Going for gold

Written by: Geraldine Faulkner | Published:

Warwickshire County Council’s David Whitehouse tells Geraldine Faulkner the story behind the local authority’s award-winning creative approach to the franchising of its HWRC re-use shops – and why its upcoming re-use shops tour is already ‘sold out’.

The philosopher’s stone is a legendary substance allegedly capable of turning inexpensive metals into gold. It was even believed to be the elixir of life, useful for rejuvenation and possibly for achieving immortality. For a long time, it was the most sought-after goal in Western alchemy.

Using this as an analogy – and not such a far-fetched example as might be first envisaged – it could be argued that by franchising its household waste recycling centres’ (HWRCs) re-use shops, Warwickshire County Council (WCC) has discovered its own alchemy in turning base metals to gold.

Consider the case: WCC has competitively ‘franchised’ the operation of eight of its nine HWRC re-use shops. By creating partnerships with charities, and in one case a private waste management specialist, to run its HWRC re-use shops (FCC Environment and its charity partner, Chapter 1), WCC has not only successfully provided a sustainable income stream for the authority – particularly significant in these times of budgetary austerity – but also diverted thousands of tonnes of material from landfill and raised millions of pounds for charity. Kerching. And it’s a formula that WCC is very happy to share with other local authorities that are responsible for waste disposal. David Whitehouse, marketing and project manager, waste management economic growth at WCC, predicts that: “By scaling up the Warwickshire re-use shops franchise model to the UK’s remaining 1,056 recycling centres would generate an additional £35 million a year for cash-strapped councils.”

Whitehouse goes on to point out that: “The symbiotic relationship between social enterprises and public recycling facilities demonstrates the circular economy in action – underpinning the triple bottom line of social, environmental and economic benefit.”

Triple kerching

So how did WCC achieve this alchemy? In the words of the legendary Julie Andrews, let’s start at the very beginning. “Prior to 2014, each HWRC re-use shop was offered as a concession to third-sector organisations that pitched for the privilege to operate the site,” recalls Whitehouse.

“The successful operator – either a local or national charity – typically paid a peppercorn rent of around £12,000 to operate the re-use shop and retained all proceeds from the operation less overheads such as fuel, water, wages and salaries, and administration costs.

“Leading up to autumn 2014, four organisations operated re-use shops at eight HWRCs, while the county’s only privately operated HWRC, in Nuneaton, has a separate arrangement with the site operator FCC Environment and its charity partner, Chapter 1.”

By 2014, WCC had aligned the contract end dates for all eight HWRC re-use shop concessions, and packaged eight sites into a four-lot competitive tender, which is reported to be yielding the county council more than £3 million over the life of the contract (five years plus an extension of up to another five years).

And the winner is...

Age UK Warwickshire (AUKW) won all four lots, and its contract to operate the eight sites – including the whole-site operation of two small HWRCs – began in November 2014.

In effect, the authority is claiming a first by effectively ‘auctioning’ the operation of these lucrative franchises in a competitive process.

“In generating an additional £250,000 a year in franchise fees, the authority is providing a platform for sustainable social enterprise – capitalising on the recycling centres as a magnet for unwanted goods and materials,” explains Whitehouse with a justifiable touch of pride. “At the same time, AUKW has the security of a five-year tenure (with an option to extend by up to another five years) across eight HWRCs, which complements its established portfolio of eight high-street charity shops.”

WCC was also astute when it issued its invitation to tender in that it stipulated that the successful bidder would be responsible for payment of the re-use shops’ business rates.

“With registered charities eligible for 80% mandatory rate relief and up to 20% discretionary relief, this undoubtedly aided the business models of third-sector bidders without closing the door to private sector providers prepared to absorb rates bills as an unavoidable overhead,” says the project manager.

Another benefit for AUKW is that it is boosting its profit margins by Gift Aiding donations of goods at its HWRC shops.

WCC’s project manager recalls that a “fiercely competitive tender for just one re-use shop in 2010 informed WCC’s new procurement plan”.

