Developing mutually beneficial first-class textiles collection services

Textiles Collections Procurement Guide

Introduction

Introduction

Textile bring banks and kerbside collections are well-established routes for local authorities and recycling firms looking to source used textiles. However, changes in market conditions can lead to a reduction in the prices paid for second hand clothing – especially for exported materials – resulting in challenges to the viability or quality of services.

This Guide is for anyone who needs to organise and manage textiles collections. It is not intended to be prescriptive, but is a guide of the issues to consider and the options available individually, or as a partnership, in relation to the procurement of textiles collections for re-use or recycling.

Further and detailed information on the design, commissioning, management and communication of all types of textiles collections is available in WRAP’s Textiles Collection Guide. WRAP previously published a guide on ‘How to include re-use in local authority HWRC procurement’, which is available on the WRAP website.

WRAP’s Textiles Collection Procurement Guide aims to help local authorities and textiles collectors to introduce and operate effective and resilient collection arrangements that strike a balance between service costs and quality.

This guidance has been developed by WRAP as part of its work for the Sustainable Clothing Action Plan (SCAP). The SCAP Re-use and Recycling Working Group helped with the development of this guidance. The aim of SCAP is to improve the sustainability of clothing across its life cycle.

By bringing together industry, government and the third sector, SCAP aims to reduce resource use and secure recognition for corporate performance by developing sector-wide targets.

1 WRAP | Textiles Collections Procurement Guide

Contents

Introduction 1

External factors to consider 3

Market forces 3

Pricing 3

Collection arrangements 5

Types of collection arrangements 5

External delivery options 5

Commissioning and procurement 8

Procurement stages 8

Procurement rules 9

Designing the service 11

Promoting the opportunity 13

Prequalification 13

Setting standards 13

Due diligence checks 13

Balancing cost with quality 14

Service levels 15

Quality end markets 15

Costs 16

WRAP’s marketing materials service 18

Index-linked contracts – a note of caution 19

Contract scale and longevity 19

Incentivising bring bank collections 19

Contract management 20

Appendix 22

Appendix 1 Further information to help drive change 22

Appendix 2 Prequalification questionnaire (PQQ) 24

Appendix 3 Example multi-criteria award 24

Appendix 4 Cost clauses 25

Appendix 5 Performance standards and monitoring 26

2 WRAP | Textiles Collections Procurement Guide

External factors to consider

Market forcesTextiles collections are primarily set up to capture clothing. Any non-clothing items, such as sheets, pillowcases, curtains, duvets or shoes can be recycled but tend to have a low re-sale value.

As a result, the cost of textile collections is principally determined by the value that can be obtained for collected clothing, which itself is driven by the value of the highest quality items available. To help authorities make the most from the sales of collected materials, WRAP has produced its Approach to Material Sales guidance.

PricingChanging prices

Like any other area of commerce, the market for used textiles is subject to highs and lows.

A number of factors are thought to be responsible, including: the relative strength of the pound to importing countries; a perceived reduction in the quality of UK clothing; trade restrictions on imports; inflows of brand new, low-cost clothing; and increased competition in receiving markets from mainland European textiles recyclers.

Figure 1 indicates prices for textiles bank materials falling from a high of £450/t in April 2013 to a low of around £200/t between mid-January and April 2016. The price does not include collection and contract costs.

WRAP has undertaken research on the impact of various collection methods, including kerbside,

on the value of textiles collected. This research can be found in the Impact of Textile Feedstock Source on Value, WRAP, 2012.

WRAP’s Textiles Market Situation Report suggests that over half of the textiles collected for recycling or re-use are exported, while 32% are destined for re-use in the UK (e.g. through charity shops) and 9% for recycling.

External factors to consider

Figure 1: Recovered textiles prices

Source: WRAP Materials Pricing report, monthly averages. (Chart data runs until October 2016)

Jan 2013

Sep2016

Apr2013

Sep2013

Jan2014

Apr2014

Sep2014

Jan2015

Apr2015

Sep2015

Jan2016

Apr2016

£ pe

r ton

ne

(Chart data runs until October 2016)

0

100

200

300

400

500BanksCharity shops

3 WRAP | Textiles Collections Procurement Guide

What do falling prices mean for collections

The market dictates the income generated from collected items and this, in turn, impacts on the viability of collection services. For councils, the revenue received from the sale of textiles helps to offset operational costs and, in turn, impacts on the viability of the service.

