ESA warns councils not to breach procurement law

And, ESA – the waste sector trade body – warned that local authorities should take ‘careful steps’ not to breach procurement law if considering to enter ‘cooperative arrangements’ with council-owned companies to carry out waste services on their behalf.

The recommendation comes after Stroud district council became the latest local authority to become a shareholder in council-owned firm Ubico Ltd, which was carried at a meeting chaired by Cllr Mark Rees last night (November 6).

The local authority had been considering moving to the company – which was created by founder shareholders Cheltenham borough council and Cotswold district council – at the end of its current contract with Veolia in 2016 (see letsrecycle.com story).

Proposals

The proposals came as part of a wider planned overhaul of waste services in Stroud, with councillors also voting to introduce an opt-in £36 charge for garden waste collections, as well as fortnightly collections of refuse and weekly collections of food waste in caddies.

Teckal-exempt companies – that are wholly-owned by councils but operate at ‘ arm’s length’ – have become an increasingly popular procurement option for neighbouring local authorities, which promise savings on lengthy procurement procedures or outsourcing contracts to the private sector.

But, while welcoming the formation of Joint Waste Authorities, the ESA warns that councils must still ensure procurements meet the relevant criteria in European law.

ESA

A spokesperson for ESA said: “There have been increasing media reports of local authorities seeking to take advantage of “Teckal” style publicly-owned companies for the provision of their waste services. ESA of course recognises that many authorities currently prefer to carry out their collection activities in-house and that some of these co-operative arrangements may be seen as an extension of that.

“Any authorities considering such a move should however take careful steps to ensure that they are meeting the relevant criteria in European law. If they are directly awarding contracts to entities over which they don’t exercise sufficient control to meet the “in-house” definition then they will be breaching procurement law and could potentially be open to challenge.”

ESA added: “The best way for local authorities to achieve value for money for their waste services is unquestionably to tender on the open market. The competitive tension provided through a tender process incentivises innovation and keeps authorities’ costs down, which is a key consideration in the current climate of constrained public finances.”

LARAC

However, Andrew Bird, chair of the Local Authority Recycling Advisory Committee (LARAC), told letsrecycle.com that ‘mistrust’ surrounding long-term contracts promoted by private contractors was one factor contributing to a shift towards joint arrangements.

He said: “In a sense you should always do some market testing but that doesn’t necessarily mean you should go out to tender. More councils want to be in control of their own destiny, and there’s currently some mistrust of some contractors at the moment, especially around long-term contracts. Councils fear being locked in for years in what has become a very fast changing market.”

Stroud joins a number of councils that have moved or are debating a move to Ubico, with Tewkesbury borough council moving its in-house collections under the council-owned firm in October with the hope of saving taxpayers an estimated £364,000 by 2020 (see letsrecycle.com story).

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And in June, a spokesman for Cotswold district council told letsrecycle.com the inclusion of Forest of Dean and West Oxfordshire under the Ubico umbrella was also under consideration.

‘Flexibility’

Rob Bell, managing director of Ubico Ltd, said: “Teckal companies such as Ubico are gaining in popularity as they able to offer greater flexibility in service delivery and change management against a background of significant financial uncertainty for local authorities.

“Value for money is a key consideration for all local authorities and the addition of new partners in Ubico has to be supported by a robust business case and independent external soft market testing to benchmark our offer against the current market conditions.

“In addition, we operate on a ‘not for profit’ basis and therefore any service efficiencies we deliver directly benefit the authorities we work for. Our track record of delivering efficiency savings to our shareholder councils speaks for itself.”