears and reflect the performance for the previous month. The broad principles of the payment mechanism are such that:

• The Partnership only pays for services that have been delivered. Payment will be matched to increasing diversion associated with construction and operation of the contract infrastructure;


Page 76

• risk is transferred to the PFI contractor in accordance with its performance obligations. Financial incentives, both positive and negative, are created to perform in accordance with the Output Specification and waste hierarchy; and

• incentives exist for the PFI contractor to exceed contractually underwritten diversion targets where it is to the advantage of the Partnership to do so.

5.6.2 WIDP Payment Mechanism and Output Specification

The Partnership will adopt the WIDP Payment Mechanism and Output Specification as a basis for their waste management project. It is aware that WIDP has issued an update of the 4ps Procurement Pack as a Consultation Draft in December 2007. The Partnership is therefore likely to incorporate revised best practice guidance in relation to the Payment Mechanism within the project’s contract documentation when the mechanism is published in its final form.

The Project Team will initiate a number of internal procurement workshops to draft the payment mechanism in detail for the ISDS stage of the Competitive Dialogue process, following the published final guidance by Defra This will be developed in conjunction with the Output Specification, performance management and monitoring system.

The rest of this section summarises the main elements of the Payment Mechanism in line with the WIDP guidance, which will form the core of the Partnership’s approach to payment for services.

5.6.3 Calculation of the Annual Unitary Charge

The Annual Unitary Charge (“AUC”) will be modular, albeit that as much of the costs as possible will be contained within the main element, that is the base payment. It is not possible to include all elements in a unified whole without either reducing value for money (VfM), as bidders have to price in uncertainties, or creating perverse incentives conflicting with the requirements of the Output Specification. The elements of the Payment Mechanism are as shown in the formula below and the details are set out in Table 5.2.

Payment Mechanism Formula - AUC = B - D - P - M - N - T + R + PT

Table 5.3 describes each element of the payment mechanism formula.


Page 77

Table 5.3 Elements of the Payment Mechanism

Symbol Description Comments

B Base Payment The base payment is calculated based on a rate per tonne which is applied to all tonnages of Contract Waste accepted by the Contractor in a Contract Year. The relevant rate per tonne will step up as the facility is commissioned. The base payment is subject to a minimum tonnage provision, below which the base payment shall be calculated as though the tonnage of contract waste was equal to the minimum tonnage provision.

D Diversion Performance Adjustment The diversion performance adjustment reflects the difference between:

• the tonnages of contract easte the contractor sends to landfill; and

• the target landfill tonnage in a contract year which the contractor is permitted to send to landfill.

P Performance Deductions The main purpose of the performance deduction component is to incentivise the contractor to meet the performance standards set out in the Output Specification.

M Mileage Deduction The mileage deduction is intended to compensate the individual authorities for additional haulage costs incurred in the event that the authorities have to deliver contract waste to the contingency delivery point.

N Non Acceptance Deduction Intended to compensate the Partnership for tonnage not accepted by the contractor.

T Third Party Income The purpose of the third party income deduction is to allow the Partnership to share in the financial benefit that arises if actual income is in excess of that anticipated. The intention is to leave the contractor with the risks and rewards relating to operational efficiencies.

R Recycling Payment The purpose of the recycling payment would be to provide a mechanism to incentivise the contractor to recycle.

PT Pass Through Costs There may be a need for other components of the Unitary Charge to allow for miscellaneous payments that may arise for various reasons, including project specific reasons. The components will therefore vary from project to project. However, it is likely that in most projects there will be a need to allow for some “pass through” payments.

It is recognised that the PFI contractor will wish to protect itself against inflation over the life of the project, and to prevent operating cost increases through inflation undermining the bankability of the project. It is therefore proposed that the Annual Unitary Charge will, in part, be subject to indexation. Whilst it is anticipated that it will be for bidders to propose the proportion of the Annual Unitary Charge subject to indexation, the Partnership expects that the proportion will reflect the underlying cost structure of the project. The Partnership will consider alternative proposals from bidders through the competitive dialogue process where improved value for money and affordability can be demonstrated.

5.6.4 Performance Monitoring by the PFI Contractor

Unless there is an effective system of monitoring in place, it will not be possible to know how well the PFI contractor is performing or to know if payments and deductions are justified. It is important for the contract to be self-monitoring as far as possible so as to reduce the burden on the Partnership and


Page 78

individual Authorities. It is anticipated that staff from the Partnership will be responsible for confirming and verifying the monitoring reports derived by the PFI contractor. This will include incidents of failure, which the PFI contractor should be obligated to highlight, including incidents that relate to deductions.

5.7 Markets for Process Outputs The Partnership has selected EfW as the preferred residual waste treatment technology. This particular process will have a number of process outputs for which a market will be required. A brief summary is presented below.

• Electricity – it is anticipated that electricity generated from the facility will either be exported to the National Grid or to a local user.

• Heat/steam – the SWDWP Reference Project is an EfW with CHP. CHP is dependent on finding a suitable user of the heat/steam within the locality of the facility. Whilst the infrastructure required to deliver a CHP solution will increase the facility capital costs, it is assumed that the increased revenue generated from the sale of the heat and the Renewable Obligations Certificates (ROC’s) will mean the scheme will be at worst, cost neutral to the Partnership. The modelling undertaken to date assumes zero revenue for CHP. An initial CHP assessment of the Reference Project based on an assumed site of Ernesettle or Coypool is summarised at Section 7 and is included at Appendix 4D.

• Incinerator bottom ash (IBA) – this constitutes approximately 20-25% of the input tonnage. The IBA is inert, and as such can be disposed of in an inert landfill. Alternatively, the IBA can be reprocessed and used as a secondary aggregate to make building blocks or used in road building. A recent study by the Chartered Institute of Waste Management (CIWM 2006) suggested that approximately 50% of IBA is recycled in the UK. The Reference Project flow modelling assumes that the IBA is reused, and a cost of £18/t is incurred. This is a prudent assumption as disposal to inert landfill is likely to cost less.

• Flue gas treatment (FGT) residue / air pollution control (APC) residue / fly ash – this is classed as hazardous and is usually disposed of in specialist landfill sites. Recent developments have, however, indicated that the material can be combined with other hazardous material to produce a non-hazardous substance, which can then be sent to a non-hazardous landfill site. The modelling undertaken has assumed that disposal to a hazardous landfill site is required, and a cost of £150 per tonne (disposal and transport) plus landfill tax has been modelled.

• Recovered metal – it is anticipated that metal will be recovered from the bottom ash. While this may generate revenue, the modelling has assumed zero revenue.

It is anticipated that the risks associated with finding suitable outlets for the IBA, APC residue and any recycled metals will be allocated to the contractor. However, it is estimated that these risks will be minimal as markets are well established. Regarding the sale of electricity and steam, guidance on income sharing has been published by Defra, and the Partnership intends to follow this. It should be noted that energy from waste is classed as renewable energy and so it can be expected that long-term markets will be available.


Page 79

5.8 Balance Sheet Treatment The PFI transaction is intended to be structured such that a sufficient balance of property related risks is transferred to the PFI contractor to enable the transaction to be treated as off balance sheet by the public sector and meet the current criteria for PFI support.

The UK Government announced in March 2007 that government departments and other entities in the public sector will be required to prepare their financial statements using International Financial Reporting Standards (‘IFRS’), as adapted as necessary for the public sector. This requirement is currently expected to be effective for local authorities from 1 April 2010. In December 2007 HM Treasury published a consultation paper relating to accounting for PPP arrangements, including PFI, under IFRS. As this consultation is still in progress, it is currently not possible to be specific about the accounting required for the transaction under IFRS by the Authorities. This current analysis has therefore been performed using the existing Treasury guidance for PFI transactions and does not discuss the potential accounting for the transaction under IFRS.

A clear view on the accounting treatment will not be possible until the transaction proceeds to the latter stages of the procurement process, the contract terms are finalised and quantitative analysis is undertaken. However, the basis of the proposals, in terms of the Output Specification, risk transfer and Payment Mechanism, are designed to ensure sufficient risk transfer to meet the accounting requirements. The Authorities and their legal and financial advisors will work closely together during the development and procurement of the PFI contract to ensure that this is the case. However, the final decision on the accounting treatment is the responsibility of the relevant Authorities’ Accounting Officers, in conjunction with their auditors. Accordingly, the Authorities will arrange discussions of the accounting treatment with its external auditors at an early stage.

The method of accounting is prescribed in Application Note F to FRS 5 – “Reporting the Substance of Transactions: Private Finance Initiative” (the "Application Note"), as supplemented by Treasury Taskforce Technical Note number 1 (Revised) “How to Account for PFI Transactions” (“the Technical Note”). An initial assessment of the balance sheet treatment following this existing guidance has been prepared by the Authorities’ financial advisors (Ernst & Young) and is included in Appendix 5D. This assessment indicates that the transaction could achieve off balance sheet treatment for the public sector under the Technical Note, in that the limited qualitative analysis and preliminary consideration of risks carried out provides indicative evidence that an off balance sheet treatment from the Authorities’ perspective is achievable.

The initial assessment was undertaken based on the Technical Note. It is possible that use of other technical guidance, including the Application Note and FRS 5, may result in a differing view to that given using the Technical Note. The accounting view has been reviewed by the Authorities’ Auditors (Plymouth – Grant Thornton, Devon – Audit Commission-, Torbay – Audit Commission) which are not minded to challenge the view, and their supporting letters (where available prior to OBC submission) have been provided in Appendix 5E.


Page 80


Page 81

6. Project Team and Governance

6.1 Introduction The Authorities have put in place project management and joint governance arrangements that are sufficiently robust to deliver this major project in the timetable set out in this OBC. The arrangements reflect and recognise the scale of the spending commitment involved, the complexity of the service requirements and the breadth of issues raised in the course of a typical residual waste treatment and disposal project. The Project Team is well resourced drawing on experienced personnel (supported by first class external advisors) and the Authorities have agreed to work together within firm governance arrangements encapsulated in a Joint Working Agreement.

To date, the Authorities have delivered three significant PFI Projects with a combined capital value of £175 million. They have between them, and across a variety of disciplines, developed considerable expertise in the procurement of PFI schemes. This expertise will be drawn on for this waste PFI project to provide a strong and experienced team that will ensure the Authorities achieve a successful outcome and maximise the opportunity that the Partnership and PFI credits will provide. Details of the PFI experience of the Authorities are set out in Table 6.1 below:

Table 6.1 PFI Experience of the Three Authorities

Council Project Stage Capital Investment £m

Plymouth City Council Schools PFI Project (2008) Partly under construction and operational £50m

Devon County Council Exeter PFI Schools Project (2008) Operational £100m

Torbay Council Schools PFI Project (2000) Operational £25m

6.2 Legal Context

6.2.1 Duties in Relation to Controlled Waste

The three Authorities are Waste Disposal Authorities as defined in section 30(2)(a) of the Environmental Protection Act 1990. They have a duty under that Act to make arrangements for the disposal of the controlled waste collected in Plymouth, Torbay and Devon (section 51(1)(a) of the Act). Devon County Council gives directions to (amongst others) South Hams District Council, Teignbridge District Council and West Devon Borough Council (the Waste Collection Authorities within the sphere of this project) as to where and to whom to deliver their controlled waste under section 51(4)(a) of the Act. Plymouth and Torbay are Unitary Authorities and are responsible for the collection of the controlled waste in their


Page 82

areas. They are all also under a duty to provide places for their residents to deposit household waste and to dispose of waste so deposited (section 51(1)(b)).

6.2.2 Public Procurement and International Law

The Authorities must act in accordance with the EC Treaty principles of fairness, transparency, non-discrimination and proportionality and comply with the Public Contracts Regulations 2006 in this procurement. Consequently, this contract will be tendered utilising the Competitive Dialogue procedure contained in the 2006 Regulations.

6.2.3 Land Disposal Powers.

Plymouth City Council owns land at Ernesettle, Plymouth which has been allocated in Plymouth’s adopted Waste Development Plan Document as a strategic waste management site. It is likely that this land, or part of it, will be offered to potential bidders for use in connection with this project and, if utilised, will be leased to the successful bidder on commercial terms. The land was acquired under section 120 of the Local Government Act 1972 and will be leased under the power contained in section 123 of that Act.

6.2.4 Best Value

All Authorities have a duty under section 3 of the Local Government Act 1999 to make arrangements to secure ‘best value’ in the manner in which functions are exercised, having regard to a combination of economy, efficiency and effectiveness. Best value will be achieved in this procurement by the proposed competitive process to select a preferred bidder.

6.2.5 “Well being” Powers

Under section 2 of the Local Government Act 2000, the Authorities have powers to act in such a way as they consider likely to promote or improve the economic, social and/ or environmental well-being of their areas. They should have regard to their community strategies, through measures which include the incurring of expenditure and entering into agreements and arrangements with other parties, except where the exercise of a specific power is prohibited or restricted by another statutory provision.

6.2.6 General Powers

Section 1 of the Local Government (Contracts) Act 1997 and Section 111 of the Local Government Act 1972 confer a power on the Authorities to enter into contracts calculated to facilitate, or which are conducive or incidental to, the discharge of any of their functions. The contract to be let will be capable of certification under section 3 of the Local Government (Contracts) Act 1997.


Page 83

6.3 Project Governance The Partnership’s project governance and project management arrangements have been developed since July 2007. The resultant arrangements have subsequently been reviewed against WIDP Project Governance consultation guidance issued on the 9th April 2008. Following this review, notwithstanding differences in terminology, it is considered that the Partnership’s proposed arrangements substantially accord with the WIDP guidance. A simplified comparison against “The WIDP 12 Touch Points for Effective Project Governance” as defined in WIDP guidance is contained at Appendix 6A.

The Authorities recognised the benefits of joint working at an early stage of the project’s development and identified at least four reasons why co-operation between them would be desirable and mutually beneficial. Firstly, it was acknowledged that a joint procurement would increase the scale of the project and attract a stronger market interest - an important factor in achieving value for money. Secondly, suitable sites for waste treatment are limited across the sub-region (none within the Torbay area) hence minimising site usage would reduce site development costs and help with timely project delivery. Thirdly, transport and logistics dictate co-operation across Authority boundaries particularly as Plymouth is the largest urban area west of Bristol with good transport infrastructure and an influence extending well beyond its Authority boundary. Finally, significant economies of scale, in terms of procurement, capital and operational costs, would be realised by procuring a single shared solution and help to maximise value for money for the Authorities.

In addition to the benefits of joint working, the challenges of three authorities working together on a long-term, high value joint procurement and service contract were recognised - not least having three statutory decision making bodies, each with slightly different objectives and drivers. However, this early appraisal confirmed that the potential benefits of joint working would outweigh the disadvantages. In September 2007, the Authorities therefore confirmed their intention to work together in Partnership to deliver a joint residual waste treatment solution prior to submitting their Expression of Interest to Defra for PFI credit support.

A joint working workshop subsequently held on 21st November 2007 was well attended by the three Authorities. The aims were to explore the issues and reach agreement on how best to work together and determine an equitable joint project governance arrangement. Peter Keith-Lucas and Christopher Jarman, partners at Bevan Brittan and legal advisors to the Authorities, gave a presentation which explored potential options for joint working and governance of the project. The workshop successfully established the principles and specific information upon which the legally binding Joint Working Agreement and the future project governance arrangement was ultimately formed.

6.3.1 Joint Committee

Having considered various joint governance arrangements, including forming a Joint Waste Authority which was discounted and reserved for future consideration, the Authorities decided to establish a Joint Committee for the purposes of this Project. This will enable the three Authorities to delegate decision making to a single body as opposed to making three separate decisions. Its key purposes will be to:

• Ensure the procurement, delivery and operation of the residual waste treatment solution is undertaken successfully.


Page 84

• Take the following key decisions:

1) Approval of project tender evaluation criteria

2) Approval of preferred bidder selection

3) Resolution of matters that have been the subject of a veto at the Project Executive (see below for further details).

The Joint Committee will delegate all other decisions to the Chair of the Project Executive. A simple schematic showing the South West Devon Waste Partnership Project Governance Structure is shown at Figure 6.1 with details of the specific project management arrangements and team given in section 6.4.

Figure 6.1 South West Devon Waste Partnership Project Governance Structure

Once formally constituted in May 2008, each Authority will appoint two members to the Joint Committee with a further member from the main opposition party from each Authority having observer status. Legally the voting members of the Joint Committee can only be drawn from the Executive/Cabinet of the constituent authorities. The three Authorities recognise the need for a consistent, long term commitment to the delivery of the project and operation of the Partnership and consider the observers’ role to be vital to ensure cross party support. . The Joint Committee will be delegated power by the three Authorities to decide all matters relating to the project with the exception of:

SW Devon Waste Partnership Joint Committee

SW Devon Waste Partnership Project Executive

Specialist Advisors


Stakeholders

Plymouth City Council Torbay Council

DEFRA WIDP Support

Project Delivery Team


Page 85

• Approval of the Outline Business Case and Final Business Case;

• matters that are the subject of a veto exercised by one or more of the Authorities in relation to an item(s) of business of the Joint Committee whereupon that matter(s) will fall to the three Authorities to be decided; and

• amendments to its constitution.

These matters, known as “reserved matters” will be for the three Authorities to decide individually in accordance with their constitutions.

The Joint Committee will appoint a Secretary, responsible for administrative matters, a Project Director, responsible for overall leadership and management of the Project, and a Project Manager, responsible for the day to day management of the Project.

