What options are available for local authorities looking to increase their level of performance, and save costs at the same time? It’s the solution everyone wants, but is not easy to find. Mike Read, head of waste at Grant Thornton UK LLP, assesses the possibilities… CIWM Journal Online Exclusive
The days of the big residual waste PFI schemes has largely gone and the focus has shifted to those authorities responsible for collection and recycling. This includes the many district councils whose waste budgets represent such a large proportion of their overall budgets, and from which they are expected to make ever increasing savings.
Whilst high levels of recycling remain a focus for some, the cost of delivering that additional performance is now a luxury which has to come second to balancing the books. When you add in the elephant in the room that is TEEP, these are worrying times for many councils. So what are the options that can be considered?
One option is to generate more revenue by enhancing trade waste collection services. This has potential, but clearly the private sector does not like the competition and the spectre of the VAT exemption challenge for local authority commercial collection looms. An adverse ruling would mean that competitive advantages are removed and of course would place an additional financial burden on the local authority. The other issue to bear in mind is the true cost of delivering that service.
Many trade waste services operate at a surplus at a direct cost level, but start adding genuine costs of support functions including depots, vehicle maintenance and back office support and the picture can be very different. Whilst it could be argued this is fine from an overall council finances perspective if those overhead costs are being absorbed or recovered elsewhere, in many cases it needs to be done in a more conscious way so that decisions on the future expansion or contraction of trade waste services can be done on sounder financial ground.
Decisions can then genuinely be about whether there is a commercial advantage to the service in the area either through a lack of private sector competition, the ability to derive efficiencies through the way the service can be delivered alongside household collections, or through the breadth of collection types that can be offered. Particularly for smaller district councils, considering developing economies of scale through partnering on trade waste services can be an option. This can also be applied to the household collection services.
This takes me neatly on to exploring ways to deliver cost reductions. Partnering with other local authorities needs to factor in political, geographic (including impact of being linked to different waste disposal authorities in some cases) and existing delivery regimes in determining whether it is likely to be successful; this can be challenging. It is maybe something that is easier to consider in terms of sharing existing or developing new assets whether these be depots, transfer stations or even processing infrastructure.
The other main option is assessing how services are configured within a local authority. The synergies that exist between waste collection and other “street scene” services such as service delivery, efficient use of assets and management structures can deliver savings as well as improved performance. There also can be a misconception that these efficiencies can only be made through the use of private sector delivery. This generally only makes sense if there is a combination of scale, length of contract, competition and either an existing platform for the contractor to work from or opportunities for them to use as a platform to build from in a particular location. Otherwise with TUPE and other factors the private sector is in no better place to deliver benefits than the local authority.
Hopefully this is further food for thought as waste collection authorities, particularly district councils, continue to wrestle with maintaining service delivery and reducing costs.