Contract details

Although the Parties completed the Contract in awareness of the Covid pandemic, most of the pre-contract procurement dialogue and refinement of provisions occurred before the pandemic was known to be a threat to the UK. The Authority needed to compete this important contract to ensure continued Waste Services provision in its district and at that point neither Party could reasonably foresee the true nature and extent of the pandemics direct and indirect consequences insofar on their activities and the supply of services under the Contract. There were several commercial challenges stemming directly and indirectly from Covid including operational challenges to ensure compliance with Covid restrictions, changes to the nature of waste being produced for collection and exacerbation of a national driver shortages. The Contractor more recently disclosed suffering significant losses on the contract relating to: • A national shortage of drivers for waste collection • A delay in publication and implementation of relevant central Government policies that are relevant to (and necessary to properly undertake) the operation of the contractual recycling risk share value (RRSV) mechanism, with sufficient information remaining unavailable on the anticipated Extended Producer Responsibility, Deposit Return and “Consistency in household and business recycling in England” schemes • The need for residential property subscribers needing clinical waste collection services on a different frequency than those frequencies currently provided for under the contract (with those different frequencies not currently accommodated by the contract terms) • Unexpected operational complexity regarding the transition to "Recycle More" . The overall effect of the legacy of Covid and the other loss making factors have forced the Contractor to inform the Authority that the Contract has become unviable. SUEZ have advised that without a formal variation to the contract to increase payments, they may need to renounce the contract and withdraw Services. Such an situation arising was also unforeseeable by the Authority. The Parties have consulted intensively on the economic viability challenges pleaded by the Contractor to establish: a. how it came to pass that the Contractor finds itself confronted by cost viability challenges and if these were foreseeable before the Commencement Date, and b. to assess what increase in Service Payments may be required to address those challenges and avoid a situation whereby the Contractor is forced to renunciate the Contract. The main outcome of the analysis is that the Authority has concluded that the viability issues pleaded by the Contractor are accepted and that notwithstanding the rigorous procurement exercise that was undertaken leading to the appointment of the Contractor (including receipt of external expert consultancy advice throughout) these were largely unforeseeable. Consequently, the Parties agree that increased Service Payments of £47m should be paid over the remaining Contract Period. This agreement was in the first instance only agreed between the Parties in principle and subject to an ultimate option appraisal carried out by the Authority wherein all other options were considered in detail. The Authority’s ultimate decision was to agree terms with the Contractor. The Parties agree and declare that the increased Service Payments account only for agreed unforeseen costs in performing the Contract and the Contractor accepts that it may still not realise its expected profits during the remaining Contract Period. To re-balance the Contract the Contractor has agreed to an 100% increase in its limit of liability to £20,000,000. In order to improve the Contract further amendments to the Contract are being made limited to: 1. to address a lacuna in the Contract in relation to payment for Clinical Waste collections from subscribing Residential Properties who need the service at different frequencies than those currently provided for in the Contract. 2. to suspend the Recycling Risk Share Value (RRSV) Mechanism Review for no more than 3 years to provide for the delay in the consequences of related government policy becoming known and understood. 3. To vary some performance measures and related deductions provisions of the Performance Deductions regime to align more effectively with operational realities.