Proposed contract modification (under Regulation 72(1)(c) of the Public Contracts Regulations 2015) to the Processing of Recyclable Materials including through a Materials Recycling Facility contract between the Council of the City of Newcastle upon Tyne ("the Council") and J&B Recycling Limited ("the Contractor")

In 2019 the Council awarded a contract to the Contractor for the processing of recyclable materials ("the Contract"). The Contract start date was 1st October 2019 with an initial term of 2 years and 2 x 12 month extension options. The Council has exercised both of those options, thereby giving a current contract expiry date of 30th September 2023. Due to circumstances which it could not have foreseen (as explained more fully in section VI.3) Additional information below), the Council proposes to make a contract modification to extend the term of the Contract by a further two years. This modification will result in a revised contract expiry date of 30th September 2025. Additional information: The Council's current processing of recyclable materials contract is due to expire on 30th September 2023. The Council has a statutory duty to provide this service and therefore needs to arrange for the provision of the services beyond this date. The Covid pandemic, war in Ukraine and unprecedented increases in fuel prices have resulted in global volatility in the waste industry and recyclate markets at the present time. These factors could not have been foreseen by the Council when the contract was awarded in 2019. Together with revisions to the timetable to deliver the National Resources and Waste Strategy, the above factors mean that a competitive procurement at this time is unlikely to deliver better value than that already achieved by the current contract. As such, in light of the unforeseeable circumstances above, the Council proposes to extend the Contract by a further two years.

The Council's total spend over the period from 1st October 2019 to 31st December 2022 has been £3,106,135.16 (excluding VAT). The Council estimates that the spend over the remaining 9 months of the contract from 1st January 2023 to 30th September 2023 will be £306,495.00 (excluding VAT). Combined, these two figures give a projected spend for the full contract term (1st October 2019 to 30th September 2023) of £3,412,630.16 (excluding VAT).

The remaining contract projected spend of £306,495.00 (excluding VAT) was calculated by summing the results of the following calculation for each of the remaining nine months of the current contract term:

The predicted monthly collected tonnage for each month multiplied by the known (January 2023 - March 2023) or predicted (April 2023 - September 2023) contract pay mechanism charge for that month.

The contract pay mechanism charge per tonne is expected to vary between April 2023 and September 2023 in accordance with the payment mechanism in the contract. The predicted tonnage for each month was calculated from analysis of the historical tonnages collected in each of these months over the previous three years of the contract to allow for pre-covid, covid and post-covid impacts.

The Council estimates that the contract spend for the extension period being sought (1st October 2023 to 30th September 2025) will be £1,664,760.37 (excluding VAT). Therefore, the overall total contract value, to account for the modification proposed in this notice, is estimated to be £5,077,390.53 (excluding VAT).

The projected spend for the extension period (1st October 2023 to 30th September 2025) of £1,664,760.37 (excluding VAT) was calculated by summing the results of the following calculation for each of the 24 months of the extension term:

The predicted monthly collected tonnage for each month multiplied by the predicted (October 2023 - September 2025) contract pay mechanism charge for that month.

The highest charge/tonne in the current contract payment mechanism charge range was assumed as no reliable method exists to accurately forecast contract pay-mechanism charge variation. The predicted tonnage for each month was calculated from analysis of the historical tonnages collected in each of these months over the previous three years of the contract to allow for pre-covid, covid and post-covid impacts.

These projections assume that annual tonnages of collected recycling materials have returned to pre-covid levels (19,500 to 20,000 tonnes per year) and will be minimally impacted by a potentially recessionary economic environment in 2023 and 2024. The lowest pay mechanism price index banding in the contract (which delivers the highest charge/tonne) has been assumed for the 24 months extension period being sought. The expectation, based on the operational experience of this contract from 1st October 2019 to the present, is that the pay mechanism price index banding will not remain permanently in the lowest band over the 24 months extension period and, consequently, the spend over the extension period being sought may, in fact, be less than the £1,664,760.37 (excluding VAT) estimate above.