Archived decisions

Contact: Trevor Wallis, tel 023 9244 6510 email: [email protected]

1. Summary

1.1 The County Council has previously received a number of reports about the bid for Government Private Finance Initiative (PFI) funding to address the backlog of investment and renewal on the existing street lighting network. Government funding has been awarded on the basis of a collaboration with the neighbouring local authorities of Southampton City Council and West Sussex County Council to achieve efficiency savings in procurement and synergies in service delivery. The collaboration, known as the South Coast Street Lighting PFI, requires separate governance arrangements and the Cabinet has given delegated powers to the Executive Member for Policy and Resources and/or the Executive Member for Environment to take such actions required to progress the procurement. This report sets out three significant decisions recommended by the Joint Task Force, to be made as part of the responsibilities delegated by Cabinet.

1.2 A successful procurement will address the backlog of investment and maintenance in the street lighting stock, improve lighting standards where appropriate and make a significant contribution to reducing night-time road accidents, crime and fear of crime.

2. Recommendation

2.1 That the Executive Member for Environment approves recommendations agreed by the Joint Task Force in support of the Private Finance Initiative procurement of street lighting:

(i) to agree the principles of the Joint Working Agreement including mechanisms to resolve disputes and provisions in the event of one party withdrawing or terminating the procurement, as stated in paragraph 3.6;

(ii) to pursue near identical, but separate, contracts; and

(iii) to agree the basis of evaluating Invitation to Submit Detailed Solution tenders, including a 70:30 quality:affordability weighting.

3. Background

3.1 On 23 January 2006 the Cabinet authorised the Director of Environment to prepare and return an Expression of Interest to the Department for Transport (DfT) seeking PFI funding to renew and upgrade the existing street lighting stock.

3.2 After a lengthy bid process the DfT awarded £225 million of PFI credits (a type of Government grant) on 11 February 2008 for a joint procurement between Hampshire County Council, Southampton City Council and West Sussex County Council. Collaborative working was requested by the DfT in July 2006 and the bid was progressed on this basis as the "South Coast Street Lighting PFI".

3.3 During the bid development it became apparent that the South Coast Street Lighting PFI would require separate governance arrangements at Member and officer level. To foster joint working at Member level a Joint Working Group was established and the Cabinet approved the following recommendation on 26 November 2006:

(i) That the Executive Members for Policy and Resources and Environment be nominated to represent the County Council on the informal Joint Working Group (now known as the Joint Task Force) with Southampton City Council and West Sussex County Council.

(ii) That the Executive Member for Policy and Resources and/or the Executive Member for Environment, in consultation with each other, be authorised to take such decisions as may be required to develop the Outline Business Case and matters leading up to a decision on the Private Finance Initiative Contract.

3.4 The Joint Task Force has met on three occasions and a summary of the main actions agreed is set out below.

3.5 In terms of the overall procurement, three bidders have been short-listed and will submit priced bids in July 2008. Negotiations will then be conducted under EU rules and a Preferred Bidder announced (subject to further Council approvals) in early 2009 for service commencement in autumn 2009.

3.6 The Joint Task Force agreed the principles of a Joint Working Agreement (JWA) including mechanisms to resolve disputes and provisions in the event of one party withdrawing or terminating. The JWA is intended to exist for the duration of the procurement up to contract signature. It provides for a maximum compensation payment of £0.5 million to each of the other Councils should one party withdraw prior to the conclusion of the procurement. The rationale was the cost of rerunning the procurement exercise rather than any costs associated with the Council's existing contractual arrangements or the loss of PFI credits.

3.7 Members agreed proposals for the evaluation and weighting of a short-list of three bidders in the next stage of the procurement. Quality will be weighted higher than Price, as common in contracts of this value. It is not unusual to use a ratio of 4:1 in PFIs since the affordability envelope is known to bidders. Energy costs will still be the responsibility of the Councils. It is therefore considered important to include the impact on energy costs in the evaluation and the recommendation is to award 30% of the score to price, with 50% of the price component to be awarded against the affordability gap.

3.8 Members endorsed a proposal to continue the joint procurement on the basis of three separate but near identical contracts with the same Service Provider, based on their evaluation of the risks, complexity and likely financial benefits of a joint contract.

3.9 Members agreed at their last meeting to also seek a Variant bid at this detailed submission stage, based on maximising the investment opportunity offered by the PFI credits but also offering the most sustainable, flexible and carbon efficient solution with low future running costs. The intention of this Variant bid is to explore the opportunity for dimming where appropriate, or other ideas to reduce energy consumption. The financial consequences of accepting any Variant bid or otherwise would obviously have to be evaluated and assessed alongside the standard bid, and these will both inform the ultimate specification on which bidders are invited to submit their finals offers.

4. Impact Assessments

4.1 Renewal and upgrading of the existing street lighting stock is intended to reduce night time road accidents, crime and fear of crime. The programme of works may cause some traffic disruption. The project is also addressing the emerging issue of energy consumption in the context of Government announcements on carbon reduction commitment.

5. Conclusion

5.1 The South Coast Street Lighting PFI is a major procurement and requires a number of decisions to be agreed between the three participating Councils. Governance arrangements are in place but from time to time it is appropriate for the Executive Member for Environment or Executive Member for Policy and Resources to ratify the major decisions or actions.

1632Rpt/TW