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T own hall decision-makers take plenty of convincing when it comes
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to awarding contracts to the private sector. As spenders of taxpayers' money, they face intense scrutiny to ensure they receive good value for money. And many are still suspicious about the whole principle of replacing their inhouse operation with one from the private sector, even though competitive
tendering became compulsory 14 years ago.
According to CDC Publishing, which monitors local authority contracts, the proportion of refuse collection contracts in private hands has barely changed since 1989, with three-quarters still run by councils. Its research also shows that less than half of street cleaning and highways maintenance— the two other maintransport-based services administered by councils— are contracted out. But for any company that does establish a foothold, the rewards can be considerable. An initial contract MI potentially open doors in other local authorities (there are more than 450 throughout the UK). Most have a good reputation for paying on time and they are unlikely to go under leaving unpaid creditors.
MRS Environmental Services is one of the big success stories in the municipal sector. It runs five refuse collection contracts in London and the south east and also provides street cleaning and grounds maintenance services as well. It was founded in 1988 when three officials from Westminster City Council tendered for and won the authority's street cleaning and refuse collection contract. Today, it has a fleet of nearly 200 vehicles and a turnover of £20m.
Another success story is Scottishbased Euro Environmental Contracts which was set up four-and-a-half years ago as a specialist in culvert and drain cleaning and inspection. It now has a
mover of around gm and customers elude Glasgow, Edinburgh and berdeen councils. Jim Docherty, manging director of the Bathgate-based isiness, says: Some would say we are et lucky but I'd say we work hard, prode a good service and have been pruant when we needed to be prudent" He says there is much more paperork involved than with the private secir which can prove frustrating. You we to go through a series of pre„rifts—it's not as straight-forward as le would like it to be.” But Docherty lys the process is becoming easier with pproved lists of contractors increasgly being compiled centrally so that indidual councils no longer have to do all of e vetting themselves.
Misconceptions
RS's contracts director Michael urgess says it is a common misconcep)n that councils are inefficient and ..ireaucratic: "Some councils are bad ?.cause they have bad individuals workg for them, just as some private corneaes are bad for the same reason, ouncils are spending public money so ey have to be accountable. They don't .ke risks. No-one wants a failing conactor because it's not good for resiants, the contractor or the council. We we to be 100% financially prudent and )ove board."
Burgess does, however, question the fectiveness of the 'best value' system of ilecting contractors which replaced com
pulsory competitive tendering when Labour came to power in 1997. Instead of choosing contractors largely on the basis of price, other criteria are taken fully into account as well. In refuse collection, for example, contractors are marked down if they miss more than 40 bins in every 100,000 properties they collect from. Burgess argues that contractors can be unfairly penalised as a result.
Under European competition law, any council contract worth more than £150,000 has to be advertised throughout Europe. In refuse collection, big multinationals such as Sita and Onyx predominate and a privately-owned company such as MRS is unusual. In highways maintenance, Ringway and Colas, which are owned by the Vinci group, are among the biggest players. In Devon, they have set up a joint-venture company, South West Highways, which uses a fleet of more than 80 vehicles to maintain the county council and Exeter City Council road networks. Although the business is completely independent of local authority control, many of its employees are from the councils' original in-house maintenance teams.
Birmingham City Council, which is the largest local authority in the UK, says about 60% of Rs annual road maintenance budget of around £20m is accounted for by the private sector. Paul O'Day, acting manager for highway maintenance, says there are approved lists of contractors for various categories of work: 'We have a procurement sector which looks at things like health and
safety, turnover and references. From this approved list, we will invite people to submit a tender. Once on the list, we will gauge their previous performance. It's very rare that people are actually removed from ft."
He explains that there are two main types of contract. For smaller, shortterm jobs, the council pre-prices the work and then contractors are given the opportunity to submit a tender based on this figure: "On larger schemes, contractors are invited to put prices against each item of the contract so you can see more about his tendering strategy."
This is because factors such as the amount of material that needs to be removed is often unpredictable and therefore cannot be accurately calculated before the work starts. O'Day says that road gritting is kept in-house partly because the work is so infrequent.
Even though most transport-related contracts are handled by big operators, there is plenty of work for the selfemployed.
Nuneaton-based Eric Pointon set up on his own as a road sweeper nearly 10 years ago and currently does about 15% of his work for local authorities on a subcontract basis.
