Hertfordshire County Council

Waste Management

Outline Business Case

/ Final Draft
October 2008

Contents

1. Executive summary

2. Background

3. Strategic waste management objectives

4. Procurement strategy and reference project

5. Risk management, risk allocation and contractual structures

6. Project team and governance

7. Sites and Planning

8. Cost, Budgets and Finance

9. Stakeholder Communications

10. Timetable

1. Executive summary

1.1 Introduction

1.The management of municipal waste is one of the greatest challenges facing local government. With increasing awareness of the issue being translated into EU and UK regulation supported by increasingly stringent fiscal measures an alternative solution to landfill is required.

2.Hertfordshire County Council as Waste Disposal Authority (WDA) works in partnership with ten Borough and District Waste Collection Authorities (WCAs) through the Hertfordshire Waste Partnership (HWP). The Partnership endorsed the Joint Municipal Waste Management Strategy (JMWMS) 2007 in November 2007.

3.The Strategy sets the context for municipal waste management and seeks to address the immediate and long term issues. Targets are set for increasing recycling and composting, minimising the amount of residual waste sent to landfill and increasing the treatment of residual waste. The Strategy is supported by the waste minimisation and recycling campaign known as WasteAware, established in 1997[1].

4.This Outline Business Case (OBC) seeks to build on the Strategy and identify a long term solution for Hertfordshire through the treatment of its residual waste.

1.2 Background

5.Hertfordshire is situated just north of London, neighbouring the London Boroughs of Enfield, Barnet, Harrow and Hillingdon in the south, with Essex in the east, Cambridgeshire, Bedfordshire and Luton in the north and Buckinghamshire in the west. Hertfordshire is a prosperous county and is the least deprived in the Eastern Region. Local people are generally healthy, and enjoy higher life expectancy and lower than the national average death rates.

6.The county has a population of 1.048 million[2] living in over 452,000 households[3] with the majority living in 30 settlements. As a consequence it has a population density (6.44 per hectare) that is only exceeded by Surrey (6.53 per hectare). The use of space will continue to be a challenge as the East of England Regional Spatial Strategy (RSS)[4] identified that Hertfordshire should plan to accommodate at least 82,000 new dwellings and an additional 20,000 houses resulting from the expansion of Harlow and Luton.

7.The county is easily accessible with a good road network of motorways and A roads. It has two international airports on its border - Luton (Bedfordshire) and Stansted (Essex), whilst London Heathrow is easily accessible from Hertfordshire by motorway. Main rail lines cross the county with mainline stations between the North and Midlands and their respective London termini.

1.2.2 Council governance

8.The county council currently consists of 77 elected members with an executive function discharged through a Cabinet of nine councillors. The authority's net revenue budget is £650 million with a capital budget of £150 million for 2008/09. The county council's ambition is ‘to make Hertfordshire a better place to live and work and to provide the best possible services'. This ambition is shared by its partners and is being delivered through a group known as Hertfordshire Forward that oversees the delivery of the Local Area Agreement (LAA).

1.2.3 Managing waste through partnership

9.For municipal waste management the Hertfordshire Waste Partnership (HWP) has set out through the JMWMS 2007 its policies and action plans. At the heart of the strategy is the principle: Reduce, Reuse, and Recycle. The partners work collectively through a Memorandum of Understanding (MoU). This governs the operational engagement and determines the direction of joint working. The joint recycling and composting initiative known as WasteAware[5] has existed for over a decade and is well recognised amongst Hertfordshire residents.

1.2.4 Municipal waste arisings in Hertfordshire

10.During 2007/08, Hertfordshire disposed of 566,096 tonnes of Municipal Solid Waste (MSW), which includes not only waste collected from households but also street sweepings, waste from Household Waste Recycling Centres (HWRCs) that is not recycled plus trade waste.

