Last month (November 2018) the council’s cabinet approved the plan to take control of its waste and recycling services when its existing contract with Veolia expires at the end of the decade.
A report published ahead of the meeting suggested that moving the service in-house would bring about ‘cost savings and an improved service for residents’ (see letsrecycle.com story).
The proposed in-house switch has caused concern within the ESA – which represents private sector waste management companies. The Association reasons that the report understates the risk to the council of bringing the service under its own control.
Value
In the letter to the borough’s mayor, John Biggs, the ESA executive director Jacob Hayler said the report “fails to demonstrate the council’s duty to obtain Best Value’ for its services”, and called for a re-think of the proposals.
Mr Hayler wrote: “We believe this report misrepresents the benefits of outsourcing collections and understates the risks to the authority of transferring its services in-house.”
He added: “The ESA recommends strongly that Tower Hamlets reconsiders its decision and proceeds with a competitive tender process to reveal its true market price for its collection services and to demonstrate that it is achieving Best Value.”
Tower Hamlets’ report was compiled by consultancy firm WYG. The firm suggested that the total cost of providing the recycling and waste service in-house would be around £8.2 million per year, £1.7 million cheaper than if delivered by a private sector company.
But, in the letter, ESA has suggested that the WYG report “downplayed the significant risks” involved in delivering an in-house service, and suggested that there is also ‘greater accountability’ when using a private contractor to provide the service.
“It is ESA’s view that the cabinet report downplays the significant operational risks of delivering a service in house to budget (risks which would be transferred to the private sector under an outsourced arrangement),” the letter continued.
“The report states that there are other benefits of moving services in house, such as approved accountability and continuous improvement. In reality, accountability and transparency are more easily enforced through a contract, and contractors are incentivised by their shareholders to deliver continuous improvement”.
Comparison
In assessing its future options for delivery of the service, the report compared costs in the 2016/17 financial year with three neighbouring boroughs, Newham, Hackney and Islington, which all have in-house services.
The results showed that Tower Hamlets paid £48.79 per household per year for waste collections, while Hackney, by comparison paid £37.58, and Newham £54.11. Islington, described as “the most expensive” paid £75.90 per household per year, according to Tower Hamlets’ analysis.
“This makes Tower Hamlets 29.8% higher than LB Hackney but significantly cheaper than LB Islington, which is the most expensive by a significant margin,” the WYG report said.
ESA has questioned these findings and in its letter said the report failed to mention other cases where councils have taken contracts in-house and have seen “sharply rising costs, contrary to promised savings”, naming Liverpool and Hounslow as examples.
And, the Association remarked: “The vast majority of contractors in the marketplace, and ESA members in particular, have a good track record of managing service change, innovating, improving performance and providing financial savings for local authority members, which outweighs the significant financial and operational risks of transferring collection services in house.
“Our members have considerable experience at delivering Tower Hamlets’ stated objectives and are incentivised to do so through competitive tender processes which deliver best value”.
Tower Hamlets council has been approached by letsrecycle.com for comment.
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