Agenda item

NCC Enviroenergy Servicing and Maintenance Contracts - key decision

Meeting of Commissioning and Procurement Executive Committee, Tuesday, 14th February, 2023 10.00 am (Item 58.)

Report of Corporate Director for Communities, Environment and Resident Services

Minutes:

Councillor Longford, Portfolio Holder for Energy, Environment and Waste Services, introduced the report.

Wayne Bexton, Director of Environment and Sustainability, and Antony Greener, Head of District Heating and Waste Strategy, presented the report and stated the following:

· Nottingham City Council owns and operates the largest district heating network in the UK. As the plant ages (it is now 50 years old), continued maintenance has minimised the risk of service downtime;

· the plant must provide heating, hot water and power to its customers on a 24/7 basis for as many days of the year as possible;

· the complexity of works required is considerable and is reflected in the level of external specialist support required. However, the arrangements in place help contribute to securing business continuity, continuous improvement and best value;

· a decision by the Executive Board to hive up Enviroenergy Limited into the Council recognised the additional investment required to ensure the continued success of the District Heating Network;

· As part of the Asset Transfer Agreement between the company and the Council, company contracts, including service and maintenance contracts, were novated to the Council and the terms and conditions of these contracts continue to be relevant;

· To ensure goods, services and works continue to provide best value, approval is sought to enter into new arrangements for the contracts and services required (detailed in the report and the exempt appendix) and summarised below:

(i) Provision of Welding, Repair and Maintenance Services;

(ii) Water Treatment;

(iii) Turbine Maintenance;

(iv) Network Maintenance and Repair;

(v) Control System;

(vi) Carbon Credits;

· the recommendations in the report, if approved, will maximise the ability of the service to continue to provide heating and power supply services within the Council’s Contract Procedure Rules, whilst also maintaining Council’s contractual obligations to the Eastcroft Incinerator, therefore minimising the risk of service disruption.

Resolved

(1) to approve:

(a) the tender and award of new contracts for heat station and district heating maintenance, as detailed in table 1 of the report;

(b) extensions to the contracts for heat station and district heating maintenance, as listed in the exempt appendix;

(c) the procurement of Carbon Credits through the use of a broker, to ensure that the Council complies with its statutory obligations in respect of the UK Emissions Trading Scheme;

(d) spend against the contracts, listed in table 1 of the report and in the contracts and transactions listed in the exempt appendix, for the duration of all contracts and transactions, including any extension(s).

(2) to delegate authority to the Director of Environment and Sustainability to award contract extensions, tender and award new contracts for services and purchase goods and/or works, as detailed in the recommendations above.

Reasons for recommendations

Recommendation (1)(a): Award of new contracts

Table 1 below sets out the requirement to tender for and award new contracts for the provision of the following services to support district heating, with a rationale for each contract required detailed below the table:

Contract	Term	Estimated value	Estimated value including extension
Provision of Welding, Repair and Maintenance Services	5 Years plus extension options for 2+2 years	£2,000,000	£3,600,000
Water Treatment	5 Years plus extension options for 2+2 years	£450,000	£810,000
Turbine Maintenance	Up to 7 years	£2,000,000	N/A
Network Maintenance and Emergency Repair	5 Years plus extension options for 2+2 years	£3,000,000	£5,400,000
Scada Control Engineering System	Up to 6 years	£1,300,000	N/A

Provision of Welding, Repair and Maintenance Services

The contract for essential servicing and maintenance of the boilers and associated mechanical infrastructure including condensers and steam management systems is due for renewal. Boiler servicing and maintenance takes place continually as required and projects are identified, costed and agreed before Purchase Orders are raised on a job by job, call-off basis. If essential works, are not completed, the system may not be able to operate safely and there is a significant risk of losing the steam management systems meaning customers could be without a supply of heating and hot water for prolonged periods.

There is a requirement to secure the continued supply of this service and a new contract needs to be tendered and awarded for 5-years with options to extend by 2+2 years to ensure a suitable contractor is available to respond to emergency situations and schedule planned works as required throughout the contract term.

Water Treatment

The water treatment plant at the Combined Heat and Power (CHP) Station treats raw water from the on-site borehole/mains supply to produce boiler grade feedwater for the Eastcroft Energy from Waste (EfW) plant and district heating makeup water to replenish water losses. The closed water cycle feeds the generating turbine at the London Road Heat Station as well as the District Heating Network and Eastcroft EfW. The Environmental Permit under which the Council operates requires improvements to be delivered, best achieved through modernising the current water treatment process.

The technical solution chosen will remove chemical water dosing arrangements and replace this with reverse osmosis technology to remove the requirement to store bulk hazardous chemicals on site. A new contract is to be specified, tendered and awarded for 5-years with options to extend the contract term by 2+2 years if required to ensure that the improved water treatment requirements are delivered.

Turbine Maintenance

The Council owns and operates a turbine from its London Road Combined Heat and Power (CHP) Plant and requires expert external assistance in the effective management and maintenance of this asset. The current contract has expired and requires a new arrangement to be secured until 2030 which is the expiry date of the Council’s steam supply Agreement with the operators of the Eastcroft EfW plant.

Network Maintenance and Emergency Repair

The Council must retain the ability to respond to leaks or other repairs required on the District Heating network so that disruption to heating services is minimised. Essential maintenance and emergency repairs of the district heating network is completed with the assistance of external contractors where required and the contract is due to expire shortly. The Council therefore needs to procure and award a new contract for 5-years with options to extend the new contract term by 2+2 years if required.

Control Engineering System (Scada)

Supervisory control and data acquisition (Scada) is a control system architecture comprising computers, networked data communications and graphical user interfaces for high-level supervision of machines and processes. It also covers sensors and other devices, such as programmable logic controllers, which interface with process plant or machinery.

The support required is currently provided by an annually renewed Service Support Agreement. However, the service has identified a requirement to work with Corporate Procurement to investigate options for securing best value in maintaining a Scada system for the longer term, and tender for and award any necessary new contracts as required.

Recommendation (1)(b): Extension to Contracts

Contained within an exempt appendix to the report.

Recommendation (1)(c): Procurement of Carbon Credits

The Greenhouse Gas Emissions Trading Scheme Order 2020 places statutory obligations on the Council to offset its fossil fuel consumption utilised in the delivery of district heating through the purchase of Carbon Credits under the regulated UK Emissions Trading Scheme. The methodology for procuring the required Carbon Credits is contained within the exempt appendix to the report.

Recommendation (1)(d): Contract Value

The estimated contract values are detailed in table 1 of the report. The values of the contract extensions or transactions are detailed in table 2 of the exempt appendix. Approval is sought to raise the requisite purchase orders up to the values listed within the appropriate contractual or transactional arrangements.

Recommendation (2): Delegation of Authority

To expedite the award of contract extensions and contract tenders and awards, approval is sought to delegate authority to enter into the arrangements to the Director of Environment and Sustainability.

Other options considered

Do nothing – If the Council does not award contracts or extensions to contracts:

Welding Repair and Maintenance

· Risk of Failure and shutdown of service