Thursday, 28 January 2016

Council writes off lost millions as a "non-story"


Readers of the Border Telegraph's letter column this week may have noticed that a senior member of Scottish Borders Council's Executive finally emerged through the apparently impenetrable wall of silence to defend the local authority's role in the waste treatment project debacle.

We now know - thanks to Councillor John Mitchell - that SBC tried, from 2008, to deliver a £70 million Public/Private Partnership Project "using innovative [useless more like!] technology". During the process, which lasted seven long years, Mr. Mitchell says the council spent resources on staff and advisory fees (for well paid consultants) which ultimately had to be written off when the contract could not be fulfilled.

But SBC's actions had been vindicated during audits by their own external auditors KPMG and by public watchdog Audit Scotland with a risk register for the project also scrutinised  independently. This meant, according to Councillor Mitchell, there was a full understanding of the risks faced by the council in attempting to deliver the project with their chosen contractors New Earth Solutions Group.

That appears to suggest for the first time that councillors who took various fundamental decisions linked to the (non) development of a waste treatment facility at Easter Langlee knew exactly what they were doing.

Here's the crucial passage in the councillor's letter: "At each stage of this process, proper risk assessments were undertaken and there is no evidence to suggest that the council proceeded at any time with other than appropriate advice and due diligence".

So the buck stops with the elected members who, from this day forth, cannot possibly blame officials for the waste treatment project shambles. But it would be reassuring if Councillor Mitchell and his colleagues allowed local taxpayers access to the hundreds (maybe thousands) of documents generated during the seven year saga which produced precisely the square root of absolutely nothing...and that's putting it politely.

In a swipe at the council's critics, and at those seeking a detailed explanation of how and why their millions 'went down the pan', Councillor Mitchell wrote: "Continued efforts to identify stories where there are none is simply diverting public attention away from the real challenges the council faces in delivering a complex waste management solution which meets European, Scottish Government, SEPA, and local requirements both now and in the future".

Hold on a minute. Is the councillor seriously suggesting that SBC's achievement in squandering £2.4 million [a very conservative estimate, according to "industry insiders"] of other people's cash is a non-story? Perhaps others are better placed to pass judgement on that particular aspect of the fiasco.

A spokesman for UKWIN (United Kingdom Without Incineration Network) told us: "Scottish Borders Council should never have pursued incineration as a means of waste management. Compared to some other local authorities who entered into long-term incineration contracts SBC got off light, but it still wasted time and money that should have been devoted to investing in real zero waste solutions. We all hope they have learned their lesson."

And many will remain unconvinced that selective auditing by an array of accountants who looked at narrow aspects of a huge public contract can be interpreted as a clean bill of health for those who messed up at SBC.

Monday, 25 January 2016

£26 million in benefits lost by waste contract collapse


The development of a conventional treatment plant capable of processing 40,000 tonnes of Borders household waste each year would have delivered cost savings of at least £26 million over a 24-year period, according to documents seen by Not Just Sheep & Rugby.

Scottish Borders Council commissioned Dorset-based New Earth Solutions (NES) in 2011 to build a Mechanical Biological Treatment (MBT) facility at Easter Langlee after senior local government officers and leading councillors accepted in 2009 that a "do nothing" option - continuing to send most of the region's rubbish to landfill - was unsustainable 'going forward'.

But the cancellation of the amended deal with NES last February in the face of insurmountable technological and funding issues means the same "do nothing" scenario still exists seven years out from the start of the procurement process.

It has also been confirmed that those responsible for waste disposal at the council discounted the possibility of transporting all of the region's garbage out of the Borders by road before entering into discussion with potential bidders for the £65 million waste treatment contract. But following the total collapse of the SBC/NES partnership, carting the refuse in fleets of lorries for treatment elsewhere is firmly back on the agenda.

The shambolic failure of the contract to deliver any benefits has - according to SBC - cost taxpayers £2.4 million. But it would appear from the confidential statistics contained in several reports prepared for the council by consultants and officials that the real cost could be at least ten times that figure when land fill tax and other expenditure required to maintain the "do nothing" option is taken into account.

