Long Term Waste Management Contract Settled Out Of Court
Ongoing litigation related to the councils’ long term waste management contract has been settled out of court.
Derby City Council and Derbyshire County Council have paid a joint total of £93.5m to Resource Recovery Solutions (Derbyshire) Ltd’s (RRS) administrators. It comes after several months of negotiations between the councils and RRS’s administrators, who were claiming £187m was owed – a figure which the councils disputed.
In 2009, RRS - a partnership between infrastructure firm Interserve and waste management company Renewi – was awarded a contract by Derby City Council and Derbyshire County Council to manage the councils’ residual waste and design, build, commission, and operate a waste treatment facility in Sinfin, Derby.
RRS paid for the facility – which under the councils’ contract with RRS was planned to be completed in 2017 – to be designed and built, in order to divert 190,000 tonnes of waste per year away from landfill.
But after RRS failed to pass commissioning tests by the agreed date, the councils lawfully terminated the contract in August 2019.
Following termination, the councils and RRS began a process to determine the Adjusted Estimated Fair Value (AEFV) of the contract. The AEFV was the sum due as compensation (to either RRS or the councils) following the termination of the contract, and is designed to reflect the future value of the long term waste management contract. RRS and the councils were contractually required to go through the AEFV process, and all parties to litigation are expected to make every effort to negotiate a settlement outside a formal litigation process, in order to avoid unnecessary costs to either party.
At respective Cabinet meetings earlier in July, both councils resolved to accept the settlement, and pay RRS £93.5m to protect council tax-payers from the risk of further significant costs.
If a sum had not been agreed through negotiation, the dispute would have been resolved through the courts, and formal litigation – a lengthy process with unknown outcomes and additional costs.
With this settlement, litigation ends, and RRS has no further involvement.
The total sum of £93.5m has been split by the councils in accordance with their agreed split; 50:50 up to £50m, and all sums thereafter split proportionately; 73.4% by the county council and 26.6% by the city council. £36.57m therefore paid by the city council and £56.93m by the county council.
In anticipation of litigation, or a settlement, finances were earmarked as part of Derby City Council’s Medium-Term Finance Planning process for 2023/24, meanwhile Derbyshire County Council has earmarked reserves to cover the settlement costs.
Article by Derbyshire County Council
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