6.3.2 Project Executive

The Joint Committee will delegate the vast majority of its powers to the Chair of the Project Executive. The key reason for delegating power in this way is to streamline decision making and enable what will be largely practical, commercial, management and organisational issues to be dealt with at officer level. It will also promote and encourage the resolution of such issues at a level, and in a forum, where detailed knowledge rests. However, in law, delegation from the Joint Committee is not possible to a group of individuals such as the Project Executive so, in practice, the delegation by the Joint Committee must be to an individual officer.

It has been agreed that this officer will be the Chief Executive of Plymouth City Council as PCC is taking the lead. As this potentially gives significant powers to one individual, the Joint Working Agreement allows decisions to be vetoed by members of the Project Executive from other Authorities (the Lead Officers, or their nominated substitutes). When a particular decision is vetoed, it will be passed to the Joint Committee. Although the veto right exists, it will be desirable and undoubtedly the intent of the Chair of the Project Executive to achieve consensus as it will be paramount to avoid either unnecessary disputes or disagreements.

The Project Executive will be led by the Chair (Chief Executive Officer of PCC) who in law will take all decisions by way of delegated powers from the Joint Committee. Three senior ‘Lead Officers’ will assist him, one from each Authority, plus three additional officers nominated by each of the Lead Officers. As PCC is taking the lead role, the Lead Officer for Plymouth will also act as the Project Owner. Other standing members of the Project Executive will include the Defra WIDP (Waste Infrastructure Delivery Programme) representative, the Project Director and Project Manager. The Project Executive will be assisted and advised by the Project Team and external advisors who will be requested to attend as and when required. Officers from the Plymouth City Council’s internal audit function will also have access to all information and will have an option to attend formal meetings.

Each Authority’s Lead Officer is to act as the ‘Project Champion’ within their own authority. They will represent their Authority and will be responsible to the Project Executive for their Authority’s progress and actions.


Page 86

6.3.3 Approval of Outline Business Case, Joint Working Agreement, Final Business Case and Project Agreement

The three Authorities have developed the Outline Business Case (OBC) and Joint Working Agreement (JWA) documentation jointly over a period of six months and the contents and implications of both documents have been communicated to Members in each Authority. Formal approval of the OBC and JWA has been made by each of the three Authorities as follows:

• Plymouth City Council: Full Council Meeting on 21st April 2008;

• Torbay Council: Full Council Meeting on 17th April 2008; and

• Devon Council: Executive Meeting on 8th April 2008.

The reports, minutes and resolutions approving the Joint Working Agreement and the submission of the OBC are reproduced at Appendix 6C, 6D and 6E for each Authority.

The Joint Working Agreement identifies that the Final Business Case will be approved by the three Authorities individually by way of a resolution from their respective Executives/Cabinets. This approval can only be withheld should costs exceed the projected affordability envelope as approved as part of the OBC. The Chair of the Project Executive will approve the execution of the Project Agreement under delegated authority.

An exit from the Joint Working Agreement is specifically permitted if PFI credits are not approved, or are less than anticipated. Additionally, an authority may withdraw from the Agreement on notice, but will be responsible for the losses suffered by the other Authorities as a result. An exit for an Authority could, under general legal principles, be agreed consensually. Further commentary on the Joint Working Agreement is provided at section 6.6.

6.4 Project Management

6.4.1 The Project Team

The key individuals making up the Project Team are set out in figure 6.2 below:


Page 87

Figure 6.2 Project Management Structure and Key Individuals

SW Devon Waste Partnership Project Executive Chaired by PCC Chief Executive – Barry Keel PCC Lead Officer (champion) – Director for Development (Project Owner) – Nigel Pitt DCC Lead Officer (champion)– DCC Deputy Director of Environment – Ian Harrison TC Lead Officer (champion) – TC Strategic Director for Community Services – Mike Yeo Advised by: Defra WIDP Transactor – Niranjan Patel Project Director – Mark Turner Project Manager – Martin Pollard Internal Audit – Dominic Measures Advised by other officers as required: Head of Strategic procurement – John Cremins DCC Project Officer – Ben Jennings TC Project Officer – Sally Farley

SW Devon Waste Partnership Joint Committee Rotating Chairs 2 PCC Cabinet Members, Opposition Observer 2 DCC Cabinet Members, Opposition Observer 2 TC Cabinet Members, Opposition Observer Supported by Secretary and other officers as required

Torbay Council Devon County Council Plymouth City Council

Project Team Project Director – Mark Turner Project Manager – Martin Pollard PCC Project Officer – Mike Carroll DCC Project Officer – Ben Jennings TC Project Officer – Sally Farley Planning Officer Support – John Dixon Finance Officer Support – Elizabeth McDonald Specialist Legal Support – Alwyn Thomas Project Support Office Manager – Rachel Millett Internal Audit – Dominic Measures Supported as required by other officers from PCC, TC DCC

Specialist Advisors Technical - Entec Financial – Ernst and Young Legal – Bevan Brittan Communications – Coast Communications Commercial PFI advisory support

Defra WIDP Support- Niranjan Patel

Stakeholders


Page 88

The Partnership project management structure and team, developed since July 2007, now brings together a wealth of skills and expertise from each Authority, supported by specialist external advisors. The project governance arrangements and Project Team structure will be finalised and implemented during summer 2008 before procurement commences, although all officers and advisors listed in table 6.3 have been extensively involved in the project development to date.

It is proposed to use stage plans as the means of delegating responsibility for the day-to-day management of the project from the Project Executive through the Project Director and Project Manager. These plans will ensure that clear objectives, boundaries and key decisions are agreed in advance and thus provide the appropriate control of risk. . The project stage plans will also be used to determine and agree capacity and resource requirements at the various stages of the project and ensure that staff, who are not dedicated full-time to the project, have sufficient time allocated and agreed with their departments and line managers to deliver to the project.

Officers will represent the Partnership or their Authority and in some cases both. Plymouth City Council, acting as the lead Authority and host, is contributing the majority of officers to the core delivery team on both a full and part-time basis. Additional officers from each Authority will support the project as required. In representing the Partnership, it has been agreed that costs will be shared equally across the three Authorities. The Joint Working Agreement included at Appendix 6B sets out the duties of the key roles and details the cost sharing arrangements.

Key roles and responsibilities within the Project Management structure are defined in Table 6.2 below:

Table 6.2 Project Management Structure and Roles

Title Project Role

Project Owner The Project Owner provides overall sponsorship and leadership of the project and is ultimately responsible for ensuring the end product meets the needs of the users and controlling project expenditure and adherence to the Business Case. The Project Owner will also provide a link between the project governance arrangements and across the Authorities and ensure that the Joint Committee is kept informed of project’s progress and developments.

Lead Officers Each Authority’s Lead Officer is to act as the ‘Project Champion’ within their own Authority. They will represent their Authority and will be responsible to the Project Executive for their Authority’s progress and actions.

Project Director The full-time Project Director is responsible for the overall co-ordination of the Project, ensuring that the Project is delivered effectively and on-time throughout the various stages of the process. The Project Director will also provide strategic input and direction into identified waste workstreams and key project management areas that are integral to the success of the Project and will work with the Project Manager to ensure that all stakeholders are involved and consulted throughout the Project. The Project Director will also perform the project assurance role on behalf of the Project Executive.

Project Manager The full-time Project Manager is responsible for day-to-day running of the project and will lead and co-ordinate the procurement of the project to time, cost and quality targets. General responsibilities include the co-ordination and management of the Project Officers and wider Project Team throughout the procurement process and working with the Project Director to report progress and issues. Specific responsibilities include the preparation and maintenance of project and stage plans, risk management log, preparation of key contract documentation, leading on bidder clarifications, negotiations and evaluations throughout the procurement.

Project Officers Each Project Officer is to act as their Authority’s lead representative on the Project Team and will be responsible for progressing the project and for co-ordinating and steering the input from other officers from their Authority.

Project Support Office Manager

The full-time Project Support Office Manager will be responsible for providing the secretariat function of the Joint Committee, Project Executive and Project Team, configuration control, documentation/ information management, progress monitoring and stakeholder liaison functions.


Page 89

6.4.2 Project and PFI experience of the Project Team

The Project Team has been selected from across the Authorities drawing on a range of experience and skill sets. The relevant experience of key individuals is summarised in Table 6.3 below. However, it should be recognised that there is wider PFI, financial, legal and technical experience available from within each Authority as necessary.


Page 90

Table 6.3 Project Team and Relevant Experience

Individual Project Role Summary Experience

Barry Keel

BSc (Econ) Hons Dip TP

Chair of the Project Executive Chief Executive Officer of Plymouth City Council with a career in local government. He has substantial experience of managing major project delivery with local authorities and regeneration bodies in the north east of England. Has chaired the PCC Schools PFI project to successful delivery over the last 3 years.

Nigel Pitt

BSc MSc MRTPI

Project Owner and PCC Lead Officer

Director of Development with over 30 years local government experience and has been responsible for delivering major changes to PCC waste management services over the last 5 years. Responsibilities include Planning & Regeneration, Transport & Highways, Environmental Services and Asset Management.

Ian Harrison

BSc PhD CEng MIHT MRTPI

DCC Lead Officer Deputy Director for Environment, Economy and Culture at Devon County Council with a 34-year career covering transport and engineering as well as an extensive involvement in Local Authority Waste Management. Experience includes the development of the Devon Waste Management Strategy, tendering of Devon’s Waste Management Contracts and the recent securing of planning permission for an energy from waste plant at Exeter.

Mike Yeo

BSc CEng MICE MIHT

TC Lead Officer Torbay Council’s Strategic Director for Community Services with an engineering background and nearly 30 years experience in local government. Responsibilities include Torbay’s waste management services as well as highways and engineering functions with a net annual revenue budget in the order of £15m.

Mark Turner

BSc (Hons) CEng MICE

Project Director A chartered civil engineer with 21 years experience, primarily private sector, as a consulting engineer and facilities manager working across multiple sectors and projects. Joined PCC in 2005 to lead and manage a range of waste projects and strategic waste management issues including securing a replacement waste disposal arrangement following the closure of the Council’s landfill site.

Martin Pollard

IEng MIET

Project Manager Over 28 years experience in engineering and project management in both the defence and education sectors. An accredited Prince 2 Practitioner and 4Ps Gateway Review team member. Current role is as Plymouth City Council’s Strategic Procurement Manager for PFI/PPP projects and is now completing the delivery of PCC’s Schools PFI project.

Ben Jennings

BSc DMS CEng MICE MCIWM

DCC Project Officer A Chartered European Engineer with 43 years experience of the design and delivery of major civil engineering infrastructure. Currently responsible for Devon County Council’s Waste Management Service since 1990 including drafting and letting contracts for the disposal of waste, the operation of the County’s network of recycling centres and the restoration of redundant landfill sites. Recent experience includes developing a Municipal Waste Management Strategy for Devon, procuring new infrastructure to achieve the landfill diversion targets and the development of an energy from waste plant for Exeter.

Mike Carroll

BSc MCIWM

PCC Project Officer Over 30 years experience in a variety of technical and engineering fields with the last 13 years in waste management working on strategic waste management projects. A chartered waste manager representing PCC and providing technical support to the project.

Sally Farley

DipHE, BSc (Hons), M.Phil, Grad CIWM

TC Project Officer Joined Torbay Council 3 years ago as Service Manager for Environmental Policy and Performance. Now responsible for the development and implementation of Torbay’s Municipal Waste Management Strategy and lead project officer for strategic waste projects within the Authority.


Page 91

Table 6.3 (continued) Project Team and Relevant Experience

Individual Project Role Summary Experience

Alwyn Thomas Solicitor

MISM

Specialist Contract & Procurement Lawyer

A career spanning 27 years with wide experience of large projects having worked in local government, central government (MOD) and the private sector. Acting as the sole in-house legal advisor to the MOD on its Search and Rescue Helicopters PFI Project and successfully concluding many multi-billion pound projects in the defence sector. An expert in local government law with strong general commercial skills.

Elizabeth McDonald

ACIS

Finance Officer Over 25 years experience working in a financial environment, overseeing PCC Development Directorate finances including waste management. Large contract experience includes representing the Finance Department on a new contract for the disposal of Plymouth’s waste and to seek a private sector partner to deliver PCC’s Highways and Engineering activities.

John Dixon

BSC (Hons), DMS, MRTPI

Planning Officer A qualified planner with over 20 years experience in the public, private and voluntary sectors, of which the last 6 has been in waste management. Responsible for waste planning in PCC’s Planning and Regeneration department, including successful preparation and adoption of the City’s Waste Development Plan Document.

Rachel Millett

BA (Hons) APM

Project Support Office Manager and Secretary to the Joint Committee

Five years experience in administration and front-line service environments for PCC. Appointed the co-ordinator for the PFI Schools project in early 2007. Currently managing project documentation and administrative requirements, and providing management support for the transitional phases from construction to operation and support to contractor negotiations.

The Project Director, Project Manager and Project Support Office Manager will be full time roles.

The Project Director will have a wider responsibility overseeing Plymouth City Council’s waste programme, which sits alongside the residual waste project, many elements of which form part of the Reference Project for this Outline Business Case. The proposed Project Director has a wealth of project management experience in the public and private sector, and will be supported by other staff and advisors with specific knowledge and experience of PFI.

The proposed Project Manager is a procurement specialist, PRINCE2 practitioner and well versed in PFI procurement. He will naturally migrate from the Plymouth Schools PFI Project, which becomes fully operational in summer 2008, to the Waste PFI Project.

The proposed Project Officers from Devon and Torbay will act as their Authority’s lead representative on the Project Team and will also take responsibility for delivering their Authority’s wider waste programme including those associated initiatives identified in the OBC.

Other roles within the Project Delivery Team will be on a part-time basis with the degree of input identified and agreed within each stage plan and varied to align with the scope and intensity of work which will fluctuate throughout the various procurement and contract implementation phases. Where staff are allocated on a part-time basis, workloads will be prioritised such that this project will be afforded the highest priority. The need for flexibility and contingency within the Project Team has also been recognised as key staff will, if required, be able to cover several roles and disciplines. Experience and


Page 92

advice of a more specialist nature is also available from the external advisors referenced in section 6.5 and these advisors will also provide flexible capacity should the need arise.

6.4.3 Continuity from Procurement to Contract Management Phase

The different phases of the procurement, construction, commissioning and operational steady state, as defined in the Treasury’s Operational Taskforce Project Transition Guidance, are recognised by the Project Team and none of these phases are ‘stand-alone’. Drawing on past PFI and contract management experience, it is understood that the transition between phases must be planned from, and integrated into, the procurement phase to maximise the successful delivery of the project.

The in-house Project Team has considered the future needs by incorporating staff from a variety of backgrounds who between them are responsible as the service end-user and others who are familiar and experienced with the process of taking procurement through to operational service. For example, the proposed Project Manager is currently completing the Plymouth City Council’s Schools PFI Project having led the procurement process and is now guiding the project through to its operational stage and handover to the end-user. In addition, the Project Director has successfully procured and seamlessly mobilised a recent waste disposal services contract with new infrastructure to replace Plymouth City Council’s existing Chelson Meadow landfill arrangement.

It is recognised that the current governance and project management arrangements are primarily focused on the procurement phase. However, this will be reviewed and modified during the later stages of procurement when the focus will move to implementation and then the operational phase.

A project budget including contingency has been estimated for the next four years and requirements identified within each Authorities’’ medium term financial budget. It is recognised that the budget will need to continue to fund contract management arrangements post financial close and into the operational phase. It is understood that project budgets will vary over time to reflect the exact contract needs of the different phases. They will also need to fund any overlap of staff between phases such as the potential to employ both a Project Manager and Contract Manager from financial close to the completion of construction.

Although this will be more clearly defined as part of the Final Business Case, at this early stage, it is envisaged that, when the contract is fully operational, a single shared contract manager with support staff will be required along with contract liaison officers in each Authority. However, during the construction and commissioning stage additional staff will be required to administer and mobilise the contract. Based on previous PFI experience, this resource would probably originate from within the project procurement team but supplemented by other staff that specialise in construction and contract management. Such expertise is already available in-house within Plymouth City Council as a result of the Schools PFI Project and other substantial on-going waste related projects that include capital infrastructure schemes and new service contracts.

The Partnership considers that the experience of the proposed Project Team provides a robust platform from which to deliver the required continuity through procurement into operations. It is also fully aware that the resources should be flexible and that future budget commitments should accommodate the fluctuating procurement and contract management demands.


Page 93

6.4.4 4ps Involvement

The Partnership intends to utilise the 4ps Gateway review process throughout the procurement and has already completed a Gateway 0 Review in October 2007. This review was undertaken immediately following the submission of the Expression of Interest to Defra. It identified several important areas for development given that the Partnership was in its infancy and the scope of work and resources required to deliver the project were not fully scoped at that time.

The recommendations made by the 4ps as part of the Gateway review have been instrumental in driving the Project forward at pace and in consolidating the Partnership in a formalised Joint Working Agreement. A critical recommendation from the review related to the level and commitment of resource required to the deliver the OBC and for the subsequent procurement. This has been actioned. The effectiveness of the actions taken are illustrated by the excellent progress made in forming the Partnership and the production and internal Authority approval of a robust OBC. Details of the Gateway review recommendations and the subsequent actions undertaken are contained in Appendix 5B.

In consultation with the 4ps and as a consequence of the substantive progress made towards the preparation of the OBC since the initial review, it was decided not to schedule a Gateway 1 review before OBC submission. However, a Gateway 2 review will be programmed for September 2008 to coincide with the formal commencement of the procurement process.

The Partnership has also drawn on the experience and guidance of its Defra WIDP (Waste Infrastructure Development Programme) transactor who was assigned to the Project in August 2007. This regular WIDP support and guidance has been a vital component in helping the Partnership produce its initial EoI and in resolving key issues in the development and production of the OBC in a relatively short period.

