4 July 2011

Laughing all the way to the recycling bank

This morning Mr Mustard is not his normal healthy yellow but red with rage. He is splutteringly mad with the overblown & incompetent management at Barnet Council. They want to negotiate extremely complex out-sourcing Contracts and yet Mr Mustard sees the mess they have made of a particularly easy one.

Now imagine you are a supplier who just has to collect a commodity from the doorsteps of residents every week and then sell it. The simplest of Contracts. The Contract sets out that you will be paid your costs of collection and then you get to share in some of the money made from selling off the collected items for which there are known markets at known market prices. What do you expect in the way of a bit of a bonus; 5% maybe or 10% would more than fairly compensate you as some £2.5m worth of goods are collected every year so even 5% would give you a bonus of £125,000 p.a..

And now Mr Mustard surmises that the negotiator for the supplier naturally started his negotiations with an unfeasibly high share fully expecting to be negotiated down to a reasonable amount ( he had after all been to Egypt on holiday and could barter with the best of them and he had also been on some training courses about negotiating ). When he named his opening figure he must have been completely shocked to find it accepted without demur.

So what is this Contract of which Mr Mustard speaks and what is the justification for the high percentage share paid to the supplier. This is what Barnet Council had to say:-

Barnet Council's Recycling Services contract with May Gurney allows for the sharing of income from the sale of recyclable materials collected from households, schools and recycling banks. This applies to all materials and not just to paper. ( It's good to share; well it is for May Gurney )

Within the contract, May Gurney retain the first £702,894.40 of income from the sale of materials. The annual contract price that the Council pays to May Gurney for providing the services is then reduced by the same amount. ( So put another way the first £702,894 of sales belongs to Barnet Council - that's us by the way - the Council Tax Payers )

50% of the income received by May Gurney for the sale of materials above this amount is paid to the Council, and May Gurney retains 50%. There are no specific tonnage targets, but the 50% share of income acts as an incentive to May Gurney to collect a greater tonnage of household materials for recycling, and to achieve the best price possible for these materials

The Council's share of income from the sale of materials in the year ending 31 March 2011 is to be finalised, but will be approximately £889,000. ( May Gurney will collect the same amount for no good reason that Mr Mustard can think of )

Now Mr Mustard is struggling with this concept. The incentive is that you get to keep 50% of what you collect above a certain amount. To incentivize you to get the best price you get free money. Paper is the most collected item and for that there is a market price which you can find at this link paper prices so May Gurney are not adding any value to what they are collecting. They should have been put under a duty in the Contract to get the best price and this should have been monitored by Barnet Council against publicly available data. It's not an incentive; it's a gift.

This Contract started on 1 September 2008 and is a 5 year Contract to 2013 with an option to extend for 2 more years. So if all 7 years have the same over generous payment to May Gurney that is £6million given away.

This Contract is one of the worst bargains for Council Tax Payers that Mr Mustard has yet seen. It is just shocking. And who signed this Contract ( it started with ECT Recycling CIC who May Gurney took over ) on behalf of Council Tax Payers. Firstly the then Mayor, Cllr John Marshall, who can be excused for relying on his Officers although I would advise the current Mayor to carefully read everything she is given because Mr Mustard thinks that with this example one shouldn't rely on the Officers.

The other signatory was Margaret Martinus, the Head of Legal who one would expect to scrutinise a Contract most carefully. I hope that she asked some difficult questions at the time but suspect that she just has to sign Contracts for which the terms have already been negotiated no matter how bad the terms are.

The trouble must have started earlier though. The proposal to award a Contract went to the Cabinet Resources Committee on 25 February 2008, although at that stage the final bidder had not been selected, and afterwards there was a challenge to the award and another meeting was held on 16 April 2008 to discuss this. Those papers are exempt from release to the public. I have put the papers for that meeting up as a page to the right of this blog.

How much blame attaches to Councillors for this bad bargain? The Chair was Mike Freer and Councillors were Finn, Hillan, Harper, Marshall & Offord. So only Cllrs. Finn, Harper & Marshall can easily be asked anything. However, unless they asked to see the background papers they would not have known what the tenders contained and would assume that the Officers could be left to drive a hard bargain.

The Officers who presented the report were :-

Mike Freestone, Director of Environment & Transport ( moved on )
Roger Jones, Chief Environmental Services Manager ( moved on )
Nicola Buck, Environmental Services Manager, Waste Strategy ( still at LBB )

and presumably they had all carefully studied the tenders but didn't think it worth mentioning in the report they presented to Council that there was this 50% bonus for one of the Contractors. Mr Mustard is going to have to do some research to see when these documents might become public as he thinks they will be very interesting.

Mr Mustard would be pleased to receive any emails from Barnet Councillors or Officers explaining why giving away 50% is such a bargain, or even equitable, for Council Tax Payers  ?

Mr Mustard also has a sinking feeling. He read the 208 pages that make up the agenda pack for the Cabinet Resources Committee Meeting which took place at 7pm on 29 June when the Councillors nodded the proposals through in 22 minutes flat. The "Business Case" includes the following line at 8.4 Payment Mechanisms "gain-share for increased level of savings" so the plan is to give away to the supplier some of the profit share from outsourcing.

It's funny ( except that it is quite serious ) but Mr Mustard thought that the whole point of going out to private contractors was to save his money and not to give it away.

Come on Councillors, start rocking the boat and asking really well targeted and difficult questions. Please don't just vote these proposals through when they come back to a future committee without giving them a good workout.

And soon would be a good time to decide not to extend the Contract by 2 years unless the 50% gift gets replaced by something much more modest and to go back out to tender for a new supplier to start in September 2013.

Yours frugally

Mr Mustard


  1. Fantastic, detailed, worthwhile research. Seriously, how should the Council now respond? The issue, in so many instances,appears to be in the drawing up of contracts and then the scrutiny where the private sector has move expertise and invests more than the public.
    I'm a baby in this field but hope to learn.

  2. The council should reasonably have stated in its report(s) what happened in other authorities.

    Slightly in the council's defence (now, that's a novelty!) it would be easy for the contractor to collect waste as "recycled", and then dump it in general waste, unless we make it worth its while. However, that doesn't have to mean a 50% bung.

  3. Hello Baarnett

    I don't think May Gurney would find it cheaper to send the recycling to a dump as landfill tax is £56 a tonne and going up to £64 a tonne next April.

    We should all recycle more but I don't want to gift May Gurney more money.

    Best regards

  4. No Mr M, but they might well incinerate it - unfortunately, there is no "incinerator" tax, like landfill tax, so it must be a marginal cost.


I now moderate comments in the light of the Delfi case. Due to the current high incidence of spam I have had to turn word verification on.