North Yorkshire Council
Executive
19 August 2025
Yorwaste Teckal Agreement
Report of the Corporate Director of Environment
1.0 PURPOSE OF REPORT
1.1 To seek approval to enter a new contract with Yorwaste Ltd. The contract term is for a maximum of 10 years with an initial five-year period, with options to extend up to a maximum of a further five years.
2.0 SUMMARY
2.1 This report seeks approval to implement the decision made on the 12 September 2024 by the Assistant Director Environmental Services and Climate Change in consultation with the Executive Member for Managing our Environment, namely:
· not to exercise the option to extend the existing Services Contract between NYC and Yorwaste.
· to develop a new Services Contract that better reflects the responsibilities of the North Yorkshire Council as a Unitary Council and address areas of existing drafting that need improvement; and
· to agree that a new Services Agreement is entered into from 18 September 2025, and to delegate agreeing the terms and conditions of the new Contract to the Assistant Director Environmental Services and Climate Change,
2.2 To implement these recommendations, a new 5-year contract with up to a five-year extension period is proposed to Executive for consideration.
2.3 There is a potential conflict of interest in relation to the fact that the Corporate Director of Environment is also a Director of Yorwaste. For this reason, any Council decisions made in relation to Yorwaste were delegated to the Assistant Director of Environmental Services and Climate Change on 06 December 2023.
3.0 BACKGROUND
3.1 On 18 September 2015, the former North Yorkshire County Council (NYCC) and Yorwaste entered into a contract (“the Services Contract”) for the provision of waste management services utilising the ‘Teckal’ exemption in Regulation 12 of the Public Contracts Regulations 2015. The City of York Council (CYC) and Yorwaste entered into a separate services contract at the same time on the same basis. Under the Procurement Act 2023 Teckal is now referred to as the vertical arrangement exemption.
3.2 The individual services provided are detailed in a series of schedules to the Services Contract (“Schedule”); each Schedule setting out the specification in relation to each waste service.
3.3 The Services Contract had an initial contract Term of ten years which ends on 17 September 2025. There is an option for a five-year extension, with a requirement that “at least 12 months before 17 September 2025 the Council may require Yorwaste to continue to provide the Services for a further term of five years commencing on 18 September 2025, provided that the Charges shall not be increased as a result of the extension, other than as agreed by the Parties.”
3.4 Consideration was given to the range of services provided through the existing contract with Yorwaste throughout 2024. Due to a number of changes since the contract commenced, rather than exercising the option to extend from 2025 - 2030, a new, modern, fit for purpose contract for a unitary council would be most advantageous to the new North Yorkshire Council.
3.5 That decision was made by the Assistant Director Environmental Services and Climate Change in consultation with the Executive Member for Managing our Environment in September 2024, and since then the waste management service has worked with Yorwaste to develop a new contract.
4.0 DETAILED PRESENTATION OF THE SUBSTANTIVE ISSUE
4.1 When the Services Contract was written in 2015, NYCC was able to exercise the duties and powers of a Waste Disposal Authority (WDA), whilst the District and Borough councils, as Waste Collection Authorities (WCA) had different powers. With the formation of The North Yorkshire Council on 01 April 2023, the new North Yorkshire Council became a Unitary Authority encompassing the powers and duties of both a WDA and a WCA.
4.2 As set out in 3.1, the City of York Council has a similar service contract albeit with a slightly different end date of 30 September 2025. CYC have always been a Unitary Authority, and their contract was written to suit them, and so in September 2024, they decided to exercise the option to extend their contract for a further five-year period. Both CYC and NYC are in discussion with each other due to the impacts any decision taken by one party may have on the other.
4.3 Given the changed status of the Council, and with the contract renewal timing, this was an opportune period to reflect on the existing contract to ensure it meets the changed status of the new Council and its expanded range of powers and responsibilities.
4.4 It was identified that a number of clauses within the Services Contract are no longer relevant to the new North Yorkshire Council’s Unitary status and so needed to be revised. This could have been done through a series of complex variations to the existing agreement if we extended it, however it was considered that a new contract was the best way to proceed given the extent of changes that would need to be made.
4.5 National waste policy and legislation is also much different than was foreseen in 2015 and the current Services Contract allows a limited ability for the Council to change services specified within the Schedules to react to that already changed and impending legislation.
