Effective public procurement saves money & protects the environment - lessons from the UK. Presented by Adam Read, Waste Management & Resource Efficiency Practice Director. Presented at the Air & Waste Management Association’s 105th Annual Conference & Exhibition, San Antonio, June 19-22, 2012.

1. EFFECTIVE PUBLIC PROCUREMENT SAVES
MONEY & PROTECTS THE ENVIRONMENT
Lessons from the UK
Adam Read – Practice Director
Waste Management & Resource Efficiency, AEA
AWMA 2012
A world leading
19th – 22nd June energy and climate
change consultancy
San Antonio, Texas

2. Overview … in 20 minutes …
+ Personal welcome
+ Introduction to municipal waste management in the UK and
the current drivers to improve service performance
+ UK economy impacts on waste services
+ Background to local authority (LA) procurement
+ Introduction to the Case Studies
+ The essentials of ‘getting it right first time’
+ Key Outcomes
+ Current UK Procurement Trends
+ Summary & Lessons learned
2

3. A personal welcome
+ Adam Read
- Practice Director @ AEA
- 18 years of operational expertise in recycling service design and
procurement
- Leading AEA support to a large number of UK authorities and private
sector waste management companies on new scheme delivery and
improvement
- Staff of 75 plus consultants (UK and US)
- Leading MBT procurement for a number of UK authorities
- Specialise in waste infrastructure siting and community liaison
+ Role on the projects
- Project Director and lead policy advisor to Charnwood Borough
Council, Milton Keynes Council and Thurrock Council
3

4. Acknowledgements
+ Jim Perkins Thurrock Council
+ Andy Hudson Milton Keynes Council
+ Neil Greenhalgh Charnwood Borough Council
+ Hannah Lawrie AEA
+ Ken Hall AEA
+ Bob Read AEA
+ Martin Rivers AEA
- Thanks to them all for their contributions to the projects & the paper
4

5. My sponsor ….. www.aeat.co.uk

6. Our US sponsors
+ We are here exhibiting with ERG
- we acquired them in 2010
+ Come and see us on Booth #118
- ERG and AEA Technology Group
+ Franklin Associates (ERG division)
- extensive experience in all aspects of
solid waste management (over 30 years
of practice)
- integrated solid waste master plans
- full life cycle analyses of solid waste
- waste stream evaluations for local,
regional, state, and national agencies
6

7. UK Waste Management Drivers
7

8. Past UK Waste Management
Over-reliance on landfill
Cheap and readily available waste disposal option
Large number of sites suitable for filling
 Recent legislation and policy has led to landfill no
longer being the most viable option
 EU Landfill Directive requires ‘diversion’
 Landfill Tax (discourage disposal to landfill)
 Waste Strategy favours the ‘hierarchy’ approach
to waste management
 Closure of most of the 8,000 licensed landfills in the
UK
 Need to look at alternative sites, technologies
and waste services
 Massive programme of expansion in curbside
8
recycling!!

9. EU Landfill Directive
+ UK must adhere to EU law
- EU Directives require member states to achieve end results in set
timescales
- Free to adapt laws to meet goals set
+ Landfill Directive imposes legally binding targets to limit
biodegradable municipal waste (BMW) sent to landfill
BMW levels allowed to Target Year for UK
landfill
75% of 1995 quantities 2010
50% of 1995 quantities 2013
35% of 1995 quantities 2020
+ Failure to meet targets will result in heavy fines
- Potentially £150 per tonne above the target levels 9

10. Need for change…
60
50
Millions tonnes per annum
40 Non-biodegradable
Municipal Waste
30
20 Biodegradable Municipal Waste
Requiring Diversion
10
Biodegradable Municipal
Waste Allowed to Landfill
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Defra Data, assuming 3% annual growth of MSW
10

11. Landfill Tax
+ Key UK driver for public sector and private sector alike
+ UK Government announced in the Budget 2010 that rate for
‘active’ waste will escalate by £8/yr until at least 2014/15
- Will reach £80 / tonne in 2014/15 (£64 / tonne currently)
- Was only £48 / tonne 2010/2011
+ Strong disincentive to send waste to landfill
- Instrumental in pushing waste up the waste ‘hierarchy’
- Making recycling collections are real ‘must have’
11

12. Revised Waste Framework Directive
+ Overarching legislative
framework for the collection,
transport, recovery and Waste Prevention
disposal of waste across
Europe
Preparing for re-use
+ Drives waste services and
infrastructure up the waste Recycling
hierarchy towards prevention,
preparing for reuse and Other
recycling recovery
+ To recycle or prepare for reuse Disposal
50% of household waste by
2020 from a current level of
41.2% (2010/11) 12

