5 June 2018
Victoria Hutchin, Associate Waste & Resource Management Consultant at WYG, discusses the challenges faced by local authorities in procuring waste contracts during a period of significant change within the industry. The following contains an exceprt from Victoria's article, which was first published on W: mrw.co.uk on 2nd June, 2018.
It is certainly an interesting time to be involved in the sector, with the impacts of the waste we generate hitting national headlines on weekly basis. For those of us who work in contract procurement, this is a particularly busy and challenging period; with research by BDS Marketing Research showing that nearly 50% of contracts will expire by the end of 2019, and a great number of uncertainties about the future policy, legislative and market challenges for the industry. The key questions are how to face off the uncertainties about the future direction of the waste industry and how to get the most out of local authority procurement.
The procurement of waste contracts has changed significantly during my 12 years in the sector, with contracts getting tighter on both sides – more rigorously worded contract conditions on the one hand, and contractors being more risk adverse on the other hand, resulting in a departure away from the ‘race to the bottom’ approach. In the current uncertain times, outsourcing may not insulate authorities against in the way it once did. It is probably highly unlikely that a contractor would accept terms and conditions which placed this risk on them which were beyond their control.
In addition to this, there has been significant consolidation of the waste contractor market. Although there are thought to be in the region of 300 operators delivering waste contracts, the move towards partnership working and procurement of single contracts covering multiple services, combining services often rules out smaller operators. Leaner client management teams, resulting from austerity, restricts time and resource available for managing contracts and local authorities may, as a result, be attracted to procuring services combined to reduce overall contract management effort.
Based on recent procurements, the two current biggest areas for concern in waste contracts appear to be the risk apportionment and contract performance requirements. The challenge for local authorities is revising contracts that were fit for purpose when they were last let, to make them fit for purpose in the current market place. The Environmental Services Association's (ESA) recent report on outsourcing cites risk transfer as one of the key reasons for local authorities to opt for a contract over an in-house operation; however, evidence from recent procurements shows that there needs to be a delicate balance between minimising risks to the council and deterring competition.
Clearly, there will never be a ‘one size fits all’ approach to waste collection and individual risk appetites of local councils will impact on their chosen service delivery model. However, what recent procurements do highlight is a greater need for collaborative working with the private sector and this has been demonstrated through the popularity of the new Competitive Procedure with Negotiation. Well thought-out and carefully designed procurement, which places risks with those most suited to managing them and which places realistic performance standards on the contractor can achieve good competition as well as successful contract delivery.