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Procurement negotiations will continue despite loss of PFI credits

October 29, 2010

The South London Waste Partnership today confirmed that it intends to continue with its existing procurement negotiations for new waste treatment facilities, despite the withdrawal of Private Finance Initiative (PFI) funding.  The Partnership remains well placed to procure a value-for-money solution to the challenge of diverting 200,000 tonnes of waste away from landfill.

On 21 October, Defra announced that PFI credits were being revoked from seven waste infrastructure projects, including the South London Waste Partnership.  It goes without saying that the Partnership was disappointed by this decision; but PFI funding was an option for the Partnership and not something it was entirely reliant on.

What has not been announced are any plans to relax the challenging landfill reduction targets, and associated increases in landfill tax, that councils across the country are expected to meet in the years to come.  The rising cost of landfill means that it will soon be cheaper to treat waste than to bury it in the ground.

So an important source of funding has been taken away, but the challenge facing us remains: we must find a more environmentally and economically sustainable alternative to landfill.

The Partnership has looked carefully at the impact of the withdrawal of PFI credits and has concluded that it remains well placed to meet this challenge. 

The Partnership was established with the key objective of making efficiency savings in the way the four Partner boroughs handle and treat their municipal waste.  With that firmly in mind, the Partnership’s negotiation team has been working hard with bidders over the last 14 months to ensure that the proposals being developed for new waste treatment facilities are affordable and provide best value, even without PFI credits.

The withdrawal of PFI funding does potentially allow for a more flexible contract structure.  The Partnership now intends to use this additional commercial freedom to its advantage and seek to secure even better value for money from the three bidders that remain in the competitive dialogue process.

The Partnership is confident that the current negotiations will result in a value-for-money solution to the challenge of preventing waste from ending up in landfill.