UK: Shake up of competition in the municipal waste sector

The Office of Fair Trading (OFT) and The Office of Government Commerce (OGC) have collaborated in the production of two reports which signal a forthcoming shake up of competition in the municipal waste sector.

The OGC report "Improving Competition and Capacity Planning in the Municipal Waste Market" provides a general analysis of competition in the municipal waste sector. It concludes that competition in the sector is not satisfactory with too few suppliers in the market and the lack of a systematic approach to procurement. The OGC therefore recommends:

• a more centralised approach to procurement with (a) greater co-ordination between local authorities and central government in order to plan and timetable procurement exercises (b) a move towards more standardised procurement procedures and (c) centralised monitoring of contracts;

• funding and procurement models to follow set outlines, with fewer integrated contracts:

1. Collection contracts: 5-7 year contract with assets retained by contractor
2. Small scale facilities: Design build and operate contracts
3. Large scale facilities: PFI as the primary option. Assets to revert to public sector at end of contract. Joint venture structures to be considered for mixed use facilities.

Suppliers to the NHS can attest to the dramatic changes that can arise when central government attempts to intervene in the co-ordination of local procurement exercises.

The OFT document "More competition, less waste" provides more specific recommendations designed to encourage more effective competition under local authorities’ procurement procedures, for example:

• restricting waste collection contracts to a 5 year duration;

• opening up competition for waste collection contracts by relaxing selection criteria and providing for access to necessary facilities;

• encouraging specification of outputs rather than inputs for waste treatment contracts;

• seeking bids for waste treatment from suppliers outside the relevant region.

The OFT also encourages local authorities to be "aware of the risk of collusion". The existence of these reports means that companies in this sector can expect to be under an increased level of compliance scrutiny by the OFT. The first OGC report of this nature focused on the construction sector, following which there have been a large number of OFT investigations for breaches of competition law in the construction industry – particularly in the context of bids for public sector work. Companies in this sector would therefore be well advised to update their competition law compliance arrangements.

Click here to view the OGC report.

Click here to view the OFT report.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 31/05/2006.