Pickles’ parting shot

We suspect that the departure of Eric Pickles from the role of Secretary of State for Communities and Local Government will not be widely mourned amongst council officials. His replacement, Greg Clark, had a previous stint as minister of state in the department between 2010 and 2012, and subsequently held the cities brief. While it may be too early to pronounce with confidence that a major change of approach is in the air, Clark is a strong advocate of decentralisation of power, and might reinvigorate the localism agenda that fell by the wayside as Pickles increasingly sought to bend councils to his will.

Pickles fired a parting shot across local authorities’ bows, though, taking one last pop at councils in the form of a report on procurement in the waste sector, rushed out hours before the start of the election campaign. DCLG claimed that councils could save 10% on vehicles and 35% on bins, just by changing how they are bought. The department’s press statement was peppered with Pickles-isms: “for too long rubbish town hall procurement policies have wasted taxpayer’s money”, it chided, adding that councils seemed to prefer “cutting frontline services or introducing stealth taxes” to “making the sensible savings”.

Should we buy it?

Were this true, it would certainly be a grave charge to lay at the doorstep of the town hall. However, whatever Pickles’ newly-announced knighthood was for, it won’t have been his department’s track record on statistical accuracy – a previous procurement report in 2012 was considered for the accolade of “worst government statistic ever created”. But as far as we can see, no-one has yet examined whether Pickles’ parting shot was a live round or a dud.

The headline number that DCLG promoted in its press release was an annual saving of £70m. However, there are over 350 waste collection authorities in England, so that translates to a less than stellar £200k apiece, far from sufficient to pay for weekly residual waste collections.

The press release and the report’s introduction both imply that the improved procurement is the main source of savings, but on closer inspection:

• The biggest element of the £70m doesn’t come directly from procurement at all. £42.6m is claimed from a “5% efficiency saving across local government [waste collection], driven by harmonisation and standards”.
• The second biggest element is £16.7m from the joint procurement of vehicles.
• The remaining £13m or so comes from the purchase of containers; £12m from wheeled bins, and the remainder from food caddies, sacks and the like.

DCLG doesn’t propose a mechanism by which service harmonisation saving is to be achieved, or consider the costs of implementation. Nor do the figures acknowledge that some waste partnerships (e.g. Somerset, Kent) have already cashed much of this potential dividend. In the absence of any real justification of the majority of the claimed saving, let’s focus on the trucks and bins, where there’s a bit more reasoning to explore.

Truck off

The £16.7m of potential vehicle savings is derived by an odd method. DCLG estimates the share of waste services expenditure that relates to vehicles, and on the basis of a single case study state that 10% of this could be saved across the board. Quite how a Waste Collection Authority that has outsourced its collection services could achieve savings on vehicle procurement is not made clear.

The way that the case study is used is also peculiar. The 10% saving estimate comes from a joint vehicle procurement exercise in Lincolnshire and Yorkshire, but is derived by comparing the lowest tender price with the second lowest. There’s no comparison of the quality of the bids, and crucially for DCLG’s argument, no justification is given for the assumption that, had the authorities tendered individually, they would only have been offered the second best price.

Bin shopping

DCLG’s argument about bins is rather more complicated. The report makes several related claims about bin purchasing practices to support its view that the average council could save £5 per wheeled bin:

• In Germany, wheeled bins cost £5/unit less than in the UK, because they are uniformly grey.
• Councils insist on brightly coloured bins with their logo embossed on them, and this requires more virgin plastic which increases the cost.
• As a result, councils have to buy bins in relatively small quantities, which is more expensive.

DCLG argues that councils should be a bit more Germanic and club together to buy grey, uniform bins, using different coloured lids where needed to enable residents to work out which container is for which purpose.

The £12m annual saving results from multiplying £5/bin across two wheeled bins for each of the 18m houses in England, divided by an expected 15 year lifespan. We’ll focus on just one of these numbers – the £5 saving. Where does it come from, and is it realistic?

