Agenda item

To consider a report by Councillor Brian Jones, Lead Member for Waste, Transport and the Environment (copy enclosed) updating Cabinet on the latest cost and budget position on the Waste Service Remodelling project and seeking Cabinet approval of an updated Business Case.

RESOLVED that Cabinet –

(a)       acknowledge the latest cost and budget position (Appendix 1 to the report);

(b)       approves the updated Business Case (Appendix 2 to the report);

(c)        delegates authority to the Chief Executive, in consultation with the Section 151 Officer and Monitoring Officer to call upon capital plan unhypothecated funding if required due to uncontrollable increases in costs as a result of inflation or supply chain issues.  Any call on this funding will subsequently be reported to the next meeting of Cabinet, and

(d)       confirms that it was read, understood and taken account of the Wellbeing Impact Assessment as part of its consideration (Appendix 3 to the report).

Councillor Brian Jones presented the report updating Cabinet on the latest cost and budget position on the Waste Service Remodelling Project and sought Cabinet approval of an updated Business Case and the delegation of authority to appropriate officers to call upon capital plan unhypothecated funding if required.

Councillor Jones highlighted the transparency in the management of the project which had been overseen by the Waste Project Board and subject to scrutiny with regular member updates.  In line with other council schemes the project had been impacted by the spiralling costs of goods and materials globally which were beyond the Council’s control and had resulted in a revised Business Case for approval.

The Head of Highways and Environmental Services provided some background to the project and work undertaken since approval of the initial Business Case in December 2018.  He also reiterated the benefits of the new model resulting in increased recycling levels, higher quality recycling, reduced carbon emissions and the waste service costing significantly less than the current model.  The depot site was adjacent to Colomendy Industrial Estate and by working collaboratively with four local businesses to acquire land for the site local jobs had been protected and new jobs created.  However, the development had taken longer to deliver than anticipated with progress also affected by the impact of Covid-19.

The main change since approval of the Business Case had been the significant increase in inflation and costs of goods and materials due to global factors which could not have been foreseen.  The contingency in the overall budget had been increased to £2m in July 2019 to deal with risks/unknowns.  However, due to the significant increases in the cost of goods/materials over the last twelve months cost pressures of £3.588m had been identified across the project.  A bid for £1.588m extra funding to cover the shortfall had been approved by the Welsh Government in March.  Cost inflation remained a risk until tenders had been returned and contracts awarded.  In recognition of that issue the Welsh Government had provided additional unhypothecated capital funding to all twenty two local authorities.

Councillor Julian Thompson-Hill advised that the financial circumstances were not unique to the waste project with the increase in costs having been factored into a number of ongoing schemes across the authority.  The commitment of the Welsh Government to this project and the extra funding provided meant that at this stage the project was fully funded enabling the necessary contracts to be let in the coming weeks/months to completion, and he fully supported the recommendations.  Councillor Brian Jones also added that the Council’s contract with United Paper Mills (UPM) Shotton to recycle household waste expired in autumn 2023 which was likely to result in additional financial pressure on the waste service, and any delay in the project roll out beyond autumn 2023 would result in greater costs to the Council.

Councillors Brian Jones and Julian Thompson-Hill, and the Head of Highways and Environmental Services responded to questions as follows –

·        the Welsh Government had confirmed an additional £1.588m grant funding to help meet the cost pressures identified resulting in a fully funded project at the present time, but inflation costs remained a risk until the point of contract award

·        provided assurances that the project had been progressed as quickly as possible.  It had taken fifteen months following approval of the initial Business Case to acquire the site due to complications with the land registry and the technical information for the tender specification had not been available earlier.  The volatility of the current market meant contractors were not prepared to hold tender prices which may only be valid for a matter of weeks

·        in response to Councillor Barry Mellor’s concerns over the cost increases and calls for Internal Audit to examine the Business Case, he was advised that information had been made available to members throughout the duration of the project, the Waste Project Board had monitored progress and costs, and work had been carried out with the Waste and Resources Action Programme (WRAP) and Finance Team with much scrutiny of the financial elements of the project.  There would be no issue with Internal Audit examining the Business Case if that was deemed necessary

·        in terms of the funding table it was not usual practice to show the contingency funding as a separate budget line as it was part of the overall cost with all capital projects having a level of contingency built into the funding envelope

·        the scale of the project was significant with a total project cost of £19,337,142.  However, it was delivering a brand new waste infrastructure to service the whole county, including a new fleet for the waste service, and more than £11m of the project cost had been provided by Welsh Government – the project had been well managed and the finances scrutinised and controlled as far as possible

·        the Council had a successful track record for its major capital projects coming in on or below the overall funding envelope allocated to it, but the steep cost increases over the last eighteen months due to external unforeseen factors beyond the Council’s control had impacted on a number of existing ongoing projects, including the waste project, with even minimal percentage cost increases having a significant impact given the scale of the project

·        whilst not directly related to the report it was clarified that under the new waste recycling charges residents would not be paying any extra for existing services but would benefit from an enhanced service whereby more materials would be accepted at recycling centres at a cost lower than the private sector.  Fly tipping was a national issue (not unique to Denbighshire) but work was being undertaken to actively tackle the issue through education and enforcement.

Councillor Bobby Feeley thanked officers for the report and detailed explanation of the issues involved.  She highlighted the importance of the project and recycling and was supportive of it and the report recommendations.  The Leader added that assurances could be taken from the detailed scrutiny of the project and work of the Waste Project Board, with costs having escalated due to factors beyond the Council’s control.  The opportunity to work with local businesses to safeguard jobs and facilitate job creation and economic growth on the site was also welcomed.  The Chief Executive commented that the Council did not shy away from taking on large, complex projects and it was good practice to revise the Business Case for reconsideration if the project changed over time in the interests of openness and transparency.  He also expressed his support for the amended Business Case.

RESOLVED that Cabinet –

(a)       acknowledge the latest cost and budget position (Appendix 1 to the report);

(b)       approves the updated Business Case (Appendix 2 to the report);

(c)        delegates authority to the Chief Executive, in consultation with the Section 151 Officer and Monitoring Officer to call upon capital plan unhypothecated funding if required due to uncontrollable increases in costs as a result of inflation or supply chain issues.  Any call on this funding will subsequently be reported to the next meeting of Cabinet, and

(d)       confirms that it was read, understood and taken account of the Wellbeing Impact Assessment as part of its consideration (Appendix 3 to the report).