How to adapt waste service contracts to new national policies

Published on 11/02/2019



Paul Frith from Frith Resource Management, a supplier on the ESPO 664 Consultancy Services framework, discusses some common considerations across all waste management contracts.


What is the contract duration?

Is it going to be affected? Many of the policies cited in the National Resources and Waste Strategy are intended to come into effect in 2023. Therefore existing contracts may or may not be substantially impacted by the measures proposed. However, almost all new contracts are likely to need to consider changes in current services (see item below).


How flexible is the contract?

This may mean flexibility in terms of a variety of operational parameters, for example waste acceptance criteria or composition change, either of which might impact on calorific value, which may in turn impact on either the contractor or the council’s revenue from electricity generated (in EfW / AD contracts). The composition of dry recycling could again impact on revenue from secondary resource markets which may be a risk share within MRF or other recycling contracts. Tonnage thresholds and bandings could be influenced by measures such as deposit return schemes or new collection requirements.


What is the Change in Law provisions?            

These clauses in the Conditions of Contract are designed to provide a mechanism for handling changes in law, and their allocation between the contracting parties. As regards the new policies and their implementation, the first consideration is whether these aspects may have been flagged up in waste law lists at the time of the contract. In this regard there are usually three ‘classifications’, in broad terms:-
 

1. If the change was foreseeable and priceable – it is the contractor risk
2. If they may have been ‘foreseeable’, but not with sufficient clarity to be priceable
3. If they were not foreseeable – this is the Council risk

In the second classification above, it is still likely to be the Council risk but there may be grey areas around the extent to which it was known and accounted for. So the first step is identifying the impact of the change and then considering allocation of those costs / revenues in the context of the contract and service.



What if you are going out to tender soon?

The Council will need to identify the range of options that need to be modelled to determine the shape of the service and to build sufficient flexibility in the contract. The flexibility is required as whilst we know more about the policies we cannot be certain about the detail and extent of their implementation. If contracts are going to be let soon there is the need to adopt a strategy based around one of the following:-
 

1.  

Design a service that phases in implementation of new policy requirements as they come into effect. This allows for a longer term service but is required to deal with the complexity of transition.

2.  Begin the new service with the operational implications of new policy measures in place at service commencement. This is simpler in contractual terms but higher risk as some assumptions may need to be made as regards implementation of the policies into local services.
3.  Let a short term contract for ‘business as usual’ and a subsequent contract for the new operational parameters. This is more costly in procurement terms, and market appetite for shorter term contracts may not offer such good value as longer term options. It is however lower risk as it allows procurement to be based on the prevailing policy conditions.


If you would like to find out more about Frith or the Consultancy Services framework (664), click here.
 
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