The uncertainty emerging from changes in legislation for packaging and emissions means that local authorities are considering insourcing environmental services which are currently outsourced. Insourcing has the advantage of the local authority having direct control over the output, performance, and cost of the services. It allows the local authority to develop the services over time. However, it means that the local authority takes all risks for the delivery and performance of the services, and there is no competition in pricing that comes from tendering services.
A decision on the insourcing or outsourcing of services should be guided by a delivery options appraisal. The staffing costs for local authorities bringing services in-house can be greater than outsourcing. This is because the authority pays Local Government Pension Scheme (LGPS) contributions which are around 19% of salary against a minimum of 3% payable by contractors. Local authorities can avoid paying LGPS pension contributions by delivering the services though a Local Authority Trading Company (LATC). Local authorities can also get economies of scale through partnering with other local authorities. There is no clear picture whether in-house services cost more or less than outsourced services in the long term, but insourcing gives the local authority greater direct control of costs.
Some local authorities shy against bringing services in-house because of the time and resources involved, together with the lack of in-house experience of service delivery. Services can be brought in house in 12 months, equal to the typical time taken to procure and mobilise a contract. However, depending on the asset ownership in the outsourced arrangements, this time period may be dependent upon the delivery of vehicles for waste collection contracts (which is around 18 months for Euro 6 diesel or alternative fuelled vehicles). Local authorities can procure resources and advice for planning the transition and TUPE employee transfer.
Local authorities should not be wary of the transition process itself, as this can be programmed into a series of manageable tasks. However, it is recommended that service change should not be made at the same time as in-house transfer, but should be left until the in-house services are embedded. The transition tasks include:
- Setting up a transition management team and engaging necessary resources
- Transfer of authority owned assets and depots to the authority including the termination of any Leases
- The TUPE transfer of contractor staff and the recruitment of any shortfall, and staff training
- The development of service operations documentation i.e. Service Delivery Plan
- Specification and purchase of new vehicles, plant and equipment including maintenance arrangements
- Setting up a Management Information System (MIS) for data and information management
- Transfer of Environmental Permits and/or Waste Management licences
- Purchase of necessary insurances
- Making exit arrangements for the existing contractor including any subcontracts with local authority continuation clauses
- Media and public relations regarding the new in-house service delivery
Frith Resource Management (FRM) has undertaken a wide variety of delivery options appraisals and feasibility studies for a range of environmental services (waste collection and street cleansing, depots, HWRCs and haulage) including negotiations with LATCs. We have supported clients in the transition to in-house services and supported outsourced procurement exercises.
Get in touch with us to find out how our FRM team can support your service delivery arrangements. E: email@example.com T: 01746 552423
Frith Resource Management Ltd is an ISO14001 & ISO9001 certified company.