Penny Rinta-Suksi 07 February 2020

Leisure centre contracts in the era of the climate crisis

Only time will tell whether 2019 was a tipping point for action on the climate crisis, but it was certainly the year the environment became a mainstream issue for households across the UK, as picked up by the party political manifestos.

While Extinction Rebellion sit at the more extreme end of the climate debate, the ‘environment’ was regularly cited as one of the top five things voters cared about when considering who to vote for in December. This is the first time the environment has been considered a top five issue in an election and marked a notable shift.

Local authorities also played a critical role in the movement. Since 2015, more than 65% of district, county and unitary authorities have declared a climate emergency in their area, some going above and beyond the government’s 2050 zero net-carbon target and declaring a 2030 target instead.

National legislation will need to shape how the UK responds to the overarching 2050 target, but local initiatives driven by local authorities are critical. Typically, a local authority’s carbon impact and emissions base can be enormously varied – from housing to waste, transport and air quality management. However, energy use and emissions arising from owned assets often accounts for a significant proportion of total impact and cost. Among these assets, leisure centres are likely to be some of the very greatest energy consumers. In the UK, the leisure sector spends upwards of £700m a year on energy bills and emits around 10 million tonnes of carbon. As a result, energy bills are second only to staffing when it comes to total running costs.

Green incentive

Naturally, the case for improving the efficiency of local authority leisure facilities is clear – better energy performance equals less cost. But that’s an oversimplification and it requires careful planning on the part of a local authority, operating partners and contractors to improve the performance of leisure assets on an ongoing basis and link these to overarching climate targets.

For example, many leisure facilities are procured, built and operated under ‘design, build, operate and maintain’ (DBOM) contacts, many of which can last for over 25 years. To put that into context; 25-year contracts coming to an end now pre-date most mobile phones, let alone high-end insulation or solar panels. That means contracts must be developed in such a way that constant renewal is ‘priced in’ to a contract and an operator – assuming a local authority decides to outsource – is correctly incentivised to prioritise both operational improvement and lower emissions.

Incentivisation is critical in this respect. It’s too easy to assume the lowest price is right but tackling the climate crisis means choosing the right design, materials, equipment, services and utility providers. For example, encouraging an operator to seek out the cheapest energy tariff may run counter to the need to seek out the cleanest energy provider. While there’s little doubt renewable tariffs are increasingly competitive, the reality is non-renewable sources of energy may well be cheaper still.

Naturally, this introduces risk in the form of more expensive tariffs for an operator. To mitigate this – and incentivise operators – authorities should consider taking on the tariff risk while operators take on the consumption risk. This means operators can be directed to choose the right tariff while remaining focused on keeping consumption costs down.

Similarly, in the case of DBOM contracts, the design and build phases should focus on developing the most efficient buildings possible for the future – prioritising long-term gain over reducing capital expenditure in the short term. Increasingly, we’re seeing authorities specifying the upper levels of BREEAM across their portfolios – a tough, but futureproofed target that will ultimately help meet carbon emissions targets and result in cost efficiencies long into the future. The real benefit of that investment for authorities should be captured in both contractual provisions and their own internal contract accounting.

The maintenance aspect of a DBOM contract must also be carefully scrutinised to ensure a constant review of how well a building is performing. Some of this is about careful maintenance of equipment, heating, lighting and staff training, but it is about encouraging new ideas. To do this some authorities ask their operators to present new ideas to them on a regular basis to encourage innovation and trial new technologies. An authority can then decide whether to invest, but the key advantage is that it avoids freezing out future technologies and encourages a collaborative approach to meeting climate targets. While one would hope a good relationship will always encourage new ideas, regular reviews can be specified in a contract to invite this open exchange of ideas.

What’s perhaps most important though is long-term contracts – whether DBOM or operations and maintenance – recognise the pressures of a changing climate. A lot can change over the course of more than two decades, and an authority needs to be mindful a contract provides enough space to allow and incentivise change. Some of this can be achieved through a focus on ongoing cost reduction – usually related to energy consumption – but that alone won’t meet tough climate targets. Instead, contracts need to recognise that emissions and material consumption are as important as cost and build that in.

Penny Rinta-Suksi is a partner at Blake Morgan and heads up the firm’s Local Government England team.

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