After determining appropriate assumptions in relation to future waste growth and (pre-residual waste treatment) recycling rates the Authority is in a position to model the profile of residual waste arising over the period of the project - typically 25 to 30 years. At this stage the Authority should check whether the residual waste arising per person is consistent with the target set out in WS2007.8 If the modelled waste arising is in excess of that targeted in WS2007 then the Authority should revisit its waste growth figures and recycling projections to assess whether it could legitimately alter key assumptions to allow it to meet the WS2007 targets. All assumptions used must be credible and the Authority should be prepared to justify the projections used for the options appraisal.
The next step is to decide what capacity of plant to assume for the Reference Project recognising that any waste flow forecast is uncertain. In determining the capacity of residual waste treatment required the Authority must take into account the risk that the total tonnage of MSW arising may be greater than modelled and/or the recycling levels modelled are not met. There is a strong case for allowing for some headroom in the capacity to allow for these contingencies.9
At the OBC stage, such headroom should reflect only the potential for reasonably likely variations in the residual MSW arising. It should not include any headroom intended specifically for other non MSW waste flows such as commercial and industrial waste. In line with WS2007 Authorities should explore proposals for additional capacity10 for commercial and industrial waste during the procurement stage of the project. Such proposals should, however, be in line with both Defra's PFI criteria and local waste strategies and come from bidders, able and willing to underwrite the associated risk. It is therefore inappropriate to include such capacity in the Reference Project at the OBC stage.11
_________________________________________________________________
8 See page 13 which states the target as 225kg per person by 2020.
9 It is undesirable and unnecessary for the Authority to commit to use such headroom. There is typically more than enough commercial and industrial waste of a similar composition to MSW available for the Contractor to take the risk in relation to the usage of such spare capacity.
10 Such additional capacity will not attract PFI credits - see Appendix E of the OBC template available at: http://defraweb/environment/waste/localauth/funding/pfi/pdf/obc.doc
11 Where bidders make proposals for additional capacity it should be on the basis that they are prepared to take the commercial risk relating to the revenue arising from the acceptance of such waste. If Authorities presuppose such capacity in their OBCs it may be more difficult to achieve this risk allocation. Section 4 of the " Standardisation of waste management PFI contracts: guidance on SoPC derogations " , Defra, May 2006, highlights issues arising from Third Party Income being included in projects and is available at: http://www.defra.gov.uk/environment/waste/localauth/funding/pfi/pdf/guidance-SOPC3-wip.pdf