To receive the report of the Leader of the Council and Cabinet Member for Environment which recommends the next steps for the delivery of Waste, Street Scene and Grounds Maintenance services beyond the current contract end date of 31 March 2022, and provides a Best Value Review and detailed assessment of options in line with the Cabinet decision of 15 July 2020.
Please note that Appendix 2 is exempt from disclosure to the press and public by virtue of Paragraph 3 of Schedule 12A of the Local Government Act 1972 as amended (information relating to the financial or business affairs of any particular person including the authority holding that information). If Members wish to discuss Appendix 2 the Committee will need to resolve to exclude the press and public before doing so.
8.1 The Leader of the Council and Cabinet Member for Environment, Councillor Cook, introduced the item and highlighted key elements. He outlined that the report set out the next steps for the delivery of Waste, Street Scene and Grounds Maintenance Services beyond the current contract end date of 31 March 2022. Councillor Cook then thanked WYG for the work undertaken as part of the options appraisal and Best Value Review. Lastly, he invited questions from Committee Members.
8.2 Responding to Councillor Wilson‘s first query regarding paragraph 2.0.18 of Appendix 1, the Corporate Director clarified that what was being recommended at a minimum was to narrow down the four options which were considered in Phase 1 to two options. This would mean not proceeding with both the in-house option and commencement of a formal procurement on the open market, given their relative drawbacks in comparison to the Amey extension and the Ubico options. The Corporate Director added that whilst he would have liked to have presented the Committee with options which could be accepted straight away, the potential sale of Amey meant that there were no assurances that the potential new owners would stand behind the proposals put forward by Amey, thus presenting a potential risk to the Amey proposal. As such, if Members were hesitant to proceed with Amey due to a lack of experience with the potential new owners, it was being recommended that they proceed with UBICO as a preferred option. However, the Council would need to go into further discussions with Ubico as a potential owner and member of the company regarding the final model and costs.
8.3 In answer to Councillor Wilson‘s second query, the Corporate Director added that the Council was in a good position to take on the responsibility for the sale of dry recyclables if Members chose the option which required this. Moreover, it was unlikely that this would be entirely without the support of the service partner, although the responsibility for the contracts and the risk would sit with the City Council. In answer to both questions, Len Attrill added that since the report had been written there was now greater clarify on a number of points in relation to Ubico which had been unclear at the time that the report had been written. This was outlined in a letter sent to the Council from WYG (page 91 of the agenda). Furthermore, he agreed with the Corporate Director that Gloucester City Council was in a good position to sell its own dry recyclables if the option chosen required this and noted that other neighboring district Councils currently sold their own recyclables.
8.4 Councillor Cook responded to Councillor Stephens’ comments as follows. Firstly, he thanked Councillor Stephens for recognising the work which had been carried out in improving the delivery of services with Amey over the past 18 months. His view was that the delivery of service had improved markedly. In particular, he commended the level of work which had been carried out by Amey during the first national lockdown, for which he had thanked them extensively. Notwithstanding this, he was cognisant of the reputational issues associated with Amey especially prior to the Deed of Settlement, Release and Variation being agreed in December 2019. Secondly, in relation to Ubico, he stated that the general consensus amongst other neighbouring District Councils who worked with them was that they provided a good service. Hence, Councillor Cook was happy to move forward with Ubico as an option. Thirdly, Councillor Cook advised that the report suggested that it would not be prudent to proceed with the in-house option for several reasons, such as the fact there were additional costs associated with this.
8.5 Len Attrill added that whilst it was for Members to make a decision on which option/s to proceed with, the report outlined that running an in-house service would require meeting regulatory and legal requirements as well as an upfront investment of money and resources. Overall, it would carry more risk.
8.6 Councillor Cook replied to questions raised by Councillor Hilton as follows. He advised that splitting grounds maintenance contracts could be done with any of the options. With regard to commercial waste, Len Attrill explained that there was the potential to develop a commercial waste service with the in-house and Ubico options, however there was no guarantee that this would generate a meaningful surplus. Furthermore, on the topic of whether the contract with Ubico could be less than a 10-year contract, he outlined that this was an aspect which still needed clarification. In terms of improving street cleansing standards, he stated that Ubico had indicated that this would come with marginal costs. He noted that Ubico was experienced in grounds maintenance, and this was evidenced in the level of grounds maintenance standards in the local authorities where Ubico operated. Although this was not the only determining factor in choosing the options, achieving this same standard could be more difficult with an in-house service.