4.6 A new contract allows us to introduce elements of flexibility into the contract and to tidy up areas where the contract and subsequent Schedules are no longer fit for purpose. An example of this is that five of the seven former District and Borough Councils had entered into Collaboration Agreements with NYCC for at least one element of service to be provided by Yorwaste. Each of these services is subject to a different Schedule and so the service is provided in similar but slightly different ways depending on the locality area. From a contract management and operational perspective, it is more efficient for a single specification to exist for the same service for the new Council.
4.7 There are other areas of the original drafting that have evolved over time as operational practices have changed, or it was realised that the original drafting did not achieve the original intent. There is also an opportunity to include some services that Yorwaste provide primarily in relation to the interface with the Allerton Waste Recovery Park contract with Thalia as that contract did not commence until 2018. A new Services Contract will address all of these inconsistencies and produce a more flexible, suitable and modern agreement.
4.8 Initially, the range of services provided under the new contract with Yorwaste Ltd will be unchanged. However, a number of improvements have been put forward in the new contract to provide the following:
· Flexibility: enable Schedules, either in whole or part to be amended or withdrawn during the contract Term to reflect changes in Council priorities, working practices and legislation.
· Transparency: segregation of service costs to clearly show added value to shareholders to demonstrate efficiency and effectiveness.
· New Unitary status: adopt a consistent approach to service provision reflecting the new unitary status of the Council.
5.0 CONSULTATION UNDERTAKEN AND RESPONSES
5.1 The lead members of the Transport, Economy, Environment and Enterprise Overview and Scrutiny Committee were provided with information on the proposals for the scope and intent of the new contract in June 2025. They were supportive of the approach but keen to understand how directly awarding a contract in reliance of the Vertical Arrangements in the Procurement Act 2023 to a controlled company provided value for money to the Council. A further briefing paper was provided to all committee members setting out how this is demonstrated, and no further questions or comments have been received.
6.0 CONTRIBUTION TO COUNCIL PRIORITIES
6.1 The waste services contract will allow the Council to fulfil its statutory obligations as a waste disposal authority enabling the recycling, composting, transfer, transport and treatment of waste.
6.2 It also contributes to the Council priorities for sustainable and connected places, as well as to health and wellbeing priorities.
· A clean, environmentally sustainable and attractive place to live, work and visit
· Communities are supported and work together to improve their local area
· People are supported to have a good quality of life and enjoy active and healthy lifestyles
7.0 ALTERNATIVE OPTIONS CONSIDERED
7.1 No other options are put forward for consideration. Before making the decision not to extend the existing contract, options to provide the services through third party contracts were considered and discounted due to the Council’s ability to directly award the contract to provide waste Services to its own company (vertical exemption) under Schedule 2 of the Procurement Act 2023.
7.2 The contract duration has been considered. Given the likelihood of changes in legislation, ways of working and infrastructure, an initial term of five years with the ability to vary the service agreement and individual Schedules, plus further options to extend by up to a further five years, affords the council maximum flexibility.
8.0 IMPACT ON OTHER SERVICES/ORGANISATIONS
8.1 Under the Procurement Act 2023, a local authority can directly award an above-threshold contract to a person controlled by it provided certain conditions are met. This is permitted under the “vertical exemption” in Schedule 2, Paragraph 2 of the Procurement Act 2023.
8.2 Using the Council’s waste management company (Yorwaste) provides best value for the Council compared to outsourcing to a private third-party contractor due to the following reasons:
· Under the Vertical exemption, local authorities can award contracts directly to their wholly or jointly owned companies without a competitive tender, saving time and procurement costs. The estimated internal cost ranges from £50k–£150k+, depending on the duration and complexity. Further to this external consultancy and legal fees can range from £20k - £100k+.
· The Council retains strategic and operational control, allowing for alignment with local priorities, environmental goals, and social value outcomes.
8.3 Post LGR, internal finance and legal teams do not have the capacity to undertake and complete this work. Instead, the waste service has secured external support to make the necessary changes which will be overseen and led by the Council’s financial, legal and waste service teams.
8.4 Whilst City of York Council have chosen to extend their current contract with Yorwaste Ltd, North Yorkshire Council will continue to work with them so both Councils are aware of the nature and extent of changes being sought.
9.0 FINANCIAL IMPLICATIONS
9.1 The current contract with Yorwaste Ltd provides waste services to North Yorkshire Council at a cost of approx. £18.25 million per year and is covered within existing waste budgets. A new waste services agreement with Yorwaste Ltd will not materially adjust the existing scope of services but provides flexibility to do so at a later date. Instead, the new contract seeks greater transparency, affording the Council clear sight of service costs, pressures and savings opportunities whilst separating shareholder value from service delivery.
