OPINION: Outsourcing services allows councils to share risk in these uncertain times

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OPINION: Everyone in the industry is experiencing the incredible period of change and uncertainty we are currently facing. The Government has been proposing the most radical changes to recycling channels for 15 years with the implementation of consistency, EPR packaging and a DRS.

Additionally, the post-pandemic disruption of supply chains, amplified by the current war in Ukraine, is driving inflation to 40-year highs, fuel, labor and construction costs. all increasing, while delivery times for new trucks and equipment are being extended and a lack of Environment Agency permitting capacity is causing major delays in permitting applications.

Jacob Hayler is Executive Director of ESA

In this context of emerging challenges, increased risks and pressure on services, the case for outsourcing municipal services is stronger than ever. Private sector contractors have extensive experience in providing change services for councils in varying local conditions across the country. This will prove invaluable as the sector navigates the challenges and changes of the coming years. By learning of similar provisions planned for councils elsewhere, contractors are able to increase the efficiency of their service delivery, increase recycling and reduce residual waste, while performance and budget certainty are enforced. transparently through the contract.

The Covid period has demonstrated the resilience and flexibility of contractors to be able to maintain services for their client Authorities. Throughout the pandemic, ESA members were able to tap into their resources across the country to minimize impacts on frontline services, while some authorities with stand-alone DSOs needed support from local operators. private sector and neighboring authorities to get through this difficult period. .

Providing waste management services to multiple properties at different times, as well as finding market outlets and disposal routes for collected materials, presents multiple risks and potential service failure points. These risks are particularly acute in circumstances where significant changes and modernization of services are introduced – the forthcoming period of legislative and regulatory changes being an extreme example which will introduce operational challenges, and contractors are well placed to use their expertise and their experience to overcome.

Experience shows that service costs tend to rise faster than general inflation

These service changes will also need to be introduced during a time when the wider economy is going through a tough time. Experience shows that service costs tend to rise faster than general inflation and recent increases in labor and fuel costs, as well as changes to National Insurance, have been absorbed by entrepreneurs this year. This comes after a number of years in which contractors have absorbed other cost increases resulting from general changes in legislation, such as changes to the national minimum wage, new holiday pay and new pension rights, as well as the apprenticeship tax. Throughout this period, contractors realized savings to offset rising costs and service demands.

By finding the appropriate balance of risk allocation with their contractor, boards are able to protect themselves from unforeseen costs and gain greater certainty about their budgets that would not occur with in-house or LATCO alternatives. The risk of delivering a quality service within budget rests with the contractor and is implemented through its legal obligations under the contract. This ensures transparency and accountability in service delivery, which improves outcomes for local council taxpayers and maximizes value for money.

The difficult economic environment is reflected in the current market conditions, with market participants being very aware of the risks. It is therefore essential for the authorities to properly test the market and fully identify the risks which lie best with the entrepreneur and those over which they have no control.

Eunomia Research, commissioned by ESA in 2020, demonstrated that outsourced services offer better value for money. Budget pressures have not gone away for local authorities and in these uncertain times, partnering with a proven private sector contractor offers councils the surest route to making the changes we need as we aim to make a radical change in recycling performance and achieve a more circular economy.

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