Journal of Finance and Management in Public Services. Volume 5 Number 2
Cost Saving Through
The Case of Refuse
Richard Tonge and Caroline Willett
University of Portsmouth
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.
Since the Labour administration of 1976 there has been significant pressure on the public sector to
reduce as a proportion of the national economy, and to manage its remaining activity on the basis of
improving the value-for-money (VFM) obtained. This has been achieved by changing the nature of