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Private enterprise looks set to clean up

3rd July 1982, Page 16
3rd July 1982
Page 16
Page 17
Page 16, 3rd July 1982 — Private enterprise looks set to clean up
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THE 84th Institute of Wastes Management Conference and Exhibition has just been held in Scarborough. It featured a number of discussions and papers, none more interesting than those involving privatisation within the industry.

The theme of the conference was contained in its title: A time for opportunity! The continued controls on finance emphasise a need for more effective management; the revaluation of existing methods and consideration of new ones; continued research and experimentation allied to technological progress. Companies and local authorities in waste management, as a major industry, must be equal to the challenge."

Here are excerpts from two of the papers, as well as some of the exhibits on show.

It seems almost impossible for local authorities to develop the same attitude towards the provision of services as that held by private contractors. This is the belief of Richard Barlow, group managing director of Exclusive Cleaning Group.

Mr Barlow told conference delegates that Southend-on-Sea Borough Council had made a momentous and courageous decision in May 1980 when it decided that the best way to achieve real savings in cleaning was to invite private contractors to submit tenders for the work involved.

"Events since then have proved that decision to be totally correct. Indeed, not only have the ratepayers of Southend enjoyed a cost saving in the first year of the contract's operation in excess of £500,000, they have also found that the use of a private contractor can improve standards of service and operational efficiency," says Mr Barlow.

Seventeen authorities have followed Southend's example and committed themselves to the principle of introducing private contractors for part or all of their cleaning operations, and many others are giving serious consideration to such a move, he reports. "The debate about the use of private contractors for the provision of services in the public sector is, in large part, centred around conflicting political philosophies," says Mr Barlow.

"There are those who maintain that the principle is in itself wrong, irrespective of the implications in the financial or operational sense, and one must respect this view when it is sincerely held.

"However, the other side of the political argument suggests that it is a duty of members of any local authority to minimise the level of rating requirements, assuming that effective services can be maintained, and I believe that the majority of people find this view at least equally tenable."

Over a number of years, authorities have been subjected to a growing and very considerable under-utilisation of labour with all the consequent cost implications, claims Mr Barlow.

"A further result, which in recent years has become even more significant, is massive under-utilisation of vehicles, with vehicles costing upwards of £30,000 each only being used for four to five hours a day. This can only be regarded as a substantial waste of capital resources."

Mr Barlow went on to develop his claim that professional and responsible private contractors have an attitude to the service requirements "which appears to be virtually impossible to develop in a local authority". This attitude, he says, owes a tremendous ammount to effort and determination, and is based essentially on the old-fashioned virtue of the right of management to decide acceptable levels of performance.

"The recent history of industrial relations in the public sector suggests that this right no longer prevails in direct labour situations, but I am certain that it enables contractors to both demand, and achieve, higher levels of performance.

"Contractors are not hidebound by local authority rates, bonus payments, wet money, dry money and similar nonsenses but are in a position to pay a much improved basic wage for the commitment by their workers to make themselves available to work honestly for eight hours a day." Private pension schemes als generally compare favourabl with local authority scheme particularly as they are based c higher pensionable basic earl ings.

A contractor can also intn duce more realistic vehicle poi cies, says Mr Barlow. The eigh hour day means higher utilis, tion of vehicles and a need ft less of them.

"Freed from the capital restri tion often imposed on loc authority management as means to avoid grasping th nettle of over-manning, contra tors who enjoy a sound financi base are able to maintain much lower average fleet age.

"While this involves substa tial capital costs, these are mo than counterbalanced by the r ductions in the cost of maintai ing the vehicles. It also seen apparent that efficient contra tors will have the ability to bt vehicle maintenance services a far more competitive rate."

Mr Barlow's company had r cently undertaken a detailt feasibility study of public clea ing for 52 local authorities. TI studies had been limited some cases to a single servii like refuse collection, but other embraced several aspec of public cleansing. The resull , he says are staggering.

"Our surveys show that tl authorities concerned are a. rently spending approximate £70.7m a year on the servic studied before central este lishment costs. Our outlir proposals, all of which are basi on maintaining existir methods and frequencies, toi £52.8m per annum at curre cost levels. The total potent savings to the authorities Si died are therefore in excess of per cent."

Savings vary from 6.6 per ce

o 38.5 per cent. Most of the studies have been carried out for :onservative-controlled authoriIies. These authorities are often rural or semi-rural and in the few nstances where the larger metropolitan boroughs have been studied, potential savings appear on average to be signifi;wily higher,

"It therefore seems appropriate to conclude that, generally speaking, the bigger they are, he less cost-effective they are likely to prove."

All the major contractors trymg to enter the public cleaning field recognise the need for the maintenance of the highest possible standard of services, and 3re prepared to accept .substan

ial should they not perform well, says Mr Barlow.

