As part of this year’s National Recycling Awards, the Environmental Services Association (ESA) hosted a roundtable during the day that looked at ways local authorities and waste companies could work better together. Representatives from councils and companies including Biffa, FCC and Veolia held a wide-ranging discussion.
Council services are under huge strain and further pressures are likely down the line. Defra is signalling the potential for additional duties for councils, with extended producer responsibility (EPR) and a deposit return scheme (DRS). And, of course, Brexit is on the horizon.
In response, local authorities have been considering their options in terms of outsourcing or moving their services in-house directly or through a ‘teckal’ exemption.
The ESA wants to see how its members, as contractors to the sector, assist councils. To start with, a perceived lack of flexibility in waste contracts was highlighted during the roundtable as a huge concern for local authorities.
One councillor introduced the issue of plastics and how, more recently, the public has asked for more recycling of this material. Councils argued that they need flexibility to be able to answer that, and not just put it off for five, 10 years or whatever the terms of the contract were.
However, the industry view was that contracts already have enormous potential to be adaptable and that many long-term contracts to-date do include lots of flexibility. Rarely does a contract end in exactly the same profile that it started.
One industry view was that local authorities made things harder for themselves in the way that they contract – for instance by not adopting change mechanisms. Companies reported a huge variance in capabilities in terms of contracting, and benefit was seen in bringing in specialist consultants to help with this.
One issue flagged was how to get the investment in a new vehicle fleet, for example, under a shorter contract. If you only wanted a contract lasting two or three years, it would not be possible to pay off the fleet in that time.
A solution could be to create a marketplace where some of that investment is up front. Perhaps the council buys or pays down some of that value at the start so, if the contracts were to be nulled or completed after two or three years, the waste business would not be out of pocket.
The industry view was that big infrastructure costs money, and it has to come from somewhere and be paid back. Flexibility comes with responsibility, so it is getting that balance right.
Longer contracts, however, appeared to offer the most flexibility. One industry player argued that more development, evolution of services and perhaps more success was seen with the longer contracts. Councils often prefer them because they offered more certainty in terms of cost and budgeting.
But around 70 local authorities will need to renew their deals in the next few years, and they face enormous uncertainty due to legislative changes on the horizon and Brexit. They may be tempted to opt for shorter contracts, but the industry view was that contracts should be procured with the expectation that there is going to be change.
The question was also asked whether some councils were unable to afford more flexible contracts because of austerity. A view was taken that some councils were deciding to go in-house to give them greater control. This throws the challenge back out to industry. Unless things change radically, there will not be more money going to local government so, in terms of future contracts, councils are going to be restricted in what they can do.
One councillor commented that some colleagues think that because the council is paying someone to do a service, then that company has to be making a profit. They ask ‘why don’t we have that profit, why don’t we innovate and adapt to change?’ At the same time, the Government is telling local authorities to become more commercially minded.
The view was that councils could easily charge for extra services.
But even with the most commercially minded staff on board, councils made the point that their role still has a social element. They said that a lot of colleagues making decisions say ‘we have to get the best value for money but where is the social aspect that we are delivering?’
Industry took the view that they are in the waste business to absorb risk and that is why local authorities outsource services. Employing people and running fleets was a risk industry seemed happy to take on. This included the burden of employment legislation – which is not covered by waste contracts – whether it be apprenticeships, the national minimum wage or holiday pay.
Population growth was another contract risk identified. Industry spoke about how local authorities can fall into the trap of trying to pass all of this risk back to them, which just means that the waste company has to front-load the contract.
This could actually see the council paying for an increased amount right from the get-go of the contract, rather than from half-way through when the impact started to take effect and more collections are needed. Local authorities can phase in a population increase if they write it into the contract.
With industry routinely providing key performance indicators (KPIs) on a range of measurables, it was difficult for them to understand why councils were less open. However, it was clear that authorities do collect KPI data and share this information among themselves – just not necessarily with those outside local government.
Business complained that, while authorities use KPIs in their contracts, this varies hugely around the country and some of the penalties for missing targets are disproportionate. They called for more joined-up thinking between council waste and legal teams.
A contract stating, for example, that if a company has three consecutive months of reduced performance or missed bins then the council can terminate the contract is unrealistic and draconian. It is unlikely that the council would be ready to terminate such a large contract within a month.
Authorities revealed that they sometimes used the KPIs in waste contracts and penalties as a means to sooth public dissatisfaction with an aspect of the service. Industry understood but made the point that the penalties needed to be proportionate and that there was a difference between a ‘kick in the shins and a knock-out blow’.
Councils did not want standardised KPIs, but there was an agreement that 95% of the KPIs used by both sides were from the same basket. The authority view was that it was up to them to decide which metrics to use and which objectives were the most important.
There was a consensus that it was important to benchmark using comparable services otherwise you would end up ‘comparing apples, pears and bananas’.
One councillor said she looked at the recycling rate for an inner city area that was really low, because it was a poor area and people did not throw much away. She said there would be no point comparing this to an affluent area where there is lots of recycling because residents there consume so much more and lots of the packaging can be recycled.
Industry argued that the need for more transparency was not going to go away, and that EPR could mean big brands paying local authorities for their services to get their materials back.
