Section one: Contracting authority/entity
one.1) Name and addresses
Southwark Council
160 Tooley Street
London
SE12QH
Contact
Elaine McLester
elaine.mclester@southwark.gov.uk
Country
United Kingdom
Region code
UKI44 - Lewisham and Southwark
Justification for not providing organisation identifier
Not on any register
Internet address(es)
Main address
one.6) Main activity
Production, transport and distribution of gas and heat
Section two: Object
two.1) Scope of the procurement
two.1.1) Title
Heat Supply Agreement relating to South East London Combined Heat and Power District Heating Network
two.1.2) Main CPV code
- 09323000 - District heating
two.1.3) Type of contract
Supplies
two.1.4) Short description
Southwark Council (Council) and Veolia ES Southwark Limited (Veolia) entered into a PFI Project Agreement (Project Agreement) on 11 February 2008 for integrated waste management services for an initial term of [25] years . The procurement of the Project Agreement was conducted under the Public Services Contracts Regulations 1993 with a total value of 665,000,000.00 GBP.
In 2013, the Council entered into a separate heat supply agreement (HSA1) with Veolia for heat supply services by means of a district heating network (Heat Network) to take waste heat from South East London Combined Heat and Power (SELCHP) to certain Council premises. The services in HSA1 were not included in the Project Agreement. HSA1 was entered into pursuant to the exemption set out in Regulation 14(1)(d)(i) of the (now repealed) Public Contracts Regulations 2006. This exemption allowed the Council to directly procure Veolia for the provision of heat supply services not included in the Project Agreement, which had subsequently become necessary due to unforeseen reasons. The HSA1 was entered into on 14 June 2013 and a related contract award notice was published on 3rd August 2013 (OJEU Reference Number: 2013/S 150-261592 ). The original term of the HSA1 as awarded was coterminous with the Project Agreement (i.e. expiring on 10 February 2033 .
HSA1 is due to expire on 10 February 2033.
The Council is now proposing to make the following modifications to the HSA1 via a Deed of Variation:
1) an extension to the geographical coverage and extent of the Heat Network so that it [includes/covers [insert details]some areas within the wards of Old Kent Road, Nunhead & Queen's Road, Peckham, Rye Lane and St Giles (Geographical Coverage Modification); and
2) an extension to the duration of the contract so that instead of expiring on 10 February 2033 it will expire on 31 March 2050 (Duration Modification).
Further information regarding the Geographical Coverage Modification can be found in a map (Figure 1 on page 5) within the Council's published governance document to be found on the Council's website here:
https://moderngov.southwark.gov.uk/documents/s130163/Report GW3 SELCHP Heat NetworkPhase2Extension.pdf
The Council considers that it is entitled to rely upon Regulation 88(1)(b) of the Utilities Contracts Regulations 2016 (UCR) to modify the HSA1 to incorporate the Geographical Coverage Modification and Duration Modification without requiring a new procurement procedure for the reasons set out in Annex D2.
The Council will not enter into the Deed of Variation until the expiry of at least 30 days from the publication of this notice.
two.1.6) Information about lots
This contract is divided into lots: No
two.1.7) Total value of the procurement (excluding VAT)
Value excluding VAT: £267,900,000
two.2) Description
two.2.2) Additional CPV code(s)
- 45231100 - General construction work for pipelines
- 45232142 - Heat-transfer station construction work
- 45259000 - Repair and maintenance of plant
- 50410000 - Repair and maintenance services of measuring, testing and checking apparatus
- 71200000 - Architectural and related services
- 71314000 - Energy and related services
- 71315100 - Building-fabric consultancy services
- 71315200 - Building consultancy services
- 71315210 - Building services consultancy services
- 71315300 - Building surveying services
- 71315400 - Building-inspection services
- 71420000 - Landscape architectural services
- 71510000 - Site-investigation services
- 71540000 - Construction management services
- 73220000 - Development consultancy services
two.2.3) Place of performance
NUTS codes
- UKI44 - Lewisham and Southwark
Main site or place of performance
SELCHP facility
two.2.4) Description of the procurement
District Heating extension of SELCHP facility as set out in this notice.
Southwark Council (Council) and Veolia ES Southwark Limited (Veolia) entered into a PFI Project Agreement (Project Agreement) on 11 February 2008 for integrated waste management services for an initial term of [25] years . The procurement of the Project Agreement was conducted under the Public Services Contracts Regulations 1993 with a total value of 665,000,000.00 GBP.
In 2013, the Council entered into a separate heat supply agreement (HSA1) with Veolia for heat supply services by means of a district heating network (Heat Network) to take waste heat from South East London Combined Heat and Power (SELCHP) to certain Council premises. The services in HSA1 were not included in the Project Agreement. HSA1 was entered into pursuant to the exemption set out in Regulation 14(1)(d)(i) of the (now repealed) Public Contracts Regulations 2006. This exemption allowed the Council to directly procure Veolia for the provision of heat supply services not included in the Project Agreement, which had subsequently become necessary due to unforeseen reasons. The HSA1 was entered into on 14 June 2013 and a related contract award notice was published on 3rd August 2013 (OJEU Reference Number: 2013/S 150-261592 ). The original term of the HSA1 as awarded was coterminous with the Project Agreement (i.e. expiring on 10 February 2033 .
