The shortlist of bidders for the £800M South West Devon Partnership PFI made up of Plymouth, Devon and Torbay local authorities - has been halved to the final three.
MVV Umwelt, Sita UK and Viridor remain to compete for the contract, as Shanks Waste Solutions, Urbaser and Veolia lose their places.
The firms have already submitted plans and sites to deal with an annual 200,000 tonnes of residual waste, but the next stage will require further details about how the waste will be managed.
Two bidders will be chosen in summer 2010 with the contract awarded in the following year.
Chairman of the South West Devon Waste Partnership Roger Croad said: Whether we like it or not, waste is everyones problem. With more recycling and composting, we are steadily improving, but we still need to treat the remainder.
MVV Umwelt has put forward the possibility of using Ernesettle and North Yard in Devonport Naval Base and Viridor is looking at building at New England Quarry, near Ivybridge. Sita UK initially submitted plans to build at Ernesettle and South Yard, Devonport but decided to withdraw the Ernesettle proposal and concentrate on South Yard.