11.To predict the likely future growth in waste, four scenarios have been considered. The assessment made assumes the achievement of the 50% recycling and composting target by 2012 held at that level over the life of the procurement. The model reflects the proposed household growth promoted by the East of England Plan to 2021 and, thereafter, the county's historical growth rates. This model produces an average annual MSW growth rate of 0.8% with a treatment requirement of approximately 249,000 tonnes by 2019/20.

1.2.5 Waste collection and disposal arrangements

12.All ten WCAsprovide refuse, dry recycling and organic waste collection services. Two of the districts (St Albans City & District Council and Dacorum Borough Council) operate small Materials Recycling Facilities (MRFs) for the separation of plastics and cans.

13. The WDA manages various arrangements for the recycling and composting of waste and its disposal either to treatment facilities or landfill. These include:

  • 19 HWRCs county wide.
  • Windrow composting facilities at Cumberlow Green (Hertfordshire), Ongar and Canfield (Essex).
  • In-Vessel Composting (IVC) contracts for mixed organic waste at St Ives (Cambridgeshire) Harefield (Hillingdon), and Cumberlow Green (Hertfordshire).
  • A Waste Transfer Station (WTS) at Waterdale, North Watford serving five Waste Collection Authority areas.
  • A single Energy from Waste (EfW) contract at Edmonton (North London).
  • Three landfill disposal contracts (Hertfordshire, Bedfordshire and Cambridgeshire) utilising six sites.

14.Service performance is good with over 38.5% recycling and composting being achieved currently. The county has been well within its landfill allowance limits in each year of the Landfill Allowance Trading Scheme (LATS)regime.

1.3 Strategic waste management objectives

1.3.1 The Joint Municipal Waste Management Strategy (JMWMS) and its approach

15.The HWP has developed a strategy that sets out policies, objectives and delivery actions. The HWP wants first and foremost to adhere to the waste hierarchy and to move away from a reliance on landfill for waste that cannot be economically reused or recycled. The JMWMS was informed by extensive public consultation with more than 11,000 people registering their views. The consultation resultsidentified that the public wanted the HWP to consider the following when planning new waste treatment facilities:

  • Minimising transportation to the facility.
  • Cost effectiveness and affordability.
  • Environmental impacts (e.g. noise and emissions).
  • The potential for turning waste into energy.

16.In order to meet the targets set out in the national Waste Strategy England 2007 (WS07) the Partnership wants to deliver high recycling and composting levels.To achieve these targets the HWP has recycled or composted a further 65,129 tonnes between 2004/05 – 2007/08.

1.3.2 Following the waste hierarchy

17.The JMWMS policies seek to manage materials in accordance with the waste hierarchy and to move away from the reliance on landfill. It also identifies as a priority the need to work collectively to reduce the potential for generating waste. The JMWMS contains three policies that focus on waste minimisation to be achieved by:

  • Utilising the Waste Performance and Efficiency Grant (WPEG)and Waste Infrastructure Capital Grant (WICG) to enable the introduction of new services and facilities or to facilitate improvements to the HWRCs to help to maximise recycling and composting.
  • Incentives for waste minimisation such as initiatives to promote home composting, the use of reusable nappies, support for community organisations for unwanted household goods.
  • More composting capacity, to allow county-wide collection of green and kitchen waste.
  • New Recycling Centre management contracts to increase the number of recycling opportunities including waste wood.
  • Appointment of a Partnership Development Manager to coordinate and promote the development of the HWP.
  • Ongoing engagement with Waste and Resources Action Programme (WRAP) to identify recycling opportunities.

Figure 1: Contribution to recycling and composting targets by the proposed activities of the Hertfordshire Waste Partnership.

Year / National Waste Strategy target (% household waste recycled) / Reference Project - expected attainment (%)
2009/10 / 40 / 42.50%
2012/13 / - / 50% minimum
2014/15 / 45 / 50% minimum
2019/20 / 50 / 50% minimum

18.Despite its strong current performance in recycling and composting, over 60% of the county’s residual household waste is sent to two landfill sites within Hertfordshire and four in neighbouring counties. Core Policy 12 commits the Partnership to reducing the amount of unstabilised waste sent to landfill to a level that is no greater than is necessary. To this end, the county council’s current strategy to achieve LATS self sufficiency has three strands[6]:

  • Work with the HWP (and through HWRC management) to reduce waste arisings.
  • Work with the HWP to increase recycling and composting to at least 50 percent by 2012, through the capture of food waste and card.
  • Procure residual waste treatment facilities, which will be fully operational in 2014/15.