And the bill for waste disposal would have been even higher had the Scottish Government's system of landfill fines not been suspended. One estimate warned the penalties could have cost SBC upwards of £14 million.

There is also the small matter of £6 million in capital costs which will be needed for the construction of a waste transfer station at Easter Langlee to handle the rubbish before it proceeds on its final journey to a treatment plant, possibly in the Lothians. That money will have to be borrowed before being repaid over a period of years with associated interest added.

The council members were told of the potential for £26 million worth of savings in a confidential report submitted to them in March 2011. The proposed MBT plant was going to divert a guaranteed 80% of waste from landfill, believed at that time to be one of the highest diversion rates in the country. The forecast savings were calculated by comparing the MBT project against the "do nothing" scenario.

But before work on the MBT could begin SBC and NES entered into a so-called Deed of Variation during 2012 to include an energy from waste facility at Galashiels even though the brand of technology was not ready for commercial application. This highly ambitious and risky combination of functions proved impossible to achieve, and the entire scheme was ultimately abandoned.

It has also come to light that an accountancy firm working for Audit Scotland, the national public expenditure watchdog, has recently concluded an exercise which considered aspects of SBC's decision to award the waste management contract to NES in 2011.

KPMG, the company which acts as external auditors to SBC, has concluded that "the technology which has subsequently not been able to be implemented was not core to the original agreement with NES. The basis of award was not reliant upon delivery of the technology. However, to make the process more advantageous to both parties an amendment to the agreement was reached in 2012."

According to KPMG at this point the council protected their commercial position with the incorporation of 'no-fault break clauses' allowing them to walk away in the event of the technology not being able to deliver the anticipated benefits.

But it is understood the council already had a right to terminate in the original contract for the MBT facility. Some observers and critics claim the Deed of Variation to include the energy recovery technology severely diluted SBC's commercial position.

The KPMG assessment adds: "Progress has been made in addressing areas for improvement with appropriate procurement, governance and risk management arrangements in place".

The fact remains that despite spending at least £2.4 million and a great deal of staff time, and forfeiting potential cost savings of £26 million, SBC still does not have a fit for purpose waste treatment facility which could and should have been operational in 2012. It is difficult to see how auditors can consider such an abject and costly failure as a satisfactory outcome given the environmental impact and road haulage costs linked to the latest "solution".

Thursday, 21 January 2016

Council's multi-million pound gamble confirmed


A senior executive at New Earth Solutions, the company handed a £65 million contract by Scottish Borders Council (SBC) to develop the region's waste management service, has confirmed that the technology which would have been used in a new treatment facility at Galashiels had still not been proven on a commercial scale when the deal was abandoned last February.

The admission, contained within an interview with a waste management trade magazine, backs up earlier claims and allegations that councillors in the Borders took a massive gamble with taxpayers' money when they decided to "buy" the untested 'energy-from-waste' system in October 2012 while it was still under development by NES technicians.

Apart from a terse joint statement from the council and New Earth which merely confirmed the 24-year contract had been ditched after running into specific technological and funding issues there has been no public pronouncement from the Dorset-based NES about the Borders fiasco. They have subsequently referred requests for information back to SBC.

The company was asked in 2010/11 to build a conventional treatment plant at Easter Langlee, Galashiels to deal with municipal waste generated by the region's households. It was to be the sixth venture by NES which, at the time, was already operating several identical facilities.

But at the same time businesses within the NES Group were investing £60 million in a bid to perfect a technology capable of converting waste into heat and power at a massive centre in Avonmouth, near Bristol.

SBC has yet to explain publicly why it agreed to radically alter its contract with NES to immediately include a version of the fledgling energy-from-waste set-up at Easter Langlee despite the lack of any apparent guarantee of success.

When the Avonmouth scheme failed to produce satisfactory results and was draining the financial lifeblood from the Group, the decision was taken last summer by NES' funders Premier Group Isle of Man to sell off the energy sector to a bank. The plant had failed to perform satisfactorily ever since coming on-stream in 2013.

In a lengthy and detailed interview with the Chartered Institute of Waste Management (CIWM) Journal, Richard Brooke, NES commercial director, explained why the company's first Scottish project did not materialise.

