We make the following recommendations to help the Department accelerate the successful delivery of waste management PFI projects.
I The Department is engaged in taking forward a challenging programme of procurements of projects which have complex risks. To help evaluation of the programme and the identification of areas for improvement, the Department should build on its existing management information and develop Key Performance Indicators. The Department should then publish annual performance statistics for the projects which it approves. These statistics should include:
a project delivery timescales, including separate monitoring of project approval, procurement and construction periods;
b the number and range of bidders for local authority waste PFI projects;
c the extent of price changes after selection of preferred bidder;
d authority satisfaction with support received from WIDP; and
e whether the services in operational projects are being delivered in line with the contract.
II Local authorities would value greater access to benchmarking information and data that could help them plan procurements effectively. The Department should complete its current work in compiling benchmarked costs of infrastructure for different types of waste project. This information will help local authorities to plan projects and to evaluate bids. The Department should also supplement its existing guidance by collating the following information and making it available to authorities to assist in the development of projects:
a Internal and external resource requirements for different types and size of project including appropriate budgets for the use of external advisers.
b A standard set of assumptions for authorities to use in project plans on key variables such as waste growth. Local authorities may still wish to carry out sensitivity analysis based on alternative assumptions.
c Information on how to handle the interfaces within the waste management system where waste collection is excluded from the PFI contract.
III The financing costs for waste PFI projects are higher than many other types of PFI projects and, like other PFI projects, are affected by the current uncertainties in the financing markets. The Department should:
a check that the cost of finance for waste PFI projects can be shown to be reasonable for the risks borne either through a funding competition or benchmarking;
b analyse trends in the differential between the cost of finance for PFI waste projects and other types of PFI project to establish the scale of, and reasons for, the difference; and
c set out the assessment local authorities should undertake where a contractor proposes to finance construction through its own resources. This form of financing may avoid delays or price uncertainties in raising project finance in the current financing markets. Authorities should, however, not see faster deal closure as the main reason for choosing a contractor but should weigh this alongside other value for money considerations.
IV To date the Department's support to local authorities has mainly focused on project development and procurement. It is now beginning to consider contract management. The Department should increase its oversight of projects after contract award and particularly during the construction phase by:
a building on its existing model of providing experienced individuals to assist with project development and procurement and making sure input is available after contract award if required;
b establishing minimum standards for resourcing contract management and encouraging local authorities to plan for the handover from procurement to operational contract management; and
c increasing the frequency of monitoring returns from local authorities during the construction phase to at least quarterly, rather than six monthly, from contract award until asset construction is complete and all facilities are operational.
V Gaining planning permission for new waste treatment facilities is a challenge for local authorities. There is often concern by residents about the nature of the facilities being proposed, resulting in objections which can cause substantial delays to the Department's programme. The Department should encourage local authorities to consult early with residents to identify issues which residents are likely to raise about different types of technical solution. The Department should complete its planned communications toolkit to assist authorities.
VI The achievement of the EU landfill targets will be dependent on local authority projects using forms of procurement other than PFI. The Department should obtain sufficient information from local authorities in the form of business cases and progress reports to enable the Department to assess the deliverability of these projects within the forecast timetables. The Department's oversight disciplines for PFI projects, for example its review of business cases and the involvement of Transactors as a support to project teams, may also be helpful to local authorities using other forms of procurement.