The significance of this income source will depend on the capacity of the facility in relation to the Contract Waste provided by the Authority. If the facility is sized for Contract Waste then the potential for Third Party Waste Contracts may be quite small but where the Contractor has built a larger plant to exploit economies of scale the potential can be very significant and the income share for the Authority will be equally significant. This should be taken into account when the relevant Contract Management procedures are developed.
The WIDP Contract (Clause 51.5) places some restrictions on the Contractor's ability to treat Third Party Waste at the project facilities. The main restriction is that the treatment of the Third Party Waste should not compromise the Contractor's ability to treat Contract Waste in accordance with the Contract or its ability to meet contractual performance targets.
The WIDP Contract (Clause 51.4) also has provisions relating to changes in law and insurance which apply if the Contractor enters into Third Party Waste Contracts over a certain scale i.e. Qualifying Contracts with another Local Authority. These provisions ensure that where there is another significant provider of waste to the facility the extra costs that could occur no longer fall entirely on the Authority but are shared with the other provider of waste. If the provider is not a Local Authority the Contractor is obliged to use reasonable endeavours to achieve such a sharing arrangement.
The Contract Management Manual should include comprehensive procedures for checking each aspect of the calculation of the Monthly Payment including any deduction for a Third Party Income share. Any unexplained reduction should be investigated. Procedures set out in the Contract Management Manual should also cover the need to escalate consideration of any breaches of the Contractor's obligations in relation to third party and off take contracts to the Contract Management Board and how and when to raise the issue with the Contractor.