In the EU, 475kg was produced per person in 2014, down 10% from 2002 levels, of which 44% is either recycled or composted. European legislation calls for a further reduction of garbage, which is putting municipalities under pressure, as they are the ones usually responsible for the collection and treatment of waste. They often do this by awarding contracts to private and public companies under EU public procurement rules. A new European Commission study looks at seven EU countries' (Germany, Italy, Poland, Romania, Spain, Sweden, and the United Kingdom) weaknesses and opportunities for improvement when it comes to public procurement in waste management.
Organisation of municipal waste management
The organisation of municipal waste services in the seven countries is generally under the responsibility of local public authorities (municipalities). Local authorities have the possibility to perform the provision of services themselves (direct public management) or to delegate them to other public or private entities (delegated public or private management). Public procurement procedures are only used in the latter case.
In the collection and transport phase of the municipal waste sector, outsourcing is predominant in Poland, Romania, Spain, Sweden and the United Kingdom. In Italy and Germany, direct and delegated public management are more common.
In the treatment and disposal phase, outsourcing was utilised predominantly in Poland, Romania, Spain, and the United Kingdom. By contrast, in Italy, Germany, and Sweden, delegated public management has an equal or slightly higher share of disposal and treatment services compared to outsourcing to the private sector.
More competition drives down waste management costs
Evidence from Germany and Sweden shows that the cost of waste services is lower when there is open competition under procurement procedures between private providers. However, there are also indications that the quality of waste services is higher if provided by public entities.
The top performing EU countries (degree of decoupling of waste from consumption, amount of waste recycled, recovered, disposed, etc.) have varied systems that rely on both private and public participation. In other words, no clear correlation between the extent of public and/or private participation and performance could be established.
The vast majority of procurement procedures used for waste services are open procedures which create competition among various bidders. A small number of contracts were awarded through restricted procedures (3%) and negotiated procedures without prior publication (2%). The latter were used for the award of contracts in situations of alleged "extreme urgency" (Romania, Italy), lack of satisfactory offers received during an open procedure, technical reasons or the need for complementary/supplementary services to those provided under an existing contract.
The internal market for waste management is lagging behind
The study concludes that there is not yet a functioning EU internal market for waste collection and treatment. It highlights the following weak points in the performance of public procurement for waste services in EU countries:
- Low direct cross-border procurement in the EU internal market, which accounts for just 0.74% of contract awards.
- Indirect cross-border procurement is higher in Poland, Romania and the United Kingdom with a higher share of local subsidiaries of foreign-owned parent companies, while in Italy, Spain, Germany and Sweden domestic providers dominate.
- Requiring a location within a specific area was included in the specification of several tenders in Germany, Spain, Italy, Poland, and the United Kingdom. This prevented companies from other geographical areas to bid for the contracts.
- Favouring incumbent companies: There is a general trend to favour incumbent providers, a figure which reached more than 70% of all tendered contracts in the United Kingdom.
- Non-compliance with EU procurement rules: Spain did not publish some tenders and companies in Poland had to fulfil burdensome administrative requirements for registration.
- Small and medium-sized enterprises felt at a disadvantage in Spain with contracts not divided into several lots or requiring a disproportionately high proof of solvency.
Abuse of dominant market position/private market activities of public waste operators
When they operate on open household and industrial waste markets and in parallel perform similar services under a directly awarded contract, a possible cross-subsidisation between their activities was investigated in Sweden, e.g. by using part of contract money for the other sector. Moreover, with no VAT obligations publically owned companies can propose lower prices for the treatment of waste. Such irregularities have been considered by the national courts of Sweden, Denmark, Italy and Germany, especially concerning the interpretation of the requirement that an in-house entity perform the essential part of its activities for its controlling entity and that its activities on the private market must be limited.
- For example, there have been cases of direct contract awards to in-house companies with higher private ownership than permitted (Germany and Italy) or to public companies with a high share of services provided on the private market (Sweden and Denmark).
- Further irregularities related to the abuse of a dominant market position were identified in Spain and Poland, and were investigated in Sweden. In addition, cases of corruption, bribery and criminal behaviour were identified in Spain and Italy. Further irregularities concern the excessive duration of public contracts (Romania), irregular changes to the initial public procurement procedure (United Kingdom), and abnormally low pricing (Poland).
- Irregularities with concession contracts: In Romania and Spain, it appears that contracts did not always entail a transfer of operational risk to the concessionaire, which is a requirement to qualify as a concession contract. As a result, some of the contracts in Spain were annulled by administrative tribunals.
EU countries increase recycling facilities, but do not always invest enough
The share of government expenditure on waste management services rose to 2% per year on average for the period 2007-2013 with expenditure 13% higher in 2013 than 2007. This was due to a trend across all EU countries to move towards an increase in incineration/recovery capacity and a reduction of landfill facilities. However, reduced budgets in Italy and the United Kingdom have inhibited investment in new municipal waste infrastructure, with the trend being towards shorter interim contracts (2-3 years) for renovation or extension of existing assets.
During the 1980s and 1990s, nearly all EU countries outsourced waste management services to the private sector via public procurement. Romania and Spain used concession contracts to save costs. However, a process of re-municipalisation of waste services has gained momentum recently. This was influenced by the need for flexibility (Germany, United Kingdom) and control over the delivery of services (Germany, United Kingdom, Romania).