Cost saving through competitive tendering: the case of refuse collection revisited

The public sector has been under significant pressure for some time to improve the value-for-money (VFM) obtained from resources in relation to services provided. One example of this has been the introduction of Compulsory Competitive Tendering (CCT) to some services; among them refuse collection. Competition has been perceived as the key to driving through improvements in the efficiency of the service and thus lowering cost. Following this introduction, research interest blossomed. Using data from years when the scheme was initially voluntary and then subsequently compulsory, researchers identified that significant cost savings could be achieved. Following very quickly on their heels, further work made a number of criticisms and cast doubt over the validity of the results obtained. However one area that appears to have been overlooked in this phase is the issue of charging out indirect costs or overheads on the basis of activity measures which are linked to direct resource consumption. This paper utilises the archival material of one particular local authority and identifies the extent to which the approach to charging out of these indirect costs can potentially lead to further reservations about the level of cost savings implied by the quantitative models. It suggests that the issue of cost recharging cannot be ignored if any real sense is to be made of the real level of cost saving achieved from the competitive tendering process when applied to refuse collection.