As a result, the sharp fall in prices experienced since 2013 is having a troubling effect on the collection arrangements in place for textiles with some authorities being forced to withdraw what is a discretionary service.

Collectors are feeling the pinch too. Some had opted to pay a fixed price per tonne to authorities over the term of their contract. The fall in prices has challenged the tenability of some contracts altogether. Where contract negotiations have faltered, fly tipping caused by missed collections and full banks has been reported.

Other contractors may be under-declaring the volume of textiles collected. Close monitoring of collection volumes is advised to minimise such misdemeanours.

What authorities and collectors want

A price mechanism that is fair and equitable is more useful in a contract than a high, but unsustainable, price per tonne. An arrangement which results in premature contract termination is no use to either party as it forces a contractor out of business, or requires a high degree of contract maintenance with frequent and protracted renegotiations.

What authorities and collectors both want are arrangements which can withstand significant price changes and provide a reasonable financial return for each party.

External factors to consider

4 WRAP | Textiles Collections Procurement Guide

Collection arrangements Types of collection arrangementsA range of choices are available to authorities. The right commissioning option will depend on the authority’s existing infrastructure, the type of organisations the local authority wants to work with, the value of the service, and the level of involvement the authority expects.

Arrangements for collections may be separated from reprocessing contracts (for sales of collected materials) or they may be integrated together. In each case, the authority may pay an overall collection charge for the service, an arrangement may be provided free of charge to the authority, or a net income may be gained.

a temporary necessity. An example contract clause/pricing schedule for a DSO selling materials to the market is included in Appendix 3.

External delivery optionsAuthorities commissioning or procuring textile collections externally typically choose from a couple of types of arrangements:

Contracts

Contracts very clearly define expectations in terms of service requirements and costs. They tend to include measures such as key performance indicators (KPIs), which should be reviewed throughout the contract. A one to two-year period is typical for bank collection contracts, although some kerbside contracts may run for seven years or more. The contract may also be modified or terminated.

Delivery arrangements

Authorities seeking to make arrangements for the collection of textiles have a wide choice available to them. They may choose to operate the scheme in-house, or to procure externally for a service provider.

Direct service organisations

Direct service organisations (DSOs) enable the authority to make collections itself.

The main advantage to this way of working is that it allows the authority to guarantee the quality of the service. It may also receive a larger proportion of recycling income than in a relationship with third parties.

The disadvantages are that authorities have to commit set up costs, staff time and infrastructure, and they are also exposed to market prices, so must spend time sourcing markets for materials. Should the authority face contract failure, a DSO may be

If a local authority is commissioning a multi-material recycling contract, then textiles should be included from the outset, rather than added on at cost at a later date.

In common with all types of agreements, contracts suffer if service standards slip, client-contractor relationships break down, or trust between both parties is lost. If collectors and authorities are subsequently unable to agree essential modifications, then the contract can fail.

Collection arrangements

5 WRAP | Textiles Collections Procurement Guide

Partnerships

Partnerships may involve third sector organisations, enhance local social value, and provide charity shops with stock for their shops. Partnerships can be established through less formal arrangements via memoranda of understanding (MOU) or through contracting arrangements where the terms of the partnership may be set out in a service level agreement (SLA).

A MOU is a non-binding agreement between two parties used to establish the terms of a partnership, offering a level of flexibility that may be appealing. They are simple and easy to administer, providing a rapid and cost effective way to develop a service.

However, MOUs may not offer the same level of certainty as contracts, and expectations should be made absolutely clear. Examples of the types of service standards to consider are given in Section 5 of WRAP’s Textile Collection Guide.

A service level agreement (SLA) may form part or all of a contract. A SLA defines the service, management requirements, performance standards, contract value and payment terms. They are useful tools in partnerships, where parties work together to define and agree the terms of the service.

Case study:

Partnership with a charity – London Borough of Brent and TRAID

TRAID is a charity which works to reduce the social and environmental impact of textiles in the UK and globally. It has worked in partnership with the London Borough of Brent since 1999 and employs 94 people across London.

In 2015, TRAID diverted, collected and sorted 275,000 kilos of unwanted textiles in Brent through a network of public bring banks and its free home collections service. This equates to a CO2e saving of approximately 3,822,500 kilos.

