There may be provisions in the Contract that give the Authority the option to extend the Contract. If this is the case the Contract Manager should be mindful of the need to notify the Contractor in time. In most cases there will be a need to do this a long time before the Contract would otherwise expire - potentially as long as three years or more.
The desirability of extending the Contract will depend on the Unitary Charge payable during the extension period. This may be specified in the Contract in some way or left to be agreed at the time the issue becomes relevant. If it is specified in the Contract it is unlikely to be as straightforward as a specific sum of money; indexation and/or benchmarking may be required to determine the Unitary Change payable. Given that agreeing the Unitary Charge payable with the Contractor may take some time it is advisable to start this process well before the deadline for notifying the Contractor that the option to extend will be taken up.
Even if there are no provisions in the Contract that give the Authority the option to extend the Contract there may still be interest on both sides in agreeing such an extension. The Contractor may even pressurise the Authority to take that approach. Any decision to take such an approach should not be taken lightly by the Authority. Therefore if the Contractor raises it with the Contract Manager (s)he should immediately escalate the issue to the Contract Management Board. There are two key issues that the Authority will need to consider - one legal and one more commercial.
The legal issue is whether EU procurement law obliges the Authority to re-procure rather than extend the existing Contract. Part of the EU role is to hold member states responsible for implementing EU Law. Therefore, the UK government is responsible for ensuring there is compliance in relation to waste management and there is a significant body of expertise on this issue in central government. Authorities considering this legal point are recommended to contact WIDP to access that expertise.
The commercial issue is whether a Contract extension can provide better value for money than the next best alternative. In many cases that may involve the Authority taking over the facility on Contract expiry and then letting an operating contract through a competitive tender process. The Contractor may well bid for that contract but it will do so in the knowledge that it will face competition and may therefore bid a lower Unitary Charge than would have been obtainable though the Contract extension route.
When considering the merits of a Contract extension the Authority should ensure it has an alternative option. This will ensure it has a genuine choice as to whether to accept terms offered by the Contractor and will thereby potentially improve the terms offered. It may be necessary to parallel track an extension option and a re-procurement option for some time to ensure there is competitive pressure on the Contractor. The resource implications of this parallel tracking should be taken into account by the Contract Manager when planning the approach to Contract expiry.