(Environment Portfolio Holder) To consider the attached restricted report (C-056-2017/18).
Decision:
(1) That the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials and the impact this was having on the financial sustainability of the Council’s Waste Management contract with Biffa Municipal Limited be noted;
(2) That the request by Biffa Municipal Limited for additional payments from the Council to cover the additional costs arising from the decision of the Chinese Government be noted:
(3) That the specialist external technical advice received by the Council in relation to the request from Biffa Municipal Limited for financial assistance to deal with the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials be noted; and
(4) That a further report be submitted to a future meeting of the Cabinet when responses to the questions raised in the proposed letter to be sent to Biffa Municipal Limited were received and details of the impact of the changes plus options for mitigation were known.
Minutes:
The Environment Portfolio Holder presented a report concerning the potential impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials.
The Portfolio Holder reminded the Cabinet that the Chinese Government’s decision to impose tougher quality standards on imported recycling materials was reported at the previous meeting, and the global impact of this decision was now becoming clearer. The Council’s waste management contractor had been adversely affected by this decision, but they were not alone in this as other large recycling processors across the UK had also been impacted. Biffa Municipal Limited had written to the Council and requested the Council to pay the additional costs attributed to its recycling materials. The rationale was that these external factors were outside their control and could not have been foreseen when they entered into the contract with the Council, thus placing a considerable financial strain on their contract with the Council.
The Portfolio Holder reported that, following the publication of the agenda, the Council had engaged WYG Environment Planning Transport Limited (WYG), a respected specialist consultancy in the field of waste management and recycling, who had assisted the Council during the procurement process for this contract. WYG confirmed that all Material Recycling Facility operators in the UK had been impacted by this decision of the Chinese Government. The Council was keen to work with Biffa on this issue but, following advice from WYG, it was clear that not enough information was currently available to make an informed decision. It was agreed to seek further clarification from Biffa and a letter was sent on 29 March 2018. A further report would be presented to the Cabinet when more information had been obtained from Biffa.
The Portfolio Holder added that the next meeting of the Waste Management Partnership Board was scheduled for 17 April 2018, and there was the possibility that a separate container could be needed in the future to isolate paper from the other recyclable materials.
Decision:
(1) That the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials and the impact this was having on the financial sustainability of the Council’s Waste Management contract with Biffa Municipal Limited be noted;
(2) That the request by Biffa Municipal Limited for additional payments from the Council to cover the additional costs arising from the decision of the Chinese Government be noted:
(3) That the specialist external technical advice received by the Council in relation to the request from Biffa Municipal Limited for financial assistance to deal with the impact of the Chinese Government’s decision to impose tougher quality control standards on imported recycling materials be noted; and
(4) That a further report be submitted to a future meeting of the Cabinet when responses to the questions raised in the proposed letter to be sent to Biffa Municipal Limited were received and details of the impact of the changes plus options for mitigation were known.
Reasons for Decision:
To consider options to help provide financial stability to the Waste Management contract in the short to medium term.
Other Options Considered and Rejected:
To refuse to consider the requests made by Biffa and demand that they operate the contract under the terms it was awarded. However, the contract could become financially and environmentally unsustainable. In the longer term, if the situation was not resolved and Biffa was unable to operate the contract as tendered, they might be forced to issue a termination notice.
In the event of a termination of this contract, the Council might have to appoint an interim contractor, more than likely at a higher operating cost, and be left to pick up all the loss in recycling income. A procurement exercise for a new waste and recycling contract of this scale could take up to 14 months, and there was no guarantee, especially given the current market, that a new provider would be prepared to share the recycling income risk to the level Biffa had done.