Mr. Brooke said: "The energy recovery scheme at Avonmouth was fully built out and is now operational. However, New Earth has now divested the Avonmouth energy plant in order to focus on optimising and expanding its waste business, which is seeing a strong demand from the local authority sector...and its shareholders, funders and management team can now focus on the company's profitable waste business.

"The development in Scotland that would have been New Earth's sixth facility did not come to fruition for a variety of reasons, most notably the drop off in the quantity of residual waste requiring treatment; and the specific energy technology to be built and operated was not ready to bring on-line on a commercial scale."

In a telling footnote, Mr. Brooke added: "After the demands and pressures of establishing companies and operations in the energy sector over the last few years, we want to 'get back to the knitting' of delivering waste treatment services to our local authority and commercial clients and managing our waste facilities to a high standard."

It seems SBC readily agreed to vary their contract with NES to include risky energy recovery in the deal when in fact the council should have stuck to the basic principles of waste treatment, or in Mr Brooke's words 'stayed with the knitting'.

Had they done so the Easter Langlee MBT (Mechanical Biological Treatment) plant, scheduled originally for completion in 2012, would have been operational. It had the capacity to divert up to 80% of Borders rubbish from landfill, thereby bringing valuable environmental benefits while saving the council a small fortune in landfill tax.

Instead the unexplained, disastrous gamble cost a frightening £2.4 million (at least) with no return by the time SBC was finally forced to tear up their bookie's slip!

Tuesday, 19 January 2016

Councils spending billions without proper scrutiny


Scotland's councillors are not being given adequate information on capital investment by paid officials which means up to £7 billion of public cash may have been spent over the last three years without proper scrutiny.

That is one of the most worrying conclusions of a newly published report from Audit Scotland (AS), the public expenditure watchdog, after a follow up study Major Capital Investment in Councils featuring analysis of 15 major projects which had been the subject of a similar exercise by AS in 2013.

One of the schemes placed under the watchdog's microscope was the ill-fated waste treatment facility planned by Scottish Borders Council (SBC) at Easter Langlee, Galashiels which was to have cost £18.2 million, according to the report.

In the 2013 assessment the Borders waste management facility was shown to be already 27 months behind schedule with an estimated completion date of January 2015 instead of the original 2012 deadline. But the entire concept had to be abandoned in February 2015 when the council's deal with their chosen contractors New Earth Solutions was torn up. Expenditure on the scheme is recorded in the latest AS report as £2.4 million.

According to the document: "Scottish Borders Council cancelled the project due to project-specific issues. In particular, the council failed to demonstrate the project's technical viability and was therefore unable to secure funding for the project."

The Borders proposal was the only one out of the fifteen to be scrapped with nothing to show for years of planning and at least two and a half million pounds of abortive spending. Nine other schemes from the 2013 study had been completed by October 2015 with five more in development.

SBC's refusal to release information about how the Easter Langlee project was radically altered mid-way through the planning process and whether councillors carried out adequate checks to ensure money was being spent wisely means it is impossible to conclude whether issues outlined in the AS report can be applied to the disastrous Borders waste management contract.

Audit Scotland says: "Elected members are not able to scrutinise the performance of capital programmes effectively because they are not receiving adequate information on capital investment.

"Councils do not routinely report to elected members project risks or non-financial information, such as the benefits realized from capital investment activity. No council has a continuing programme of training in place on capital issues".

In the Borders case the 10-year capital programme is worth £271 million which represents a significant sum being spent possibly without adequate supervision by elected members. But surely any councilor who claimed to be "on the ball" would make sure he or she asked pertinent questions of senior officers before sanctioning expenditure.

There was an adequate opportunity to ensure the waste management project received robust scrutiny when no fewer than 18 SBC members and officials travelled to south-west England at taxpayers' expense to visit a New Earth Solutions sister plant at Avonmouth.

The party stayed at the four-star Hilton Garden Inn in Bristol City Centre, some getting there by air while others preferred to travel by train. Total cost of the trip, according to a council response to a Freedom of Information request was £3,939 split between transport (£1,656) and accommodation (dinner, bed & breakfast £2,283).

Credit card transaction records of two senior officers who were part of the delegation show one purchase linked to the trip was £570.20 for two train tickets, and a single rail ticket which cost £228.70.