According to Whitehouse, key lessons learned from the 2010 exercise were:

  • The importance of stimulating interest and enthusiasm from potential bidders beyond the publication of contract notices and tender alerts
  • Provision of detailed trading histories aids accurate business planning and income projections
  • Exit strategies for unsuccessful, incumbent operators are crucial as the enterprise may have over-relied on re-use shop income
  • Concession fees should be proportional to shop turnover and profitability, and not invariably ‘peppercorn’. Some Warwickshire outlets were already turning over more than £250,000 a year
  • Packaging outlets into lots and offering a five-year term is likely to achieve best value for the authority and generate an adequate return on investment for the operator
  • Invitations to tender reflecting a high degree of localism and social value will stimulate third-sector interest. However, the possibility of a highly competitive bid from the private sector and/or private/voluntary partnerships should not be ruled out.

Lessons learned

A pre-tender information day attracted representatives from 15 organisations ranging from local furniture re-use schemes to national charities and waste management companies.

Many of the questions tabled at this event were distilled into a frequently asked questions publication, which formed part of the subsequent tender pack.

WCC emphasises that while it welcomed enterprises to operate its HWRC re-use shops, peppercorn rents were seen as insubstantial and unsustainable in the current climate of austerity. A benchmark was set of £50,000 per annum for each of the four lots.

As well as publication of the OJEU Contract Notice and its re-publication in Contracts Finder, WCC highlighted the opportunity to the Coventry, Solihull & Warwickshire Re-use Forum plus industry contacts and existing suppliers. No fewer than 26 expressions of interest were received for the contract, whittled down to five compliant bids for four lots.

As part of the tender evaluation, a confidence rating was applied to bidders’ business plans to establish whether or not they were realistic and achievable – generating a reliable income stream for both charitable causes and the local authority.

A nice little earner

“The franchise is generating an additional £250,000 a year for WCC against a tide of increasing austerity for local government. This is £100,000 a year more than WCC’s procurement benchmark,” states Whitehouse.

AUKW is also investing £50,000 from its own funds to improve signage, storage, office equipment, security and cash handling at HWRC re-use shops.

Whitehouse points out that the economy of scale and pooling of expertise across eight outlets has already seen significant improvements in trading activity and shop turnover – as much as a four-fold increase at one outlet within weeks of taking over.

Unsurprisingly, WCC has garnered a crop of awards for its innovative approach to the franchising of its HWRCs’ re-use shops.

So far, the project has been honoured in the Improvement and Efficiency Awards 2015, National Recycling Awards 2015, International Corporate Social Responsibility Excellence Awards 2015,

APSE Service Awards 2015, the LARAC Celebration Awards 2015, the 2015 Public Sector Sustainability Awards and The Circulars 2016 (the premier circular economy award programme).

An over-subscribed autumn 2014 tour of selected Warwickshire HWRC re-use shops was attended by waste disposal authority representatives from Anglesey, Suffolk, Hampshire and Merseyside. The tour was repeated in March 2015 and again was oversubscribed, with 30 representatives attending from UK waste authorities.

Whitehouse says to date, WCC has shared its re-use shops’ tender packs and contract documents with more than a dozen local authorities and waste partnerships. He also says that the March 2016 re-use shops tour is already ‘sold out’ with a growing reserve list.

So, bearing in mind JRR Tolkien’s words “all that is gold does not glitter”, WCC and its creative waste management do appear to have found their own alchemy, and one it is happy to share with other organisations. The message from WCC is ‘do not be backward in coming forward’ in finding out how you too can benefit from the lessons it has learned.

How to pick a re-use partner:

Choices include:

  • Let as a competitive concession contract – how much are you willing to pay us?
  • Set rent and 100% quality evaluation
  • Arms length e.g. via HWRC contractor
  • Arbitrary/first come (anti-competitive)

Prepare for:

  • Cut-throat competition between bidders
  • Feedback to unsuccessful bidders
  • Aggressive lobbying and/or negative publicity by losers
  • Exit strategy at end of term

Fact file: Nuneaton HWRC and re-use shop

Recycling and waste management company FCC Environment designed and built Judkins Household Waste Recycling Centre on a brownfield site at Tuttle Hill for WCC.

FCC Environment funded the construction of the HWRC as part of a 15-year contract with the local authority. It is expected to save around £175,000 a year by increasing recycling rates instead of sending waste to landfill.

The split-level site includes a purpose-built charity re-use shop where residents can donate unwanted household goods for resale.

The shop is run by Chapter 1, a charity that specialises in providing accommodation and support for vulnerable people.

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