Waste partnerships: a failing model?

Waste and streetscene consultant, Tim Guile, seeks to understand the benefits of local authorities coming together in a waste service partnership.

I have spent a career delivering Environmental Services largely from a private sector perspective delivering services into local authorities.

I spent nine years as partnership director for Serco looking after all aspects of contracting, performance, engagement and relationships. Subsequently, I have undertaken projects working mostly on combined local authority contracts.

The concept should not be condemned by the mistakes of history, however, but benefit from the lesson learnt and deliver further future benefits

Currently, I am working on assisting The London Borough of Tower Hamlets bring a service back to local authority delivery following nearly 20 years in the private sector. From these experiences, I have some gained some valuable insights into the pitfalls and potential benefits of such contracts.

Currently, some partnership contracts are being brought to early termination (by both sides); service delivery is very often being driven by the big stick and in some cases the partnership continues to trundle along, serving neither the interests of the authority or supplier (or, most importantly, the residents).

The concept should not be condemned by the mistakes of history, however, but should benefit from the lessons learnt ain order to deliver further future benefits. Partnerships still has a huge part to play in the landscape of service delivery going forward.

Designing around finances

Delivery of services such as waste, recycling and streetscene are one of any local authorities’ largest spend areas and are also an area where decisions can be made to design services around available finances.

The environmental services industry is largely a logistics industry comprised of people, machines, trucks and depot locations. There have been many variable and operational tools developed for logistics that could be, and are, adapted to consider the parameters of the environmental service, rather than playing catch up and re-inventing the wheel.

We work in areas where we are not necessarily specialist, but put in bespoke solutions without having, or at times, buying in the necessary skills that are already available in different but compatible market sectors.

As with any contract, the concept and birth can be difficult. This canbe exasperated by the necessity of having to consider the politics and aspirations of different groups of authorities. Clear steps need to be taken before any form of agreement should be entered into:

  • What is the ultimate goal of the partnership?
  • Does it form part of a larger agenda to unite authorities?
  • Is it fiscal benefit in these times of continued austerity? (generally, certainly a consideration)
  • Is it to unify operations into the best modus operandi, for ease of use and engagement with the public?
  • Is there a safety imperative to change existing operations into a more safety friendly, efficient operation?
  • Is the authority prepared to spend to gain?
  • Are there strategic or stranded assets to consider?
  • What is the infrastructure available to deliver any changes, is it fit for intended purpose and to a degree future proof?
  • Does the authority wish to enter into a true partnership with shared risk and reward, is this proportioned correctly?
  • How highly is quality of service truly valued?
  • Is it still a race to the bottom?

One essential is clear: unambiguous contract objectives linked to a given and agreed set of deliverables against which performance will be measured.

All the above and many more need to be fully addressed before any contract should be put into place (as they should with individual contracts).

Overriding objective

I would suggest that the overriding objective should be something along these lines “to work in harmony with partners delivering a sustainable, fit for the future, high-quality service, maximising assets, addressing the needs of the residents and understanding all constraints in place, taking into account the opportunities afforded by economies of scale, service design and simplicity, the benefit of success and the pain of failure, maximising geographic and strategic assets, infrastructure and the volatility of the rewards for increased recycling and or improved environmental impact/revenue”.

Quite obvious – and a bit of a mouthful – but does capture the essence of both individual and multiple contracting.

In an area where tourist revenue for example is a key driver, increased spend in cleansing standards/recycling yields may well be an investment that brings in large returns (in some cases the BID districts or tourist attractions exemplify this).

Involve and harness local businesses, they have a vested interest.

I have now worked on, and been involved in, several of these projects and each has had its intrinsic difficulties, although sad to say none have reached their potential;  the model has generally been flawed and some, but not all, of the above have not been given the necessary amount of thought or gone through a rigorous enough process, in my opinion each should have delivered better results for all parties.

Watered down solution

The contracts have ranged from those where the infrastructure and theory was very sound but the partnership and communication poor, leading to delays and a watered down solution, poor preparation, with a lack of trust and clarity and ultimately cost – evident to those where the solution was quite simply not fit for purpose and the resource levels inadequate.

This is something that should have been identified in the bid process, to allow either a modified solution or exclusion from the submission process.