TRAID sorts collected clothes at its Wembley warehouse. Employment and volunteering opportunities are also offered across the organisation, especially in its charity shops.

The charity has also worked closely with the council to deliver a range of waste, re-use and recycling activities in Brent, directly reaching over 10,000 students since 2012. Activities include interactive assemblies, practical repair workshops and classroom-based projects to investigate, tackle and solve the problems of clothes waste.

Stopping unwanted clothes from being thrown away reduces waste, consumption and carbon emissions in Brent, while enabling TRAID to raise vital funds in its charity shops to stop the exploitation of people and the environment in the global garment industry.

Collection arrangements

6 WRAP | Textiles Collections Procurement Guide

Case study:

Kerbside collection – Elmbridge Borough Council (EBC) and the British Heart Foundation (BHF)

Through a three-way partnership between Elmbridge Borough Council, the British Heart Foundation (BHF), and Veolia (the incumbent waste collector) a pilot was undertaken with 22,000 households. Following the successful trial, the collection service was rolled out and extended to 52,000 households.

Features of the service now include:

• Collections made circa four times a year.

• Bags are not provided, residents are actively encouraged to re-use old bags they have in their home.

• In advance of the collection, residents are given information about what can be donated along with ‘bin hangers’ to attach to their bags and mark them for collection.

• The scheme is promoted locally by EBC and regionally by BHF.

• Recycling credits are awarded to smaller local charities for re-used and recycled textiles.

• Initially, EBC covered costs while BHF paid an agreed marketing fee to cover all costs (MOU agreed in advance).

• Payments are made against key performance indicators.

In 2016 the arrangement was simplified:

• An arrangement was agreed between EBC and BHF only and collection costs reduced.

• BHF drivers carry out all collections.

• Quarterly reports are provided to EBC on tonnage diversion and funds generated.

• PR activity is provided by both the council and BHF.

In total, 60,000kg of material is captured each year. The scheme is an exemplar cost-effective collection, which provides local and national social value. BHF is presently undertaking pilots with two further authorities in England.

Collection arrangements

7 WRAP | Textiles Collections Procurement Guide

Commissioning and procurement

Public services can be commissioned in a number of ways. The authority can deliver services in-house, contract with a commercial or third sector collector, or work in partnership with a commercial/third sector operator.

An authority can also give organisations the right to provide the service (a ‘concession’ or licence) without paying the service provider or receiving revenue. It may, for example, grant the rights for a contractor to place bring banks at its household waste recycling centres (HWRCs).

Public service ‘commissioning’ incorporates:

• assessing the needs of the people served;

• designing the service specification; • securing delivery of those services;

and • monitoring and reviewing delivery.

Public procurement rules apply for the purchase of goods, services and supplies. However, the rules only apply when the public authority has decided to – or has ascertained that it must – procure a contract, rather than opting for an alternative commissioning route, such as a MOU.

Authorities may openly tender for the service, or implement a restricted process (to an agreed framework contract). Negotiated procedure and competitive dialogue can be used in exceptional circumstances.

Procurement stagesA typical procurement process comprises the following stages:

• Planning/pre-procurement At this stage, the authority chooses its service requirements/outcomes, objectives and approach. Local market research/industry engagement may also be undertaken.

• Advertising the opportunity – invitation to tender Requirements, including the number of tenders required and the length of the tendering period will be governed by procurement regulations and the requirements of individual authorities. This process may involve prequalification in addition to the issuing of an invitation to tender.

• Clarification and selection This will include answering any questions raised during the tendering period, tender evaluation, appointment of a service provider and contract negotiations.

• Service set up The contract or SLA agreement is finalised, and the service may be trialled before being rolled out across the authority.

• Contract management Service performance is monitored, managed and reviewed.

• Evaluation The contract will be formally evaluated in advance of re-tendering, with the findings feeding into re-commissioning/pre-procurement planning.

Commissioning and procurement

8 WRAP | Textiles Collections Procurement Guide

Procurement rulesIf a service is subject to public procurement regulations, authorities must advertise large contracts in the Official Journal of the European Union (OJEU). In addition, under UK procurement rules, authorities must also advertise all contracts greater than £10,000 in value to encourage competitive bids from smaller suppliers.