8.7 In reference to points raised by Councillor Haigh, Councillor Cook responded as follows. Firstly, he agreed that there were reputational issues with Amey in the past, however, the Council and Amey had worked hard to resolve these issues resulting in the Deed of Settlement, Release and Variation being agreed in December 2019. Additionally, he indicated that the Council’s waste and Streetcare contract permitted the contract to be transferred to another party, with the Council’s consent (which could not be unreasonably withheld) if the other party was a fit and proper organisation to undertake the obligations of the contract. Therefore, beyond discussing whether the potential new owner satisfied these requirements, it was a discussion which was beyond the remit of the meeting. Secondly, Councillor Cook outlined that Gloucester City Council owned the recycling fleet which would likely be transferred over if the Ubico or in-house options were chosen. The issue to consider would be regarding new equipment which would be purchased under the Ubico or in-house options either by the Council or the company. Councillor Cook explained that for this reason a 10-year contact was being considered to allow the vehicles to be amortised.
8.8 The Corporate Director stated that there was a distinction between the novation of the existing contract from Amey to any potential new owner and the potential extension of that contract by a period of up to 5 years. The contract currently in place between the Council and Amey until March 2022 stated that the Council should not unreasonably withhold consent to the transfer of the contract to another party, unless it was deemed that the party did not satisfy certain conditions which he outlined. As such, the Council was carrying out due diligence to ensure that it was satisfied that the company fulfilled these conditions. If satisfied, the Council had a contractual obligation to consent to the sale for the remainder of the remaining contract. The Corporate Director emphasised that it was important that this issue was not tied up with the separate question of whether the Council wished to extend the existing contract for a further 4 years.
8.9 Councillor Bowkett raised two questions which Councillor Cook, and Len Attrill responded to turn. Firstly, with regard to staff remuneration under the different options, Len Attrill advised that it was made clear to bidders that they would be required to pay the living wage as a minimum. Moreover, the current wages paid to Amey staff were comparable to what they would be paid under the City Council ‘s grading structure. Under the Ubico option, staff would also be paid similar rates. Overall, the employee terms and conditions would likely be the same across the different options. Secondly, with regard to extending the Amey contract, Councillor Cook outlined that any extension would be to the existing contract, and the Council would not be able to make material changes to this unless by way of an extension as this would render the contract vulnerable to legal challenge. Len Attrill added that WYG and Council Officers had worked hard to develop a specification for the works which would form the basis of any arrangements with the Ubico option and a re-procurement options, although the latter was not being recommended in the report.
8.10 Councillor Pullen submitted that any decision as to which option to proceed with should not only consider costs, but also the credibility of the various options. As such, he was against extending the contract with Amey due to the reputational issues associated with the company and was in favour of proceeding with an in-house option. In response, Councillor Cook stated that whilst he acknowledged the reputational issues associated with Amey, he was disappointed that the progress made with Amey was not being recognised. Likewise, he agreed that quality in any future service delivery was paramount. However, there would be significant costs and risks attached to achieving a quality service with an in-house option for the reasons set out in the WYG report. Len Attrill echoed this adding that the Council would have more flexibility and control under this option, however, there were also significant risks such as legal and compliance risks associated with it. He outlined that examples from other Councils highlighted that an in-house option could also lead to substantial overspends.
8.11 In response to Councillor Hyman‘s query on the potential Transfer of Undertakings (Protection of Employment) Regulations 2006 implications with regard to the Head of Operations post, the Corporate Director explained that the answer to this was based on a number of hypotheticals. In essence, there may be a number of circumstances under an in-house option by which an individual may be transferred into the Council with the seniority and experience to carry out the role. In this situation, the Council would be under an obligation to deal with that individual fairly and appropriately under the TUPE regulation.
8.12 Councillor Stephens stated that the improvements made by Amey were being acknowledged by Members, however the concern was that the company’s performance was still average.
8.13 Committee members discussed and voted on possible recommendations.
8.14 RESOLVED that the Overview & Scrutiny Committee RECOMMENDS that:
1.) Cabinet no longer consider the option of extending the existing Waste, Streetscene Grounds Maintenance services contract with Amey.
2.) In the event that the above recommendation is not accepted, Cabinet should only consider an extension to the existing contract with Amey in the context of a competed model on the open market.
3.) The option of bringing services in-house should be retained at this stage.
4.) Cabinet examines and learns from examples of Local Authorities who have brought Waste, Streetscene Grounds Maintenance services in-house.