13. The UK Economy
13

14. UK Economy
+ Increasing financial pressures from the UK’s biggest ever
peacetime deficit
- LA funding grant has been cut so LA’s need to introduce 15-20% cuts
year on year to remain viable organisations
- Central government spending review also in progress which won’t
directly affect LAs but will indirectly hit organisations providing LA
funding (banks etc.)
+ BUT the public still expect better services
+ AND increased service provision and performance is integral
to meeting UK and EU targets
+ UK is now focusing on how this can be achieved whilst
delivering the cost savings desperately needed through the
effective procurement of waste services …
14

15. Background to LA Procurement
15

16. LA Procurement Regulations
+ LA procurement in the UK is legislated by the Public Contract
Regulations 2006 for contracts above £156,442 ($255,110)
+ Underpinning objective of the Public Contracts Regulations
2006 is for LAs to ensure they don’t provide information or
treat bidders in a discriminatory manner
- Must not give any bidder(s) an advantage over others
+ Notice must be published in the Official Journal of the
European Union (OJEU)
- Notifies potential service providers and provides service
detail
+ Provide details of the procurement route to be adopted
- Open, Restricted, Negotiated and Competitive Dialogue
16

17. Restricted Procedure
+ Typically takes 12 to 18 months
+ Most suitable where there is a defined specification
- Utilising defined methods and equipment already selected
prior to the commencement of the bidding process
+ Completed in a shorter timeframe
- But does not allow for the potential flexibility and
innovation offered by the Competitive Dialogue process
+ Bidder numbers reduced through a pre-qualification stage
(PQQ)
+ No negotiation or dialogue permitted at Invitation to Tender
(ITT) stage
- Only questions of clarification are permitted 17

18. Competitive Dialogue Procedure
+ Introduced in January 2006 - typically takes 18 to 24 months
+ Used where no pre-determined method or equipment
defined or unable to define technical, legal or financial
contractual detail
+ Bid against waste projections and expected outcomes or
achievement requirements
+ PQQ stages used to reduce bidder numbers
+ Tender stage
- Bidder numbers are reduced and bid submission
requirements become more onerous over a series of
stages where dialogue with bidder is permitted
+ Final stage reverts back to Restricted - closed bidding
18

19. Introduction to the Case Studies
19

20. Our Approach
+ Case studies show a range of UK LAs with different
demographics that as a result of going out to procurement
(for recycling collections) in the last 3 years have achieved
- Cost benefits
- Improved performance and / or
- Increased environmental benefits
+ Each case study shows different aspects of best practice in
procurement that helped achieve the outcomes
+ Use these to provide guidance and key messages when
considering letting waste services
20

21. Background
Charnwood Milton Keynes
• Waste collection authority • Unitary authority
• 27,906 ha • 31,000ha
• 155,000 population • 232,185 population
• 68,000 hhlds • 99,486 hhlds
• Majority live in university • One of the fastest
town of Loughborough growing areas in SE
England
Thurrock
• Unitary authority
• 16,500 ha
• 150,600 population
• 63,300 hhlds
• Majority live in the 7
main towns
21

22. Scope of services
2009-2010 2005-2010 2008-2009
Lot 1: Collection Collection and
Lot 2: HWRCs Cleansing Waste collection and
Lot 3: MRF MRF cleansing services
Lot 4: Composting (Community
Recycling Centres) Evaluation Stage only
Lot 5: IVC/AD
(Organic Treatment)
Lot 6: Landfill
22

23. Scope of the presentation?
+ This presentation covers the procurement of
- Waste and recycling collection
- Household waste recycling centre (HWRCs)
- Materials recovery facilities (MRFs)
- Composting (windrow)
- In-vessel composting (IVC) / Anaerobic digestion (AD)
- Landfill
+ It does NOT include
- Residual waste treatment facilities
23

24. The ‘essentials’ of getting it right!
24

25. Project Resourcing
+ Assess the capacity and capability of the internal (Council)
team
- Identify gaps and put in place an adequately resourced internal team
with the necessary decision making powers
+ Value of retaining external technical, legal and financial
advisors cannot be underestimated
- Considered as ‘costly’ in the short term
- BUT have access to additional resources which can be used as and
when needed
- AND can benefit from the added experience gained from other
projects (helps minimise risks)
+ Develop the internal contract management team
- Ensure they have the skills and knowledge necessary to effectively
manage the contract going forward (post procurement)
25

