A PFI Solution

Traditionally, landfill has been used by local authorities as a low cost option to manage waste. The EU Landfill Directive aims to reduce the dependence on landfill through waste minimisation and increased levels of recycling. It sets out targets to reduce the amount of biodegradable waste sent to landfill as 75% of the 1995 level by 2010, 50% of the 1995 level by 2013 and 35% of the 1995 level by 2020.

PFI is set to play an important role in helping local authorities achieve these targets. As local authorities move away from their reliance on landfill they face increased costs in dealing with waste. PFI can help local authorities bridge the affordability gap as subject to Comprehensive Spending Review 2007. The project's capital expenditure can be met through a PFI grant from Defra. However, the increased costs will be primarily operational costs and local authorities must ensure that all costs are identified and that there is a political signup to the overall affordability envelope.

Choosing the PFI route can add rigour to the procurement process. 4ps supports local authorities throughout this process to ensure a detailed and robust options appraisal is carried out to properly inform the Outline Business Case and thereby satisfy the credits criteria.

4ps has developed a waste management procurement pack which provides standardised documentation to provide support for local authorities throughout the project lifecycle.

Defra will not grant PFI credits to a local authority that has not carefully planned their project and developed a detailed business case. Within this business case an acceptable level of risk transfer to the private sector has to be demonstrated over the concession period to support it.

For example, this risk transfer ensures that if a contractor has problems delivering the plant the local authority will not be responsible for the costs of delay. HM Treasury will not readily approve a project in which the local authority accepts a risk allocation contrary to SoPC3 and those in the waste derogations.

An emphasis of government policy is to promote recycling and recovery. Increasing levels of recycling and composting can ensure local authorities meet the 2010 EU Directive target.

New PFI criteria issued earlier this year has disaggregated the procurement of front end facilities, including household waste recycling centres. This is to focus support on the costs of the major infrastructure required to meet the Landfill Directive targets in 2013 and 2020 and to help accelerate the procurement of these front end facilities.

Recycling and composting facilities are less expensive and less risky than residual waste management plants and are therefore quicker to procure enabling these facilities to be contributing towards meeting the 2010 targets.

Recent reports from the Kelly Review and the National Audit Office raised concerns that not enough is currently being done to meet the EU Landfill directive targets. This concern was reinforced by the Defra's Waste Strategy Review which was published for consultation earlier this year.

To support local authorities in meeting these targets Defra set up the Waste Infrastructure Development Programme (WIDP) in June 2006. WIDP aims to more accurately forecast the scale of residual waste treatment infrastructure required to meet the Directive’s targets and accurately monitor the ongoing delivery of projects. Expert support is available through 4ps and PUK.

Another aim is to accelerate the building of the infrastructure needed to treat residual waste without compromising efforts to minimise waste and increasing recycling levels. Only a successful combination of these activities will allow the local authorities to meet their obligations.

The co-ordinated support programme offered by WIDP and the guidance provided by 4ps will strengthen local authorities' ability and resources to achieve the very challenging targets set by the EU Landfill Directive.

For further details visit www.4ps.gov.uk