6.4.5 Budget for Internal Project Team

It has been agreed by the Authorities that procurement costs, where contributing to the joint residual waste treatment solution, will be shared equally across the three Authorities. It has also been agreed that the cost of procuring and delivering any associated increased recycling, composting and waste minimisation initiatives will be borne by each Authority respectively unless additional joint working arrangements are agreed.

A breakdown of the estimated procurement costs including budgets to cover the Project Team, external consultants and site development and planning studies is included at section 8.2.

6.5 Advisors Following a rigorous competitive process to ensure value for money, Plymouth City Council procured and appointed external advisors in 2004 to provide specialist technical, financial and legal advice for the procurement of its residual waste treatment solution. These advisors, who are nationally recognised for their Waste PFI experience and expertise, will be retained by the Partnership for the duration of the project to undertake tasks allocated to them within their areas of expertise. Specific work elements, tasks and areas of advisor support have been provisionally identified and agreed along with the key staff involved, estimated time commitments and associated cost estimates.


Page 94

A communications consultant with experience of waste communications including Exeter’s energy from waste project has also been engaged by the Partnership through an existing Devon County Council contract and areas of work with cost estimates have been agreed.

Table 6.4 shows the current advisors to the Partnership together with key staff involved.

Table 6.4 Current Advisors to the Partnership

Financial Technical Legal Communications

Ernst and Young:

Jeff Gibbon Assistant Director

Martin Hayball - Senior Executive

Entec UK Ltd:

Jonathan Bebb - Associate Director, Project Leader

James Cook - Senior Consultant, Project Manager

Bevan Brittan:

Chris Jarman Partner PFI Procurement

Dermot Duncan Senior Assistant

Coast Communications:

Liz Waugh

Director

Jeannie Lunn

Associate Director

In addition, the Partnership proposes to secure commercial PFI advisory support from Andy Joss. Andy has worked alongside Plymouth City Council for several years supporting the Schools PFI Project Team in their successful delivery of this PFI project and more recently in developing this OBC.

Other areas of external advice and support have also been identified such as specialist insurance advice to the Partnership and specific planning, site investigation and environmental support. As with Plymouth’s previous Schools PFI contract, insurance advice will be secured during the procurement process when more detail is available. It is intended that a framework contract will be procured by PCC during 2008 for planning, site and environmental consultancy support.

Costs associated with external advisors have been allowed for in the forecasted and approved procurement budgets (see section 8.2) and where possible fixed prices will be explored where the scope of the work is well defined. To control costs, each consultant’s input and associated cost estimates will be reviewed and agreed as part of the stage plan development (see section 6.4.1) before receiving approval by the Project Executive. Actual expenditure will be monitored monthly by the Project Manager and Project Director and regularly reported to the Project Executive. Budgetary adjustments or use of contingency funds will similarly be reported to the Project Executive for approval and, if necessary, fed back into the annual budgetary setting process within each Authority.

It is proposed that every three months during the procurement, the Project Director, Project Manager and relevant members of the Project Team will review and discuss the performance of external advisors. Work undertaken in the proceeding three months will be reviewed, as will the Partnership’s satisfaction with that work. Any required amendments to the way these services are provided will be agreed at this time.


Page 95

Short CVs of the relevant advisors are set out at Appendix 6F. Arrangements for sharing knowledge and learning lessons from the advisors are already in place, for example through legal up-date bulletins, the sharing of generic and specific information and the use of workshops and presentations to the Project Team officers and Senior Management Teams. Such specialist training and support has already enabled the Joint Working Agreement to be largely drafted in-house and also for the procurement strategy to be developed and substantially agreed without the need for expensive advisory support. Such knowledge sharing and reduced cost training opportunities will continue to be drawn upon alongside the use and support provided by WIDP, 4ps and PUK.

Entec has held one to one workshops with each of the Authorities where training on the Entec Mass Flow Model has been provided. The workshops served as a means of ensuring the various parties were comfortable with the modelling assumptions in addition to transferring knowledge. Ernst & Young have held similar sessions with finance personnel from each Authority where the financial models were presented. Entec and Ernst & Young delivered an additional workshop where the Output Specification, Performance Framework and Payment Mechanisms were discussed. It is anticipated that a number of other workshops will be delivered by the advisors during the procurement process to ensure that the Authorities maximise their learning.

6.6 Joint Partnership Arrangements A Joint Working Agreement (JWA) has been developed between the three Partnership Waste Disposal Authorities – that is: Plymouth City Council, Torbay Council and Devon County Council. This agreement has drawn on the experiences of other Authorities and adapted their good practice to suit the less common partnership arrangement of a county and two unitary authorities.

The JWA is included at Appendix 6B and sets out Governance arrangements as described in section 6.3. The JWA was approved and signed by the three Authorities in April 2008 and is a legally binding agreement. This agreement not only establishes the governance and responsibilities of key roles, it also clearly establishes the principles and obligations of joint working including the following key features:

• Procurement costs will be shared equally between partner Authorities;

• any Authority withdrawing from the Partnership after signature will be liable for the losses suffered by the remaining partners as a result of the withdrawal. However if the requested PFI credits, as determined in accordance with Defra’s guidelines, are not approved, then any Authority has the option to withdraw;

• any land offered by an Authority and used as part of the joint solution will be considered on a commercial basis outside the contract;

• most decisions are to be delegated to a Joint Committee comprising two Executive members and one opposition member observer from each Authority;

• there is further delegation by the Joint Committee of day-to-day operational decisions to the Chief Executive Officer of Plymouth City Council (Chair of the Project Executive) who will be assisted by a Project Team;

• all decisions will be subject to veto arrangements such that, if a decision is vetoed, it will be referred upwards to the Joint Committee/the three Authorities as appropriate;


Page 96

• disputes will be escalated internally / referred to WIDP / Defra / mediation / the courts as appropriate;

• operational service costs will be paid on the basis of actual waste tonnage delivered to the facility (whilst recognising the requirement for each Authority to cover the appropriate proportion of the fixed capital costs); and

• the duration of the Agreement will be until the end of the operational services contract for the facility (i.e. 2039).

6.7 District Involvement The Local Authorities of Devon have been working closely together on waste issues since the early 1990’s and have a formally constituted joint working arrangement called Devon Authorities Waste Reduction and Recycling Committee (DAWRRC). All Devon Authorities contribute towards a single DAWRRC budget that is subsequently aimed at improving waste recycling and waste reduction across the whole county.

Although the formal Joint Working Agreement only covers the three Waste Disposal Authorities, the Devon Waste Collection Authorities (WCAs) have been kept aware of the Partnership’s potential sub-regional waste treatment proposals through DAWRRC and other Devon waste forums such as the Chief Executive and Leader’s quarterly meeting on waste issues.

The three WCAs in the sub-regional area (South Hams District Council, West Devon Borough Council and Teignbridge District Council) are each currently achieving around, or in excess of, 50 per cent recycling rates for their household waste. This exceptional performance is among the best in the country and, through their own local policies and sign-up to the Devon Waste Strategy, remain committed to this national agenda.

A specific commitment by Devon Authorities to support this joint residual waste treatment solution was also recorded at a DAWRRC meeting in February 2008 which minuted that:

“DAWRRC supports in principle the Plymouth/Torbay/Devon Partnership’s objective of procuring an energy from waste plant to deal with residual waste in the Plymouth, Torbay, South Hams, Teignbridge and West Devon areas, without undermining current waste reduction, recycling and composting initiatives.”

Notwithstanding current WCA arrangements, it is recognised that future changes may occur. This risk has been considered although is unmanageable as Devon County Council has powers to direct WCA waste to specified disposal points. Furthermore, as Devon County Council is planning a number of waste treatment and disposal facilities around the county, it can be flexible in terms of quantity and composition of the waste it directs to any facility.

A local authority boundary review has also been recently announced for Devon. The risks arising from any change to local authority boundaries are not considered significant or unmanageable given that existing contractual agreements and arrangements will be transferred if any boundary changes occur. Whilst this eventuality may potentially require changes to collection arrangements, these will not unduly impact on the Partnership’s joint residual waste treatment solution. Indeed, the pre-existence of the Partnership working at sub-regional level will assist in ensuring a smooth transition to any new


Page 97

administrative arrangements. The Boundary Committee’s draft proposals will be published in July 2008 and final proposals submitted to the Secretary of State for DCLG in December 2008. Any implications of the proposals will be explored in detail in the preparation of the Final Business Case.

It is proposed to include the contributing Districts as part of stakeholder group involvement to ensure that they are kept informed of contract developments and proposals and so their needs are considered and reflected in the Project Agreement as appropriate.


Page 98


Page 99

7. Sites, Planning and Design

7.1 Introduction Due to the nature of the Partnership’s catchment, the most suitable location for a residual waste treatment facility is in or near to Plymouth. This section sets out Plymouth’s approach to sites and planning for the delivery of residual waste treatment facilities, and has been developed with reference to Defra’s Planning Health Framework.

Following more than 3 years of work, Plymouth City Council successfully adopted its Waste Development Plan Document (WDPD) in April 2008 (see Appendix 7D and 7E for the Inspector’s Examination Report and adopted WDPD). This document builds on the adopted Local Development Framework (LDF) Core Strategy and identifies four strategic waste management sites within Plymouth, two of which are readily capable of accommodating a sub-regional residual waste treatment facility. Further sites are identified in the Devon Waste Local Plan but only one site is close to the City and this has a number of constraints. Nevertheless, they may provide alternative locations for strategic facilities should the need arise.

The WDPD has regard to a range of national, regional and local plans, policies. These include the Waste Strategy for England 2007, Planning Policy Statement 10 (in particular the key planning objectives for waste) the Draft Regional Spatial Strategy and the Regional Waste Strategy. At a local level the WDPD is complementary to the Plymouth Municipal Waste Management Strategy. The WDPD also reflects the Waste Plans and DPDs of the neighbouring Waste Planning Authorities of Devon and Cornwall.

The WDPD is based on a robust and comprehensive evidence base, has been subject to public consultation during its preparation and has taken account of the results of a sustainability appraisal. The Sustainability Appraisal, which incorporates a Strategic Environmental Assessment and considers the economic, environmental and social effects of the plan, was undertaken by independent consultants at each key stage of the WDPD’s development. The appraisal process, and its final conclusions and recommendations, have informed the strategic direction of the DPD, the choice of options, and the content of the policies and proposals.

7.2 Site Identification

7.2.1 Identification of Strategic Waste Sites in Plymouth

A thorough independent site search was completed within the Plymouth urban area in 2005 as part of the development of the WDPD. Site options for both strategic and local waste management facilities emerged but no potential sites for landfill were identified.

Drawing upon the guidance provided by PPG10 and the draft PPS10, the initial exercise identified in excess of 300 distinct and individual sites within Plymouth. These sites were progressively reduced


Page 100

through a series of assessments and consultations to four sites, which are identified in the WDPD as having some potential to accommodate a strategic facility. Of particular interest were those sites that held the greatest potential for the co-location of facilities. These four sites and their locations within Plymouth are shown in figure 7.1 below:

Figure 7.1 The Four Identified Strategic Sites in the Plymouth Waste DPD

7.2.2 Site Suitability for a Sub-regional Solution and Reference Project

Of the four sites identified in the WDPD, further evaluation was necessary to consider which of these were suitable for a sub-regional waste treatment solution and hence which should be assumed as the basis for the Reference Project. The suitability of each site for a sub-regional waste treatment solution is summarised as follows:


Page 101

• The Ernesettle site is largely a green-field site with sufficient land area available to accommodate a sub-regional solution and is close to the A38 major trunk road. However it is adjacent to a MoD armament depot which imposes some planning constraints;

• the Chelson Meadow site cannot be easily developed for a sub-regional solution as the majority of the allocated site area already houses a range of recycling and waste management infrastructure and only a comparatively small area (about 1 ha) can readily be used to accommodate a new facility;

• the Coypool site is currently an industrial site used for china clay drying operations but has sufficient land area available to accommodate a sub-regional solution, is close to the A38 major trunk road and has a railway link to the mainline network; and

• the Moorcroft Quarry site is currently used as an operational quarry and has been allocated for inert material recycling only as this is considered complementary to its existing uses.

The only two sites that could realistically be suitable for a sub-regional Partnership solution, and hence for the Reference Project, are at Ernesettle and Coypool. These sites are shown in more detail as figures 7.2 and 7.3.

Figure 7.2 Ernesettle Strategic Site also showing MoD safeguarding arcs (yellow area unlikely to be usable)


Page 102

Figure 7.3 Coypool Strategic Site

Following the approval of the WDPD, the site at Ernesettle has been selected as the assumed site for Reference Project cost estimating purposes. This is on the basis of a number of factors, not least that this site is in Plymouth City Council’s ownership and has certainty in terms of availability to meet the project timescales. It does not imply, however, that this is the preferred site, since that will only emerge during the procurement process and ultimately be determined at planning application stage.


Page 103

7.3 Securing and Developing Potential Sites

7.3.1 Ernesettle Site

As already mentioned, the Ernesettle site is already in the ownership of Plymouth City Council and subject to planning consent is available for immediate use. However, to determine the precise form of development that could be accommodated, a number of further assessments, investigations and background studies are planned. These include detailed:

• Ground and site investigations including contaminated land;

• background environmental and ecological studies;

• consultations with statutory undertakers; and

• analysis of planning and design constraints imposed by the adjacent MoD site.

The results of these further investigations will form part of the Environmental Statement and be taken into account in the planning application.

7.3.2 Coypool Site

Plymouth City Council commenced negotiations to acquire, or agree an option on, the Coypool site in early 2005 following the announcement by Imerys (occupier and part owner of the site) that they would be ceasing their operations. Although Imerys has not yet progressed the disposal, the Authority has maintained its dialogue with the Company and the other part owner of the site.

Plymouth City Council has, in the meantime, commissioned planning studies on the site which provided evidence for the Plymouth Local Development Framework and a basis for negotiation with the site owners.It is continuing to negotiate with the existing owners and has recently re-confirmed its interest in acquiring the site both to ensure the availability of a developable strategic waste management site and to deliver wider strategic objectives of the Authority. The Partnership intends to continue to undertake assessments, investigations and background studies to ensure the site is available at the right time should it be required or available.

7.3.3 Sites outside Plymouth

Devon County Council adopted its Waste Local Plan in 2005. This plan identifies waste policies and potential waste sites across the Devon area, the nearest at Lee Mill approximately seven miles east of Plymouth.

This site at New England Quarry is in private ownership and has been used for inert material disposal. The Waste Local Plan identifies many potential uses for the site including energy from waste treatment. However, the plan also identifies a number of issues that would need to be resolved before it could be


Page 104

brought into use including access constraints and floodplain issues. The potential of this site will be considered by the Project Team along with other site planning matters.

7.3.4 Suitability for Combined Heat and Power (CHP)

It is the intention of the Partnership, if at all possible, to utilise the heat as well as the power (CHP) from any residual waste treatment solution. The Partnership has already commissioned a high-level study to assess the potential for CHP. This is included at Appendix 4D.

This study has highlighted some small-scale opportunities near to each of the Coypool and Ernesettle sites and also larger potential further afield. These will need further careful analysis and discussion before concluding their viability. Existing opportunities identified include:

• The possibility of transferring heat to several major heat users including HM Naval Base Devonport or the Derriford Hospital complex; and

• smaller heat-using potential includes factories, schools and other public buildings near to either Ernesettle or Coypool sites.

There is also the possibility that future development can be encouraged near to the facility that will make use of the heat supply. Known developments and identified municipal development requirements include:

• A new 5,000 property housing development at Sherford on the outskirts of Plymouth, together with a further 1,500 houses at Plymstock Quarry;

• possible further development at Coypool adjacent to the allocated waste site; and

• a new public swimming pool requirement in the north of the City.

7.4 Planning Health Framework The Partnership’s approach to sites and planning in relation to the delivery of residual waste treatment facilities has been developed with reference to Defra’s Planning Health Framework. The completed Planning Health Checklist is at Appendix 7A. The key issues covered by the framework have been addressed within this section. The status of the Partnership’s Waste Management Strategies is covered in Section 3, and details of consultation and communication are discussed in Section 9.

While not prejudicial to its statutory responsibilities as Local Planning Authority, Plymouth City Council and the Partnership will provide support to the preferred bidder in bringing forward a planning application. This is expected to be submitted in late 2010. The Partnership will build on the studies already completed by ensuring that the necessary data has been collected to enable the environmental statement to be prepared and the planning application compiled. This information will be handed over to the preferred bidder.


Page 105

7.5 Design and Sustainability Issues Through its WDPD, Plymouth City Council requires high quality design on any future waste development. The Partnership has made a commitment to achieve this on this project.

Plymouth’s LDF Core Strategy also places considerable emphasis on good design and ensuring that future development contributes to improving the quality of the City’s built environment. A Design Supplementary Planning Document will provide more detailed guidance.

Policy W8 of the Waste DPD sets out the need to achieve BREEAM excellent standards and the need for the submission of a Climate Change and Sustainability Statement with every major application. Policy W2 (Ernesettle) requires proposals to exhibit the highest standard of design and to achieve an iconic or landmark building that will be worthy of its surroundings. The design policies in the WDPD were influenced by a study of design principles for waste management facilities undertaken by independent design consultants.

To ensure that the Partnership is able to achieve its design ambitions, it has in place a robust design management process. In addition to in-house urban design expertise, Plymouth City Council has established an independent Design Panel, including representation from the Commission for Architecture & the Built Environment (CABE), to advise on major and other significant applications. This project would fall into that category. The Partnership is also able to draw Devon County Council’s recent experience in successfully obtaining planning permission for their Exeter EfW plant which included a high quality facility design.

