How councils can do more with less
Extracting best value out of service provision and treatment options is now the biggest challenge facing council waste departments. Adam Read and Sarahjane Widdowson offer some advice
Councils are striving to deliver year-on-year service savings, but will agreement on a 'scaled back' collection contract now mean that the authority is subject to higher long-term costs in the future as new services are required in times of growth and prosperity? In this article we explore three of the areas in which councils are considering alternative approaches to traditional decision-making and service delivery as a means of getting through this turbulent period.
The first of these is doing more with less. In some places, authorities must save up to 50% of their operating budgets over a three-year period. Birmingham City Council announced that 7,000 staff would be going to save £300M per annum, whilst Blackburn Council will be cutting 1,000 jobs and Wakefield Council will be cutting its workforce by 10%. These cuts are not only targeting waste management services, but given that waste contracts are some of the largest that any authority lets and the labour-intensive nature of street cleansing and refuse collections, our part of the public sector is going to have to face the music.
These cuts will require wholesale restructuring of departments and reductions in frontline services. Efficiency gains is the new buzz phrase and authorities are taking time to scrutinise the ways in which they work through benchmarking and comparative analysis of service type and performance to see what they can do more effectively. This should not only be a measure introduced in times of austerity, but should underpin good contract management and budget setting in the public sector, with some services reviewed one year and others the next.
Tough decisions are being made about what services can be offered beyond those that are a legal requirement, and many councils are taking a long hard look at bring facilities and HWRC provision. Given the rapid of expansion of kerbside recycling over the last decade, many of these services may be under-performing or even competing for tonnage. Within the news recently we've seen criticism of the Somerset Waste Partnership's decision to charge entry to its HWRCs for users to avoid having to close these sites, and the introduction of charging systems in Dorset for certain non-household materials.
Both these authorities have made tough decisions about what they need to do to deliver the cuts required whilst maintaining service performance. In Somerset's case this has been in consultation with local communities regarding how sites can be kept open whilst protecting expenditure - a real example of localism in action. Authorities need to be more open with their residents about the reality of the circumstances they face, and making decisions together can create a sense of joint ownership, appreciation and support that these services are 'the right ones'.
The second approach is partnerships and joint working. The partnership agenda has been gaining support and is growing in momentum with many authorities entering both informal and formal partnerships to design strategy and deliver solutions. These have historically been linked to larger residual waste treatment contracts than local collections activities, but the increasing need to cut budgets has catalysed this activity and many authorities are now looking at how services can be delivered more effectively and at a lower cost by working together.
One of the biggest announcements to date has been the proposal to share services between the three London Boroughs of Westminster, Kensington and Chelsea, and Hammersmith and Fulham. These administrative savings alone could be worth between £50M and £100M per year for a range of services including waste management. Every service, from chief executive and senior directors to street cleaners and social workers, could be shared, and under the plans, each authority would keep its council leaders and local elected councillors--thus ensuring a local perspective on strategic decisions.
In terms of a success story, the Somerset Waste Partnership is already achieving savings of more than £1M per annum through alignment of its collection services, the sharing of best practice and the ability to buy and sell as a single entity ensuring better prices for fuel, containers and recyclables. The Hertfordshire Waste Partnership has formed a consortium to sell its recyclables and is generating significant additional income when compared to when they achieved when acting independently.
Joint working can provide many opportunities to improve service efficiencies and can lead to significant savings. Efficiencies can be realized through joint depots, sharing of vehicle fleets, buying together, sale of recyclables, route optimisation and by having a more attractive portfolio when you go to market. Recent studies have been commissioned by the Surrey Waste Partnership and the Clyde Valley Waste Review Group to analyse opportunities for closer alignment of local service delivery, joined up client functions and sharing of depots.
Many of these savings will be achieved through 'invest to save' activities where some level of investment is required to fully understand the range of options available, but short-term spending is not something that many authorities are currently considering. This could prove to be the 'fly in the ointment' for necessary sea change in local activity and delivery, and result in some local decisions being taken that are ultimately 'wrong' as insufficient data was available to inform the decision-making process.
The third approach is procurement. Whether it's a new collection service or a treatment solution, the procurement of a new service or facility is a major undertaking for an authority in both time and cost. To help minimise the costs involved, WRAP hs been providing support to councils to help ensure that their collection procurements are delivered right, drawing on consultancy support and industry best practice to inform service specifications and tender documents.
In addition IESE has announced that it plans to develop a new collections framework contract for use initially in the Southeast which will pre-qualify a handful of waste companies with designated unit costs for types of service. Local authorities can then use this framework when going to market to minimise expense on PQQ, and can use standard tender documentation that they then localise to suit them.
This will inevitably help to make procurement more cost-effective, but with the likely increase in joint procurement and joint working, the procurement process will continue to be complex, costly and full of potential risks if done incorrectly. However, with increasing standardisation of collection systems, some deliver better performance and are becoming more common in new tender. And with the requirement to deliver efficiencies, procurement of collection services should prove a fruitful area for cost cutting.
However, the same may not be true with residual waste treatment. The cut in PFI credits for a number of the larger procurements and the pressure of the current economic environment mean that there is perhaps an even greater requirement for authorities to procure more bankable solutions.
There has been a need for some authorities to rethink their solutions - some are considering a switch to more bankable technologies like traditional energy-from-waste or MBT, whilst others have decided to cease their procurement exercise and look at an interim solution perhaps for two or three years whilst they re-assess the market.
The shift in banking appetite is also impacting commercial facility development, and again we are expecting to see an upturn in traditional thermal treatment solutions as merchant facilities across the UK as they are considered bankable with a long track record of delivery.
Buying capacity in existing merchant facilities may cost a little extra in the short term, but it will allow breathing space for an authority to reconsider options and to make sure that an appropriate solution is pursued.
However, these facilities are generally unpopular, do not sit well with a localism debate, and may struggle to sail through planning. So investment decisions and technology development in over the next two years will be an interesting area to watch. With the level of uncertainty facing our sector unlikely to decrease in the next six months, it will be hard for any local authority to take long-term strategic decisions.
But 2020 and the EU Landfill Directive targets are still on the horizon and are getting ever closer, so inaction is not an option. Interim solutions will 'do what it says on the tin' but longer term investment and decisions about joint ownership, working and delivery need to be made soon, and that will require information, analysis and support.
Dr Adam Read is global practice lead for waste management and Sarahjane Widdowson is a specialist consultant at AEA