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Evidence call in debate over in-house services

Lack of evidence makes it difficult to assess whether or not council-run waste management services are more cost-effective than private sector contracts, according to the Ricardo consultancy.

It is calculated that around 40% of municipal waste related services are currently contracted out, with 30% delivered in-house and a further 30% delivered in some form of partnership.

A number of authorities, including Liverpool City Council, have chosen to set up an arm’s length company to run services instead of the private sector.

Under the ‘Teckal’ exemption, established by case law, a council-owned company can be awarded a contract without having to go through potentially costly EU procurement procedures.

Ricardo says an increasing number of local authorities are seeking advice about setting up Teckal companies or direct labour organisations (DLO).

But Adam Read, practice director at Ricardo, said: “There’s a lot of hyperbole, with claims that councils can get a cheaper service by not having to procure and can have greater flexibility in service delivery. There aren’t many examples of what exact savings can be made.

“Most local authorities that have taken services in-house aren’t really willing to tell the world about it, which suggests to me it hasn’t delivered the services they were hoping or they didn’t have enough data on which to base their judgements.

“I find that authorities struggle to work out whether a service costs X or Y per household, and don’t know whether they’re including things like pensions. When you try to compare outsourced, in-house models or Teckal models, it’s not obvious whether you’re comparing apples and bananas.”

Read said Warwickshire set up a DLO for their household waste recycling centres (HWRCs), meaning they are able to change opening times without having to negotiate a change in contract.

“Ultimately they felt it gave them greater flexibility to make a change when they needed to, and I would suggest for HWRCs it works,” he added. “Bringing it in-house has given them cost savings and greater efficiencies, and you can’t argue with the evidence that has been put forward.

“But I don’t think every local authority has got the clarity of thought that Warwickshire has.”

Read suggested that in some cases decisions can be politically driven, with Labour-run authorities significantly more likely to retain in-house services.

“Saving money might be part of the equation, but might not be the primary part. If the examples of Middlesbrough and Bristol were purely about value for money, you might question whether the current service provision is not better value for money than what they were getting before.”

Ricardo, in conjunction with the Environmental Services Association and Local Authority Recycling Advisory Committee, is to launch a report on current trends in waste service delivery and procurement in late February.

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