VIABILITY 

Investment objectives and outcomes need to be translatable into outputs which can be contracted for, measured and agreed.  Many service areas can be contracted for, but some areas will inherently be non_contractible.

Issue

Questions

Observations

Programme level objectives

Is the procuring authority (Department) satisfied that operable contracts could be constructed for projects falling in this area?

  Outputs based waste management disposal contracts have been let by Local Authorities to the private sector since 1990.

  11 processing, treatment and disposal contracts have already been signed under PFI.

  The 4Ps Procurement Pack for Waste Management PFI contracts and in particular the exemplar output specification and standardised payment mechanism help to ensure delivery of operable contracts.

Can these contractual outputs / requirements be robustly assessed?

The standardised Output Specification specifies key performance indicators, including contracted levels of recycling, composting and diversion of bio gradable waste from landfill. 

Outputs in the standardised Output Specification are stated in a calibrated, specific and measurable form.  

Could the contracts describe service requirements in clear, objective, output-based terms?

Most key performance indicators with respect to recycling translate readily into clear, objective, measurable and output-based terms.

Refer to the 4Ps exemplar output specification work.

Could they support assessments of whether the service has been delivered to an agreed standard?

Evidence from the growing number of signed and operational waste management PFI contracts confirms that this is the case.

Is the fit between needs and outcome sufficient to proceed?

Reference should be made to the options appraisal.

In the event of staff transfer, can the contracts be drafted to avoid perverse incentives and deliver quality services ?

The contracts should be drafted to take account of this and include the appropriate TUPE conditions.

Operational Flexibility

Is the Procuring Authority satisfied that operational flexibility is likely to be maintained over the lifetime of the contract, at an acceptable cost?

This is usually a key requirement of the change mechanisms included in the output specifications and payment mechanism.

However this may be harder to justify if high levels of recycling are not included as building a large (energy from waste) facility effectively locks up materials from further recycling.

Is the Authority seeking to build on the guidance issued by 4Ps. Will the [integrated] waste management service meet their needs?

Have the long term tradeoffs between operational flexibility and cost been identified?

Refer to:

  anticipated cost savings and the 'premium' associated with change mechanism; 

  level of flexibility required by the Authority.

Equity, efficiency and accountability

Are there public equity, efficiency or accountability reasons for providing the service directly rather than through a PFI contract?

Refer to:

  the findings of market soundings and the ability of the private sector to respond;

  the Environmental Protection Act (1990) which requires that Waste Disposal Authorities do not directly operate waste disposal facilities, but which will soon be repealed.

Are there regulatory or legal restrictions that require services to be provided directly?

  The Environmental Protection Act (1990) requires Authorities to out- source waste disposal operations. This will soon be repealed.

Have the expected staff terms and conditions at stage 2 been considered and what are the impacts on the contract, equity, efficiency and accountability?

There is a reasonable precedent in the waste management industry for staff to be transferred between operators.

OVERALL VIABILITY

Is the accounting officer satisfied that an operable contract with built in flexibility can be constructed, and that strategic and regulatory issues can be overcome?

DEFRA has no evidence of this not being possible.