87/06    18 May 2006

The OFT has today published its study on the effects of public procurement on competition in the municipal waste management sector.

Download More competition, less waste (pdf 451 kb)
Download Executive summary (pdf 97 kb)
 
The study, conducted jointly with the Office of Government Commerce (OGC) and the Department for Environment, Food and Rural Affairs (Defra), focuses on how the use of landfill to dispose of municipal waste in England could be reduced through the development of more competitive markets. The value of the municipal waste management services sector is estimated to be approximately £2 billion. 
 
The OFT's recommendations for encouraging more competition for municipal waste collection services include:

• local authorities should set contracts of a sufficient length to allow suppliers a reasonable return on their investment, but in general no longer than five years
• local authorities should avoid setting selection criteria that require suppliers to have previous experience in the municipal waste collection sector. This should encourage more bids 
• when including in-house providers in an invitation to tender, local authorities should take care to ensure competition on a level playing field so that private suppliers are not discouraged from bidding.

The OFT's recommendations for municipal waste treatment include:

• local authorities should tender separately for municipal waste treatment contracts and landfill contracts. Priority should be given to finding mechanisms to deliver bids from a number of suppliers, both within and outside the region which will mitigate the risk of regional monopolies
• local authorities should guard against the risk of collusion. For example, information relating to waste management contracts in the pipeline may encourage bidding, but care needs to be taken to avoid giving suppliers the ability to collude and share out contracts.

John Fingleton,  OFT Chief Executive, said:

'Taxpayers will benefit from greater competitive pressures in this sector. Our report makes a number of practical recommendations to central and local government to ensure that they maximise the benefits of competition.'

Environment Minister Ben Bradshaw said:

'The OFT report, together with the Office of Government Commerce's separate report, has made a significant contribution to the government's plans to tackle and cut the amount of municipal waste going to landfill.

'We have already begun implementing proposals by the OFT and OGC, which are very much in line with those highlighted in Defra's public consultation its review of the waste strategy for England.

'I am announcing today plans for a new waste infrastructure development programme led by Defra, along with changes and simplifications to arrangements for the award of waste sector PFI contracts.'

NOTES

1. The study focuses on improving procurement in the municipal waste management sector, which includes the collection, treatment and disposal of household waste, civic amenities waste and street cleaning services.

2. The study was announced in May 2005 with a joint OFT/OGC press release.

3. The OFT published 'Assessing the impact of public sector procurement on competition' in September 2004. The preliminary research, which was carried out by independent consultants, indicated that public procurement can enhance competition as well as restrict or distort it. The report also identified a number of sectors where it was more likely competition could be affected by procurement practices, one of which was 'sewage and refuse disposal, sanitation and similar activities' (which includes waste management). See the OFT statement.

4. Following the Chancellor of the Exchequer's pre-budget report in November 2002 which asked OGC to look at what steps could be taken to increase competition and improve long term planning in markets where government has purchasing power, an OGC team headed by Sir Christopher Kelly published a report entitled Increasing competition and improving long-term capacity in the government market place in October 2003 (the Kelly report). The report highlighted areas that needed addressing in order to improve competition and capacity planning. The Kelly action plan was published in December 2003.