But although taxpayers footed the bill for the "jaunt" SBC has refused to disclose information or documents to show what took place or what was achieved on the visit, only four months before the council dropped New Earth Solutions like a ton of bricks. We are told the proceedings are "commercially confidential" which means reports and other correspondence have been heavily censored.

Friday, 15 January 2016

Lights! Camera! Action!...Rubbish


Not Just Sheep & Rugby can reveal that the waste management company awarded a £65 million contract by Scottish Borders Council was sponsoring a Jeremy Irons movie while the council was  acting as guarantor for a £315,000 insurance bond the firm could not afford.

The revelation that New Earth Solutions and its offshore funder Premier Group Isle of Man were dabbling in show business but "could not afford to set aside the capital" to cover a requirement from the Scottish Environment Protection Agency is the latest in a long list of embarrassing and incredible disclosures since the contract between SBC and NES had to be "trashed" in February 2015.

New Earth was supposed to look after waste management issues and services in the Scottish Borders for 24 years, and was charged with the construction of a multi-million pound treatment plant at Easter Langlee on the outskirts of Galashiels.

But while the council was squandering well over £2 million of public money on consultants and on procuring and arranging the contract, NES had neither the funds nor the technology to deliver the urgently needed waste management solution.

The 'security' bond was required before an operating licence could be issued by SEPA for the planned facility at Easter Langlee. The guarantee was to ensure funds were available should an environmental event occur that required clean-up at the facility.

It would also cover the cost of cleaning up/getting rid of any waste left in the facility should NES cease trading. The undertaking was required to ensure the permit was obtained, and SEPA would not issue a certificate without it. But the council was forced to step in during 2012 after NES indicated it didn't have the money for the guarantee.

Ironically - or perhaps appropriately - the 2012 'docu-feature' in which NES became the main sponsor was entitled "Trashed". The Blenheim Films production was selected for a special screening at the Cannes Film Festival.

The blurb issued to promote the movie starring Jeremy Irons with music by Vangelis explained how Irons set out to discover the extent and effects of the global waste problem "as he travels the world to beautiful destinations tainted by pollution".

An official press release from Sally Fischer Public Relations told us "This is a meticulous, brave investigative journey that takes Irons (and us) from scepticism to sorrow and from horror to hope".

The lengthy news release goes on to confirm that New Earth Solutions is delighted to be a proud sponsor of Trashed. The firm is described as "a UK based waste treatment and renewable energy specialist dedicated to delivering robust technical and environmental solutions to the UK's challenge of finding sustainable ways to manage the waste society creates, promoting recycling and reducing customers' carbon footprint through quantifiably beneficial processes".

A glowing testimonial for a business which took Scottish Borders Council on a journey of less positive discovery!

And the Isle of Man-based Premier Group, named in confidential council documents as the funders for the Galashiels waste facility, was quick to jump aboard the "Trashed" bandwagon with its own upbeat 2012 news release.

According to Premier's David Mackenzie, the Group's Head of International Distribution: "We are delighted to announce that New Earth Solutions is the main sponsor of a new hard hitting documentary about waste and its impact on the environment.

"Whilst the film does not directly refer to New Earth Solutions, it certainly paints a picture of the growing need for their type of waste management solutions, not just in the UK but globally. The energy from waste initiatives which will be coming online around the year end will also contribute to resolving the problems highlighted by the film".

But as readers of these columns will know, after spending £60 million in a bid to develop and perfect a brand of Energy From Waste technology which was intended for use at Galashiels, NES was forced to dispose of the entire untried, flawed system to its lenders for a pittance. It is a pity that SBC decided to use council taxpayers' money to 'buy' this useless type of waste management kit before it had even been passed fit for commercial use.

The value of the sponsorship invested in Trashed by NES and Premier Group has not been made public. But perhaps there is scope for a sequel telling the story of how a gullible local council spent six years and millions of pounds on a project which produced the square root of nothing. Suggestions for a title on a postcard please....

Sunday, 10 January 2016

It Is With Regret We Announce....