HSA1 is due to expire on 10 February 2033.
The Council is now proposing to make the following modifications to the HSA1 via a Deed of Variation:
1) an extension to the geographical coverage and extent of the Heat Network so that it [includes/covers [insert details]some areas within the wards of Old Kent Road, Nunhead & Queen's Road, Peckham, Rye Lane and St Giles (Geographical Coverage Modification); and
2) an extension to the duration of the contract so that instead of expiring on 10 February 2033 it will expire on 31 March 2050 (Duration Modification).
two.2.11) Information about options
Options: No
Section four. Procedure
four.1) Description
four.1.1) Type of procedure
Negotiated without a prior call for competition
- The works, supplies or services can be provided only by a particular economic operator for the following reason:
- absence of competition for technical reasons
Explanation:
The Council's position is that the proposed modifications to the HSA1 are permitted modifications under Regulation 88(1)(b) of the UCR 2016 on the basis that there is a need for additional works, services or supplies by Veolia, irrespective of value, which have become necessary despite not being included in the initial procurement where a change of contractor (i) cannot be made for economic or technical reasons; and (ii) would cause significant inconvenience or substantial duplication of costs for the Council.
The Council considers that the works/services related to the Geographical Coverage Modification are necessary in order to achieve a significant reduction in the local combustion of natural gas via the use of low carbon waste heat from SELCHP in order to meet its environmental obligations and commitments with regard to air quality and becoming carbon neutral by 2030.
The Duration Modification is also necessary because a 25-year operational period is required in order for a contractor to amortise its capital costs of building the extension to the Heat Network. The Council also understands that private connections to the extended Heat Network will only sign up to heat supply agreements that are for a period of 20 years or longer. HSA1 is due to expire on 10 February 2033 and does not allow for an appropriate amortization period.
The Council has concluded that a change of contractor cannot be made for economic or technical reasons because Veolia owns and operates SELCHP and therefore controls the supply of low carbon waste heat. It is the Council's view that no other supplier can supply enough low carbon heat to the Council at an equal or similar price to serve the required network extension, especially at the temperatures required. Furthermore, it would not be economically viable to use another supplier as they would have to buy the low carbon heat from Veolia to then sell to the Council. The Council considers that Veolia would not sell the low carbon heat to a third party at the same competitive rate as currently supplied to the Council as there is no commercial incentive to do so.
The Council also considers that a change of contractor would cause major inconvenience and substantial duplication of costs if it was required to procure a third-party operator to operate and maintain the extension to the Heat Network for the extended duration.
Additionally, if a contractor other than Veolia is appointed to operate and maintain the extension to the Heat Network this would mean that different contractors would be operating different parts of the same network, which would be technically and economically unviable in having duplicate control systems, water quality testing and other risk/contract interface implications.
For the reasons set out in this notice the Council considers that it is necessary for the additional works/services to be awarded to Veolia for economic or technical reasons and that it would cause significant inconvenience or substantial duplication of costs for the Council to award the required works/services to another contractor.
four.1.8) Information about the Government Procurement Agreement (GPA)
The procurement is covered by the Government Procurement Agreement: No
four.2) Administrative information
four.2.1) Previous publication concerning this procedure
Notice number: 2013/S 150-261592
Section five. Award of contract/concession
A contract/lot is awarded: Yes
five.2) Award of contract/concession
five.2.1) Date of conclusion of the contract
13 June 2013
five.2.2) Information about tenders
The contract has been awarded to a group of economic operators: No
five.2.3) Name and address of the contractor/concessionaire
Veolia ES Southwark Limited
210 Pentonville Road
London
N1 9JY
Country
United Kingdom
NUTS code
- UKI44 - Lewisham and Southwark
Companies House
06256521
The contractor/concessionaire is an SME
No
five.2.4) Information on value of contract/lot/concession (excluding VAT)
Initial estimated total value of the contract/lot/concession: £267,900,000
Total value of the contract/lot/concession: £267,900,000
Section six. Complementary information
six.3) Additional information
The values set out in Section 11.1.7 and V.2.4 (£267.9m) comprise the sum of the original value of HSA1 (£47.1m), the value of previously agreed modifications (£6.5m), and the estimated value of the intended Geographical Coverage Modification and the Duration Modification (£214.3m).
Voluntary ex-ante transparency notice published in OJEU / TED 27628-2026
six.4) Procedures for review
six.4.1) Review body
The High Court of Justice
The Royal Court of Justice, The Strand
London
WC24 2LL
Country
United Kingdom
six.4.3) Review procedure
Precise information on deadline(s) for review procedures
In accordance with Regulation 103 to Regulation 119 of the UCR 2016 (particularly, Regulations 107, 108, 109 and 114 in relation to deadlines).