The Partnership’s approach to design within the procurement process will be to set out explicitly the need for a high standard of design and sustainability without being over prescriptive. The key requirements will be set out in an Information Memorandum and the bids will be assessed for their design content by an expert panel who will report to the main evaluation panel. The Memorandum will be based on a Design & Sustainability Strategy, a draft of which is at Appendix 7B. The Partnership will be looking for innovation and creativity in the design of the proposals and the experience of the bidder’s design team.

The WDPD was subject to a Strategic Environmental Assessment / Sustainability Appraisal as well as Assessment under the Habitats Regulations

Key design and sustainability outcomes for the project are likely to include:

• Power generation or combined heat and power

• BREEAM Excellent standard;

• iconic design; and

• 10% recycled content in building materials

On the basis of the design principles report and the inclusion in the WDPD of design and sustainability criteria, a substantial sum has been included in the Reference Project cost estimate to ensure that this adequately represents the required standard of development. Equally, the project timescale reflects the need to ensure that sufficient time has been allowed during the bidding and evaluation stage and the planning application stage to incorporate the need for design development.


Page 106

The risk register identifies a number of potential risks associated with environmental issues. These will be minimised by the early commissioning of studies to identify the scale of the risk and the work required to overcome them.

7.6 Public Engagement Plymouth City Council has an adopted LDF Statement of Community Involvement (SCI) and this governs the public engagement in all aspects of planning policy and control Extensive consultation and communication has been undertaken as part of the WDPD process and this is summarised at Appendix 7C. A Consultation and Communication Strategy for the Waste Project has also been agreed and this will influence communication and engagement with the public and stakeholders from now on, this is included at Appendix 9A.

The Partnership will engage with stakeholders and intends to form residents’ panels to enable local involvement in the development of the planning applications and in particular the design elements of any proposed facility. The Partnership is considering the use of the Design Quality Indicator process to enable stakeholders and end users to influence the design of the facility.


Page 107

8. Cost, Budgets and Finance

8.1 Introduction The Reference Case and Reference Project were defined in section 4. This section now sets out the Partnership’s understanding of the costs of their procurement and examines the following:

• The procurement route for this contract which represents the best Value for Money (VfM) for the residents living within the Partnership boundary, comparing a procurement approach based upon the Private Finance Initiative (“PFI”) as opposed to a more standardised Conventional Procurement (“CP”) (section 8.3.1);

• the comparison of the Reference Project, that is, the nominal cost of entering into a long term residual waste treatment contract with the private sector with a “Do Minimum” approach that continues to send waste to landfill (Landfill Option);

• the affordability of the Reference Project. This analysis also considers the effect on the affordability position of a number of sensitivities that are applied to key cost assumptions (section 8.5);

• Councillor’s Approval (section 8.6); and

• The Partnership’s LATS Trading Strategy (section 8.7).

The shadow tariff financial model that supports the Reference Case of procuring and operating an EfW facility in Plymouth with at least a 25 year operational life and the supporting assumptions for the Reference Project as a whole are included in Appendices 8C and 8E respectively.

The affordability analysis detailed in section 8.5 indicates an “affordability gap” for the Partnership in pursuing the Reference Project (net of PFI credit) of £423m, including a headroom facility of £66m. The Partnership has recognised this “gap” and furthermore, each of the Authorities has committed to fund their proportion of the shortfall over the life of the contract. Section 8.5 details the approval process that each Authority has adopted in signing off the affordability envelope.

8.2 Procurement Costs Budgets for the procurement stage of the project have been estimated and allocated based on past PFI experience and drawing on the experience of advisors and other Authorities. For some aspects, such as site investigations and planning studies, the cost estimates are high-level, as detailed work could not be progressed until Plymouth’s Waste Development Plan Document was adopted. Given these unknown elements, a realistic contingency has been agreed which will be utilised by the Project Team with the approval of the Project Executive.


Page 108

The budgetary provision for the shared internal Project Team and external consultancy support to complete the required procurement has been approved by the three Authorities and will be borne equally. These budgets will be managed by the Project Team and will be regularly updated, monitored and reviewed annually by the Project Executive to ensure adequacy. Budget estimates for the procurement are set out in Table 8.1 below.

Table 8.1 Shared Waste Procurement Budget Estimates

Resources

Actual 2007/08

£000

Estimate 2008/09

£000

Estimate 2009/10

£000

Estimate 2010/11

£000

Estimate 2011/12

£000

Internal Shared Project Team £88 £330 £337 £344 £353

External Consultant & Advisory Support £210 £278 £264 £245 £133

Site Investigations and Planning Studies £10 £75 £200 £225

Contingency £200 £200 £200 £100

TOTAL £308 £883 £1001 £1015 £586 Source: Plymouth City Council

As set out in Section 6.4.1, it is intended to develop stage plans, agreed by the Project Executive, for the various procurement phases which will detail actual in-house and specific advisor input along with boundaries, key decisions and levels of delegation.

8.3 Value for Money Assessment

8.3.1 Value for Money Introduction

This section of the report, in accordance with HM Treasury’s requirements, assesses the residual treatment infrastructure included within the Reference Project and determines whether the use of PFI offers potentially better VfM over a solution that is procured conventionally by the public sector.

This OBC assumes that Defra has already undertaken a Stage 1 programme level assessment for waste PFI projects as part of the Comprehensive Spending Review completed in 2004, demonstrating that waste, as an investment programme, is likely to achieve VfM under PFI. This OBC details the Stage 2 project level assessment aimed at verifying whether this initial decision to use PFI to fund the Reference Case is valid for the Partnership.

Set out below are three stages of the process under which the VfM of PFI is assessed in relation to alternative funding options:


Page 109

• Stage 1: Programme Level Assessment (undertaken at a Government department level), to ensure that PFI is only considered for those programmes where PFI is likely to represent VfM;

• Stage 2: Project Level Assessment (undertaken by Councils as part of an Outline Business Case), comprising both qualitative and quantitative elements; and

• Stage 3: Procurement Level Assessment, which is an ongoing assessment during the procurement phase of the project to ensure that the desired project can be delivered.

In order to verify the Stage 1 assessment, the Authorities have considered the use of PFI as an alternative to the Public Sector Comparator (which estimates the cost of the Public Sector undertaking the project), referred to henceforth as Conventional Procurement (“CP”).

The CP and PFI procurement methods are defined as follows:

• The CP Option: Procurement through conventional approaches that use public funding. This can include letting a design and build contract for the construction of an asset (funded through Prudential Borrowing (“PB”)) and then letting annual operating and maintenance contracts for the on-going maintenance of that asset. CP may afford a different contractual and therefore risk profile to procuring councils than traditional PFI contract structures; and

• The PFI Option: Procurement under the PFI which is a specific procurement methodology through which the public sector lets a design, build, finance and operate contract to the private sector for the construction and whole life maintenance of an asset and/or associated service.

8.3.2 VfM Assessment of PFI and CP

Having defined the scope of the PFI project, the next step is to establish the procurement route that represents the best VfM for residents. The approach taken is consistent with that outlined in the updated HM Treasury VfM Assessment Guidance (“the Guidance”) as issued in November 2006 and the “Supplementary VfM Guidance for Waste PFI” prepared by PUK for Defra in September 2005.

This project level assessment has considered both qualitative and quantitative factors. The qualitative appraisal considers the viability, desirability and achievability of PFI. The quantitative analysis uses a prescribed methodology and electronic spreadsheet provided by Treasury to determine whether PFI represents indicative VfM when compared to Conventional Procurement. This section outlines the results of the qualitative and quantitative assessment.

8.3.3 Qualitative Assessment

The Guidance states that PFI should generally apply to large projects, with a capital value in excess of £20 million and the assets are critical to the delivery of public services. PFI projects commit the procuring authority to a particular provider for some years ahead and, whether the projects are successful or not, will depend on both cost and a number of qualitative and quantitative considerations, relevant to deciding


Page 110

the most appropriate procurement route. The three qualitative factors identified by the Guidance are as follows:

• Viability: Confirmation that the investment objectives and desired project outcomes can be translated into outputs that are measurable, ‘contractable’ and can be agreed. This factor also involves assessing whether there are efficiency or accountability issues which demand that the project is provided by the public sector directly rather than through the PFI procurement route;

• Desirability: Involves assessing the relative merits of different procurement routes. Considerations include incentivisation; risk transfer in PFI; the Government’s lower cost of borrowing in conventional procurement; and the relative advantages and disadvantages associated with a long-term contractual relationship between the public and private sectors; and

• Achievability: Involves gauging the expected level of market interest and whether the public sector client would have sufficient capability to manage the complex processes involved. This is integral to both the procurement of the services and their ongoing management and performance.

The Partnership has given due consideration to a series of qualitative questions designed to verify the decision for proceeding with PFI. Table 8.2 below summarises the Partnership’s responses for each of the three qualitative factors described above. The full list of questions and responses is included in Appendix 8A.


Page 111

Table 8.2 Qualitative Assessment Summary

Qualitative Factor Summary Question from the Guidance The Public Sector’s Considered Response

Viability Overall, in considering PFI, is the department satisfied that sustainable long term contracts can be constructed, and that strategic and regulatory issues can be overcome?

The Partnership is satisfied that a contract structure can be arrived at which will:

• Meet the Partnership’s strategic aims and objectives for waste management;

• Deliver the project to the Output Specification;

• Meet landfill targets immediately as the proposed infrastructure is commissioned;

• Provide a flexible solution, so that changing regulatory targets can be met where necessary;

• Satisfy current regulatory requirements, including Treasury Taskforce Note 1, the application of FRS5 and comply with the Local Government (Contracts) Act 1997.

Desirability Overall, is the accounting officer satisfied that PFI would bring sufficient benefits that would outweigh the expected higher cost of capital and other disadvantages?

The Partnership is satisfied this PFI contract should bring sufficient benefits to outweigh an expected higher cost of capital through:

• The risk transfer of future costs which could be subject to fluctuation;

• Certainty of service delivery during the contract term; and

• The use of a DBFO contract, which will ensure the construction and subsequent operating cost benefits are linked.

Achievability Overall, is the accounting officer satisfied that a PFI procurement programme is achievable, given an assessment of the market, Authority resources and the attractiveness of the proposal to the market?

The Partnership is satisfied the procurement programme is achievable, given that:

• The right level of resource and expertise has been committed to the project. This is supported by experienced consultants;

• Soft market testing has provided positive feedback. Considerable interest has been expressed in the project from all sectors of the market place including established waste management operators, technology providers and financial institutions;

• The project seeks a product with which the private sector is familiar;

• Risk sharing will be based on established standards, with which the private sector is familiar; and

• The management of the project will be robust, with staff appropriately trained.

Source: Partnership

Based on the qualitative project level assessment, the Partnership believes that the Reference Case meets the viability, desirability and achievability requirements of the Guidance, confirming the initial programme level assessment decision that PFI offers VfM. The results of the quantitative assessment are discussed below.


Page 112

8.3.4 Quantitative Assessment

The quantitative assessment considers how the quantifiable costs and benefits of using PFI as a procurement route are likely to compare with conventional procurement. This involves estimating values for the capital and operating costs attached to the project and adjusting these for any inherent Optimism Bias and/or specific risks, as well as expected transaction costs. For the PFI option, the project cost is calculated using an assumption of private financing and adjusting relevant factors accordingly. A generic spreadsheet has been developed by Treasury (“the Treasury spreadsheet”), to capture the values and enable sensitivity testing that, according to the Guidance, must be used as part of the project level assessment.

The next four sub-sections outline the basis upon which the Quantitative Assessment has been determined. These sections include the:

• Key input assumptions that have been made in using the Treasury spreadsheet;

• Optimism Bias;

• Indicative VfM results; and

• outcome of the sensitivity analysis performed.

8.3.5 Key Input Assumptions

The Treasury VfM spreadsheet contains a number of assumptions that have been ‘hard coded’ and therefore cannot be altered. For example, employment cost per employee for the CP option is fixed to equal the amount input for the PFI option. There are, however, many project specific input assumptions to be made. A summary of the key financial input assumptions is provided below with a full listing detailed within the VfM quantitative assessment spreadsheet at Appendix 8A.

The shadow tariff model used to estimate the cost of the project to the Partnership assumes that financial close occurs on 1st October 2010, followed by a planning, construction and commissioning period which completes on 31st March 2014. The model therefore assumes that full operation commences from 1st April 2014, and as the Project is funded on a 25 year operational period, the contract will come to an end on 31st March 2039. Table 8.3 below summarises the key input assumptions used for the Treasury VfM spreadsheet.


Page 113

Table 8.3 Summary of Key Input Assumptions

Variable Description Partnership Input Assumption

Timings The contract period is restricted to intervals between six and 40 years.

The contract period for this project is modelled at 28 years.

Capital Expenditure (“Capex”)

Expenditure incurred in procuring the asset. It does not cover expenditure required to maintain the asset.

The initial (real) Capex of the project at projected financial close of 1 April 2011 totals £174 million over a two year period for the PFI option and £165 million for the CP option. The PFI Capex costs reflect the estimated cost of the risks borne by the private sector under a PFI transaction.

Lifecycle Expenditure Capital Expenditure incurred on a periodic basis during the course of the contract period following completion of the initial construction period, to maintain the asset so that it remains fit for its intended purpose.

Lifecycle expenditure has been separately provided by the Authoritys’ technical advisors, Entec. Lifecycle costs have been calculated on an annuity basis on the figures provided by the technical advisors.

Operating Expenditure (“Opex”)

Represents the costs incurred by the Partnership in operating the asset and/or running the services that are included within the scope. Expenditure which falls outside of the scope is excluded.

The annual opex cost (non-employment) is calculated as £5.5 million, The employment costs are calculated as £0.8 million per annum. Operating costs commence following the completion of the two year construction period.

Third Party Income This represents any income stream which may result from the procurement which will reduce the unitary charge

The Councils’ technical advisors derived the third party income data for the project (for electricity income). An annual amount of income is calculated following the same methodology as with opex (i.e. the derivation of an annuity). The annual amount calculated is approximately £3.75 million.

As with opex costs, the third party income stream only commences after the initial 1 year planning and 2 year capex period has finished.

Transaction costs These represent the costs incurred by the private sector and the public sector, in reaching contractual agreement.

The transaction costs have been assumed at £2m under the CP and £5m under PFI, based on the size and complexity of the procurement and costs incurred on other waste PFI projects.

Gearing This represents the share of the total financing requirement which is funded by debt under the PFI option.

The level of senior debt as a percentage of the total project funding is 85%, based on a prudent level of gearing acceptable to the current market.

Source: Ernst & Young Analysis

8.3.6 Optimism Bias

Optimism Bias relates to the demonstrated and systematic tendency for project appraisers to be overly optimistic when considering project benefits and costs.

The Treasury Optimism Bias spreadsheet accounts for the impact of uncertainty over project costs. The Guidance states that there is currently little, if any, evidence to suggest that either conventional or PFI-style procurement methods deal any more or less efficiently with Optimism Bias. However, there is evidence that the allocation of risks achieved under a PFI contract reduces the impact of any Optimism Bias on the procuring authority as compared to the contractual arrangements typically resulting from a CP option.


Page 114

The Guidance also explains that, in accounting for Optimism Bias, the Treasury spreadsheet differentiates between two key stages of the investment decision process, namely pre-FBC and post-FBC. Final Business Case in this instance represents the date of contract award. The pre-FBC Optimism Bias factor represents the increase in estimated costs or shortfall in estimated income between the OBC and the FBC stage. Post-FBC Optimism Bias factor represents the increase in costs or the shortfall in income between the date of contract award and the completion of the associated asset(s).

Fundamental to the internal operation of the Treasury spreadsheet is the assumption that the impact of post-FBC Optimism Bias will be greater under the CP option than the PFI option.

The Treasury spreadsheet requires inputs for both pre-FBC and post-FBC Optimism Bias percentages for capex, lifecycle costs, opex, transaction costs and third-party income. These inputs have been provided by the Partnership’s technical advisors and are summarised in Table 8.4. Comprehensive details of how the inputs were derived are provided in Appendix 8B and are summarised in Table 8.4.

Table 8.4 Optimism Bias Input Assumptions

Cost Centre Overall Optimism Bias

(%) Pre-FBC Optimism Bias

(%) Post-FBC Optimism Bias

(%)

Capex 43% 15% 28%

Life cycle 48% 13% 35%

Opex (non-employment) 20% 8% 13%

Transaction 30% 10% 20%

Third-party Revenue 20% 10% 10%

As an example as to how the above Optimism Bias inputs are used in the Treasury Spreadsheet, for capital expenditure the overall level of Optimism Bias is 43%. The Pre-FBC Optimism Bias of 15% represents the likely increase in costs up to the point of contract award and the Post-FBC Optimism Bias of 28% represents the potential cost increases after contract award. As stated above, the impact of the Post-FBC Optimism Bias for the procuring authority is likely to be reduced by a PFI contractual structure.

8.3.7 Indicative PFI VfM Results

The key outputs from the Treasury spreadsheet are the CP Net Present Cost (“NPC”) of the project, the PFI equivalent and the indicative PFI VfM percentage, representing the percentage difference between the two. If the indicative PFI VfM percentage is positive, then this indicates that the project supports the programme level assessment that VfM can be achieved through PFI. If negative, the CP is deemed to offer better VfM.


