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Short term waste contracts help beat credit crunch blues

Local authorities should opt for short term waste contracts with contingencies in place according to a Kent County Council official.

Councillor Keith Ferrin told MRW in August (22) that Kent County Council had regretted signing a 25-year contract with Kent Enviropower 10 years ago to provide 320,000 tonnes of waste for the Allington incinerator and pays a gate fee to its contractor. In August Ferrin said that the council could not take advantage of rising material prices and new emerging technologies such as anaerobic digestion. 

But Ferrin has not changed his mind amid a sharp drop in material prices. He said: The present conditions do not make long term contracts any better. It would be the wrong time to go into long term contracts at this moment. With the pessimistic conditions that we have you do not know what the price will be in 18 months time. If contractors are making a loss of £5 million because of a drop in material prices they will find some way to pass that cost on to the local authority.

At the end of the day if they are making a loss they will come back to you and ask for a price increase.

Ferrin advocates that local authorities should opt for short term waste contracts with contingencies in place. He said: There is no perfect solution and no such thing as being risk free.

Westminster City Council has a short-term seven year contract and pays its contractor disposal costs. The recent credit crunch has not destabilised their contract so far.

Waste strategy manager Mark Banks said: Essentially we know that things will change during a contract period some we can predict and some we cant so we try and wrap the fortunes of our contractors in to our own fortunes as a council. Sharing goals, rewards and pain means that both parties are jointly looking at how best to manage risks and exploit opportunities as they emerge rather than studying the contract terms to see whether they can extract more cash or resource from the other party.

Banks said that he has seen waste levels fall in line with the economy and that they were down 8% from this time last year. But he said that hopefully they would be up 8% this time next year. We have had similar reports from other city centre councils and private sector waste management companies that their tonnages collecting for disposal are down.

He has seen falls in waste for the hospitality market because he said fewer people are eating out. He also said that there had been fewer visitors to the capital which meant less litter being dropped and this all reflected in how Westminster Council paid its contractor for providing disposal services. 

The price we pay is directed to the volume of work we expect our contractor to do. If they collect less we pay them less.

Banks said that he was more worried about the drop in material prices than the terms of the councils contract.


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