26. Project Scope and Design: Milton Keynes
+ Undertook a detailed options appraisal and modelling
exercise upfront, and prior to commencing procurement
- Provided assurance that the solution was affordable and
capable of meeting targets
- HOWEVER this can only be fully tested on going to market
+ Project was designed to mitigate risks of the service being
unaffordable
- Market testing
o Helped inform the procurement strategy and documentation
o Identified and removed barriers to opening up market e.g. land
ownership and contract packaging
- Specification
o Used the modelling work to inform the specification development and
use optional service enhancements to manage service costs 26

27. Project Scope and Design: Milton Keynes
27

28. Project Scope and Design: Charnwood
+ Identified gaps and inefficiencies in the old
contract
+ Sought views and experience of contractors
through a market testing exercise
+ Consulted with residents and members of
the Borough
- Addressed areas of concern with the old
contract
- Influenced the weighting of the evaluation
criteria developed
- Ensured it delivered what was important
to the customers!!
28

29. Procurement Strategy
+ Contract packaging – disaggregated or aggregated contracts?
- Both Milton Keynes and Thurrock disaggregated theirs to
o Open up the market to niche providers for different service areas
o Loosen the hold those with existing waste facilities in area may have
- This created more competition and drove down prices
+ Procurement route – Restricted or Competitive Dialogue?
- Seek advice from market, and internal and external project team
- Needs to be assessed on a project by project basis
- How long have you got to deliver? How much is going to change?
29

30. Procurement Strategy (continued)
• To accommodate a very tight timeframe
Thurrock - Restricted • Due to the complexity and scale of the contract
procedure • Experience and knowledge of the project team
Milton Keynes • Council knew exactly what they wanted due to
collection and the upfront modelling & design work
cleansing contract – • Could go straight to market and procure without
Restricted procedure the additional expense of Competitive Dialogue
Milton Keynes MRF • Required flexibility to explore bidder’s proposals
contract – for sharing income with the Council
Competitive Dialogue • Needed proposals for increasing capacity of the
procedure MRF and / or number of material streams
30

31. Documentation Development: Thurrock
+ Poor existing documentation required a great deal of upfront
work
- Needed to be robust so those managing the contracts had the tools to
do this effectively over the contract lifetime
+ Proposed changes or variations to the service anticipated
over the contract were incorporated at this stage to gain
competitive quotes
+ Documents provided guidance on the scope and level of
service required and the extent of information needed from
bidders
- This reduced the possibility of under (or over-pricing) by different
interpretations of service quality
- Resulted in bids being received which were reasonably close to each
other in terms of service level provision and price 31

32. Documentation Development: MKC
+ Used aspects of the old contract which were proven to be
successful
- Collection and cleansing specification, plus added more “aspirational”
elements designed through the modelling
- For the MRF contract “aspirational” elements encouraged by bidders
through the dialogue process
+ Tested the specification early on allowing bidders to have a
positive influence upon service operation
+ Essentially output based and used key performance
indicators (KPIs) (linked to incentive payments)
- Drive the “right” performance in important areas of the service
+ Also incorporated input information
- Ensure the service was compatible with other Council services and to
deliver the level of service required by the Council 32

33. Documentation Development: Charnwood
+ Adapted existing contract to an output based performance
driven contract
- Enabled Council to deliver continuous improvement in service
performance over the contract life
+ A reward and deduction system was introduced
- Bidders were rewarded for meeting KPIs (linked to Council needs and
UK standards) and penalised for failing to meet them
33

34. Tender evaluation process: Thurrock
+ Evaluated bids to ensure the best possible deal for LA
+ All contracts used Most Economically Advantageous Tender
(MEAT) evaluation process
- Takes into account price and quality of bid and therefore the overall
benefit to the LA
Contract Lot Price Weighting Quality Weighting
Lot 1: Collection and recycling 55% 45%
Lot 2: HWRCs 55% 45%
Lot 3: MRF 60% 40%
Lot 4: Composting 60% 40%
Lot 5: AD/IVC 60% 40%
Lot 6: Landfill 80% 20%
34

35. Tender Evaluation Process (continued)
+ To assist in the evaluation process a rigorous evaluation
methodology was developed
- Enabled bids to be thoroughly and independently assessed
35

36. The Evaluation Team
+ Experienced evaluation team with a high level of technical
understanding was integral (and essential)
- Particularly where bidders could suggest their own methodologies
- Fully understand cost submitted against service level offered
- Identified areas of clarification to ensure what was and wasn’t
included in the evaluation
+ Where skills gaps are identified these should be addressed
- Milton Keynes held training before the CD process as it was a new
process which bidders were much more familiar with
- They also identified the need for an experienced commercial
negotiator to add weight and skills to the Council’s dialogue team
- Used draft submissions as a “dummy run” and enabled the team to
fully understand the bidder’s solutions and prepare to get the best
from each solution during dialogue
36

