Cardiff City Council Triumphs in Energy Facility Expansion with Support from Local Partnerships

Local Partnerships ensured Cardiff City Council received its fair share of income and cost protections after the contractor expanded the energy recovery facility’s capacity.

Local Partnerships worked with Cardiff City Council to ensure the council benefited from a proposed change sought by its energy recovery facility contractor, which could otherwise have resulted in unshared profits for the contractor. We ensured that the contract’s change mechanism was properly applied, securing additional income for the council from third-party waste tonnage.

The Challenge:

Cardiff City Council entered into an agreement with a contractor in December 2013 to design, build, fund, and operate a 350,000-tonne-per-annum energy recovery facility. Shortly after the contract was signed, the contractor applied to increase the facility’s capacity to 425,000 tonnes per annum, without issuing the required Contractor Change Notice. This would have allowed the contractor to accept third-party waste and receive all the additional income, while the council would have borne a disproportionate share of capital and operational costs under certain scenarios, such as following a qualifying change in law.

Local Partnerships stepped in to ensure that the contractor’s changes were correctly classified as a contractor change and that the council received its fair share of the additional income.

The Solution:

The Local Partnerships team of legal, financial and technical experts worked with the council’s own team to establish that what was proposed was a contractor change, which would therefore be subject to the contractual change procedure. The team considered the potential impact of the additional tonnage throughput in terms of traffic movement, additional income, impact on composition and impact on the existing contractual pro-rata sharing mechanism. After communicating the justification for the council’s position to the contractor, an agreement was reached that the increase in permitted capacity was a contractor change, and a Contractor Change Notice was susequently issued.

The Impact:

By ensuring that the contractor change was recognised and that the contract’s terms were enforced, Local Partnerships secured several benefits for Cardiff City Council:

• Cardiff City Council now receives a share of the income generated by the additional third-party waste due to the increased capacity
• A variation was introduced in the calculation of NNDR (business rates) pass-through costs, ensuring that the council does not bear an unfair burden from the capacity increase.
• Should a qualifying change in law occur, the council’s share of capital costs will be re-calculated, ensuring that it is protected from excessive costs.