19.The county council as waste disposal authority is aiming for self sufficiency in landfill allowances and modelling shows that this can be achieved throughout the life of LATS, if new waste treatment capacity is developed as outlined in this OBC.

1.4 Procurement strategy and reference project

1.4.1 The approach to waste procurement

20.Hertfordshire currently lacks facilities for treating residual waste and the landfill capacity to deal with untreatable waste within its boundaries. Given this complex challenge, the county council has agreed that a disaggregated contract approach should be followed. Consequently a separate procurement project to deliver landfill disposal capacity to meet interim needs will commence in 2009/10.

21.This approach recognises and understands the interfaces and dependencies between projects within the programme. Careful consideration has been given to the number and nature of the procurement exercises required to meet the overall waste management objectives. There is a common approach to data reporting, compilation, and management, including the utilisation of Waste Data Flow (WDF)[7]. This ensures that procurement activities are well informed and aligned, contributing to effective project interface and resource management.

22.The county council recognises that there are significant cost pressures and will seek to achieve Value-for-Money (VfM) by building upon current contracts and the strength of the HWP. There is a clear ambition to implement sustainable waste management that will achieve and where practicable exceed both national requirements and locally agreed policy objectives.

1.4.2The emerging Output Specification and associated targets

23.At the centre of the Hertfordshire Waste Procurement Programme (HWPP) is an Output Specification(OS) that identifies the services and standards required to deliver long-term residual waste management. For example, from the original Project Initiation Document (PID) the county council identified a number of acceptance criteria to provide the framework for the OS including:

  • Treating the appropriate residual waste tonnages.
  • Complying with the county council’s waste management and procurement policies.
  • Achieving appropriate risk transfer.
  • Taking advantage of market expertise solution provision.
  • Allowing the project to consider merchant market capacity.

24.Other aspects of the OS include:

  • A 28 year contract period to allow for sustainable debt repayment
  • The delivery arrangements for Residual MSW to the appointed contractor that could include direct delivery or via WTS(s).
  • The transport arrangements that the contractor needs to arrange for onward transport to the treatment location(s).
  • The treatment of third party waste (i.e. waste delivered to the facility under contracts between the operator and third parties) which will be permitted subject to tonnage limits.
  • A desire to achieve efficiencies and innovation in service delivery to ensure continuing best value.
  • The requirement to provide WTS(s) is to be excluded from the OS.

25.The contract's performance framework will focus on measurable targets and objectives and will be developed based on Department of Environment, Food and Rural Affairs (Defra), Waste Infrastructure Development Programme (WIDP) guidance. The framework will be based on measurable indicators to measure performance and where appropriate to provide incentives for the contractor.

1.4.3 Recent developments in the determination of future waste management

26.Since the March 2008 submission of the Expression of Interest (EoI) to Defra the development of the OBC has provided a strategic and commercial rationale for the scope of the Private Finance Initiative (PFI)contract.

  • Waste growth estimation has been revised to reflect the household growth proposed in the East of England RSS.
  • Waste flows have been revised to show the current situation and that expected in future, based on the above growth rates.
  • Recycling and composting has been modelled using the up to date status of contracts, projects, plans and activities and confirms that the HWP is on course to meet its target of 50% recycling and composting by 2012.

27.This work provides the basis for the development of a Technical Options Appraisal (TOA)based on Defra guidance published in April 2008(and the revision published in June 2008) to identify the most suitable treatment technology. The evaluation criteria were based on six categories: diversion from landfill, compliance with the waste hierarchy, global environmental impacts, operational flexibility, proven reliability and deliverability, and its impact on the local environment.