Under the Public Services (Social Value) Act 2012, authorities in England and Wales must consider how the services they commission and procure may improve the well-being of the local area. ‘Social value’ is not defined in this legislation, but examples include the creation of training opportunities, new and local employment, environmental projects and enhanced social care.

In Wales, the Well-Being of Future Generations Act (2015) requires authorities to apply sustainable development principles to all their work, and to consider the impacts, now and for future generations. In particular, they need to consider how their work meets the seven goals defined in the Act to improve the economic, social, environmental and cultural well-being of Wales.

The ‘Collections Blueprint’ guidance in Wales recommends for textiles to be collected separately from other dry recyclables.

Local authorities award contracts on the basis that the most economically advantageous tender (MEAT) wins. This can be evaluated on the cost/price basis only, or by including criteria such as quality or technical merit to give the best price/quality ratio.

In practice, authorities factor in non-cost criteria into their decision-making to select contractors which can deliver high quality public services that benefit the communities they serve.

Commissioning and procurement

9 WRAP | Textiles Collections Procurement Guide

A broad array of non-cost criteria is available to contracting authorities when awarding a contract on the basis of ’MEAT’. In the Public Contracts Regulations 2015, the following examples of non-cost criteria are provided (which are not exclusive):

• Quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions.

• Organisation, qualification and experience of staff assigned to performing the contract, where the quality of the staff assigned can have a significant impact on the level of performance of the contract.

• After-sales service and technical assistance conditions such as delivery date, delivery process and delivery period or period of completion.

The contract award criteria (e.g. price, quality of services, risk to contracting authority etc) and any sub-criteria, must be set out either in the OJEU notice or the procurement documents; and the weighting of each criterion or sub-criterion must also normally be given, either as an exact number (e.g. price: 60%) or as a meaningful range.

Techniques such as life-cycle costing and multi-criteria decision-making (incorporating environmental and social aspects) are described in the 2015 Regulations as ways for an authority to determine the best price-quality ratio.

Suppliers must normally be excluded if they have been convicted of offences including organised crime, corruption, fraud or money laundering in any contract.

Commissioning and procurement

10 WRAP | Textiles Collections Procurement Guide

Designing the service

The high-level and practical considerations for services are:

• The type of textiles collected Will the collection concentrate on clothes alone, or will shoes and non-clothing items also be accepted? Will it be collected with other dry recyclables collections?

• Single or combined commissioning Will contracts for bring bank and kerbside services be let separately or together?

• Type of contract structure/costs model The approach taken to risk regarding the sharing of collection costs and income streams.

• Service design Avoiding contamination and increasing the quality of items collected enables greater income to be gained.

• Contract scope, scale, value and length Including these details in the contract will help to ensure tenders meet your needs and may reduce the number of question received during the tendering process.

• Specific contract terms Relating to specific service requirements, Health and Safety requirements, expectations regarding operations,sustainability, promotion of service.

Volume versus quality?

Authorities want to provide an effective value for money service which maximises tonnages collected and limits disposal charges. They also want to offer a good service to residents that meets their needs, is simple to use, and that handles the types of material residents want to dispose of.

Operators seek to maximise income by increasing the proportion of high quality items in collections that can be resold.

Local authorities need to work with operators to ensure their needs are met so both parties benefit from collecting higher value, re-usable materials. Systems need to be in place to collect and recycle textiles that are not suitable for re-use.

Designing the service

Large, multi-authority consortium procurements are capable of offering economies of scale. Conversely, smaller organisations can offer local benefits such as rapid response times, reduced transport distances and social value, including local employment.

11 WRAP | Textiles Collections Procurement Guide

Better quality = higher income

Authorities may define quality through a mix of required ‘outputs’ (e.g. numbers of collections or tonnes collected) or desired ‘outcomes’ (for example, customer satisfaction levels resulting from efficient collections, or including more local employment and social involvement).

Things to consider to improve quality and to generate higher income include:

• avoid contamination and moisture;• collect a greater proportion

of items suitable for re-use rather than recycling;

• choice of container and vehicle design;

• frequency of collections; • dry storage; and • public communications

and engagement.

WRAP’s Textile Collection Guide provides guidance on raising the quality of material obtained from collections.

‘Quality’ is determined by a number of factors including residents’ needs, local authority service requirements and the standards set by organisations buying the textiles you collect.