37. Project Processes and Procedures
+ Key to the success in delivering
these projects
- The project team met regularly at
(or used teleconferencing) to
discuss the project development
- Continuity in the project teams
were maintained throughout
- Team flexibility – working
unsociable hours at times at short
notice to get the job done!
- Team ethic fostered and
maintained throughout
+ Thurrock project delivered in
only a 9 month timeframe!!
37

38. Key Outcomes
38

39. Summary of Achievements
LA contract Savings Service performance Other service
achieved improvements
Thurrock Approx. £2M From 36.56% recycling and Strong contract
($3.18M / yr) composting to being on documents and
target to meet 40% empowered contract
2010/2011 target management team
MKC Additional From 38.19% to 47.7% Enhanced service
Collection and services at (forecast to reach 54% in levels – additional
Cleansing no extra cost 2010/2011) organics service
MKC MRF Overall five 50% reduction in rejected Capacity and range
fold increase materials following of materials
in income infrastructure improvements processed increased
Charnwood £1.3M From 42% looking set to High levels of
($2.06M) / yr achieve 57% in 2011/2012 customer satisfaction
(top quartile in UK)
39

40. Current UK Procurement Trends
40

41. Efficiency programmes and projects
+ Strong drive towards efficiency programmes and projects to
save money without compromising quality
- Joint or partnership working to jointly procure or share
services, infrastructure and / or equipment
+ We have supported partnership work in Essex (12), Surrey
(10), North London (8) and Clyde Valley (8)
+ Dorset Waste Partnership
- Looking to save £1.4m by running a joint in-house service
for 5 of 7 Dorset Councils including
o Waste minimisation initiatives
o Joint procurement
o Increasing trade waste collections
o Sharing infrastructure and vehicles
o Introducing collections across Council boundaries 41

42. Procurement Frameworks
+ The Improvement and Efficiency South East programme
(iESE) & London Waste and Recycling Board (LWARB)
- Developing the UK’s first framework for waste and
recycling collection, street cleaning, grounds maintenance
and bulky waste collection services
+ To short list short list a number of major service providers
against each service with outline unit prices for specified
services
+ Estimated savings = £85m across 140 local authorities
+ Only 11 of 23 companies invited actually bid back as the
private sector did not believe it provided value for money
- All 11 selected to be on the framework
- Now waiting for an LA to choose to use it ….. 42

43. Standardisation of procurement docs
+ We worked with the Lancashire Waste
Partnership as far back as 2007 developing a
standard specification, conditions of contract,
pricing schedule, etc., for collection services for
12 LAs to use
+ This is being replicated elsewhere with iESE
developing standard documents for use by
London and South East based authorities
+ Standard documents can be tailored to suit
individual authority needs saving time and
money (and external support)
+ Doesn’t replace the need for bespoke sections!
43

44. Efficiency Reviews
+ Service efficiency reviews often undertaken prior to
procurement of their new services
- Identifies savings that can be made before going to market
+ These ensure that Councils are in the best possible position
to design their new service and review the tenders received
+ In some cases funding is being made upfront to support
these reviews with funds being repayable from the savings
made
- Current support funds from WRAP, LWARB and WG
44

45. Summary
45

46. Summary
+ Procurement is integral to ensuring services and contracts
are delivered that drive up recycling and composting rates,
increase diversion from landfill and promote sustainable
waste management
+ The financial climate in the UK means these services need to
deliver not only enhanced performance but enhanced
performance at a reduced overall cost to the Council
+ This is being delivered in the UK by:
- Good practice procurement
- Efficiency and service reviews
- Document standardisation
46

47. Lessons for the US
+ Procurement is not a necessary evil
+ Going out to tender can drive
performance improvements
+ Competition will save you money
+ Procurement programmes needs to be
well designed and managed
+ Procurement is most effective when
linked to efficiency reviews @ outset
+ Don’t be afraid to use consultants to
bring ‘experience’ and ‘insights’
+ Learn from the UK’s experiences
47

49. Thank you!
49

50. Come and see us …. Booth #118
Adam Read Shelly Schneider
Practice Director - AEA Franklin Associates (ERG)
Waste Management & Resource Waste Management & Resource
Efficiency Efficiency
cell: 0044 7968 707 239 tel: 913-800-8276
email: adam.read@aeat.co.uk email: Shelly.Schneider@erg.com
web: www.aeat.co.uk web: www.aeat.co.uk