OSSIE SHEARER on the passing of the Hawick News [office]

'LOCAL MEDIA DRIVES RESPONSE & ACTION' screamed the panel down the centre of page 16 of last week's Southern Reporter. Unfortunately the juxtaposition of the advert right next to a virtual obituary notice for the "death" of the Hawick News office this coming Friday could hardly have been more inappropriate.

Imagine the sense of outrage in the columns of the Hawick News if Scottish Borders Council announced it was closing its contact centre in the middle of town, forcing local inhabitants to pay their council tax in Selkirk or Jedburgh.

No doubt the paper would be running a campaign with online petition and no-nonsense editorials to preserve a local authority presence. Hawick's councillors wouldn't know what had hit them while senior officials at Newtown St Boswells would be branded 'enemies of Hawick'.

Yet as we exclusively revealed before Christmas, Johnston Press, the non-local owners of several Borders weekly papers, have decided to shut down the only newspaper office in the region's largest town as part of the company's latest cost cutting measures. It may prove to be a misguided decision, and certainly one which will not go down well with loyal readers of the News.

From this weekend the Hawick News which has been part of the fabric of The Auld Grey Toon since 1882 "will become part of The Southern Reporters [sic] Office in Selkirk", according to that 'It is with Regret' notice referred to earlier. Apparently there will be a drop off point for potential editorial contributions at a local gym.

The demise of the Hawick office is the latest in a string of closures by the Johnston Press Group which has seen newspaper offices disappear from Galashiels, Jedburgh, Kelso and Duns in recent years.

This regrettable trend has been repeated across Scotland and the rest of the United Kingdom by Johnston and many of its competitors.

When every small and medium sized town had an editorial presence the potential for members of the public to drop into an office with tips for stories and features resulted in far better editorial content than readers enjoy today. The local reporter was a valued member of the community, like the local 'bobby' who has also all but disappeared from our town centres.

But in a definite change for the worse the diminishing number of journalists now find themselves based in a central office - some refer to this as a news factory - and spend much of their time in front of computer screens processing editorial content on templates.

The opportunity to mix with potential contacts and to investigate wrong doing or even cover local events - once primary roles for the local press - have largely disappeared.

The lads and lasses who continue to produce your weekly paper do a sterling job, but they are working with at least one hand tied behind their backs as levels of investment in the editorial function are cut, then cut again. 

Of course readers now have the option of turning to newspaper websites as the cost of paper editions spirals to unjustifiable heights. But a good deal of the content has little or no relevance locally with adverts for cruises and jewelry waiting to snare extra customers.

The closure of the Hawick News office is indeed regrettable, and marks yet another backward step in the decline of Borders local newspapers following their acquisition by national conglomerates.

Perhaps the time is right for the formation of a series of ultra-local websites to serve the distinctive communities that make up the Borders.

According to the industry magazine Press Gazette new research shows there are 550 active local and "hyperlocal" news websites across the UK. These are sites which are run independently of the regional newspaper industry and which, in some cases, fill gaps in coverage.

Over the last ten years there has been a net reduction of 200 in the number of local newspapers in the UK with thousands fewer regional press journalists employed in the industry. The new sites are generally run by volunteers, with a minority employing professional journalists.

But here in the Borders are the resources, the momentum and desire for such a venture out there waiting to be tapped?


Sunday, 3 January 2016

'Financial health' check reveals debt mountain

DOUG COLLIE on why Scottish Borders Council may have been so keen to protect a private firm's 'economic interests' from public scrutiny

A ruling by Scotland's information commissioner which dashed Scottish Borders Council's hopes of covering up damaging financial facts about their former waste management contractor marked a fairly minor breakthrough in the long campaign to get at the truth behind the disastrous loss of millions of pounds of public cash.

But subsequent material compiled by Not Just Sheep & Rugby researchers may demonstrate why the local authority did not want the 'financial health' of New Earth Solutions Group opened up to scrutiny by council taxpayers and critics.

The Dorset-based company was selected by SBC in 2011 to deliver a £65 million contract including the development of a modern waste treatment plant at Easter Langlee, Galashiels. Original estimates valued the 24-year deal at up to £87 million.

