Kier to cut off East Sussex waste contract early after market changes
The East Sussex Joint Waste Partnership (ESJWP) has mutually agreed with Kier to end its £120-million waste services contract with the firm early, announcing that the deal will now end in June 2019.
Formed in 2013, the ESJWP includes Eastbourne Borough Council, Hastings Borough Council, Wealden District Council and Rother District Council, and delivers waste and recycling collections to over 200,000 homes, as well as street cleansing and beach cleaning, across a 550-square mile area.
The contract for these services was awarded to Kier upon the ESJWP’s creation, with operations beginning in Eastbourne and Wealden in April 2013 and Hastings and Rother in 2014. It was originally due to run for 10 years, ending in 2023, with an optional 10-year extension, and was estimated to be worth £120 million.
According to the most recent performance update delivered to the committee by Partnership Manager Madeleine Gorman, the partnership reported provisional figures showing an overall kerbside recycling rate of 40 per cent for the 12 months ending January 2017.
Recycling market causing trouble for Kier’s environmental services business
However, in July 2016, Kier Group announced that it was setting aside £35 million to cover future expenses caused by the falling price of recyclates. In a trading update, the firm – which operates property, residential, construction and services divisions – said that the financial performance of the environmental services business ‘continues to be affected by the low oil price’ and therefore the price of recyclate, ‘despite stable operational performance at contract level’.
The financial provision was taken to cover two of Kier’s environmental services contracts – with the ESJWP and Cheshire West & Chester Council.
The announcement of the mutual termination of the East Sussex contract came yesterday (23 March), on the same day as the group published its half-year results, posting record revenue of over £1 billion.
Despite these positive results, which included an underlying operating profit of £56.5 million and four per cent organic growth on 2015, the services division was hardly mentioned in the update, merely pointing out that it had an operating margin of 4.8 per cent and had been awarded more than £300 million of highways maintenance contracts in the period.
Julian Tranter, Managing Director of Kier, said: “We’re proud of our satisfaction rate [in East Sussex] of 95 per cent and our investment in local community projects.
“Following significant change in the recycling market, Kier and East Sussex Joint Waste Partnership have mutually agreed to end the contract with effect from 28 June 2019. We continue to work closely together to provide a high-quality service for residents and stability for our teams during the transition.”
Councils to spend 2017 determining way forward
Kier will continue to carry out the ESJWP’s services until 28 June 2019, with no changes to kerbside collections.
A spokesman for the East Sussex Joint Waste Partnership said: “The average recycling rate across the partnership has increased from 37 per cent to 40 per cent: that’s an extra 1,500 tonnes or 130 lorry loads a year.
“Our focus as a partnership remains on the standard of services being provided for residents, so we will continue working locally with Kier to achieve the best possible levels of service over the next two years. By the time the contract expires the councils will have saved circa £18 million.”
The partnership says that it will now spend 2017 working to ‘determine the way forward’ to ensure that the new service ‘complies with legislative changes and provides the most economic and sustainable waste, recycling and street cleansing services before any procurement takes place’.