Councils which choose long-term MRF contracts run the risk of locking-in higher gate fees, waste management consultancy Monksleigh has warned.
Analysis of the MRF market by the consultancy found that the budgetary certainty of long-term contracts may incur a price premium for local authorities which lock-in costs when the average market fees are at their peak.
Monksleigh director Andrew Olie said: “Authorities have a fundamental tension in the way they procure; if they go for long-term security and transfer of risk they run the risk of high gate fees that could potentially be locked in over the long-term when the market then shifts maybe in favour of the processors.
“If they go for short-term deals they run the risk of uncertainty in both market terms and with internal, often politically driven, decision-making timescales. But if they get it right, they could lock-in at a low gate fee.”
According to Olie, councils often make decisions based on politically-driven timescales which are not necessarily in tune with the market.
He added: “In many cases, procurement teams have limited understanding of the true operating costs of MRFs [and AD plants] and, as such, how the quality of the recyclates [and power generated] affect the operating costs of the plant and their subsequent commercial value.
“Indeed, the same could be said for AD plants, where the quality of input materials and their reject levels, along with the resultant power price achieved, have similar issues and consequences.
“What might come back to haunt both sides are councils providing incorrect reject/contamination data at the tender stage. [This would mean that] respective contracts are not representative of the actual material that the facility receives, with reject levels substantially above that previously alluded too.”