During the discussion it was observed that it was a ‘tall ask’ to look for innovation when councils are risk averse and have budget constraints. Shorter contracts also make innovation more difficult, perhaps even impossible, to deliver certainly to a low budget.
“If we’ve got a three-year contract, it could take us six to nine months to get our feet under the table – at that point two years are left and the local authority is starting to make its decision as to whether it needs to procure again.”- Pete Dickson, commercial director, Biffa
“I don’t think you can have standard performance indicators – performance is driven by what members want and by what residents want. Bronze, silver or gold – I think that’s how you have to weigh it up.”- Amy Bridgford, recycling and waste operations and projects manager, Aylesbury Vale District Council
“Many of the contracts in place have been flexible and changed substantially over the years. Rarely does a contract end in exactly the same profile that it started, so there is already flexibility out there.”- Simon Bussell, development director, Veolia
“Is flexibility really an issue or is it simply that local authorities can no longer afford flexibility because of austerity? Is it actually the case that councils are looking at cutting their services to balance their budgets?”- Jacob Hayler, executive director
“Suez is supporting an on-the-go DRS. Why go full bore without knowing how it might work? But with gove being gove, and with Scotland having announced its consultation on materials and scale, it may be that England comes back with a ‘let’s do it all and be done with you’.”- Adam Read, external affairs director, Suez
“In terms of disposal, which is where the real innovation needs to kick in, until we know what the landscape is going to look like, there’s a reticence from the industry to invest.”- Kristian Dales, regional director, FCC
durk reyner x 400
“I want real-time information so customers can look on their app on the train and see where was my bin lorry, when was my grass last cut, when were my streets last swept. If you want innovation in a contract, it’s a management information system feeding through to our contact centres.”- Durk Reyner, head of environment, Welwyn Hatfield District Council
A question was raised as to what exactly is defined as innovation. What one council thinks is innovative could been considered as best practice or even bog standard to the next.
Improvements around collections were seen likely to come from reduced frequency, although it was noted that members of the public were unlikely to view this as innovative.
But it is tricky for industry to invest in technological innovation around sorting when the future political landscape is so unknown. Brexit, a possible change in the party in power and legislative changes on the horizon have industry not knowing which way to jump.
Waste management companies could help councils to improve on services and find best practice or innovation if there is an open dialogue around procurement.
Ongoing information in the form of an app to help frontline staff deal with enquiries about council services was also suggested as an innovative aid by one local authority.
DRSs are being discussed and they could have a huge impact on what local authorities collect and what commodities end up at the MRF. There was a view that if a nationwide DRS is successful, it will force industry to innovate because it is likely that, all of a sudden, it will have to deal with ‘all the wrong’ input material.
Waste companies could suddenly find that all the PET bottles and aluminum cans have disappeared – along with their value – and with the continuing trend away from paper, waste composition is going to shift quite a bit.
Suez has recently published a manifesto arguing that the world of local government will look nothing like it does today because in theory councils will be providing services to companies such as Coca-Cola. And they may decide to contract with one authority representing 30 others.
The issue of dealing with other people’s innovations was also raised. Disposable cutlery made out of vegetable waste sounds like a great idea on paper but is a huge headache if it does not fit into the current infrastructure.
Some brand manufacturers are asking the waste industry ‘what happens if we change material’? Industry said they want to innovate with such companies because the supply chain is important to existing and future infrastructure.
But industry says it cannot cope with completely new packaging that does not fit into existing infrastructure and the amounts are not big enough to warrant anyone investing in a plant.
The industry view around consultation was that not enough was being carried out by local authorities. While the provision of new, or expansion of, waste sites were consulted on, other matters such as whether to bring services in-house or to reduce the frequency of bin collections were not. Was this due to austerity?
Industry pointed to how well three-weekly municipal waste collections have been accepted in Scotland once the benefits to a community are carefully explained. But it was agreed that the likelihood of residents turning up to a meeting on whether a council ought to bring their waste services in-house was remote. Despite industry’s avid interest, residents weren’t so curious.
As for consulting residents on bin collections, the council viewpoint was that residents would likely all prefer weekly - or even daily – collections, so they were not sure what the value would be for such a consultation.
Earlier this year the ESA launched a campaign to promote the use of competition to deliver value for money for household collection services, during a very challenging time for local government.
We believe that outsourcing collections brings a range of benefits, including risk transfer, innovation and cost savings over time. In discussions with council colleagues, we have heard consistently that the biggest driver to bring services in-house is to gain greater flexibility and control.
But there was consensus at this roundtable that contracts can provide as much flexibility as councils need. The key is to allow flexibility in the procurement notice.
The ESA and the Local Government Association are now working together to publish examples of where procurements and contracts have successfully delivered flexible options to the contracting authority.
But flexibility does come at a price, and a question raised by ESA members was whether a short-term need to meet council budget cuts was the real reason some are retreating from the market. If so, this would be short-sighted because outsourced collections will deliver savings over the life of a contract.
The difficulty we often have is in demonstrating this fact. This is due to a lack of transparency around both performance and costs for in-house collections.
Local authority colleagues were concerned that the publication of transparent cost and KPIs would be open to abuse.
The ESA recognises these concerns but would hope that they could be overcome. We believe that the best way to benchmark against the market is to run a competitive tender. But at least being able to compare services around the country would be a starting point.