Another is where a small interpretation of the contract specification had large resourcing implications, leading to mistrust, claim and counter claim.

There are options to ensure long term relationships. Investing in the recycling and disposal infrastructure clearly tie in both parties and need to be carefully managed.

Many of the early models suffered with some of the above or different but we continue to stubbornly drive forward without taking a breather to learn lessons and adapt.

As with all contracts, assumptions are made and the bidders make their own economic decisions, however once again with a single large chunk of turnover at stake, the kudos of serving a large populous and associated tangential opportunities many bidders do seem to make “optimistic” assumptions on savings and service solutions.

Naturally there are savings to be had, if you cannot draw benefit from the opportunity to deliver economies of scale, simplifying and improving operations, re-routing opportunities, centralising depots, backroom functions and investing in data to drive efficiency, then perhaps these are not the right opportunities.

There are options to ensure long term relationships. Investing in the recycling and disposal infrastructure clearly tie in both parties and need to be carefully managed.

For me, the process is not, and never has been, as difficult as it seems. We miss the common-sense approach.

Both parties, need to:

  • clearly lay out and understand the requirements of the contract and process
  • take into account the difficulties of combining authorities (including existing assets, workforce conditions etc, political aspirations)
  • seek out the realistic benefits from said combination (economies of scale, security of partnership, further opportunities)
  • offer up a high quality sustainable solution, either using existing depots and service delivery or offering real alternatives understanding the difficulties of getting from A to B… and beyond.

Eye on the prize

The prize can be significant, but it seems thus far, all attempts to co-join authorities have fallen short of expectations, either fiscally or operationally – in many cases both, due to strained finances (for private sector partners) leading to ineffective operations, strained relationships and an onerous default regime that does little to enhance trust or delivery.

True transparency of methodology and cost, the ability to be agile, accept compromise or adaption of delivery and above all show integrity (both sides). This is not an arena where large margins are wholesale, but a stable business opportunity with great security of tenure to deliver essential services

So, I think it is time for a reality check, of course there is room for innovation, harnessing of technology and better use of assets. The large costs of any contract involve, depots, human resources, capital equipment, backroom services and the ongoing maintenance and running costs. You should be able to influence many of these.

Depot centralisation and re-location – a hub and spoke operation – maximises the opportunity to reduce road miles (fuel being one of the top 5 costs of service operation). The opportunity to make gains is there but it has to be driven through by the local teams.

It is important to note that reduction in supervision and management may make savings, but often this can be misguided as the hidden costs of this far outweigh the savings.

Use of empirical data and statistics to drive, monitor and manage performance:

  • Streamline service, giving simplicity, ease of operation, ability to share spare resource, rub out boundary lines to ensure maximum effectiveness, centralise backroom function, partner with experts in their fields, buy in the short term go on a journey together.
  • Understand the requirement to bring both workforce and trade unions (where appropriate) with you, to drive culture change and harness a combination of human skills and technological advances.
  • Be prepared to invest to gain

Understand the recyclate trading market: what is the risk/reward division?

  • Understand opportunities to increase revenue. Branch out into organic growth, both geographically and across different but complimentary service areas.
  • Sweat assets. Be prepared to modify solution and adapt systems to deliver in other arenas.
  • Generally, the requirements are similar and involve people, optimisation and logistics which are transferable.

A failing model?

It does appear this is a failing model, but it does still have so much to offer if prepared and executed well, with partners who have a like vision and are prepared to go on a journey.

It can sometimes appear that in the quest for rapid increased turnover, operators can design a vanity service that they then hard sell into the authorities. On occasion, this may not fully comply with the objectives of the contracting authority, but the financial gain is too great to ignore.

This is evident in some of the services recently commissioned and something that will no doubt be detrimental to both parties in the long run.

There are some quick and easy fixes for those contracts outlined above that, on the face of it, appear to be struggling. Time, effort and compromise will be needed, along with a large dose of let’s draw a line under the past and work out the future!

I am confident that with thought, planning and considered buy-in from all parties, these contracts can begin to over-achieve rather than become extinct. It will, however, take a leap of faith and change in partnering arrangements for them to truly reach potential.

This is not an arena where large margins are wholesale, but a stable business opportunity with great security of tenure to deliver essential services.

Send this to a friend