(Will address diesel procurement)

The Head of Environmental and Operational Services gave an overview of the trading accounts for the Direct Services Team. He directed Members to the business reports for February 2012. Although the Team would not  meet the end of year budgeted surplus target of £75,000  they were forecasting to break even by year end.

Since the rules on both Compulsory Competitive Tender and Best Value the Direct Services Team had shown it was providing a competitive service at a price comparable to the private sector. Performance indicators and customer satisfaction showed that they were also providing a good level of service.

He considered that the principal reasons the Team’s financial targets were not being met were the costs of diesel and disposal costs for trade waste and emptying cesspools.

The charges for waste disposal were outside the control of the Council. Sita and Cory were charging £90 per tonne for trade waste. The cost of disposal for cesspool waste by Thames Water was not fixed and would vary depending on the individual waste. The Head of Environmental and Operational believed that the Council may need to reconsider its role in collecting trade and cesspool waste if it were proved that these operations could not meet financial targets. Their financial viability would probably be reconsidered in October 2012. Although there was no obligation to provide the service in its current form, the Council did have some long-standing customers who appreciated the level of service given.

Fuel was one of the main areas of expenditure for the Council but again its price was mostly controlled by the market and by tax. Although less would be spent by the Council on fuel in 2011/12 this was because fewer vehicles were being run.

Fuel supply was subject to EU procurement rules because of the size of the contract. The Council’s main focus for the contract was certainty of supply but even so the cost of fuel was only 0.047 pence per litre above the average cost paid by Members of the Freight Transport Association. The bulk of the cost was determined by the Platts Formula which derived from the Dollar crude price of oil. A small margin would be added to this by the supplier. Officers were pleased that the cost for fuel was similar to that paid by those large companies who had greater purchasing power.

Officers did not believe that joint procurement with other local authorities would reduce the cost of fuel further. Considering the cost paid by Freight Transport Association members it would be difficult to buy in sufficient bulk to have an impact. Direct Services were already providing joint services with other authorities for cleaning public conveniences and had explored possible joint working with Gravesham Borough Council, though no agreements had been made.

Officers tabled the existing contingency plan in case of fuel shortages.

In response to a question, the Head of Environmental and Operational Services confirmed that rises in fuel costs had been managed through the budget rather than by raising it as a growth item. Officers had budgeted for a rise in fuel costs from 108.5 pence per litre in 2011/12 to 116 pence per litre in 2012/13 but it was also still identified as a risk.

Members noted there was a significant budgetary variance for the maintenance of vehicles. Officers stated that this was particularly due to the age of 2 vehicles and these vehicles had been built into the replacement programme.

 A Member was particularly concerned that the full cost of the refuse service had not been charged to the general fund but only £1.9 million of the £2 million cost. Officers explained that, historically, the balance had come from surpluses on other trading activities. This meant that any shortfall would be a risk on the trading accounts and not the General Fund.