Page 115

For the base case scenario, the indicative PFI VfM percentage is generated using a pre-tax Internal Rate of Return (“IRR”) for the private sector of 15%10. This produced an indicative PFI VfM percentage of 7.21%, confirming PFI as offering the potential to deliver VfM for the project. The base case scenario results in NPC terms are summarised thus:

Table 8.5 Indicative PFI VfM Results – Base Case

£000 CP NPC PFI NPC

Base Case Option (15% pre-tax IRR) 477 442

Indicative PFI VfM % n/a 7.21%


8.3.8 Outcome of Sensitivity Analysis Performed

The Treasury spreadsheet uses indifference points to demonstrate the level of change required in the value of individual inputs to erode the difference between the CP and PFI NPCs to zero thus making the procuring authority indifferent between the two procurement routes. Table 8.6 sets out Indifference Points for capital and operating expenditure for the CP option and for the unitary charge for the PFI option.

Table 8.6 Indifference Analysis

Procurement Option Variable Indifference Points (%)

CP Capex (9)%

CP Non-employment Opex (39)%

CP Employment-related Opex (212)%

PFI Unitary Charge 11%


The analysis demonstrates that, all other things remaining equal, the capital expenditure under the CP would have to decrease by 9% in order for the Partnership to be indifferent between the two options. Similarly, non-employment operating expenditure would have to decrease by 39% under the CP. Employment related Opex would have to decrease by 212% under the CP for it to become equal to PFI. All of these are considered to be within comfortable distance of the Guidance benchmark of 5%.

10 Base case scenario assumes that the private contractor will target a pre-tax return of 15%.


Page 116

Affordability constraints aside, the Unitary Charge would have to increase by 11% for the Partnership to be indifferent between the two procurement options. Again, this is within comfortable distance of the Guidance benchmark of 3%.

8.3.9 PFI vs CP Project Level Assessment - Conclusion

The qualitative assessment produced a clear indication that, in terms of viability, desirability and achievability the Partnership is well positioned to deliver a PFI procurement. The quantitative assessment has produced an indicative PFI VfM percentage of 7.2% on the base case scenario, the robustness of which has been demonstrated through sensitivity testing. These assessments have provided a clear indication that verifies the outcome of the programme level assessment that PFI can deliver VfM for the Partnership’s waste.

8.4 Reference Project Costs

8.4.1 Introduction

The Reference Case and Reference Projects are defined in Section 4. The preferred procurement route is considered in the VfM section above, this section considers:

• The cost of the Reference Case under private finance through the use of a shadow tariff model (“STM”) to estimate the costs of delivering the residual waste treatment service under a PFI contract;

• the landfill disposal costs incurred during the construction of the residual waste treatment facility;

• the costs of the remaining elements of the waste disposal service across the Partnership that are outside the scope of the Reference Case, in order to show the global cost for the disposal operations within the Partnership

• the costs associated with the ‘Landfill’ option, including the impact of implementing a Landfill Allowance purchasing strategy;

• a comparison of options to demonstrate the need to “Do Something” and the importance of implementing a Landfill Allowance trading strategy;

• the Partnership’s projected waste management budgets over the contract period;

• the revenue support contribution of the PFI credit;

• the ‘affordability gap’ between the cost of the Reference Project and the Partnership’s projected waste management budgets over the term of the contract; and

• the effect that sensitivities, carried out on key assumptions, has on the Partnership’s projected “affordability gap”.


Page 117

8.4.2 The Cost of the Reference Project

In arriving at an affordability assessment, it is necessary to estimate the cost of services underpinning the Reference Project, which in turn comprises two elements:

• The Shadow Tariff Model (“STM”), which estimates the costs to the Partnership of delivering the Reference Case. This is the Annual Unitary Charge that would be paid to cover the capital and operating costs of the Reference Case, and includes the cost of financing the infrastructure (using latest financing data) through the use of non-recourse project finance at a gearing level of 85%; and

• the costs of delivering those services outside the scope of the Reference Case that form part of the wider disposal operations of the Partnership.

The Shadow Tariff Model that supports the PFI Reference Case is included in Appendix 8C together with the supporting model assumptions book.

8.4.3 Cost of the Reference Case

The estimated cost of the Reference Case is set out in Table 8.7 below:

Table 8.7 Cost of Reference Case

Reference Case – PFI

£000)

Total nominal costs 796,244


The above analysis does account for the impact of PFI Credit support, which would apply should the Partnership be awarded PFI credits.

8.4.4 Calculation of the PFI Credit

In accordance with the current guidance from the Waste Infrastructure Delivery Programme (“WIDP”) and Partnerships UK (which seeks to calculate the NPC of the element of the unitary charge payments that relates to senior debt repayments and then applies a percentage to determine the award of PFI credits), the calculation of PFI credits has been undertaken in accordance with Version 3.1 – January 2008 of the WIDP OBC Template. WIDP specific financing assumptions were applied to the Reference Project STM to generate the Annual Unitary Charge and senior debt repayment required for the PFI calculation to be conducted. These assumptions are listed in Table 8.8 below:


Page 118

Table 8.8 WIDP Financing Assumptions used in Calculation of PFI Credit

STM Input WIDP Assumption

Gearing 85:15

Senior Debt Interest Rate 5.5%

Senior Debt Commitment Fee 0.50%

Senior Debt Arrangement Fee 1.00%

Senior Debt Service Reserve Account 6 months

As shown in Table 8.9 below and at Appendix 8D, the calculated PFI credits for the Reference Project are £95m. Appendix 8C also includes the amended STM used in the calculation of the PFI credits.

The calculation of the Revenue Support Grant (“RSG”), (refer to Table 8.9 below) generated from the PFI credits has been calculated in accordance with the Local Authority PFI Grant Reform that came into force in April 2005, as updated by “Local Government PFI Annuity Grant Determination (No.2) 27 September 2005”.

The guidance prescribes that the RSG should be paid on an annuity basis using an interest rate which is fixed for the term of the support. This current rate is 5.5% for projects that are approved in the financial year 2008/9. Grant payments should commence to the Authorities when the relevant permanent assets specified in the PFI contract become available and is payable over the term of the contract remaining.

A spreadsheet devised by DCLG to assist local authorities in calculating their expected levels of grant (based on the annuity system) has been used to calculate the estimated annual grant. The payment of the RSG commences after the construction period, at the start of operations and continues throughout the 25 year operational period of the contract.

Under this guidance, the RSG equates to annual grant payments over the 25 year operational life of the Reference Projects of £7.1 million, resulting in total revenue support of approximately £177 million over the duration of the contract. It has been assumed that the entire construction phase will need to be completed before the annuity payment commences, as it is only after this period that the permanent assets become fully available. The calculation of the RSG (using the DCLG spreadsheet) can be found at Appendix 8D.

Table 8.9 PFI Credit and Revenue Support Grant (RSG)

Nominal Cost

(£m)

PFI Credit 95

Revenue Support Grant (RSG) 177


Page 119

8.4.5 Cost of the Reference Case including PFI Credits

Table 8.10 sets out the cost of the Reference Case taking into account the estimated RSG from a PFI Credit award of £95m.

Table 8.10 Cost of Reference Case with PFI Credit

Reference Case – £95m PFI

£000

Reference Case nominal cost (Pre RSG) 796,244

PFI Credit – RSG nominal value over contract term (176,988)

Reference Case nominal cost (net of RSG) 619,256


8.4.6 Services outside the Scope of the Reference Case

The cost of the Reference Case described in the sections above solely refers to the design, build, construction and operation of a single Energy from Waste facility to process residual waste. The Reference Case also includes the haulage and disposal costs of any residues (such as bottom and fly ash) from the treatment process.

However, the Public Private Partnership Programme (“4Ps”) Waste Management (“4Ps Toolkit”) guidance states that “It is essential that the affordability analysis considers the total cost of the waste management service”.

In assessing these total costs, it is recognised that:

• Collection services expenditure that is met by existing committed collection services’ budgets has not been taken into account within the affordability analysis. The additional collection infrastructure that will be required to support the enhancement in performance levels projected in the Reference Project is in the process of implementation. The associated costs of delivering this enhanced level of service have been reflected in the Reference Project costs and within the Partnership’s budgets;

• each Authority will continue to pay for the operation and maintenance of existing CARCs and transfer stations (or gate fee to contractor if applicable);

• each Authority will also continue to operate Green Waste Disposal through their existing composting arrangements, AD or IVC plants;

• the cost of bulking and transport of waste has been included within the wider disposal costs which make up the Reference Project costs. This includes bulking/transport of waste;

- from transfer stations to MRFs, IVCs and landfill; and


Page 120

- from transfer stations and direct delivery to residual waste treatment

• during the construction of the EfW facility, the Partnership will incur landfill disposal costs for residual waste. These costs have also been included in the affordability analysis; and

• although the costs of the current collection service are not included in the analysis, any increase in the cost of this service that is required to deliver the recycling targets under the PFI procurement has been included.

A detailed breakdown of these costs and assumptions are detailed in Appendix 8E.

8.4.7 Projected Cost of the Reference Project for the Partnership

Table 8.11 below illustrates the projected cost of the Reference Project over the 28 year contract term, comprising the Reference Case costs and other disposal operations. A detailed breakdown of these costs per annum is included in Appendix 8F. The Reference Project cost is £1.75 billion for the period from 2011/12 to 2038/39.

Table 8.11 Cost of the Reference Project

Nominal Costs Reference Project

£000

Reference Case (EfW facility) 796,244

Service costs outside the scope of the Reference Case

Recycling 197,805

Bulking and Transport 150,728

Green Waste Disposal 163,351

CARCs 156,089

Landfill 222,335

Other Services 65,114

Total Non-Reference Case Costs 955,422

Total Reference Project Costs 1,751,666

Source: Ernst & Young Analysis / The Partnership

The projected Reference Project cost over the Project period should now be compared against the Landfill Option and against the Partnership’s projected waste management budgets to determine the overall affordability position and the extent of the “affordability gap”.


Page 121

8.5 Comparison of the Reference Project against the “Landfill” Option

The Landfill Option assesses the cost to the Partnership if it were to continue disposing of residual waste to landfill, thus incurring the following primary costs:

• Bulking and transport to landfill costs;

• landfill gate fees;

• landfill tax; and

• LATS costs.

To establish the justification for undertaking the Reference Project, it is necessary to compare the Reference Project to the cost of continuing with the current landfill provision, namely the Landfill Option. The additional costs relating to the provision of collection services and the other interim measures would still be incurred under the Landfill Option.

Under both the Landfill Option and Reference Project, it is assumed that a LATS Trading Strategy is adopted. For the purposes of this comparison, a “profile” of Landfill Allowance prices has been assumed to reflect anticipated market supply and demand conditions, rather than assuming a single value for the trading price of Landfill Allowances. This profile is set out in Table 8.12 below.

Table 8.12 Landfill Allowance Trading Price Assumptions

Year from 1 April – 31 March Landfill Allowance Trading Value

2011/12 £30/tonne

2012/13 – 2013/14 £75/tonne

2014/15 – 2038/39 £50/tonne


Due to the uncertainty that exists within the LATS trading market, two alternative LATS scenarios have been considered and these are set out in the table below.


Page 122

Table 8.13 Landfill Allowance Trading Price Assumptions

LATS Scenario LATS Value

1 Buy at £75 per tonne until 2039 - no sale value is assumed

2 Buy at £30 per tonne until 2039 - no sale value is assumed

Source: Entec / Partnership

8.5.1 Results of the Comparison

The results of the comparison of the Reference Project costs with those estimated under the Landfill Option are set out in Table 8.14.

Table 8.14 Cost Comparison of the Reference Project (excluding PFI credits) and Landfill Option

Nominal Costs

£000

Reference Project

Profiled LATS Landfill Option Profiled LATS

Reference Project costs 1,751,666 1,788,604

LATS costs 7,756 113,808

Total nominal costs 1,759,422 1,902,412

Saving compared to Landfill Option (142,991)


Table 8.14 demonstrates that the Reference Case is about £143m lower in nominal terms than the comparable Landfill Option even without recognising any revenue from selling surplus LATS permits.

For 2007/08, the standard rate of landfill tax is set at £24 per tonne. As of April 2008, the standard rate of landfill tax will escalate by £8 per tonne per annum until reaching £48 per tonne in 2010/11. In the Budget 2008, the Chancellor announced that landfill tax would continue to increase post 2010/11 and, in light of this trend, three further incremental increases of £8/tonne were applied so that the landfill tax rate is set at £72 per tonne in 2013/14 as shown in Table 8.15 below. From 2014/15, it has been assumed in the financial modelling that the rate of landfill tax increases in line with inflation at 2.5%.


Page 123

Table 8.15 Landfill Tax Assumptions

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Nominal Cost (£) 32 40 48 56 64 72

The above figures do not reflect the benefit that could arise from selling LATS permits that would be available under the Reference Project. The Partnership, in line with Defra guidance, decided that it will exclude any potential revenue from LATS in the Reference Project, although it has taken account of potential LATS costs under the Landfill Option and in the early years of the Reference Project.

As part of its consideration of options, each of the Authorities were presented with an analysis comparing the Reference Project cost against the Landfill Option. This is set out in Table 8.16 below. A number of assumptions were agreed between the Authorities for the apportionment of these costs:

• The Reference Case unitary charge has been apportioned on the basis of tonnes of MSW delivered by each Council;

• other costs are based on estimates for service delivery provided by each Authority; and

• LATS costs are based on the expected amount of BMW delivered to landfill in excess of allowances at the LATS Trading Strategy rates set out in Table 8.12.

Table 8.16 Reference Project Costs by Council

Nominal Costs £’000

Landfill Option

Profiled LATS

Reference Project

Profiled LATS

Reference Project


Reference Project

Torbay Council

Reference Project


Reference Project costs 1,788,604 1,751,666 737,511 330,919 683,236

LATS costs 113,808 7,756 6,145 1,585 26

Total nominal costs 1,902,412 1,759,422 743,656 332,504 683,262

Table 8.17 below also compares the Reference Project against the Landfill Option under the two alternative LATS cost scenarios. Under scenario 1 (LATS at £75/tonne), the nominal cost for the Landfill Option is £195.35m higher than the Reference Project. Under scenario 2 (LATS at £30/tonne), the Reference Project is £100.30m cheaper than the Landfill Option. Both of the above examples exclude any LATS income.


Page 124

Table 8.17 Cost Comparison of the Reference Project (excluding PFI credits) and Landfill Option

Nominal Costs £’000

Reference ProjectScenario 1

LATS at £75/t

Landfill Option Scenario 1

LATS at £75/t

Reference Project Scenario 2

LATS at £30/t

Landfill Option Scenario 2

LATS at £30/t

Reference Project costs 1,751,666 1,788,604 1,751,666 1,788,604

LATS costs 9,353 167,766 3,741 67,106

Total nominal costs 1,761,018 1,956,370 1,755,407 1,855,711

Saving compared to Landfill Option (195,352) (100,304)


8.6 Affordability Analysis

8.6.1 Introduction

It is proposed that the public sector transfer the provision of certain waste management services to the private sector contractor and there will therefore be Partnership waste management budgets available to help fund the Reference Project costs.

To examine the affordability implications of procuring a long-term waste management contract, the projected 2008/09 budgets for both Torbay Council and the districts of Devon County Council have been adjusted to account for inflationary increases using the assumed Retail Price Index (“RPI”) of 2.5% for the life of the contract. In addition, these budgets have also been increased to take account of known changes in the rate of landfill tax from £32/tonne in 2008/9 to £48/tonne in 2010/11.

Plymouth City Council, on the other hand, has reflected the agreed budget for the years 2008/09 and 2009/10, increasing the latter by 2.5% for subsequent years. Although Plymouth has recognised the increased cost of landfill tax expected in 2010/11, its budget figures only allow for 2.5% inflation.

This need to uplift current budgets for this pre-contract period by £3.1m is recognised by the Partnership and has been taken account of in its assessment of the overall affordability gap for the project and member approval has been obtained for this increase.

8.6.2 Pre Contract Affordability

Table 8.18 shows the increase in the relevant budgets from forecast figures of £27.78m in 2008/09 to £30.92m in 2010/11.


Page 125

Table 8.18 Pre Contract Affordability Analysis Projected Partnership Budgets

Projected Budgets 2008/09 £000

2009/10 £000

2010/11 £000

Plymouth 12,075 12,328 12,638

Torbay 4,624 5,134 5,647

Devon (SHDC, TDC, WDDC) 11,081 11,844 12,637

Total 27,780 29,306 30,922


Table 8.19 below provides a breakdown of the Reference Project costs and budgets for these years for each Authority.

Table 8.19 Pre Contract Affordability Analysis by Council

2008/09 £000

2009/10 £000

2010/11 £000


Reference Project Costs 11,998 13,551 14,440

Adjusted Budgets 12,075 12,328 12,638

Budget Shortfall/Affordability Gap (77) 1,223 1,801

Torbay Council



Budget Shortfall/Affordability Gap 161 76 173




Budget Shortfall/Affordability Gap (399) (304) (225)



Page 126

8.6.3 Post Contract Affordability

Table 8.20 shows the adjusted projected budgets for the period 2011/12 through to the final year’s budget in 2038/39. The decrease in the Plymouth budget in 2011/12 from 2010/11 is as a result of a budget reduction for the Chelson Meadow landfill site as a result of completing the restoration from 2011/12. Post 2011/12 budgetary increases are solely at the expected RPI inflationary rate of 2.5%.

Table 8.20 Affordability Analysis Projected Partnership Budgets

Projected Budgets 2011/12 £000

2012/13 £000

2013/14 £000

2014/15 £000

2038/39 £000

28 Year Total

Plymouth 12,178 12,484 12,590 12,907 23,414 478,896

Torbay 6,004 5,933 6,081 6,233 11,274 230,917

Devon (SHDC, TDC, WDDC) 12,952 13,275 13,607 13,946 25,184 515,580

Total 31,134 31,692 32,277 33,086 59,871 1,225,393


8.6.4 Affordability “Gap” – Comparison of the Partnership’s Budget to the Reference Project Costs

The Reference Project modelling and budgetary information has been used to calculate the projected affordability “gap” of the Reference Project before the application of PFI credits and this is set out in Table 8.21.

