To advise of the conclusion of the waste PFI contract variation value for money assessment.

The Grant Thornton UK LLP members of staff left the meeting before the presentation of this item.

The Section 151 Officer presented members with the conclusion of the waste PFI contract variation value for money assessment provided by Deloitte.

He pointed out that the recommendation being made to the committee was to note the value for money conclusion of the report.

The waste PFI contract variation had been approved by Cabinet in December 2013. Cabinet had taken into account the work done by Deloitte up to that point with regards to value for money.

The report provided to Committee concluded that the value for money provided by the chosen option is better than that reported to Cabinet in December 2013.

Members queried how this report sits against the External Audit report previously presented to the committee in this meeting. The Assistant Director Governance confirmed the Grant Thornton UK LLP report was written based on the information since December 2013. It was identified in December 2013, by Cabinet, that there was a potential risk concerning the value for money. However, the Deloitte report presented to this committee confirms that value for money has been obtained, and is better than anticipated in December 2013.

Members brought up in discussion the findings of the recent Public Accounts Committee held by Members of Parliament. That committee had suggested that local authorities were not ‘intelligent customers’ due to the lack of resources they are able to put into procurement.

The Assistant Director Governance confirmed that the original waste contract was one of the early PFI contracts entered into in 1998. However, the issue for Cabinet in December 2013 was to choose an option for its future and the report by Deloitte confirms the option chosen gives value for money.

It was confirmed to the committee that both Herefordshire and Worcestershire Councils received materially identical cabinet reports when they make the decision in December 2013.

In reply to a member’s question concerning the council’s position as lender The Assistant Director Governance confirmed the interests of the councils as lender had been recognised throughout the contract negotiations in contract variation and had been overseen by separate specialist London solicitors.

Following a discussion concerning how the EfW plant will affect recycling levels, the Section 151 Officer confirmed the amount of waste currently sent to landfill is significantly higher than the amount we have committed to send to the EfW plant. The Assistant Director Governance went on to confirm that the council will have a commitment to provide waste to the EfW plant but, if the level of waste produced by the county reduces, there will be the opportunity to sell our capacity to others.

Further discussion was held between members concerning the history of the waste contract and how previous decisions had been reached to bring the council to the current position.

Concerning how this committee fits within the governance arrangements for the contract, The Assistant Director Governance advised that the Terms of Reference for the Audit and Governance Committee were a result of a requirement by Mercia’s (the council’s waste contractors) lawyers. It was to ensure the council’s position as lender was given appropriate importance within the governance structure and had been an important issue for Mercia.

Members felt the flow chart at Appendix C of the report did not show this adequately. The Section 151 Officer confirmed he would inform Deloitte that this needs to be amended to show the Audit and Governance Committees place within the governance structure.

Resolved:

THAT the Audit and Governance Committee note the value for money conclusion within the major constraints included in the original contract and the default penalties.