Decision - Corporate Energy Procurement - Gas Contract

(1) That a contract is awarded to the best gas bid, via the most beneficial procurement route following appraisal and recommendations from the council’s energy adviser.

(2) That the current OJEU procurement route continues whilst options are retained to place a contract through the most beneficial procurement route

(3) That the Director of Finance & Resources be given delegated powers, following consultation with the Cabinet member, Leader, and Opposition Spokesperson to award the contract and take all other steps necessary for the implementation of the proposals.

(4) That the Director of Adult Social Care and Housing be authorised to increase gas heating service charges for council tenants to reflect the increase in contract prices from 1st October 2008.

The main grounds for the recommendations that are sought are to allow the council to benefit from the best price available within a volatile market where prices are held for a maximum of 24hrs.

To enable the council to procure flexibly and take advantage of potential to aggregate it’s portfolio to achieve favourable unit costs.

As it is essential that the Gas contract is renewed, by the 30th September 2008 and market volatility has been established alternatives to delegation of powers are limited. Therefore all alternative options relate to the procurement route once powers have been delegated and these are listed below.

Continuation of solo OJEU route to meet timetable. A number of options are being pursued to ensure that best value can be achieved.

Dual fuel – This option would allow the council to tie up of both fuel supplies Electricity/ Gas with the same supplier (E-On) who will then provide a discount below market rate.

Trigger product - Index linked option this option can be very flexible by enabling the council to buy gas at a set trigger price points each month/quarter as with all flexible options there can be great advantages in a market that is going down as well as up, however it is more difficult to achieve any great benefit when the market trend is up month on month.

Winter tracker – This is an option where a daily allocation is applied during the winter months to each site – initially 80% of volume is purchased up front and the rest is purchased as required if the site exceeds allocation. At the end of the year this is tabulated and a refund or an invoice is sent depending on the usage during that year.

Aggregated procurement with other local authorities.

East Sussex County Council had intimated that there were possibilities to aggregate our portfolios and purchase as a consortium, however following East Sussex County Council report they intend to postpone this for at least a year. B&HCC could place a one year contract with a supplier and align in 2009 however, it is likely that the unit price would be higher over this year. Alternatively B&HCC could utilise the 12 month extension clause within the current contract.

Procurement via OGC route

The key benefit of procurement via the OGC framework route is speed and an implied saving through bulk purchasing. However the current OGC gas supply framework list consists of one supplier. This lack of competition is likely to have a negative effect on price especially as supplier fees will be loaded into the unit price. This route also attracts an extra administration fee. However it is worth retaining this option should the tenders returned prove unfavourable.