Table 8.21 Affordability “Gap” Analysis

Nominal Cost

Year 1

2011/12 £000

Year 2

2012/13 £000

Year 3

2013/14 £000

Year 4

2014/15 £000

Year 5

2015/16 £000

Year 6

2016/17 £000

28 Year Total £000

Reference Project costs (Incl LATS) 36,757 41,725 44,025 49,708 50,696 52,091 1,759,422

Projected budget 31,134 31,692 32,277 33,086 33,914 34,764 1,225,393

Affordability “Gap” 5,623 10,033 11,748 16,622 16,782 17,327 534,029


This shows that the Partnership is facing an affordability gap of circa £534.03m. However, it should be noted that the projected Partnership budget has been increased from the 2008/09 level to accommodate


Page 127

cost pressures associated with increases in landfill tax, waste growth in each Authority and the costs of interim measures to improve recycling and composting rates.

Table 8.22 shows how the Partnership’s affordability position would improve through the provision of Revenue Support Grant from Defra based on a PFI Credit award of £95m.

Table 8.22 Affordability “Gap” Taking into Account PFI Credits

Nominal Cost Year 1

2011/12 £000

Year 2

2012/13 £000

Year 3

2013/14 £000

Year 4

2014/15 £000

Year 5

2015/16 £000

Year 6

2016/17 £000

28 Year Total£000

Reference Project costs (incl LATS) 36,757 41,725 44,025 49,708 50,696 52,091 1,759,422

Projected budget 31,134 31,692 32,277 33,086 33,914 34,764 1,225,393

PFI support (£95m credits) - - - (7,080) (7,080) (7,080) (176,988)

Affordability “Gap” (£95m PFI credits) 5,623 10,033 11,748 9,543 9,702 10,247 357,040

% of projected Partnership Budget 18.1% 31.7% 36.4% 28.8% 28.6% 29.5% 29.1%


Based on a PFI credit award of £95m, the Revenue Support Grant contributes approximately £177m, producing an affordability gap headroom of about £357m over the life of the project. The Revenue Support Grant will not be payable until the first full year of operation of the Reference Case facility (2014/15), and the effect of the PFI credits can therefore be seen from year four onwards.

The Reference Case Unitary Charge has been profiled so that the Partnership also pays for residual waste treatment services/infrastructure when provided by the PFI contractor. However, at this point the PFI credits help to offset the increased Unitary Charge.

The Partnership therefore considers that the Reference Project represents the most economically advantageous option to ensure compliance with the EU Landfill Directive and other legislative requirements and to deliver the objectives of the JMWMS.

The affordability analysis taking into account PFI revenue support is presented graphically in Figure 8.1.


Page 128

Figure 8.1 Affordability Gap Including PFI Credit Income (Nominal Terms)

Chart showing cost of Reference Project (net of PFI credits) against existing budget

-10,00020,00030,00040,00050,00060,00070,00080,00090,000

2,012

2,013

2,014

2,015

2,016

2,017

2,018

2,019

2,020

2,021

2,022

2,023

2,024

2,025

2,026

2,027

2,028

2,029

2,030

2,031

2,032

2,033

2,034

2,035

2,036

2,037

2,038

2,039

£'00

0s

Adjusted Budgets Reference Project Costs


8.6.5 Sensitivity Analysis

The Partnership has adopted prudent assumptions in determining the costs of the Reference Project. This has resulted in a robust and conservative affordability projection. However, to assess the robustness of the affordability, the Partnership has conducted sensitivity analyses on a number of the key cost assumptions. These are:

• Capital Expenditure costs 5% higher in the Reference Case than projected;

• operational expenditure costs 10% higher in the Reference Case than projected;

• third party income 25% lower than projected; and

• a 2 year planning delay for the Reference Case.

The impact of these sensitivities on the affordability of the Reference Project is set out in Table 8.23 below.


Page 129

Table 8.23 Summary of the Affordability Impact of Sensitivities on the Reference Project

Revised Affordability gap/(surplus)

£’000 Reference

Project

Capex Sensitivity at 5% increase

Opex Sensitivity at 10% increase

Third Party Income

Sensitivity at 25% reduction

2 year planning delay for

Reference Case

Total Nominal Costs (Incl LATS) 1,759,422 1,779,279 1,785,398 1,793,172 1,819,281

PFI Credit support of £95m (176,988) (176,988) (176,988) (176,988) (170,622)

Net Nominal Costs (Incl LATS) 1,582,433 1,602,291 1,608,410 1,616,184 1,648,659

Projected Budget 1,225,393 1,225,393 1,225,393 1,225,393 1,225,393

Affordability Gap 357,040 376,898 383,017 390,791 423,266

Increase In Affordability Gap 5.6% 7.3% 9.5% 18.5%

These adverse sensitivities increase the overall affordability gap for the Project adding between 5% and 19% to the cost of the project. For all scenarios, however, the sensitised cost is still lower than the nominal cost of £1.956 billion that applies under the Landfill Option.

8.7 Councillor Approval of Budgets and Affordability

8.7.1 Councillor Approval of Budget Requirements

To adopt a prudent position for affordability purposes, Councillors have been asked to approve an affordability gap (based on the projected budgetary position) which the Partnership considers to be a “worst case” scenario as set out in Table 8.24.

For this project, the Partnership’s technical advisor has a high level of confidence in the applied capital and operating costs. The third party revenue from electricity output is also seen as prudent based on an assumption of £35/MWh in today’s energy market.

Further comfort is provided as the Authorities have prudently forecast their overall affordability position by the addition of an affordability “headroom” above the base case reference project affordability gap. This headroom is based on the scenario above that envisages a 2-year delay in planning which delays the construction programme and subsequent operation of the EfW facility. As a result, the affordability gap has been increased by 19%.The effect of this delay for the Partnership is has an overall “Affordability Gap plus Headroom” of some £423m.


Page 130

Table 8.24 Affordability ‘gap’ of Reference Project Based Upon A “Worst Case” Option

Reference Project £’000

Total Reference Project Nominal Costs 1,759,422

Projected Budgets 1,225,393

Gross Affordability Gap 534,029

PFI Support (176,988)

Net Affordability Gap for the Reference Project 357,040

Add:

Effect 2 year delay on Reference Case 14,703

Effect 2 year delay on landfill costs 39,934

Effect 2 year delay and increase in rate on LATS Costs 6,458

Effect of 2 year delay on transport costs (1,236)

Effect 2 year delay on PFI credit support 6,367

Total additional cost for 2 year planning delay 66,226

Adjusted Affordability Gap 423,266


As part of the approval process, members in each Authority were presented with a formal report with recommendations for approval, summarising the essential information of the Outline Business Case and the Joint Working Agreement. Reports to each Cabinet/Executive and Council are referenced below with the actual reports and the subsequent minutes of approval presented at Appendix 6C, 6D and 6E (noting that minutes of Plymouth City Council’s Full Council were not completed at the time of OBC submission). Reports were presented as follows:

• Plymouth City Council – Report MT/Mar/08 to Cabinet on 8th April 2008 and full Council 21st April 2008;

• Torbay Council – Report 95/2008 to Cabinet on 15th April 2008 and full Council on 17th April 2008; and

• Devon County Council – Report EEC/08/90/HQ to Executive on 8th April 2008.

The affordability positions and required commitments from each Authority for the Reference Project were clearly communicated. The reports and associated presentations gave Councillors the overall Partnership affordability position and their Authority’s respective split of budget costs, affordability gap including headroom. The relevant figures are presented in Table 8.25.


Page 131

Table 8.25 Summary of Projected Costs for Reference Project

£m Do Minimum Reference Project

Partnership

Reference Project Plymouth

City Council

Reference Project Torbay

Council

Reference Project Devon

County Council

Reference Case (EfW facility) N/A 796 373 146 277

LATS cost 114 8 6 2 -

PFI Revenue Support Grant N/A (177) (83) (32) (62)

Other Disposal and Recycling costs 1,789 955 364 185 406

Nominal Cost to be funded 1,902 1,582 660 300 621

Existing budgets 1,225 1,225 479 231 515

Affordability Gap (pre headroom) 677 357 181 69 106

Headroom N/A 66 34 12 20

Total Affordability Gap (post headroom)

677 423 215 81 126

The apportionment of costs in Table 8.25 are based upon a number of assumptions that have been agreed between the Authorities:

• The Reference Case unitary charge has been apportioned on the basis of tonnes of MSW delivered by each Authority;

• PFI Revenue Support Grant is on the same basis;

• other costs are based on estimates for service delivery provided by each Authority;

• LATS costs are based on the expected amount of BMW delivered to landfill in excess of allowances at the LATS Trading Strategy rates set out in Table 8.11;

• authority budgets are based on each Council’s 2007/08 budget position; and

• the headroom was based on the proportion of the affordability gap for each Authority.

8.7.2 Authorities’ Commitment and Approach to Meeting the Affordability Gap

It was considered necessary, as part of the approval process, that each Authority understood and approved its own affordability position and provided a clear budgetary commitment for the Reference


Page 132

Project including associated recycling initiatives. However, each Authority should decide how it will meet its budgetary commitment and whether this results in annual budget adjustments, as part of its medium term budget planning, or whether it establishes a ‘balancing’ or ‘sinking’ fund (see section 8.5.3).

Section 151 Officers have formally acknowledged their Authority’s commitment by providing supporting letters of assurance to Defra. These letters are included at Appendix 8G and the approach assumed by each Authority towards meeting affordability gap is summarised below:

• Plymouth City Council has approved the immediate creation of a balancing fund into which it will consider placing any budget under-spends, surpluses and windfalls from across the Authority. In addition, the Authority has approved that the funding of waste proposals associated with delivery of the Reference Project will receive the highest priority;

• Torbay Council has confirmed its commitment to making the necessary funding available although the actual mechanism for achieving this has yet to be approved. The Director of Finance has indicated his preference for the establishment of a balancing fund similar to that already used with their schools project in Torbay. In addition, during the current close down of the Authority's 2007/08 accounts, it is expected that a contribution will be made to a reserve account to contribute to the set up costs of the scheme ; and

• Devon County Council has confirmed its commitment to making the necessary funding available when it is required. The actual funding mechanism will depend upon its financial circumstances at the time. In the meantime, the Authority is continuing to invest in improvements to recycling centres, the provision of organic waste treatment facilities and the provision of an EfW plant for Exeter all of which feature in the current medium term financial plan. It is envisaged that provision for the PFI plant will be made as that plan is rolled forward.

8.7.3 Sinking Fund Analysis

Potential mechanisms for dealing with the affordability gap have been considered by the Partnership. The preferred option for two Authorities is the introduction of a sinking or balancing fund. One mechanism is to make an annual uplift in the budget requirement in year 2011/12 paid into a sinking fund which earns interest. This increased budget figure, when indexed, covers the gap in the subsequent years. This approach ‘smoothes’ the annual requirement especially in the early years of the project. In addition, individual payments can be made into the fund.

Based on a PFI Credit award of £95m, it has been calculated that an annual ‘sinking’ or ‘balancing’ fund requirement for the Partnership would be approximately £8.9 million from 2011/12 to meet the affordability gap plus headroom. This requirement is assumed to remain constant in real terms over the 28-year contract length.


Page 133

8.8 The Partnership’s LATS Strategy

8.8.1 The Landfill Allowance Trading Scheme

Article 5(2) of the EU Landfill Directive requires the UK to reduce the amount of biodegradable municipal waste (BMW) that it sends to landfill.

On 1 April 2005, Government introduced the Landfill Allowance Trading Scheme (LATS), a system of tradable landfill allowances for the period leading up to the first target year of 2009/10 and the subsequent interim years in order that the UK meets its obligations under the Directive. LATS has been designed as a tool to enable WDA to collectively to meet their individual targets for the reduction of BMW sent to landfill in the most flexible and effective way.

8.8.2 Partnership’s LATS Position

The LATS Trading Scheme rules

The LATS Trading Scheme has been established to assist WDAs to mitigate their LATS exposure. WDAs are required to divert a proportion of their biodegradable municipal waste from landfill from April 2005 onwards. Alternatively WDAs may purchase an equivalent quantity from other WDAs with surplus allowances.

WDAs may “bank” any unused allowances from one year for use in a later year. There is a restriction of 5% on the amount of allowances a WDA can “borrow” from its next year allocation to meet an immediate shortfall. No banking or borrowing will be allowed across the target years of 2010, 2013 and 2020, as this could lead to the amount of BMW physically landfilled exceeding that permitted by the Directive in a target year.

In addition, trading in landfill allowances is to be permitted, whereby a WDA which estimates it will generate surplus allowances in a future year can sell them to another or other WDAs. The seller would benefit from a current cash receipt and the buyer would benefit from security of future landfill capacity.

Transactions may be conducted directly between two WDAs or through a broker registered with the Environment Agency (EA). There is to be neither a price floor nor a price ceiling for tradable allowances, although in reality a ceiling may be established at the level of the financial penalty for non-compliance of £150/tonne for any BMW landfilled above the level of allowance. Beyond this, Government is also considering passing the whole of any European fine onto the “offending” WDAs.

The Environment Agency provides and maintains an electronic register of all allowances issued, traded and held. One of the requirements is for each WDA to nominate a Trading Officer, who will be the person authorised to enter requests to trade or borrow allowances onto the LATS register.


Page 134

Plymouth City Council LATS Strategy

Plymouth City Council is aware of its obligations under the LATS regime and in recent years has been rolling out a recycling programme across many parts of the City. As a result of this and a number of other initiatives such as composting, it has been able to divert more waste from landfill and accumulate permits rather than having to purchase them from other local authorities.

However, from 2009/10 the Authority will not have sufficient allowances allocated to it and will need either to purchase them at the market rate or pay fines at £150 per tonne. This position is unlikely to significantly change until a new facility is acquired which will in the long term obviate the need to acquire allowances.

On the 23rd January 2007, a report was submitted to Cabinet outlining the Authority’s forecasted position until 2020 with regard to LATS allowances and the impact of potential fines if no action were taken. Members agreed to delegate authority for the purchase or sale of allowances jointly to Nigel Pitt, Director of Development and Adam Broome, Director of Corporate Resources, together with the relevant Cabinet Portfolio Holders.

Attempts to sell surplus allowances have proved to be unsuccessful and it is now anticipated that they will have to be written off in 2009/10. An analysis of Plymouth’s waste tonnage projections until 2020 (assuming growth of 1.5% MSW) identified a need to purchase permits from 2009/10 onwards to avoid costly fines.

In 2007/08, recognising the risk that a shortage of permits could force up the price, the Authority felt it prudent to negotiate the purchase of approximately 50% of its requirement for the three year period from 2009/10. The purchase of additional allowances will be made in due course when the impact of further recycling initiatives have been evaluated and estimated tonnages become more certain.

Torbay Council LATS Strategy

Torbay Council’s LATS Trading Strategy was approved by Cabinet on 17 July 2007. The report submitted to Cabinet identified that Torbay Council, through banking of surplus LATS allowances, would have no difficulties in meeting LATS targets in the period to 2008/09, but that there would be a shortfall of allowances for 2009/10. The report gave delegated authority to the Director of Finance in conjunction with the Strategic Director for Community Services and the Deputy Mayor to acquire allowances for the financial year 2009/10. This has been undertaken and the Authority recently acquired 6,000 allowances for 2009/10 to bridge the predicted gap.

For future years, the Trading Strategy Report resolved that LATS allowance requirements for 2010/11 and onwards should be considered at the appropriate time and certainly after Torbay's Waste Strategy had been adopted. That Waste Strategy was adopted on 28th February 2008.

The waste scenario for Torbay Council reflected in the OBC recognises that Torbay has the following LATS allowance deficits over the four years from 2010/11:


Page 135

Table 8.26 Torbay Council LATS Allowances

Year LATS Allowance Deficit

2010/11 5,550 tonnes

2011/12 8,649 tonnes

2012/13 9,006 tonnes

2013/14 8,674 tonnes

Source: Torbay Council

Surpluses are forecast from 2014/15 as the Partnership residual waste treatment facility comes on line.

The minutes of the Torbay Council meeting that approved the affordability position shown within the OBC recognises the commitment to meet the costs of acquiring allowances in 2011 to 2013 as part of its affordability gap. The minutes also approve a commitment to fund the medium term budget gap between 2008/09 and 2010/11 in the sum of £410,000 which includes the pre OBC allowance shortfall of 5,550 tonnes identified in Table 8.26 above. The mechanism and authority that enables the trading of LATS allowances together with the funding thereof has therefore been agreed for the period 2010/11 to 2013/14. The Authority does however acknowledge that an updated LATS Trading Strategy will need to be presented in due course to consolidate the above measures.

Devon County Council LATS Strategy

By making certain assumptions and forecasting both waste growth and recycling performance, an analysis has been carried out to determine how Devon County Council is likely to perform annually against the LATS permits it has been allocated.

From analysis undertaken within the Authority, it appears that Devon County Council should be able to stay within its LATS permit allocation until 2009/10. Only if waste growth is much higher than forecast, or the amount of waste diverted through recycling or composting is less than forecast will the Authority need to either buy allowances or use those it has banked from previous years earlier than 2009/10.

A sensitivity analysis has been undertaken for the three EU target years, assuming that the proposed in-vessel composting plants (IVCs) are operational but that no waste treatment facilities have been developed.