Case study:

London Waste and Recycling Board (LWARB) and London boroughs consortium collection

In 2011, a survey of borough councils across London identified that a number of councils were interested in a consortia contract for textile bring banks.

LWARB initiated a steering group to scope out the likely success of a pan-London consortium for textile bring bank services. Potential benefits included increased recyclate income, procurement savings, London-wide communications, and greater protection against market volatility.

A contract was procured in 2013, with the London Borough of Lewisham acting as lead borough and individual authorities making their own arrangements with the contractor. The framework contract runs for four years, providing an income for the authorities, after which time the contract will be re-tendered.

Designing the service

12 WRAP | Textiles Collections Procurement Guide

Promoting the opportunity Public procurement rules (and UK case law) stipulate that interested parties must be offered the opportunity to find out about contracts being tendered or re-tendered. Authorities are advised to contact a range of national and local collectors and charities.

Because textile collections have a value, tenders should also be advertised, for example on government procurement portals.

The procurement portals are:

• UK/England • Scotland• Wales• Ireland• Northern Ireland

PrequalificationPrequalification is used when authorities expect an overly large number of bidders to apply and to ensure that only suitably qualified organisations submit bids.

Contractors are asked to complete a prequalification questionnaire (PQQ) and provide supporting evidence.

Evidence may be sought on accreditation or membership of professional trade organisations. PQQs can also offer a feedback route for authorities to ask for views on how service requirements may be met, or on aspects which may not have been considered.

Following receipt of a PQQ, it is advised that authorities consider conducting further due diligence on contractors. Checks can be made to corroborate the information provided in the PQQ if it is unclear or ambiguous. References may be contacted and online checks or arm’s-length site visits may confirm operational capacity and infrastructure.

An example of the typical content of a PQQ is provided in Appendix 2 of this guidance.

Setting standardsReassurance on the professionalism of collectors can be sought in the prequalification stage. For instance, the PQQ could ask for evidence of accreditation or membership of a professional trade organisation such as the Textile Recycling Association, Recyclatex, Charity Retail Association, the Bureau of International Recycling, or references from other customers.

Due diligence checksThere are a several factors to consider when choosing a service provider. Authorities are encouraged to obtain information such as waste carrier licenses and environmental permits, exemptions from potential collections, or recycling suppliers. You will need to understand how tonnages and pricing in tenders has been calculated and how volumes collected will be measured and reported. You may wish to visit company premises, to identify any issues or best practice with the service provision.

Widespread advertising and open competitive tendering promotes competition, which is more likely to result in value for money and best value innovation for authorities.

Designing the service

13 WRAP | Textiles Collections Procurement Guide

Balancing cost with qualityPrice is obviously a primary consideration when awarding any contract, as it is the responsibility of authorities to get the best value for tax payers’ money. However, in some cases where authorities have considered price alone, quality of service and local social value have been compromised. The split between cost and quality varies, but 60% price versus 40% quality is typical.

WRAP’s Textiles Collection Guide provides a useful reference to the types of considerations and objectives which are likely to be considered.

For example, under the Social Value Act, authorities in England and Wales must consider the positive impact their contracts can have. They need to provide scope in the tendering process for collectors to indicate the added value they can provide to local communities.

It is important that procurement professionals are involved throughout the process to ensure that key principles are applied (and can be demonstrated):

• Be open and transparent Tenderers should understand what you are going to do and how you are going to do it.

• Be objective Allow all tenderers a fair and equal chance of winning the contract.

• Be consistent This is particularly important in the assessment of the tenders received.

Long term, awarding public service contracts based on a balanced set of decision criteria is likely to be more effective and more resilient. Be open. Be objective. Be consistent.

Designing the service

Case study:

Commissioning a Service Level Agreement (SLA) – Conwy County Borough Council

In 2011, Conwy County Borough Council (CCBC) commissioned a fortnightly textile collection service with Crest Co-operative. The council chose an SLA because the textile collection service does not involve any payments, so the majority of the clauses in a full contract would have been irrelevant.

Crest Co-operative services 52,000 homes across Conwy and provides 30 textile banks throughout the county. The textiles are then sorted (with children’s clothing, shoes, bags and belts being re-sold at Crest’s community store) and all other clothing being sent to overseas countries.

