Major waste companies opt out of iESE framework

At least three key players in the waste services industry have not tendered for the UKs first waste management services framework, letsrecycle.com can reveal.

A snap survey of companies providing waste collection services, carried out by letsrecycle.com, found that Biffa, the Kier Group and Serco did not apply for the framework contract being developed by Improvement and Efficiency South East (iESE).

The framework is being developed on behalf of 141 signatory local authorities in central London, the greater South East and the West Midlands and will allow them to choose from a list of approved suppliers for services including recycling and waste collection and street cleansing – without having to carry out a full procurement process. iESE believes this could save councils up to 85 million in procurement costs (see letsrecycle.com story).

The companies contacted by letsrecycle.com included those listed by iESE as the main ones operating waste collection services in South East England in a recent presentation at the London Conference. According to this presentation, in-house providers have a 38% market share, while Veolia holds 22%, Biffa 19%, SITA 9%, Serco 6% and Enterprise 3%.

Veolia told letsrecycle.com that it had tendered. Cory Environmental, SITA UK and Enterprise declined to comment.

Value

The companies that declined to tender cited a range of reasons for doing so including doubts about the frameworks value for money and lack of flexibility.

Speaking to letsrecycle.com a spokesman for Biffa said: After a close study of the iESE proposition, Biffa felt that it did not offer required value opportunity to either public or private sectors, and so declined to tender.

A spokesman for Serco added that the iESE framework contract was seriously considered by its business development team but after assessing the opportunity against its bidding criteria the company decided not to pursue it.

The trade association for the waste industry, the Environmental Services Association (ESA), said it had raised concerns with iESE about the frameworks proposed savings.

In a statement, the Association said: ESA has expressed concerns to iESE about some aspects of its proposals and the deliverability of savings through the framework. ESAs members are committed to providing the best possible value for money for their local authority customers and will continue to do so, whether through iESEs framework or alternative procurement processes.

iESE will receive a 10,000 annual fee from suppliers within the framework. In addition to this it will also receive a fee of 0.5% of all turnover from contracts let under the framework until it closes at the end of April 2016 from local authorities who use it. Some have suggested that this could dwarf any savings made and could prove more costly to councils than hiring a consultant to run a procurement.

Contracts procured under the framework are also limited to a maximum duration of ten years and further concerns have been raised that this could increase how often councils procure contracts, thereby increasing costs. Most councils typically procure contracts in units of fleet life, typically seven or eight years with the option to extend for a similar amount of time but under the framework there would be no option to extend.

Savings

Despite some criticism of the framework, Veolia, which currently holds more local authority waste collection contracts in South East England than any other private company, told letsrecycle.com that it had tendered for the work.

Pascal Hauret, municipal services director as Veolia, said: We can confirm that we have submitted a bid to the iESE waste framework. We understand that some of our potential customers may wish to tender through this process and therefore we do not want to miss the opportunity to bid for the provision of their services.

Meanwhile, iESE stands firm that the framework contracts will lead to savings for the local authorities who use it. Earlier this month (March 12) it stated that it had received a very positive response from potential suppliers (see letsrecycle.com story).

Alison Templeton, market leverage director for iESE, told letsrecycle.com: We are projecting savings of up to 85 million. Because it [the framework] covers right across the spread of services it will benefit authorities that have small contracts and those that have multi-service procurements.

She added: Its really important with councils being faced with very difficult decisions about where they make budget cuts that this framework can help them to make savings.

Ms Templeton explained iESE was working with early adoption local authorities who wish to be ready to use the framework when it is launched on May 1 2012.

Commenting on the costs to local authorities and suppliers she said: The rebate is used to fund the framework and provide the additional support. We have set the level and it will be annually reviewed.

What we have said in the proposal is because iESE is not for profit we will reinvest surplus money. We will annually review the level of cost. It is important that we will demonstrate that reinvestment back into the sector.