9.2 There are no procurement costs attached to using the proposed approach.
9.3 There are costs associated with the drafting of a new services agreement. Due to capacity within the in-house legal team to meet the timescales, the preferred approach is to utilise the contract with external legal advisors Ashfords LLP which is already in place. Initial price estimates are in the range of £8,000 to £10,000. This also has an advantage in that Ashfords LLP are advising on the Allerton Waste Recovery Park contract and so understand the interface between the Yorwaste contract and the Thalia contract which may realise benefits that are unknown at this time and will also help to keep costs as low as possible as they are already knowledgeable on our services. These costs will be funded from Waste services budgets.
9.4 The only other costs associated with drafting a new contract are in terms of officer time which will be met through existing budgets.
10.0 LEGAL IMPLICATIONS
10.1 Schedule 2 to the Procurement Act 2023 contains a list of exempted contracts, which are not subject to the Procurement Act 2023. This includes Vertical Arrangements.
10.2 Vertical arrangements broadly reflect the previous exemptions under Regulation 12 of the Public Contracts Regulations 2015 (Teckal) for in-house companies.
Vertical Arrangements
10.3 Vertical arrangements are a contract between a contracting authority (NYC) and a person wholly or jointly controlled by it (Yorwaste).
10.4 If the contract satisfies the criteria set out in Schedule 2, Paragraph 2 of the Procurement Act 2023 (Vertical Arrangements), the Council can directly award an above threshold contract to a person controlled by it without undertaking a procurement exercise. All the criteria must be met in order for the exemption to apply:
· the contracting authorities (NYC and CYC) is a parent undertaking of Yorwaste as defined in the Companies Act 2006;
· No other person exercises (directly or indirectly) a decisive influence over the activities of the controlled person (Yorwaste);
· More than 80% of the activities carried out by Yorwaste are carried out for or on behalf of NYC and CYC or another person that are controlled by the authorities acting jointly;
· NYC an CYC must be represented on Yorwaste’s board or equivalent decision-making body; and
· Yorwaste must not carry out activities contrary to the interests of NYC or CYC.
10.5 The control test is not satisfied if a private entity has shares in Yorwaste.
10.6 The criteria above is considered to be satisfied therefore the waste contract with Yorwaste Limited is a Vertical Arrangement and an Exempted Contract under Schedule 2 of the Procurement Act 2023.
10.7 As stated in 9.3, Ashfords are preparing the documentation required for a new Services Contract with detailed support from the waste team, and from NYC legal contract team as necessary.
11.0 EQUALITIES IMPLICATIONS
11.1 There are no impacts on any of the protected characteristics for equalities as a result of the matters discussed in this report. An Equalities Impact Assessment screening form is attached at Appendix A.
12.0 CLIMATE CHANGE IMPLICATIONS
12.1 A climate change impact assessment screening form has been completed, attached as Appendix B.
13.0 CONCLUSIONS
13.1 Following the Council’s new unitary status an ambitious period of harmonisation of waste services across the seven former district and borough council areas has begun. As Council waste collection policies and operating practices are aligned and the impacts of new and impending legislation become clearer, awarding a contract to a Council owned company provides more flexibility for change without complex and costly contract renegotiations.
14.0 REASONS FOR RECOMMENDATIONS
14.1 The recommendations allow for the Council to continue to benefit from the services provided by Yorwaste Limited but with a more modern, fit for purpose contract in place.
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15.0 |
RECOMMENDATIONS
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15.1
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It is recommended that: · the Executive approve the award of a ten-year waste contract to Yorwaste Limited with an initial Term of 5 years with options to extend for a further five years, with effect from 18 September 2025; and · The Executive delegate negotiating and agreeing the terms of the new contract and any other actions required to facilitate the Council entering into the new contract with Yorwaste Limited to the Assistant Director Environment and Transport in consultation with the Corporate Director Resources, the Assistant Chief Executive (Legal and Democratic Services) and the Executive Member for Managing our Environment.
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APPENDICES:
Appendix A – Equalities Impact Assessment screening form
Appendix B – Climate Change Impact Assessment screening form
BACKGROUND DOCUMENTS: None
Karl Battersby
Corporate Director - Environment
County Hall
Northallerton
30 July 2025
Report Author: Kerry Green - Contracts and Compliance Manager (Waste)
Presenter of Report: Michael Leah - Assistant Director, Environment and Transport
Kerry Green - Contracts and Compliance Manager (Waste)
Note: Members are invited to contact the author in advance of the meeting with any detailed queries or questions.