Delegated authority for utility procurement

Report: 09
Date: 15 December 2005
By: Commissioner

Summary

The Utility Procurement Strategy (Electricity and Gas) was approved by the Finance Committee in April 2004. An essential element of this strategy is the requirement to be able to procure blocks of utility (electricity and gas) on the energy spot market, within hours, following advice from the supplier and the independent consultant.

Whilst the individual purchasing decisions associated with these blocks of utilities would fall within existing delegated powers, the aggregated values over the life of the utility contracts would exceed the current delegation arrangements.

A. Recommendation

That

1. Members approve the delegation of committal authority for blocks of utilities, within the utilities contracts, to appropriate levels as stipulated in the MPA contract regulations and, if then in excess of £1m, to the Director of Property Services subject only to the purchasing decisions being taken on the advice and recommendation of the supplier, retained consultant and the MPA Energy Section.
2. That the Director of Property Services report six monthly to the Chief Executive of the MPA on all committals made within the period and report for each utility whether the committals are within the current budget profiles and how the purchasing arrangement is performing against market condition.

B. Supporting information

1. The strategy for Utility Procurement (Electricity and Gas) was approved by the Finance Committee in April 2004.

2. This meeting also approved the continued delegation of committal authority to the Chief Executive of the Authority.

3. The new contract arrangements for electricity and gas will be for a five year period with an option to extend for a further two years.

4. This strategy provided for a contract mechanism whereby the successful supplier (electricity and gas) was awarded the contract on the basis of the service they provide, not the value of the utilities being supplied.

5. The utilities (electricity and gas) being supplied as part of this arrangement being purchased on the energy spot market to meet the estates changing load profile via the successful supplier.

6. This strategy also provided for a retained independent utility consultant to work with the MPA Energy Section, within Property Services, and the successful supplier to provide advice and recommendations on when to buy blocks of utility to match our load profiles.

7. This arrangement to be used to progressively buy blocks of utility to fill our projected load profile for the contract period.

8. The Utility procurement strategy comprises of these two parts the supplier contracts (electricity and gas) and the purchase of utility blocks via this supplier on the spot market.

9. In order to benefit from this strategy decisions need to be made almost immediately on opportunities that become available on the spot market as prices fluctuate widely during the course of a trading period.

10. Individual values of utility blocks purchased during the life of the supplier contract are likely to be within the existing delegated power of the Director of Property Services however, the aggregated value of the utility blocks purchased over the life of the supplier contract would currently exceed the delegated powers of the Director of Property Services, within the MPA Contract Regulations.

C. Legal implications

Apart from normal contract matters there are no specific legal implications to report.

D. Race and equality impact

There are considered to be no equality and diversity implications arising from the issues in this report.

E. Financial implications

1. The recommendations contained within the report have been made to ensure that procurement procedures are in place to realise the benefits and savings offered by the approved utility procurement strategy. Without appropriate procedures the opportunities to benefit from a volatile and fluctuating market would be lost.

2. There are no known adverse financial implications from the recommendation to delegate committal authority. The overall governance of the contract has been addressed by the recommendation to produce a 6 monthly report to the Chief Executive to the MPA identifying contract performance against market performance and overall budgets.

F. Background papers

None

G. Contact details

Report author: Alan Croney – Director of Property Services, MPS.

For more information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

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