BSE, the cost of a crisis : thirty-fourth report, together with the proceedings of the Committee relating to the report, the minutes of evidence and appendices / Committee of Public Accounts.

  • Public Accounts Committee
Date:
1999
Catalogue details

Licence: Open Government Licence

Credit: BSE, the cost of a crisis : thirty-fourth report, together with the proceedings of the Committee relating to the report, the minutes of evidence and appendices / Committee of Public Accounts. Source: Wellcome Collection.

    60/68 (page 34)
    30 November 1998] [Continued — substantial capital costs to be borne by the Government (£18 million is quoted in the report); — unknown, but probably high, decommissioning costs to be borne by Government; — acomprehensive indemnity from the Government against any claims arising from the incineration of MBM; — an onerous specification for MBM delivered, leading to increased rendering costs and a requirement to reprocess MBM already in store; — high gate fees proposed, making the cost of destruction well over £200/tonne. 5. In the light of these demands and the prospect of other possible incineration outlets, UK Agriculture Ministers accepted MAFF/IB’s recommendation in July 1997 that the main power generators should be held in reserve whilst other possible options were pursued by IB. At around this time, it was also agreed between Departments that IB would formally have lead responsibility in Whitehall for identifying and contracting OTMS disposal routes, thus placing the entire OTMS operation with IB. 6. Paragraphs 7 and 8 of the Memorandum which I submitted to the Committee for the hearing on 30 November explained that in the latter half of 1997 IB suspended, and then terminated, the incineration part of its integrated tender because none of the bids met our requirements. Eight companies with a track record in combustion, or in handling MBM, were invited in January 1998 to submit costed proposals for the large scale disposal of MBM under the “negotiated” procedure of the EU Services Directive. As a result of this process, seven companies submitted costed proposals to us, with the tender from Fibrogen evaluated as the clear front runner by our Project Board. Why Fibrogen? 7. A table showing the criteria against which the Project Board evaluated the tenders received and the marks awarded to each of the bids is at Annex A. The tender from Fibrogen scored well in mene of aa deliverability, quality and volume of service and price, as below: — Early deliverability: Fibrogen’s proposal envisaged burning within six months of contract, nine months less than the closest competitor—PDM, and 14 months less than Rechem. Fibrogen’s schedule has subsequently slipped by two months, mainly due to changes in plant design suggested by the Environment Agency (EA) or being needed to meet BATNEEC (best available techniques not entailing excessive cost) requirements. BATNEEC requirements will be faced by the other companies and it is not unreasonable to assume that there will also be some impact on their schedules, if additional work is identified to meet the BATNEEC criteria. — Quality and Volume of Service: At 85,000 tonnes of MBM a year, Fibrogen offered the second largest tonnage after Rechem, and the Project Board was satisfied with the technical “know how” they would bring to the project. — Price: the price agreed with Fibrogen of £62/tonne of MBM burned is significantly better than that on offer from any other main contenders. More detail on this below. 8. In summary, the Project Board recommended Fibrogen for a contract ahead of any of the other tenderers because of a combination of an early start, high volumes of material and lowest price offered. 9. Fibrogen is the generating company wholly owned by Fibrowatt which is 60 per cent owned by Fibro Holdings, 15 per cent by Foster Wheeler Energy Ltd and 25 per cent by Finstahl SA. Eighty-nine per cent of the shares of Fibro Holdings are held by members of the Fraser family with the remaining 11 per cent held by the company’s operations director Mr Paul Apps. As at 31 March 1998 the net worth of Fibrogen as revealed by accounts lodged with Companies house was £3.21 million. Fixed assets were reported at £9.55 million with net current liabilities at £6.34 million mainly in the form of secured bank loans. Other MBM Contracts 10. Fibrogen’s contract with us to burn around 255,000 tonnes of MBM accounts for around 40 per cent of the MBM that is likely to be produced as a consequence of the OTMS and Selective Cull Schemes to the end of the year 2002-03. Negotiations are continuing with three other companies about meeting the balance of our requirement for MBM incineration capacity. We are looking to contract around 200,000 tonnes of capacity a year which will facilitate clearance of the stockpile by April 2003, but the capacity which is eventually contracted and the timescale over which disposal will take place will be influenced to a degree by whether a cost effective solution comes forward in Northern Ireland. The Terms of the Fibrogen Contract 11. Whilst Fibrogen offered the best chance of making an early start to burning significant quantities of MBM at a reasonable price, their tender was conditional upon a proportion of the gate fee being advanced to cover the cost of converting the plant to burn MBM. The cost of this task is estimated at some £5.7 million,