Collaborative procurement for better waste outcomes

Councils across the country are under pressure to deliver enhanced waste and resource recovery outcomes against a challenging commercial and fiscal backdrop.

Councils are seeking to reduce reliance on landfill, increase resource recovery and support the transition to a circular economy. This needs to be achieved in an environment of infrastructure constraints, higher construction prices, and increasing waste levies, combined with external variables such as the fuel crisis, that are driving up the cost of waste management, with limited capacity to pass these costs on to ratepayers.

For many councils, procuring services or infrastructure independently may not provide the scale, capability or market leverage needed to achieve resource recovery objectives. Waste volumes may be too small to attract strong market interest, the risks exposure too high, or internal resources too stretched – particularly when delivering complex, long-term procurements.

The benefits of collaborative procurement

Larger scale waste infrastructure projects, particularly waste-to-energy facilities, increasingly require larger feedstock volumes and longer-term contracts. Committing to these arrangements requires a robust commercial framework and careful risk allocation.

Collaboration changes the equation by offering councils a practical and proven pathway to achieve better outcomes. Through collaboration, councils can:

• Share risk between collaboration partners
• Enable a lower average cost per tonne through combining feedstock volumes
• Create procurement opportunities that are more attractive to service providers, technology vendors and investors, driving competition and ultimately achieving better value for participating councils
• Reduce duplicated effort and share procurement, advisory and internal costs, rather than approaching the same market multiple times independently
• Provide valuable access to shared expertise and create opportunities to leverage private sector investment and government funding.

Collaboration models

There are a range of options for councils going to market together, including:

Joint tendering - Councils agree on a common scope, project objectives and desired outcomes, before issuing a single procurement to the market. Councils benefit from the efficiencies of a joint procurement process while maintaining a direct contractual relationship with the service provider

Regional bodies - Member councils come together through existing, or newly established, regional organisations. This could be through an informal memorandum of understanding or a formal organisational structure. Councils can use the regional body to develop region-wide strategies, share knowledge, identify procurement opportunities and undertake joint market approaches

Establishing a new, jointly owned company - Councils create a special purpose vehicle, with independent governance, to procure and manage a long-term, large-scale contract or multiple projects. While governance, reporting, and shareholding arrangements need to be developed, this investment may be justified when councils are delivering large, long-term infrastructure projects.

Comparing the options

The most appropriate collaboration model depends on the specific project, regional context and objectives of the participating councils. When designing a collaborative procurement model, key factors include:

• Whether the opportunity will be attractive to market
• Whether the market is receptive to the proposed structure
• The size and number of participating councils
• The scale and complexity of the project
• The proposed delivery time frame
• Existing relationships or arrangements between councils.

Governance

Regardless of the model adopted, establishing a clear governance structure early is fundamental to the success of any collaborative arrangement. This includes defining decision-making authority, responsibilities and how key project decisions will be made. Similarly, councils should consider how risks and costs will be shared. Are the councils aligned on objectives? Do they have similar budget expectations, or are there different budgets to be considered between the councils? What will the contract terms look like? It’s important to settle on decision rights, delegations, risk and cost sharing, and entry/exit conditions well before going to market.

Successful collaborations rely on transparency, alignment and a shared commitment to common outcomes.

A practical first step

Forward planning is key. Start a conversation with your potential partners.

Aligning early on strategic objectives, shared challenges and regional priorities can help councils determine whether a collaborative approach is viable and beneficial.

While collaborative procurement is not a universal solution, it’s becoming an important tool for councils seeking to address growing waste and resource recovery challenges. BDO’s Project & Infrastructure Advisory team works with councils across the waste and resource recovery sector, having advised on collaborative procurements across different material types. Our team provides strategic, financial and commercial advice to local and state government clients across the project lifecycle from feasibility and options analysis, through business case and procurement.