Operationally, contractors are able to introduce freedom of Ihought, greater flexibility of response, and even more imporIant, a genuine sense of urgency, he claims.

"When a problem arises, management decisions are made 3nd implemented, and the response is immediate and not conJitional on committee sanction In two weeks' or two months' time."

Richard Barlow believes that 3verage savings of around 25 per cent are available to authorities.

"Some authorities have used Pur proposals for negotiating their own internal settlements — for example, where we have suggested that perhaps 20 per Dent could be saved, the officers, not wishing to become involved Nith using private contractors, have negotiated a saving of 10 per cent and have been able to report this achievement in a manner calculated to keep their alected members happy, and themselves still employed." "Five authorities have placed contracts for public cleaning services, a further five have invited tenders, and eight are at the stage of preparing for tender," "I believe it is fair to say that we could therefore be at the start of the development of a very substantial private sector cleaning market.

"Ample evidence exists that the private sector can, and does, save money and improve standards. It is therefore appropriate to ask which members of the Institute of Wastes Management are sufficiently open-minded to accept that there will be many instances where the ratepayers to whom they are responsible will get a better deal by the introduction of the private sector."

It is now becoming more and more evident, he said, that the provision of the most cost effective service will generally be through the introduction and utilisation of private contractors — unless a genuinely radical change occurs in the present methods by which the public sector operates, particularly so far as the industrial relations aspect is concerned.

Some public sector delegates might have been relieved to hear Richard Barlow's final comments.

"Private contractors do not have a limitless depth of management talent. As the market appears likely to develop during the next three to five years, there will be a requirement for great numbers of experienced professional managers to enter the private sector. Those members of the Institute who have genuine ability coupled with a commitment to do a good job and succeed will find far more opportu nity to use and develop their management skills."

"They will undoubtedly enjoy far higher salaries, better conditions, increased job satisfaction and a greater opportunity for public service. I therefore ask members to face the challenge, join the revolution, get away from the involvement in archaic industrial relations practices, and consider becoming part of a disciplined, professional, successful and respected private cleaning industry."

In counterpoint to Richard Barlow's thought-provoking speech, George Brown, manager of transport and cleaning at Guildford Borough Council, gave the view from the other side of the fence.

"We are sometimes told that 'private enterprise' could show us up; but those of us in contact with the outside world of contractors and industry, mainly the transport industry, do not see much there to be taken as a shining example, except that they enjoy the cream of the labour force (because they paid better wages) and their managers get paid by results, whereas in local government the grade and salary is related to the job, not how conscientiously it is done or what results are achieved.

"This system of 'reward by designation' is surely one of the stumbling blocks of our profession, and it permeates through to the shop floor or the loading hopper of the dust cart."

The mismanagement of the past has finally come home to roost in the form of unacceptably overmanned and overpaid (in bonus terms) workforces, claims Mr Brown.

"It has taken the depression and the impetus of central Government's financial restrictions to make us get up and do the things which in our hearts we knew all along were required; to get the sort of returns from our resources that we feel are justified and even while making those economies try to maintain the standards of service which the public have come to expect."

In his paper, "Surviving the squeeze — maintaining a costeffective cleansing service in the present economic climate," Mr Brown said that "common sense, experience and practical training are just as effective in operating labour intensive services as any amount of the new 'management technology' obtained at great cost during the Fifties and Sixties from work study consultants and later from management service sections."

Council transport, particularly that used for refuse collection, is one of the least satisfactory areas on which to carry out economies, he says.

"Over the last decade the cost of specialist vehicles, the intricacies of their sophisticated design, coupled with the attendant problems of repair have meant that many authorities have been forced into either running too large a fleet of spare vehicles, or overstaffing their workshops with — let's face it, because of the wage structure — not the best of the skilled labour market."

Additionally, many authorities tend to allow their replacement programme to drift so that a refuse vehicle due for replacement at seven or eight years of age, drifts on for 10 years of service as a reserve before it finally goes, says George Brown.

"Privatisation is the in-word at present, but the proof of its cost effectiveness will only be achieved in the course of time. I feel that a council whose management is alive to the problems and prepared to take the necessary steps to deal with them, will not provide the financial leeway which is required if the privateers' double profit margin is to be achieved," Guildford has achieved, in the last financial year, a saving of £0.2m from a cleaning and transport budget of almost £1.4m.

"I feel this compares favourably with the Southends of the municipal world. More importantly, it has been achieved in relative harmony with the workforce and the trade unions who have taken a very realistic if tough line in the bargaining involved.

"Harmony is important when we have to continue working side by side. The other element which is required is a great deal of damned hard work by all concerned," he concluded.

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