But it became apparent in early 2015 that NES could not fund the project while their plans had also encountered insuperable technical issues. The entire contract was torn up and abandoned with SBC forced to write off the millions it had squandered over four years.

When faced with one of several Freedom of Information requests linked to the fiasco SBC refused to reveal a passage of text from a confidential March 2012 committee report, arguing that disclosure would substantially prejudice NES's legitimate economic interests.

The council told Commissioner Rosemary Agnew that the sentence they wished to hide contained information which would "give a clear indication of the financial health of NES".

But in her decision report Ms Agnew rightly asserted that the company's financial status was readily accessible in annual accounts lodged with Companies House. She went on to point out that since 2012 NES had submitted two sets of accounts which clearly contained information on its 'financial health'.

So what kind of financial picture was painted by the New Earth Solutions Group accounts for 2010/11 - BEFORE the council signed its original deal with NES in April 2011? 

Well, in the 12 months to January 2011 the business recorded a loss of £8.358 million on an annual turnover of £11.103 million. The NES net debt totaled £55.572 million compared to £26.992 million in 2010.

SBC has been asked to disclose details of financial and technical checks carried out on NES prior to the contract being let. But the council has refused, again citing grounds of commercial confidentiality, and disclosure now hinges on further decisions from the Scottish Information Commissioner.

At this stage it is not clear whether councillors were aware of NES's 2011 losses and sizeable debts as they negotiated the multi-million pound contract. But the annual accounts for that year, running to 50 pages, included a detailed catalogue of the firm's indebtedness.

Here is a summary of various debts which formed part of the profile of NES's 'financial health':

“Nord LB bank has a fixed and floating charge over certain Group assets and contracts. They also hold the right to set-off on certain project account balances. £18.47 million of the Nord LB bank debt is repayable in instalments by July 2022 with interest fixed at 6.76%. £9.203 million of Nord LB bank debt is repayable in instalments by July 2017 with interest fixed at 6.19%”.

NES also had loan notes of £1.5 million with an interest rate of 10% repayable by September 2012; £3.029 million of loan notes at 15% repayable by September 2020; £4.133 million of loan notes at 12% repayable by September 2022; £12 million of loan notes at 8.75% repayable by June 2023; £6 million of loan notes at 8.75% repayable by March 2025, and £13.478 million of loan notes at 12% repayable by March 2025.

Did any of these significant entries from the NES financial records feature in risk assessments or "due diligence" reports considered by elected members in 2010 and 2011 prior to the crucial contract being rubber-stamped? Only the council knows the answer to that question, although surely the public has a right to know having seen large sums of their money disappearing with nothing to show for its loss.

When the contract notice inviting bids for the so-called Borders waste treatment solution was first published on January 7th 2009 the requirements were set out in great detail.

Unfortunately the failure of NES to deliver on the terms of their contract, and the years of dithering and delay by the local authority means the Borders is already missing Government targets on recycling and diversion from landfill by a country mile.

A key condition attached to the contract notice read: "All candidates will be required to produce a certificate or declaration demonstrating that they are not bankrupt or the subject of an administration order, are not being wound up, have not granted a trust deed, are not the subject of a petition presented for sequestration of their estate, have not had a receiver, manager or administrator appointed and are not otherwise apparently insolvent".

But waste management "specialists" with burgeoning net debts of £55 million were not excluded from the tendering process, and were expected to source the £23 million needed to build the Easter Langlee facility. It seems to have taken SBC four years - not to mention more than £2 million of wasted expenditure - to realise this financial scenario amounted to Mission Impossible.

Other important conditions outlined during the bidding process were apparently designed to ensure the local authority had access to the state of the successful tenderer's "financial health".

Those conditions were:

"All candidates will be required to provide a statement, covering the three previous financial years including the overall turnover of the candidate and the turnover in respect of the activities which are of a similar type to the subject matter of this notice.", and "All candidates will be required to provide statements of accounts or extracts from those accounts relating to their business."

The question is, did those councillors, senior officials and highly paid consultants responsible for drawing up and finalising the costly and ultimately useless contract study the figures and conclude that the "financial health" of NES was robust enough to deliver a 24-year solution for the Borders' waste management service? If they did, then it seems they made a dreadfully expensive mistake.