Can councils save serious money by putting a lid on their range of bin colours? Photo by Michael Coghlan (CC BY-SA 2.0), via Flickr

DCLG references the figure to a Green Alliance report, which puts the UK price at £20 and the German price at £15. This in turn gives two references:

• an article by a professor at the University of Surrey, which claims that Birmingham City Council “bought 400,000 [bins]… at a saving of £2m simply by changing the colour”; and
• a piece on the Birmingham Council website, which gives the overall bin replacement budget (£16.5m) and details the 1.1m containers the council bought, yielding the average of £15.24 per unit.

No source is given for the claim about Germany’s bins – but does the Birmingham case show that a £5/bin saving is achievable in the UK?

A brum do

Not really. The Birmingham average price quoted by the Green Alliance comprises:

• 350,000 x180L refuse bins
• 380,000 x 240L recycling bins
• 350,000 x 55L inserts for bins (to separate paper from other recycling)
• 3,000 x 360L bins

That means a third of the “bins” aren’t bins at all, but much cheaper inserts. Generously assuming that these cost £4 a throw, the average price of the remaining bins is a rather ungermanic £20.60. Birmingham’s three different types of bin aren’t a strong example of uniformity, either, but illustrate the challenge councils face as they try to provide the right amount of capacity, while meeting the needs of larger households.

The only evidence supporting DCLG’s claimed £5 saving therefore quickly dissolves upon investigation. Indeed, the Birmingham highlights that wheeled bins, which come in several different sizes with different costs, aren’t necessarily a uniform product at all.

Quantity survey

Nevertheless, it could still be true that councils are overpaying due to buying in small quantities. The report asserts that:

“procuring 50,000 240 litre wheeled bins as opposed to 1,000 should realise savings in the range of 35 to 45 per cent”.

In a diagram, it shows that 1-10 bins have a unit cost of £31.30 while for 10,000+ the unit cost falls to £18.70 – a saving of 40%. No source is given for these figures, and no examples are cited of councils buying bins through orders of 1-10 units.

In fact, it’s easy to beat both Birmingham and DCLG’s unit price for a grey 240L bin just by using widely available frameworks such as ESPO’s Framework 860, or WRAP Cymru’s recently launched container framework for Welsh authorities. Mindful of commercial confidentiality, we can say that both have manufacturers willing to supply grey bins for around £17 each for a single articulated lorry load (624 bins).

Buying in bulk can yield a discount, but the relationship between price and volume isn’t linear. Economies of scale in bin production and haulage plateau pretty quickly once you get above a lorry load so a discount of around 10% is about the best you will get, no matter the size of the order.

In fact, buying hundreds of thousands at a time can actually cause major manufacturing and logistical complications for bin producers, tying up plant capacity for long periods and creating storage and haulage issues. Several major bin suppliers have said privately that, unless they had an unusual amount of spare manufacturing capacity, they might well not bid for a major, multi-authority contract – ironically, potentially leading to weaker price competition.

The final ‘wasteful procurement’ claim made in the report is that some authorities insist on buying brightly coloured bins when grey bins would be cheaper:

“A local authority buying 50,000 wheeled bins in a bright red virgin plastic for example may be spending £250,000 more than it needs.”

So now the £5/bin saving is attributed to choice of bin colour… However, this isn’t borne out by the bin frameworks, where several suppliers – including some of the cheaper ones – offer all colours at the same price. It appears, then, that DCLG’s £5/bin saving is largely mythical, whether its claimed source is uniformity, bulk discount, or colour choice – at least for authorities that buy through established frameworks.

One of the key tests of whether Greg Clark’s arrival marks a change of approach will be whether his DCLG will continue Sir Eric’s practice of relying on dubious statistics to do down local government for petty political reasons. We hope that in future, DCLG won’t be producing any more poorly informed reports like this one.