The ACCC has granted authorisation to Council Solutions and a group of four Adelaide councils to jointly procure kerbside waste collection services.
The four councils, Adelaide, Charles Sturt, Marion and Port Adelaide Enfield, are authorised to appoint a single provider for kerbside waste collection services to residents in their municipalities.
"The ACCC considers that running a joint tender process is likely to improve the four councils’ purchasing power and encourage more competition from suppliers than if each council conducted a separate tender process," ACCC Commissioner Sarah Court said.
"It is common for groups of local councils to jointly procure waste services. The ACCC has authorised many such arrangements across Australia over the years."
"The joint tender process is likely to result in cost savings through encouraging more competitive bids, reducing transaction costs, and other efficiencies. These cost savings can be passed on to Adelaide residents in the form of lower costs or improved services," Ms Court said.
The ACCC considered a great deal of information both for and against the joint tender arrangements. This included strong objections from bodies representing the two national waste companies who currently hold the collection contracts for these councils.
"Some suppliers raised concerns that the size of the proposed contract would deter some suppliers from tendering, resulting in a worse deal for ratepayers," Ms Court said.
"While there may be some companies that choose not to participate, the larger tender is also likely to attract additional bidders, and overall we consider most of the potential suppliers which would bid if the councils contracted separately are also likely to compete for the joint contract."
"The councils have the experience and incentive to decide whether running a single tender process for a larger volume of work or four smaller, separate tenders, is likely to deliver the best outcomes for their respective communities."
The ACCC also considered the longer term impact of the joint tender on competition for the supply of waste collection services in Adelaide. While the proposed tender will cover around 180,000 rateable properties, unsuccessful suppliers will continue to have other opportunities to provide waste management services in other parts of Adelaide and around Australia.
Further information about the application for authorisation, including a copy of the ACCC’s determination and public submissions, is available at Council Solutions & Ors (collection)
In the context of procuring these services, councils may be considered to be each other’s competitors. Therefore, by conducting their procurement jointly rather than individually they risk breaching competition laws unless they have ACCC authorisation, which provides immunity from court action.
Broadly, the ACCC can grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.
The ACCC granted interim authorisation on 20 July 2018 when a draft determination was released. Interim authorisation allowed the councils to commence the tender processes. The tender closes on 12 December 2018.
Council Solutions is a regional subsidiary established in December 2012 in accordance with the Local Government Act 1999 (SA) that undertakes collaborative procurement, contract negotiation and management on behalf of its constituent councils. Its constituent councils are Adelaide City Council and the Cities of Charles Sturt, Marion, Onkaparinga, Salisbury and Tea Tree Gully.
It is common practice throughout Australia for local councils to jointly tender for waste services to reduce transaction costs, pool resources and expertise and achieve economies of scale. The ACCC has authorised 30 such arrangements to date, concluding they were likely to result in a net public benefit.
Council Solutions and the participating councils have lodged three separate applications for authorisation with the ACCC, covering joint procurement of:
- kerbside waste collection services
- receival and processing of recyclables and organics and receival and processing or disposal of residual waste, and
- collection of bulk bins (used in high density residential, hospitality, and retail facilities), hard waste (such as bulky household items) and street litter from bins located on streets, footpaths, parks and other public places.
On 14 September 2018, the ACCC released draft determinations proposing to grant authorisation for the receival and processing application and the bulk bin, hard waste and street litter collections application. The ACCC intends to make final determinations in relation to these two applications in late November.
This proposal differs from the one lodged by Council Solutions in 2016, and which the ACCC denied. Council Solutions has sought to address the concerns of the ACCC in 2016 by simplifying the joint procurement processes and providing greater certainty about how the processes will operate.
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