DEFRA aims for standard PFI contract for waste

The Government is moving towards agreement on a new standard PFI contract for the waste sector, following recommendations made in April this year by a stakeholder group, which included industry, local and national government, the investment, advisory, service and civil engineering sectors. The Treasury has recognised the "special case" that the waste industry represents and DEFRA set a brisk timetable, aiming to produce new guidance and the standard contract in March next year.

Work has been taking place across a wide range of issues affecting the standardisation of a waste contract with a timetable set out marking steps in progress towards both a set of HM Treasury approved, waste specific derogations to Standardisation of PFI Projects version 3 (SoPC3) and a first standard PFI contract for waste.

The initiative to press forward in this area was one of the outcomes of the DEFRA hosted Waste PFI conference held in London in October 2004. Furthermore, it is intended that, as set out during the consultation on the first edition, this will build on the existing WRAP/4Ps/Defra funded Waste Management Procurement Pack, produced by the 4Ps and published in July 2004.

In January this year two main strands of work were put in place to identify the key issues in waste likely to require derogation from SoPC3 and to establish the basis for developing a waste specific PFI contract. Following the October conference and a meeting between DEFRA and the Institution of Civil Engineers (ICE) late last year, a stakeholder group was convened, hosted by the ICE and including representation from industry, local and national government, the investment sector, the advisory sector, the service sector and the civil engineering sector. This group reported to DEFRA in April with a number of recommendations to help move the sector forward, many of which either were already, or have since been put, in hand.

Work in train

Some issues were already active, including, means of working with the market and developing an approach to changes in the law. Planning, as ever in the waste field, is another important area where work is in train.

A second strand is the nomination of two live projects to be supported by DEFRA as pathfinder projects in order to develop and test detailed positions with the market place first hand. DEFRA has commissioned PUK to liaise closely with the two authorities – Nottinghamshire and Cornwall County Council — working through the issues in detail with bidders and their banks. Once positions have been reached that all parties feel are sustainable and represent a reasonable risk sharing profile, it is intended that these form the basis of the derogations that will be sought from HM Treasury and which will also be tested more widely with the market place.

Whilst this work is being largely informed by the pathfinder projects which DEFRA is supporting directly, it will also be informed by other projects which are well progressed and moving towards preferred bidder and contract close.

The LA Funding and Scrutiny Team within the Waste Implementation Programme (WIP) recognises that, whilst it is important to ensure that the sector moves forward in a coherent and sustainable way, those projects more advanced in the procurement process cannot necessarily wait for formal guidance to be made available. Therefore, the government will be reviewing current procurements to reach a position whereby, ahead of formally agreed derogations, projects can continue to progress towards contract signature.

In this process it will be taking on board the views and concerns of a number of bidders and funders currently involved in waste PFI procurements.

Standard Contract and Guidance

In parallel with this work, the 4Ps will lead a review of the existing Waste Management Procurement Pack with a view to developing and incorporating a first standard contract for waste PFI, incorporating the outputs from the other strands of work. The early stages of this work are already in train and have been part of the focus for the work of the stakeholder group. The timetable for the remainder of this work is outlined here.

PPP/PFI in the Waste Sector conference

A one day conference on the theme of “PPI/PFI in the waste sector – meeting the requirements of the EU Landfill Directive” is being held in London on Thursday 11 October, organised by City & Financial Conferences and supported by DEFRA. The line of speakers covers national and local government, with speakers from private industry including the waste management services and the financial sectors.

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