The challenge
Grant Thornton recently acted as financial and commercial advisor to MKCC, supporting the procurement of a Strategic Delivery Partner for the Council’s existing Milton Keynes Waste Recovery Park (MKWRP).
The MKWRP currently combines three separate facilities:
- A Mechanical Treatment recycling plant;
- An Advanced Thermal Treatment plant;
- An Anaerobic Digestion plant.
As the sole facility managing the waste from a growing population of over 300,000 residents, maximisation of availability and throughput was critical for the new contract.
The Council required a new private sector partner to operate and invest in the three MKWRP facilities over a 10- to 15-year contract period.
Grant Thornton helped develop an innovative Strategic Delivery Partner model that was suited to the complex handover of the existing facility to a new operator, and the need for ongoing investment and incentivisation. Traditional PFI-based contractual models are not well-suited to such circumstances, where adaptability and incentivisation is key.
The commercial model incentivises the new operator to maximise availability, optimise outputs (electricity, recyclates, by-products), identify new investment opportunities, and deliver capex and maintenance works effectively.
How we helped
The procurement was a multi-year process, with ongoing Competitive Dialogue with the market to ensure market appetite and that the model developed was aligned with supplier capabilities.
Grant Thornton supported the Council to:
- Design innovative, novel financial/commercial risk-sharing mechanisms;
- Negotiate key commercial terms and financial mechanisms with bidders throughout the Competitive Dialogue stages;
- Draft two comprehensive Payment Mechanisms for the two separate project phases, where risk shifts from the Council to the Contractor after a Familiarisation Phase;
- Develop of a suite of detailed yet user-friendly financial documentation, including a financial response template model, and financial/commercial guidance; and
- Robustly assess each bidder’s financial strength, commercial proposals, and strategic collaboration approach.
The results
After a highly competitive tendering process, Grant Thornton helped MKCC identify Suez as the preferred strategic partner.
Grant Thornton will continue to support the Council during due diligence and the transition from the Familiarisation Phase to the stead state phase, where risk is transferred from the Authority to the Strategic Partner.
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