Contact: Paul Archer, ext 7022 email: [email protected]

1. Summary

1.1 The following decisions are sought:

(i) That the Buildings, Land and Procurement Panel recommends the Executive Member for Policy and Resources to approve the recommendations made by the Conciliator in respect of costs due to Hampshire Waste Services as a result of the architectural enhancement for the Chineham Energy Recovery Facility.

(ii) That the Buildings, Land and Procurement Panel recommends to the Executive Member for Policy and Resources that the costs due, less those paid to date, are reconciled and mortgaged over the remaining 19 years of the disposal contract and paid from the annual waste management revenue budget pending the outcome of a planned contract refinancing exercise later this year.

(iii) That the Executive Member for Policy and Resources approves the recommendations made by the Conciliator in respect of costs due to Hampshire Waste Services as a result of the architectural enhancement for the Chineham Energy Recovery Facility.

(iv) That the Executive Member for Policy and Resources approves that the costs due, less those paid to date, are reconciled and mortgaged over the remaining 19 years of the disposal contract and paid from the annual waste management revenue budget pending the outcome of a planned contract refinancing exercise later this year.

1.2 The Executive Member for Environment: South Hampshire and Resource Management recommends this proposal.

2. Reason

2.1 The decision to implement the waste strategy in the mid 1990s and deliver energy recovery facilities for residual waste management treatment supports both Aims 2 and 5 (Stewardship of the Environment and Improving Services) of the Corporate Strategy.

2.2 The Waste Service Contract required the Contractor (Onyx - Hampshire Waste Services) to construct three new Energy Recovery Facilities (ERF). The tender in 1994 was based upon plant built to architectural and engineering standards applicable at that date. The Contract recognised that standards would change during development of the facilities and enhancements would be necessary to comply with latest planning guidelines.

2.3 The Contract allows the Contractor to be properly reimbursed for `pass through' costs of the difference between a standard facility on an average site (as included in the tender) and the actual costs following the grant of planning permission. The Council has been in negotiation with Onyx for several years to reach agreement on the additional sum to be paid. A Conciliator was appointed in November 2004 to assist the Council's officers in examination of the information submitted by the Contractor and provided an independent recommendation for the sum due for payment.

2.4 Agreeing to accept the recommendations of the Conciliator in relation to the quantum due to Hampshire Waste Services (HWS) for the costs of higher architectural and engineering standards incurred in the construction of the Chineham Energy Recovery Facility (ERF), but which were not included in the original contract service cost, is the natural conclusion to agreeing to the long term waste disposal contract as the means by which the waste strategy for Hampshire would be delivered.

3. Other Options Considered and Rejected

3.1 The Contract requires that `all reasonable endeavours' are used to resolve issues under the Contract. Conciliation is one of the methods stated. As with any agreement there are other, often far more expensive methods available such as arbitration and litigation. Not to accept the recommendation of a conciliator and pursue settlement via arbitration or litigation was considered but was rejected for the following reasons:

(i) An appointed conciliator is an expert independent professional with a wealth of relevant experience in mediation and/or conciliation related contractual issues. The very nature of mediation/conciliation means that a conciliator is especially experienced in dealing with contract sums that are high in value and complex to resolve. Conciliators specialise in particular issues and have formal training in the resolution of these specialities. It is highly unlikely that another professional would


have come to a materially different opinion in reaching a conclusion on the quantum to be paid to HWS for additional costs from the higher architectural and engineering standards delivered at Chineham.

(ii) The County Council accepts and has always recognised by way of the Contract conditions that there would be an additional sum due to the significantly higher architectural standards arising from the planning process in relation to the delivery of the ERFs in Hampshire. In recognition of this liability, since its completion, circa 75% of the quantum claimed by HWS for the Chineham ERF architectural enhancements has been allowed for in the annual revenue budget pending the verification and validation of the costs presented by HWS. A key aspect of the waste disposal contract and the original strategy was to minimise price risk in the original tenders by paying only for costs actually incurred in enhancing the base contract specification.

(iii) Arbitration and litigation can be a divisive and often costly process both in terms of financial and human (relationship) cost. The long term nature of the Contract (the Contract still has a minimum 19 years to run) and the clear desire on both the part of the client (the County Council) and the contractor (HWS) to develop and maintain a partnering culture would have been severely compromised if a more formal route was pursued.

4. Conflicts of Interest Declared by the Decision Maker or Other Executive Member Consulted - None.

5. Dispensation granted by the Standards Committee - Not applicable.

6. Reason(s) for the Matter being dealt with if Urgent - Not applicable.

Approved by: ...................................... Date: ............................

Councillor T K Thornber

860Decn/PA