28.These criteria were applied to a range of residual waste treatment processes with weightings of 60% on the above qualitative criteria and 40% on cost. The short-listed technologies included:-

  • Landfill - to provide the base case (known as Do Nothing and sometimes referred to as status quo) against which all others would be measured.
  • Energy from Waste (EfW).
  • Energy from Waste with Combined Heat and Power (EfW + CHP).
  • Mechanical Biological Treatment producing Refuse Derived Fuel for off-site combustion (MBT + RDF).
  • Mechanical Biological Treatment with Anaerobic Digestion (MBT + AD).
  • Mechanical Biological Treatment producing Refuse Derived Fuel for combustion in an on-site Gasification facility (MBT + Gasification).

29.In addition, it was decided to model the options against different combinations of sites owned by the county council:

  • Single centrally located site supported by two WTS's (one in the east and one in the west)
  • Two waste treatment sites (central and east) supported by the existing WTS at Waterdale, Watford.

30.The combination of technologies and sites created eight different options, subsequently modelled with the following results:

  • A centrally located EfW + CHP supported by two WTS scored the highest against the criteria and the application of costs.
  • The second highest score was for the centrally located EfW,followed by a twin site EfW.
  • The MBT options scored consistently lower because of the need for an off-take market for the RDF which, if not found, would require to be landfilled.
  • The Landfill option was ranked last on the qualitative criteria and second worst in terms of cost.

1.4.4 The Reference Case

31.From the TOA, the HWPPBoard decided that the following option should form the basis of the Reference Case:

  • A centrally located EfW + CHP with the ability to treat a capacity of 270,000 tonnes at 2039/40.
  • This facility would be supported by the existing WTS at Waterdale, Watford plus a new WTS in the east to be secured by the county council.
  • In addition there would be a continuing requirement to secure landfill capacity of up to 75,000 tonnes at 2039/40 to deal with difficult to treat waste such as bulky items, street sweepings and fly-tipped wastes.

1.5 Risk management, risk allocation and contractual structures

1.5.1 The county council’s approach to risk management

32.The county council has an established and committed approach to risk management. It has its own corporate risk management team, a corporate risk management policy and operates an online corporate risk management system known as JCAD. Utilising this system, the authority has undertaken a thorough exercise to identify and assess both the risks involved in procurementand the contract risks and allocation envisaged between the county council and the contractor.

33.The county council recognises that the implementation of control measures to manage the likelihood and impact of a risk occurring is a vital element of project management. Through a programmed review cycle, the county council has allocated resource and methodology to manage risks. Risk mitigation will continue to identify optimal contingency arrangements as the project moves through its progressive procurement cycle.

34.Working with the guidance provided by Defra and under the Projects in Controlled Environments (PRINCE2) methodology, the project assurance function is led by the Corporate Head of Risk Management. There is a series of review sessions planned into the future procurement delivery programme.

1.5.2 The Hertfordshire waste procurement project risk matrix

35.The county council has identified and considered the risks associated with the Waste Procurement Project and has established a risk register which identifies the foreseeable key risks associated with the project. Risks have been considered in relation to their timing, probability of occurrence and potential impact. The risk matrix is divided into the following categories and the identified risks grouped as shown in Figure 3 below.

Figure 2: Risk categorisation

Risks categorisation within the risk matrix
Planning risk / Residual value risk / Technology / obsolescence risk
Design risk / Financial risk / Change in Law risk
Construction risk / Performance risk / Demand risk
Operational risk

36.This project risk matrix identifies the key project risks and how they will be allocated between the parties to the contract (county council (authority), Contractor or shared) at the outset of procurement. The contract terms and risk allocation will be in line with HM Treasury’s Standardisation of PFI Contracts Version 4 (SoPC4 – March 2007). As such, the proposed allocation of risk will be set out in the draft Project Agreement and other contractual documents to be developed for the Invitation to Participate in Dialogue (ITPD) and explored with bidders as part of the Competitive Dialogue (CD) procedure. New risks may emerge depending on a bidder’s proposed solution and allocations may change.