In the EU target year of 2009/10, the Authority is likely to have a deficit of 713 permits. If however, recycling performance is 2% better than forecast then there is likely to be an excess of 2,263 permits, while if 2% less than predicted then the shortfall in permits is forecast to be 4,388. Similarly if waste growth is 5% less than forecast then a surplus of 9,502 permits is predicted whereas if growth is 5% greater than predicted, this would mean a deficit of 10,929 permits.

Looking at the revenue implications of the variance in waste growth alone, Devon could either generate a potential income of £0.95 million (assuming sale receipt is £100/permit) or have to pay a maximum of £1.6 million in fines.


Page 136

In Devon County Council will not know exactly how much biodegradable waste it has sent to landfill for the previous financial year until the following summer. This will then need to be compared with the LATS permit allocation for that year. Delegated powers have been sought for the County Environment Director and Director of Finance and IT to be able to carry out any trading necessary for the Authority to stay within its LATS permit allowances, or to sell excess permits if it is deemed to be financially advantageous to do so. This will allow any trading to take place prior to the end of the reconciliation period ending in September.

Summary of the Partnership’s LATS Trading Strategies

A summary of the possible LATS trading strategies by year are listed below.

Table 8.27 Summary of options for managing permits

Year Plymouth City Council Torbay Council Devon County Council

2008/09 Sell all excess permits Sell all excess permits Sell all excess permits

2009/10 Buy supplementary permits Buy supplementary permits Buy if waste facility not ready – otherwise sell excess permits

2010/11 Buy supplementary permits Buy supplementary permits Bank or sell excess permits

2011/12 Buy supplementary permits Buy supplementary permits Sell all excess permits

2012/13 Buy supplementary permits Buy supplementary permits Buy if waste facility not ready – otherwise sell excess permits

2013/14 Bank or sell excess permits Bank or sell excess permits Bank or sell excess permits





2018/19 Bank or sell excess permits Bank or sell excess permits Sell permits

2019/20 Bank or sell excess permits Bank or sell excess permits Sell permits

Source: Devon County Council / Torbay Council / Plymouth City Council

Valuing Tradable Allowances

One of the most difficult decisions for each individual Authority in the Partnership will be to determine a “reasonable” price at which to purchase/sell LATS allowances at a particular point in time. The value of any traded allowances is uncertain. The Defra Bulletin Board currently presents a price range of £15-£40 per permit for the period prior to 2009/10.However prices have been quoted in the region of £3-£4 per permit. Whilst there are no allowances currently available for the first target year, it is known that informal discussions are taking place between local authorities to trade between the first and second target years.


Page 137

On the assumption that there are likely to be surpluses generated by a many authorities in the years prior to 2009/10, it seems probable that the current prices will decrease. However, the value of any allowances will only be determined by their availability and the willingness of the purchaser to pay for them. In view of this, each individual Authority in the Partnership will need to assess the price at which it can purchase/sell at the time the trade takes place.


Page 138


Page 139

9. Stakeholder Communications

9.1 Introduction The Partnership is adopting a proactive approach to communications and stakeholder management with the aim of securing understanding and support early on in the project’s lifespan. Acknowledging the importance and role of effective communications in successful project delivery, a formal communications strategy has been developed to assist this process, together with a Partnership communications’ protocol.

Identification, engagement and management of the wide range of stakeholders for each Authority is a key priority. Building on previous consultation work, including the experience of the Exeter EfW project, will help to consolidate and inform communications activity.

In Plymouth, public and stakeholder consultations have underpinned the development of the Municipal Waste Management Strategy (MWMS) and the Waste Development Plan Document (WDPD) that forms part of the Local Development Framework (LDF). The MWMS, which details how waste management will be achieved, was adopted in April 2007. The WDPD identifies strategic sites within Plymouth suitable for waste management and was adopted in April 2008.

In Devon, the Municipal Waste Management Strategy (MWMS), identifying waste management priorities was published in March 2005, after full consultation with the public, waste industry and environmental groups. A Waste Local Plan, proposing sites for waste management, was published in June 2006 following a similar process.

In Torbay, preparation of the Municipal Waste Management Strategy (MWMS) has involved extensive stakeholder and public consultation. The MWMS was adopted by the Authority in February 2008. The Torbay Local Development Framework is currently in preparation and consultation forms an integral part of this process.

A full stakeholder analysis will be conducted to assess influence / impact and the best ways to engage with disparate or opposition groups. A list of key stakeholders is attached in the communications strategy in Appendix 9A. An audit of existing communications’ channels for each authority is underway to identify opportunities, possible gaps and potential new means of communication and consultation. This will also indicate the scope, tone, timing and content of the material and methods to be used.

Evaluation is integrated into the communications activity to ensure that all stakeholders have been identified and are proactively engaged through appropriately pitched and relevant communications. Regular audit of the communications to assess effectiveness and penetration will also take place.

Specialist external communications support has been secured to coordinate activity, focus stakeholder engagement and provide public relations / media management as the project progresses.


Page 140

9.2 Strategy A copy of the full communications strategy is attached in Appendix 9A. It sets out the range of current and proposed activity against key date and milestones for the immediate and mid-term communications’ needs.

The overarching principle is to provide timely, clear, transparent and accessible information to as wide an audience as possible. Initially, the focus is on strategic issues, bearing in mind policy, economic and environmental factors:

• Defining and explaining the need for a long term waste management solution;

• promoting the importance of enhanced reduce, reuse, recycling and composting activity; and

• giving the rationale behind EfW in the context of each Authority’s waste management strategy and providing information on how EfW works.

As the project progresses, there will be a transition from strategic communications to operational activity, which is likely to be within the domain of the contractor rather than the Partnership. The strategy anticipates this shift in focus, proposing longer term activity, such as the setting up of community liaison groups. The communications activity falls into the following four stages:

1. The identification and analysis of stakeholders;

2. Assessment and coordination of partner communications channels;

3. Provision and dissemination of information / consultation processes; and

4. Evaluation of methodology and adjustment, to meet stakeholder needs, if necessary.

Agreement of key messages is an integral part of this process to ensure clarity and consistency of information. A communications protocol has been created to support the strategy, setting out clear parameters for Partnership communications, including approval processes, spokespeople, media enquiry routes and critical incident handling policy.

9.3 TUPE and Code of Practice on Workforce Matters At the time of writing this OBC, the Partnership recognises that there could be TUPE implications for the Reference Project but further investigation and clarity is required. The Partnership will therefore undertake further work on these issues (including discussions with existing service providers) in order to confirm what (if any) potential TUPE transfers could arise from these proposals. In the event that any such transfers may occur, the Partnership will take the necessary steps to ensure that the requirements of the TUPE legislation are complied with together with (if relevant) the Code of Practice on Workforce Matters.


Page 141

9.4 Market Interest

9.4.1 Introduction to Market Interest

The Partnership recognises the importance of making this residual waste project attractive to the market and engaging with the market at the earliest possible opportunity for the procurement to be undertaken successfully. This is borne out by the recent experiences of the partner Authorities as they have all completed PFI procurements in the education sector over the last ten years. The Partnership therefore understands the need to demonstrate that its project is at least as ‘deliverable’ and ‘affordable’ as other similar authority waste projects in the UK.

Each of the Authorities currently interacts with the waste industry through their existing waste management, collection and treatment activities and many companies have responded to the ‘soft’ market testing exercise described below. As such, the joint experience of the three Authorities through their informal market engagement has already stimulated interest in this potential residual waste treatment project.

The Partnership does not underestimate the effort required to develop and maintain appropriate relationships with the wider waste operator, contractor and technology supplier market. It is also aware of the need to do so in a consistent, coordinated and professional manner recognising competitive sensitivities and commercial subtleties that extend throughout the lengthy and often uncertain procurement process.

The three Authorities also understand that there are special circumstances in Devon that emphasise the strategic importance of delivering this project on time. Firstly, there is the known future shortage of landfill and deadlines by which other costly alternatives, not readily available, would have to be put in place. Secondly, the remoteness of South West Devon continues to drive local construction inflation at higher than average levels. When considering these factors in addition to the impact of the potential lack of capacity in the residual waste market over the next five years, it brings into clear perspective the need for Partnership to deliver on its Partnership and project commitments.

9.4.2 Soft Market Testing

After pooling market intelligence from the three Authorities, the Partnership decided to undertake a ‘soft’ market testing exercise by placing an OJEU notice in January 2008. This sought responses to a briefing note and detailed questionnaire and was targeted at all sectors of the waste industry. The questionnaire was structured around five key headings:

1. Interest in the Project

2. Scale and scope of Project

3. Sites and Planning

4. Technology Options


Page 142

5. Contractual Issues

The briefing note, questionnaire and summary of the responses from the interested organisations under each of the above headings are contained in Appendices 9B, 9C and 9D respectively.

Responses were received from 14 organisations, 12 of which expressed a positive interest in bidding for the project, 5 as lead bidder and 6 within a consortium. The respondents to the market sounding included five leading waste operating organisations, two main contractors and two leading energy from waste technology companies.

The Partnership is in the process of following up a number of these responses on a one to one basis and will continue to engage with the private sector to maintain and generate wider market interest. The approach will be proactive, positive and coordinated building on the knowledge of existing relationships, for example from the other energy from waste initiatives currently under development by Devon County Council, and will continue to address the key criteria that the Partnership considers are critical in delivering a PFI residual waste solution.

The Partnership intends to hold an Industry Briefing Day before the formal procurement process commences in October 2008. This event will be actively marketed to the industry through formal and informal communication channels which maximise the opportunity to attract appropriate high quality participants as sole bidders or members of consortia.

9.4.3 Summary of Soft Market Testing Responses

The key messages that have been concluded from the market response under each of the above five headings are as follows:

1. Interest in the Project Two of the respondents confirmed that the project is a strategically important one for them. This

is encouraging but not sufficient to provide the necessary confidence that a wider competition can be promoted successfully. However, there is clear evidence from the other respondents that there is a market appetite and the key factors that will determine their level of interest are:

- Evidence of the commitment of the Authorities to the Partnership;

- Evidence of an experienced and well organised client team and fully resourced procurement; and

- Availability of a suitable site in Authority ownership

There are also indications that over the next few years, that competition for relevant resources will increase as more projects of this type come to the market concurrently. Authorities that are unable to maintain market interest and attractiveness and provide the requisite confidence and leadership in the above key criteria may find the procurement constrained which, at best, could extend the timescale or, at worst, jeopardise the procurement.

For each of the above three factors, the Partnership considers that it has demonstrated its commitment and ability to deliver against them and has provided the necessary evidence in the


Page 143

business case. The detailed Joint Working Agreement has been signed by the three Authorities, there is the commitment to provide and maintain a well-resourced Project Team with advisor support and a strategic waste site, already in Authority ownership, has been formally recognised and approved in the WDPD.

2. Scale and Scope Of Project There were no material issues raised by the market that change the approach to the

procurement. Several respondents commented that under a PFI financing model, they would consider factors such as the size of the facility, the risk transfer arrangements, for example the volume and composition of residual waste, and the speed of procurement. The majority of the market would also anticipate contract lengths of a minimum of about 25 years.

3. Sites and Planning There was a positive response to the Partnership’s approach to dealing with the identification and

ownership of potential sites. There were also comments made on how the speed of the planning process could be improved, for example, in undertaking key survey work early. Such observations have already been taken into account in the planned activities preceding the commencement of procurement.

4. Technology Options In broad terms, respondents were content with potential funding of an energy from waste facility

as it is regarded as ‘bankable’ based on experiences elsewhere in the market. They raised no other specific funding concerns. However, the majority (78%) would welcome a ‘technology neutral’ approach and, where the larger operating and contracting companies are not tied to a particular technology, they also have no particular preference.

However, it is also evident that the market supports the view that the reference project, an energy from waste plant, is reliable, commercially proven and a sustainable technology.

5. Contractual Issues On commercial and contractual issues, respondents provided comments on the transfer of

Authorities’ LATS risk generally accepting that it should ultimately lie with the contractor but with a capped liability. There were also mixed views on whether combining services provided better value for money than procuring a single residual waste treatment contract.

With regard to the latest Defra guidance on the output specification and payment mechanism, there were no concerns expressed by the market as a whole and on the matter of a preferred contracting party, there was a majority in favour of one of the Authorities acting as the lead for the others.

9.4.4 Soft Market Testing Conclusion

The level and quality of response from the ‘soft’ market testing exercise provides sufficient confidence to progress the procurement of a residual waste project. However, the Partnership will enter this procurement recognising the importance of retaining its current attractiveness to the market by demonstrating clear leadership and a well resourced procurement, committing to and maintaining the delivery programme and entering a competitive dialogue process with the market that is open, transparent and straightforward.


Page 144

9.5 Other Relevant Authorities In developing waste management strategies, each of the Authorities has separately, and independently, arrived at the same conclusion. This is to minimise the amount of waste produced by residents, to recycle and compost economically viable materials and to utilise EfW as the preferred technology for dealing with residual waste. The proposal for an EfW plant through the South West Devon Waste Partnership was presented to the Devon Authorities’ Waste Reduction and Recycling Committee (DAWRRC) in February 2008 for their consideration and comment. This committee comprises members from all 8 districts, the 2 unitary and county authorities within Devon.

The DAWRRC gave its approval to the PFI bid, supporting the proposals to deal with residual waste in the Plymouth, Torbay, South Hams, Teignbridge and West Devon areas. It also gave its assent to increased recycling, reuse and composting measures across the county.

Further and continued engagement with other authorities is planned. There was, for example, contact with Cornwall County Council about a closer working relationship for the treatment of residual waste. Partly on account of the geography of the area, the River Tamar crossing and timing, this did not progress further and Cornwall has recently concluded a 25 year waste management contract with SITA. However, in view of the proximity to Cornwall, it is recognised that there could be opportunities for treating commercial and industrial waste in the future.

Details are presented in the communications strategy in Appendix 9A which includes a full list of consultees and an activity plan in the communications strategy.

9.6 Public Engagement All three authorities have already commenced public engagement activities through their Municipal Waste Management Strategy (MWMS) and Local Development Framework activity outlined above.

In the development of its MWMS, Plymouth held stakeholder workshops and questionnaires. There were also two full public consultations during the development of its Waste Development Plan Document. The residents’ panel, ‘Plymouth Points of View’, is part of PCC’s ongoing communications activity. In a recent survey in June 2007, 74% of respondents indicated a positive bias towards EfW as a waste management solution and a majority supported working with other authorities to deliver it.

On the 1st April, the paper describing the formation of the Partnership and Plymouth's commitment to the Outline Business Case was published. The inspector's report on the examination into the Waste Development Plan Document was also published on the same day and is included at Appendix 7D. This prompted widespread local publicity and, as a result, a number of articles and news items appeared on the day. Many of these were positive, presenting a fair and balanced view of the waste issues facing Plymouth and the surrounding region. In particular, the fact that Ernesettle is considered suitable as a strategic waste site in the report was also communicated widely. Attached as Appendix 9E is a copy of the BBC Spotlight news item which makes interesting viewing.

Devon has consulted widely during the development of its Municipal Waste Management Strategy (MWMS) and its Waste Local Plan, approved in 2005 and 2006 respectively. It has its own residents’


Page 145

panel, Devon Voice, with over 1000 active participants. It also hosts discussion boards on its corporate website and runs regular focus groups.

Torbay has undertaken extensive consultation and stakeholder meetings in producing its MWMS. It also has a residents’ panel and invites feedback through its web portal. A similar engagement is planned to support the development of the emerging Local Development Framework.

Information about the project and the Partnership is currently available on Plymouth City Council’s website and a dedicated Partnership website will be set up to outline the issues and explain the process. It will also invite comment and questions and will provide a Frequently Asked Questions facility. A media relations exercise is underway, with journalist briefings and a joint approach to environmental public relations issues has been adopted by the Partnership to ensure consistent and clear messages.

A series of exhibitions are planned for summer 2008, focusing on the waste management issue, the site and technology options, promotion of recycling and composting, and explaining the democratic process. A series of roadshows will take place across the areas involved in the Partnership and will follow member, stakeholder and media briefings. Leaflets, technical and non-technical summaries, artists’ impressions and other exhibition material are in the planning stages.

9.7 Community Sector/Non Government Organisations (NGOs) As part of the stakeholder audit, research is taking place to identify community groups, trade/ employer associations, charities, educational agencies and trusts, residents’ associations, networks, opposition / lobby groups and other interested parties in the locale.

Engagement will be through providing briefings, presentations, speakers, copy or new articles for dissemination, sharing research, bulletins, interview or whatever is deemed appropriate or useful by the groups themselves. This will also include offering visits to similar facilities, meeting their equivalent community liaison /residents’ panels and provision of focus groups in order to assist a two-way dialogue.

Experience from the Exeter Energy from Waste Project has shown that full and open communications can help provide public reassurance and address uninformed opposition. This approach will provide the basis for useful and open debate with all stakeholder groups. It will also be required in dealing with residents close to the proposed sites.

Offering proactive engagement, providing information and promoting discussion around the waste management issues including recycling, reuse and composting helps to counter some of the misinformation from opposers and to build community influencers and ambassadors for the project who are better informed and useful in countering some of the stronger or wilder objections.

A full plan of stakeholder activity is included in the communications strategy in Appendix 9A.


Page 146


Page 147

10. Timetable

10.1 Introduction This Section provides an indication of the Partnership’s proposed timetable for the procurement of residual waste infrastructure.

10.2 Timetable The procurement will be undertaken in accordance with Statutory Instrument 2006 No 5 “The Public Contracts Regulations 2006” (which implements the EU Procurement Directives).

