The following is an adaptation of a report commissioned to Eunomia by ACR+ and EEB, “Municipal Waste Performance Contracts”. The report focuses on an economic tool which can improve waste management, in line with the European waste treatment hierarchy, and encourage the move to a circular economy model – waste performance contracts. The main purpose is to introduce performance based criteria/mechanism in waste management service contracts. This means linking some bonuses or penalties for the contractor to its performance, according to standards listed in the contract itself.
The report proposes the following definition for performance contracting: ‘a contract for the management of waste which, through the action of a contractually agreed payment mechanism related to defined performance indicators and targets, incentivises the movement of waste management further up the waste hierarchy, and enhances the prospects for improved resource efficiency and the flourishing of a circular economy’. In other words, it is a contract for waste management that tries to incentivize the improvement in the waste hierarchy, and consequently a better resource management and circularity. To do so, it establishes indicators and targets for the performance, which, if respected and met by the contractor, bring bonuses in accordance, such as proportional payments.
- Incentivising the movement towards the highest levels of the waste hierarchy by linking the payment for a waste management service to the reaching of defined performance targets.
Sectors most suited for
- Waste Collection: Performance contracts that cover door-to-door collection where there is a good recycling and biowaste collection scheme in place, and those that also cover bulky waste collection and provision of civic amenity sites, can have a more positive effect than on-road communal containers or container parks.
- Waste treatment: In the case of contracts being let by the municipality includes the operation of the facility (in addition to design, build and finance), performance incentives are easier to specify since the contractor has responsibility for all aspects that affect performance
Links to the study and case: