and paid its CEO Rupert Soames total annual “compensation” worth UK£4.5m over the year to December 2018 while scrounging its way around outsourced contracts.
On 4th August 2020 Derbyshire Dales District Council met to consider approval for extra funding, requested by Serco, in order to fully implement the new waste and recycling contract following the disruption of services since the outbreak of the COVID-19 pandemic.
You’d think disruption of any council services by COVID-19 was one-sided, affecting only the council half of the contract. It seems not, as Derbyshire Dales agreed “Recommendation; To provide financial support to Serco to support the implementation of the new contract, due to the impact of delays in the process associated to contact challenge and COVID19. To cap the level of financial support to Serco to £101,185”. That’s peanuts to Serco!
As has been widely discussed and analysed, COVID-19 (or events and circumstances flowing from COVID-19) may, depending on the circumstances and the specific wording, provide force majeure relief to a party prevented (or hindered, impaired or adversely affected) from performing its obligations under a commercial contract. While force majeure provisions frequently do not carry any entitlement to additional monetary compensation (even though the contract may subsequently become more expensive to perform), commercial contracts often include a termination right where a force majeure event has subsisted for a prolonged continuous period of time or a series of force majeure events have occurred for an aggregate period of time.
Derbyshire Dales wrote “The Council’s waste & recycling collection contract is significant in terms of value and because it affects all Dales residents. During 2019/20 this contract has been subject to a competitive tendering process and a new contract (for 8 years with the option of a further 8 year extension) was awarded to the incumbent contractor, Serco, in December 2019. To allow a period of mobilisation, the new contract will commence in August 2020. While the expiring contract cost is around £2.1m per year, the new contract will cost over £3m a year. It is planned to offset some of the additional costs by introducing a chargeable garden waste service from April 2021 (forecast annual income is around £0.7m). The contract also allows for the possible introduction of three weekly residual waste collections, should that be necessary in the future.
“Members are already aware of the support that had to be given to Serco to ensure the garden waste collection service could recommence on 1st June (Emergency Committee 21 May 2020). The Council temporarily supported Serco’s additional operational costs. It accepted a reduction in recycling collections for a month, and reduced/no Food and Garden Waste collection for four months, accepting in excess of 450,000 missed collections whilst continuing to pay Serco the full monthly contract fee. The Council also accommodated Bulky Waste collection cessation, and performed 3,051 bin deliveries that should normally be carried out by Serco. Taken together, it is estimated that the combined value of these supplier reliefs and Council contributions during the Covid-19 pandemic to date exceed £250,000″.
“The new contract transitioned seamlessly on 2 August, but there are financial implications associated with this. These are due to delays in delivering the new refuse collection vehicles, and the consequent need for the existing (old) vehicles to be kept going for some months longer than intended. Part of this delay may be attributable to the Council issuing its “Letter of Intent to Purchase” vehicles on 23 January 2020, which was up to two weeks later than anticipated; this was due to clarification/challenge from the other bidder at this time and was unforeseen by Serco and the Council. Serco inform us that this 1-2 week delay caused a 1-3 month slippage in vehicle delivery slots from the supplier”.
Council tax payers in Derbyshire Dales must be boiling with rage at the generosity of officers and elected members to Serco of “exceeding £250,000”.