The Partnership will follow the ‘Competitive Dialogue’ (CD) procedure for this procurement process. Key steps in the CD process are as follows:

• Following publication of a tender notice in the Official Journal of the European Union (OJEU), companies applying to be included in the process are sent a Descriptive Document, including a copy of the Output Specification and a Pre-Qualification Questionnaire (PQQ);

• during the PQQ process, a Bidders Conference is held so that potential bidders can gain better understanding of the requirement and the process. It also provides further opportunity for the Partnership to promote the business opportunity it is giving to the market;

• those companies selected through the PQQ process in accordance with Public Procurement Regulation rules are “Invited to Submit Outline Solutions” (ISOS) and take part in the CD process;

• the Partnership will then evaluate the Outline Solutions in accordance with its published evaluation criteria and select a short list of those it wishes to take forward;

• key documents are refined to reflect feedback from the process and the short-listed bidders are “Invited to Submit Detailed Solutions” (ISDS). There is on-going dialogue with each of the bidders during this process. Following evaluation of the detailed solutions, the short list of bidders may be further reduced. The dialogue process can either be closed at this point, or further rounds of dialogue and submission of refined solutions can take place;

• at the point, the Partnership decides it has acceptable detailed solutions, it formally declares the dialogue closed and “Calls for Final Tenders” (CFT) from the companies remaining in the process.; and

• the final tenders are evaluated and the preferred bidder selected. During this final phase of the process, only clarification and fine-tuning that does not change the basic features of the bid are allowed. Final due diligence is undertaken after appointment of the preferred bidder.

Table 10.1 presents the proposed timetable for the PFI procurement process.


Page 148

Table 10.1 Planned Procurement Timetable

Task or Milestone Proposed Date

Submission of EoI 28/9/07

Approval of EoI 3/12/07

Business Case Approved by Councils 21/4/08

Submission of OBC 30/4/08

Defra Approval of OBC July 08

PRG Approval of OBC Sept 08

OJEU Published Oct 08

Descriptive Document and PQQ Issued Oct 08

Bidders Conference Day Nov 08

PQQ Return and Evaluation Nov 08

Invitation to Submit Outline Solutions (ISOS) Issued Dec 08

ISOS Returned Mar 09

Invitation to Submit Detailed Solutions (ISDS) Issued Jun 09

ISDS Returned Nov 09

Invitation to Submit Revised Solutions (ISRS) Issued (if required) Jan 10

ISRS Returned Apr 10

Call For Final Tenders May 10

Preferred Bidder Selected Jul 10

Submission of FBC Sept 10

Defra Approval of FBC Oct 10

Contract Award and Financial Close Oct 10

Planning Application Submitted Nov 10

Operational Commencement Apr 14

The above programme is based on the Partnership assumption that contract and financial close will occur simultaneously and before planning permission is given. In this circumstance the Contract will include drafting on planning outcomes based on Defra Waste Pack Guidance. However, the Partnership’s strategy is to review this at preferred bidder selection to decide the precise timing of contract and financial close. This will take into account the anticipated planning permission submission and determination dates and the prevailing interest and exchange rates i.e. a risk appraisal will be undertaken at that time to determine the precise close date. The Partnership will consult with its advisors and the preferred bidder to determine the best outcome.


Page 149

10.3 Managing Timetable Risks The key drivers for this project are the landfill allowance trading scheme, increasing landfill tax and the increasing scarcity of landfill void space within the south west region. The latter driver (availability of suitable landfill) is time bound, with the major landfill within the sub-region (Heathfield) set for closure in 2016 and Plymouth City Council’s 7-year interim landfill contract arrangement expiring in March 2015.

Section 7 of this OBC details the approach that the Partnership has adopted on the planning process and securing suitable sites. This approach is intended to minimise ‘sites and planning’ as a key risk area within the project risk management process. The Partnership is adopting a proactive approach to securing the necessary planning consents, and is committed to undertaking the necessary preliminary work to ensure the successful delivery of this project.

A summary of contingency measures to manage timetable risks is as follows:

• Ensuring wider procurement activities and wider indicatives are realised to minimise LATS and landfill obligations (e.g. Exeter EfW, achievement of high recycling and composting rates);

• identifying and progressing site and planning studies during the procurement process and where possible working with perspective bidders to ensure suitable information is available to allow planning and permit applications to be submitted as soon as possible;

• identifying and progressing site investigations and studies on several potential waste treatment sites to ensure that a suitable site is available as soon as possible;

• ensure that best practice project management techniques are employed to adhere to the procurement timetable;

• ensure that the Partnership commit sufficient resources to the procurement process to ensure adherence to the timetable;

• identifying and maintaining a list of waste treatment facilities that could provide additional capacity for the Partnership for the interim period, should a delay occur;

• securing addition landfill over and above the current consented void space within or close to the Partnership catchment; and

• Maintaining each Authority’s LATS Strategy and coordinating and reviewing these as a Partnership.


Page 150


Page 151

Tables and Figures Table 1.1 Partnership Modelled Recycling/Composting Performance Compared to WSE2007 Targets iv Table 1.2 Reference Project Partnership LATS Performance in Target Years iv Table 1.3 Required Infrastructure for Reference Case vii Table 1.4 Summary of Projected Costs for Reference Project (2011-2039) xii Table 1.5 Summary Project Timetable xiv Table 2.1 County, District and Unitary Councils Comprising the Geographic Area of Devon 5 Table 2.2 Best Value Performance Indicators (BVPI) for Plymouth’s Waste – 2003/04 to 2006/07 16 Table 2.3 Best Value Performance Indicators (BVPI) for Torbay’s Waste – 2003/04 to 2006/07 17 Table 2.4 Best Value Performance Indicators (BVPI) for Devon’s Waste – 2003/04 to 2006/07 17 Table 2.5 LATS Actual and Projected Permit Surplus 2005/06 to 2008/09 18 Table 2.6 PCC Waste Treatment Information 20 Table 2.7 TC Waste Treatment Information 20 Table 2.8 DCC Waste Treatment Information 20 Table 2.9 Teignbridge, West Devon and South Hams Combined Waste Treatment Information 20 Table 2.10 List of DAWRRC Contracts 26 Table 2.11 Current Contract Position for PCC, TC, DCC and Three District Councils 27 Table 3.1 Partnership Modelled Waste Minimisation Performance Compared to WSE2007 Targets 34 Table 3.2 Partnership Modelled Recycling Performance Compared to WSE2007 Targets 35 Table 3.3 Timeframe for Future Key Infrastructure for Each Authority 37 Table 3.4 Options Evaluated by each Authority as part of their Individual MWMS 40 Table 3.5 Partnership Options Appraisal as part of Joint Strategy 41 Table 3.6 Selected National Indicators 44 Table 4.1 Summary of Options Evaluated by Individual Authorities 51 Table 4.2 Summary Scores for Short Listed Options 54 Table 4.3 Partnership BMW to Landfill and LATS Allocation for Target years (tpa) 56 Table 4.4 Summary Results of Default Impacts 58 Table 4.5 Details of Proposed Waste Management Facilities for Short Listed Options 60 Table 4.6 Comparative Net Prseent Values of Short Listed Options 61 Table 4.7 SPC Adjusted NPV of Modelled Options 62 Table 4.8 Modelled LATS Profiles 63 Table 4.9 Modelled Landfill Tax Profiles 63 Table 4.10 Summary of Options 3 & 4 67 Table 4.11 Required Infrastructure for Reference Case 68 Table 4.12 Reference Project Summary Table 69 Table 5.1 Key Risk Areas Identified and Mitigated Since Project Inception 72 Table 5.2 Risk Allocation Matrix 73 Table 5.3 Elements of the Payment Mechanism 77 Table 6.1 PFI Experience of the Three Authorities 81 Table 6.2 Project Management Structure and Roles 88 Table 6.3 Project Team and Relevant Experience 90 Table 6.4 Current Advisors to the Partnership 94 Table 8.1 Shared Waste Procurement Budget Estimates 108 Table 8.2 Qualitative Assessment Summary 111 Table 8.3 Summary of Key Input Assumptions 113 Table 8.4 Optimism Bias Input Assumptions 114 Table 8.5 Indicative PFI VfM Results – Base Case 115 Table 8.6 Indifference Analysis 115 Table 8.7 Cost of Reference Case 117 Table 8.8 WIDP Financing Assumptions used in Calculation of PFI Credit 118 Table 8.9 PFI Credit and Revenue Support Grant (RSG) 118 Table 8.10 Cost of Reference Case with PFI Credit 119 Table 8.11 Cost of the Reference Project 120 Table 8.12 Landfill Allowance Trading Price Assumptions 121 Table 8.13 Landfill Allowance Trading Price Assumptions 122 Table 8.14 Cost Comparison of the Reference Project (excluding PFI credits) and Landfill Option 122 Table 8.15 Landfill Tax Assumptions 123 Table 8.16 Reference Project Costs by Council 123 Table 8.17 Cost Comparison of the Reference Project (excluding PFI credits) and Landfill Option 124 Table 8.18 Pre Contract Affordability Analysis Projected Partnership Budgets 125 Table 8.19 Pre Contract Affordability Analysis by Council 125 Table 8.20 Affordability Analysis Projected Partnership Budgets 126 Table 8.21 Affordability “Gap” Analysis 126


Page 152

Table 8.22 Affordability “Gap” Taking into Account PFI Credits 127 Table 8.23 Summary of the Affordability Impact of Sensitivities on the Reference Project 129 Table 8.24 Affordability ‘gap’ of Reference Project Based Upon A “Worst Case” Option 130 Table 8.25 Summary of Projected Costs for Reference Project 131 Table 8.26 Torbay Council LATS Allowances 135 Table 8.27 Summary of options for managing permits 136 Table 10.1 Planned Procurement Timetable 148

Figure 2.1 Map of Devon, Plymouth and Torbay 4 Figure 2.2 Percentage Municipal Solid Waste (MSW) Growth by Authority from 2000/01 to 2006/07 6 Figure 2.3 Total MSW Arising by Authority 2003/04 to 2006/07 7 Figure 2.4 Analysis of Municipal Waste Arising for Plymouth City Council 8 Figure 2.5 Analysis of Municipal Waste Arising for Torbay Council 9 Figure 2.6 Analysis of Municipal Waste Arising for Devon (Teignbridge, West Devon & South Hams only) 10 Figure 2.7 Plymouth Percentage Household Waste Composition Analysis 2006 21 Figure 2.8 Torbay Percentage Household Waste Composition 2003 22 Figure 2.9 Devon Percentage Household Waste Composition 2003 23 Figure 2.10 Combined Composition Analysis for Devon, Torbay and Plymouth 24 Figure 2.11 Non-household Compositional Analysis 25 Figure 4.1 The ‘Reference Case’ and ‘Reference Project’ 46 Figure 4.2 SWDWP Residual Waste Treatment Options Appraisal Process 50 Figure 4.3 SWDWP Short List Joint Procurement Options 53 Figure 4.4 Absolute Diversion from Landfill for Short Listed Options 56 Figure 4.5 Recycling and Composting Rate for Modelled Options 57 Figure 4.6 WRATE Output for CO2 Equivalent Emissions for Modelled Options 59 Figure 4.7 Cost of Short Listed Options – Landfill Tax and LATS Sensitivities (£m NPV 2007/8 to 2038/39) 64 Figure 4.8 SWDWP PFI ‘Reference Project’ Waste Flow Graph 69 Figure 6.1 South West Devon Waste Partnership Project Governance Structure 84 Figure 6.2 Project Management Structure and Key Individuals 87 Figure 7.1 The Four Identified Strategic Sites in the Plymouth Waste DPD 100 Figure 7.2 Ernesettle Strategic Site also showing MoD safeguarding arcs (yellow area unlikely to be usable) 101 Figure 7.3 Coypool Strategic Site 102 Figure 8.1 Affordability Gap Including PFI Credit Income (Nominal Terms) 128


Page 153

Abbreviations and Terminology

The following abbreviations are used in this report:

4P’s Public Private Partnerships Programme

AD Anaerobic Digestion

APC Air Pollution Control

AONB Area of Outstanding Natural Beauty

ATT Advanced Thermal Technology

AUC Annual Unitary Charge

BMW Biodegradable Municipal Waste

BPEO Best Practicable Environmental Option

BREEAM Building Research Establishment Environmental Assessment Model

BREW Business Resource and Efficiency Waste Programme

BVPI Best Value Performance Indicators

BVPP Best Value Performance Plan

CABE Commission for Architecture and the Built Environment

CapEx Capital Expenditure

CARC Civic Amenity Recycling Centre (see below - also known as HWRC and Recycling Centres, RC)

CD Competitive Dialogue

CFT Call for Final Tenders

CHP Combined Heat and Power

CIWM Chartered Institute of Waste Management

CLP Combined Landfill Projects Limited

DAWRRC Devon Authorities Waste Reduction & Recycling Committee

DBFO Design Build Finance and Operate

DCC Devon County Council

DCCN Devon Community Composting Network

DCLG Department for Communities and Local Government

DEFRA Department for Environment, Food and Rural Affairs

DEFRA’s PFI Criteria The criteria which waste projects must meet to be considered for PFI credits. Listed in Appendix 1A

DPD Development Plan Document

DQI Design Quality Indicators

DSD Direct Services Division of Plymouth City Council

DWM Devon Waste Management Ltd

EfW Energy from Waste

EIA Environmental Impact Assessment

EoI Expression of Interest

EU European Union

FBC Final Business Case

FGT Flue Gas Treatment

FIA Freedom of Information Act 2000


Page 154

FRS Financial Reporting Standards

Gasification Gasification is the process whereby carbon based waste is heated in the presence of air or steam to produce a solid (which is low in carbon) and a gas.

GOSW Government Office of the South West

GWC Green Waste Composting

GWP Global Warming Potential

HMT Her Majesty’s Treasury

HWRC Household Waste Recycling Centre (see above – also known as CARC)

IBA Incinerator Bottom Ash

IFRS International Financial Reporting Standards

IPPC Integrated Pollution Prevention and Control

IRR Internal Rate of Return

ISDS Invitation to Submit Detailed Solutions

ISOS Invitation to Submit Outline Solution

ISRS Invitation to Submit Revised Solutions

IVC In-Vessel Composting

JMWMS Joint Municipal Waste Management Strategy

JWA Joint Working Agreement

ktpa Kilo tonnes per annum

LAA Local Authority Agreement

LASU Local Authority Support Unit

LATS Landfill Allowance Trading Scheme

LAWDC Local Authority Waste Disposal Company

LDF Local Development Framework

LGR Local Government Reorganisation

MBT Mechanical Biological Treatment. MBT systems combine the mechanical sorting of materials for recycling and the biological treatment of the remaining waste that will have a high organic content. The bio treatment rapidly composts the waste, in an enclosed facility.

MoD Ministry of Defence

MRF Material Recovery Facility

MSW Municipal Solid Waste

MWMS Municipal Waste Management Strategy

NAO National Audit Office

NGO Non-Governmental Organisation

NGP New Growth Point

NHS National Health Service

NI National Indicators

NPC Net Present Cost

NPV Net Present Value

OBC Outline Business Case

OGC Office of Government Commerce

OJEU Official Journal of the European Union

ONS Office of National Statistics

OpEx Operating Expenditure

Optimism Bias A systematic tendency to underestimate project costs by the public sector.


Page 155

PB Prudential Borrowing

PCC Plymouth City Council

PFI Private Finance Initiative

PIN Prior Information Notice

PPP Public Private Partnership

PPS10 Planning Policy Statement 10

PQQ Pre-qualification Questionnaire

PRG Project Review Group

PUK Partnerships UK

Pyrolysis The heating of waste in a closed environment (i.e. in the absence of oxygen) to produce a secondary fuel product.

RDF Refuse Derived Fuel. This is a fuel made from (municipal) solid waste. RDF typically consists of pelletised or fluff MSW that is the by-product of a material recovery operation whereby the majority of the non-combustible materials such as rocks, glass, and metals are removed, and the remaining combustible portion of the solid waste is chopped or shredded.

Reference Project

The technical solution selected as the basis for establishing the operational and financial deliverability of the project. This is a model of a hypothetical residual waste technology solution and is at the heart of the OBC.

Residual Waste The component of MSW that has not been recycled or composted and requires disposal.

RIBA Royal Institute of British Architects

RNAD Royal Navy Armaments Depot

ROC Renewable Obligation Certificate

ROTATE Recycling and OrganicsTechnical Advisory Team

RPI Retail Price Index

RSG Revenue Support Grant

RSS Regional Spatial Strategy

SEA Strategic Environmental Assessment

SHDC South Hams District Council

SoPC Standardisation of PFI Contracts

SPC Shadow Price of Carbon

SPD Supplementary Planning Document

SPV Special Purpose Vehicle

STM Shadow Tariff Model

SWDWP South West Devon Waste Partnership

SWRA South West Regional Assembly

TC Torbay Council

TDC Teignbridge District Council

TUPE Transfer of Undertakings Protection of Employment Regulations

Unitary Charge The annual payment made to the PFI contractor for undertaking the services within the PFI contract.

VfM Value for Money

W&SS Waste and Street Services Division of Plymouth City Council

WCA Waste Collection Authority

WDA Waste Disposal Authority

WDBC West Devon Borough Council

WDPD Waste Development Plan Document

WEEE Waste Electrical and Electronic Equipment

WIDP Waste Infrastructure Delivery Programme

WPA Waste Planning Authority


Page 156

WPB Waste Project Board

WPOG Waste Project Officers Group

WRAP Waste Resources Action Program

WRATE Waste and Resources Assessment Tool for the Environment

WS 2000 Waste Strategy 2000

WSE2007 Waste Strategy for England 2007