Buyer beware: using procurement to root out waste crime

Waste crime has perhaps been the big resources sector issue to come to the forefront in 2014. It’s certainly the only aspect of waste that received a particular mention in the Chancellor’s budget – not even Landfill Tax managed that – and has also been given prominence by Radio 4’s File on 4 series. That’s all good profile, and the £5m that George Osborne found to tackle this criminality is no doubt being put to good use by the Environment Agency.

However, whilst waste crime is in the first instance a matter of effective regulation, regulators aren’t the only ones with the ability to influence whether waste gets into the hands of criminals. At some point along the line, waste passes from the legitimate sector to the criminal. The original waste producer should be able to influence the likelihood of this happening through careful procurement and contract management. Responsible procurement can therefore support and enhance regulatory action, helping to prevent law-abiding waste operators from losing out on work and reducing the opportunities for waste crime to occur.

Doing their bidding

In Scotland, this thought is now translating into action. Public bodies are significant collectors and producers of waste, and have a clear interest in making sure that this material is handled lawfully. Eunomia has been commissioned by Zero Waste Scotland and SEPA to produce guidance on how public bodies can use procurement and contract management to prevent their waste falling into the wrong hands.

This is not purely a theoretical problem. Occasionally, instances have come to light where waste collected by local authorities has ended up – long after it has left the authority’s hands – being disposed of illegally. In other cases, public bodies have found themselves in a position where, because of the way that a procurement has been designed, they had little option but to award a contract to a supplier about whom SEPA had concerns. Urgent regulatory action has sometimes been needed in order to address such situations. Whilst it would not be lawful to bar bidders based on unproven suspicions, it would clearly be preferable if public bodies knew the best ways to design waste crime out of their procurements.

I’m currently holding meetings with public sector and waste industry stakeholders to discuss possible solutions – but I also want to enlist the formidable collective intelligence of the Isonomia readership. I hope that both here and on LinkedIn you’ll offer feedback on the ideas I have so far, and any other proposals that I should be taking on board.

Profile building

First, let’s consider the scope of the problem. We’re looking for solutions that:

• Are applicable either to waste collectors or waste producers;
• Can be implemented through procurement processes and contract management;
• Are permissible within procurement law; and
• Do not place an undue burden on either the public body or the bidders.

Second, we need to be focused on the key risk areas:

• Materials where there is a quick profit to be made by avoiding regulations – so residual waste (avoiding Landfill Tax), WEEE (avoiding the costs of safe extraction of valuable metals) and perhaps bulky waste; but not dry recycling or separately collected food waste.
• Long supply chains, where material is handled by several different organisations on various sites, which makes it harder to track and allows greater opportunities for some of it to be diverted to illegal operators.

However, we should not assume that, for example, large contracts are less risky than small ones. Even if not bidding for work directly, a contract with an illegal operator may feature at some level within even a large, respectable company’s proposal. It need not only be new work, either. Within contracts, companies may change their tipping or disposal arrangements from time to time to ensure that they are getting a competitive deal, or to replace contracts that come to an end.

Hooks for crooks

So what can be done within the law? In order to make procurement fair, decisions must be proportionate and taken on the basis of objective evidence. It wouldn’t be reasonable, for example, to exclude all contractors who’ve ever breached a permit or had action taken by a regulator in the UK, since most major waste contractors will have encountered some problems from time to time. However, asking bidders to supply:

• number of prosecutions relative to turnover or tonnage handled; or
• criminal records of directors

might reveal where there are real problems that need investigating. Equally, it may not be reasonable to bar long supply chains outright – but it might be acceptable to require bidders to submit details (including permits and operator licenses) of all carriers and end destinations for waste. If nothing else, this could encourage the use of shorter supply chains.

Take note: waste procurement needs to factor in crime risk. Photo by Peter Jones

Such measures need not necessarily be implemented at the point where bids are submitted, but could form part of a due diligence phase once a preferred bidder has been selected, enabling the public body to fall back to a second choice in the event that the questions can’t be answered satisfactorily.

However, almost any tender can involve a check on the financial standing of the bidders at an early stage. Whilst financial performance is no guarantee of propriety, a waste business on the brink may be tempted to cut corners. Another important question for public bodies to consider is whether a particular offer constitutes an “abnormally low bid”. It is always attractive to take the lowest price on offer, but if it seems too good to be true, there is a clear risk that the contractor may not be able to deliver without cutting corners – or worse.

Standard bearers?

An interesting idea that has been used successfully in other fields is an industry-sponsored quality standard or chartermark, which could be used as a way for public bodies to easily identify reputable contractors. In the legal sector, standards such as Lexcel and the Specialist Quality Mark can be obtained by legal practitioners to demonstrate that they have high quality processes and a portfolio of experience. Holding a quality standard has long been a precondition of getting a legal aid contract in England and Wales.

Waste criminals may be less likely to have generic management standards in place such as ISO9001 or 14001. More directly relevant is Scotland’s Resource Sector Commitment, a ‘kite mark’ for resource management companies, showing commitment to customer service and to delivering consistent with legal requirements and good practice. The scheme is voluntary, but signatories are expected to show compliance with nine standards, including being able to give customers full duty of care information. Compliance is subject to a regular review process. Of course, the Commitment is currently focused on waste collections rather than treatment, and on customer service rather than demonstrating compliance, but it could be extended quite straightforwardly.

Finally, as part of the ZWS/SEPA guidance, we could look to supply a proforma to help public bodies assess the extent of the waste crime risk associated with the work they are looking to procure and the extent to which measures incorporated in the tender serve to mitigate it. This “waste crime risk assessment” could help public bodies to take a proportionate approach, and to target any waste crime reduction measures on the principal areas of risk in a particular tender.

There is still a good deal of work to undertake with stakeholders to explore whether these ideas are practicable, and I fully expect that further suggestions will emerge from our discussions. I’d be very happy to speak with anyone who has an informed interest in the subject. Public bodies clearly have an important potential role in limiting the potential for waste crime, and helping them to do so is in the interests of the waste management industry.