Competitive
Having worked in haulage in the 1960s, he initially thought about becoming an ownerdriver but opted for road sweeping because it seemed to be less competitive locally He usually sweeps roads which are outside the regular circuit of in-house council fleets: "They also need you when roads are being planed off before resurfacing so the sweeper can pick up all the small fine stuff that's left behind."
His current machine cost £50,000 second-hand seven years ago. "The investment has paid off but I'm not saying you make a fortune out of it—it's a reasonable living," he says. "One day you could do with three or four machines and
another you have barely enough work. keep you going."
D Jordan Road Brush Hire, based Redditch, is also thriving on subcontra local authority work. With six sweepei and two road planers, the firm WE founded seven years ago as a one-re business by Dave Jordan. Around a qua ter of its work is with Worcestershire ar Warwickshire County Councils.
Assistant director James West sw. health and safety regulations are ft lowed much more closely than on othE jobs, but it seems this can be an advai tage: "For most jobs you have to through an induction process which organised by the contractor—it keer you well informed."
West points out that although there more paperwork associated with coui cils, there is no requirement for efthE tachographs or 0-licences when roe sweeping or planing: "It's quite difficult I establish a foothold because counci have their own road sweepers. It's on when they break down that we get 1 work for them." He adds that rates are roughly the me as in the private sector but the vantage of council work is that it tends last for longer periods: "With building mpanies, you're often only there for a uple of hours.' A typical working day ts from 07:00-18:00hrs; the company .ys its seven drivers £6.50/hour.
'endering
(._ittish-based Hitech industrial luipment specialises in cleaning out -net drains and culverts using highessure water jets as well as vacuums. isiness development manager Gaynor an says that although 90% of its work imes from the private sector, council rk is among the most sought after: veryone knows that the work is there therefore a lot of people are tendering r it. They won't put up with any subandard service and if you don't deliver ey won't come back to you."
International accreditation through 0 is usually required before councils ward a contract. That means external )(lies check that standards are being aintained on a year-by-year basis.
But as customers and companies go, -yan says councils are very reasonable work for: "They are more organised .cause they identify their requirements id address them. They also pay you joker. Industry holds on to money as uch as it can."
Around 10 vehicles in Hitech's 40hide fleet is involved in drain and culirt cleaning. It also has 20 `supervac' ,000-litre tankers which are on call hen there is a danger of flooding. Bryan ;plains: 'An awful lot of damage was )ne to Paisley by flood water five years 0. When the long-term weather forest shows there's a risk of flooding now, a go on stand-by for the council. It ?pends on the contract whether you tt paid for being on call or only if the wvice is activated."
Removing waste oil from civic amenity tes is another important area of tech's work with councils. "We have a ;cycling plant and ultimately it goes for Jrning in power stations, cement kilns • wherever," says Bryan. "We're expanding all the time in that direction."
Winning local authority contracts can prove costly in terms of the investment that is required. Euro Environmental's Jim Docherty says a combined high speed jet and vacuum on the back of a 32-tonner can cost up to £160,000 yet councils often fail to appreciate the level of investment needed. 'We make profits, obviously, but rates are poor. Councils are price driven which is a false economy. If I had £300,000 to spend. I could get two new machines which would earn £110/hour but I could also buy six secondhand machines at £50,000 which would achieve .245-50/hour."
This is a false economy for the councils, he says, because modern machines are much quicker and more efficient. Nonetheless, most of the vehicles he has bought over the last three years have been second-hand.
Concentration
MRS's Burgess says that although its refuse collection contracts are all concentrated in the South East, there is little opportunity to operate all its dust carts as a single fleet: 'Most of the time, vehicles are dedicated to a particular contract. Councils like their vehicles to be baciged up with their logo and they prefer you to have a depot in their district."
He adds that although the chassis of a 26-tonne dust-cart costs around £45,000, that figure doubles when the specialist body and hoist have been added. 'You need something pretty hefty and not too fancy or technical," he points out. "If you're disposing on a landfill site you can get lots of very fine dust in summer so you have to pick your chassis fairly carefully.'
Potential contractors also reed to be aware of how individual authorities view the principle of contracting out. Cliff Davis-Coleman, MD of CDC Publishing, says: "You would have to be a very brave man to wander into Birmingham or the North-West unless you were supplying the in-house team as a subcontractor. 0 Labour authorities don't like the priva sector. The most dynamic municipal se tor is in London and the South-East whei authorities are more New Labour."
When Labour came to power ar introduced best value in 1997 many cou oils used this as an excuse to bring se vices back in-house. But Davis-Colem; says that in vehicle-dependent servici contractors do appear to be holding thE own against in-house provision.