Because there is a value in the service, the council used a formal commissioning route, posting a call for expressions of interest in the local press and via ‘Sell to Wales’. The provider was appointed under a two-year SLA with an option to extend.

The SLA included an option for the contractor to place bring banks on local authority sites at no charge to the council. This SLA established a successful service which is still in operation at the time of publication.

14 WRAP | Textiles Collections Procurement Guide

Service levels Authorities must define operational standards and agree these with their contractor. Measurable KPIs may be established to monitor performance, control payments and prevent fly tipping.

Controlled payments may be made on the basis of number of collections, or weighbridge weight; and may be withheld if overflowing banks are not addressed within a specified service period.

Sharing of best practice with other organisations can also be helpful. For instance, the Textile Recycling Association (TRA) provides advice and guidance to the sector on service standards.

Quality end marketsAuthorities want an assurance that the textiles collected will be properly re-used and/or recycled.

Once a textiles collector has passed material to a sorter, the collector loses control of the material. However, the authority must report on Duty of Care and End Destinations, as well as confirming diversion rates for WasteDataFlow records. A reputable recycling firm should be able to provide this.

Germany’s Gemeinschaft für Textile Zukunft (Future of Textiles Association) is developing industry standards that aim to define expectations on the levels of transparency and the detail of data that textile reprocessors should report.

Some textile collection charities, such as Oxfam, and many of the large textile recyclers, such as SOEX-ERC, have tightly controlled, in-house sorting operations. Detailed stock controls are in place, with end data provided to local authorities.

Designing the service

Service standards must be maintained throughout contracts – otherwise, when prices drop, collectors who are committed to paying high fixed prices for clothing may reduce the frequency of their collections – resulting in overflowing banks and reduced yields. To avoid this and the loss of service to local residents, authorities should consider if there is an opportunity to negotiate a price agreeable to both parties.

15 WRAP | Textiles Collections Procurement Guide

Case study:

Service standards – D & M Recycling

D & M Recycling is a medium-sized textiles collector covering London, Kent, Surrey, Sussex and the Home Counties. Service standards are guaranteed in its local authority contracts.

These include:

• standards in line with code of practice defined by the Textiles Recyclers Association (TRA);

• minimum frequency of clearing;• response time for call outs;• turnaround time for

replacement banks;

• bank maintenance procedures/refurbishment schedules;

• standards monitored throughout the duration of the contract;

• monthly reports showing total weights collected and KPIs showing the date of each collection and yields from individual banks, all supported by weighbridge tickets; and

• end routes for collected items are provided.

Designing the service

CostsEstablishing an authority’s attitude to, and willingness to take on, risk, is a deciding factor in choosing a service model. Each entity within the supply chain will determine how much risk it is willing to be exposed to for a given level of reward, and over a certain period of time.

Two key questions that an authority should seek to answer when assessing where to allocate risk is therefore:

1. How much risk does the pricing create or mitigate?

2. What price is it willing to pay for increased stability of income and quality of service?

WRAP has produced guidance for local authorities in its Approaches to Material Sales.

Various cost models are possible, each with relative benefits and risks for both parties. Examples of cost clauses are provided in Appendices 3 and 4 and further information is available in WRAP’s Approaches to Material Sales guide.“It is really important for local

authorities to work closely with their contractors and partners to ensure we get the best economic deal for taxpayers, and sharing risks makes this easier to achieve.” LARAC Chair, Andrew Bird

16 WRAP | Textiles Collections Procurement Guide

3. Variable revenue (profit share) arrangements

Variable revenue arrangements can be easy to operate and are equitable for both parties because they share the profit and the risk. The arrangement should aim to spread the risk and create a win-win situation for both parties.

The most equitable arrangements tend to be where the price closely tracks the market price, with regular updates. It is essential that each party is, from the outset, aware and comfortable with the degree of risk. It is advised that each party conducts sensitivity analysis modelling and considers contingencies prior to any agreement.

1. Fixed price agreements

Authorities can decide to pay a single service cost throughout the duration of an agreement. For an integrated arrangement, a net service fee (or net income) covers anticipated collection and contract costs, plus profit/funding of social activity, less forecast income received. The authority gains a predictable revenue stream and the collector takes on the risk.

The main issue with this type of contract is that market prices are unpredictable. The contractor will gain from any rise in the market price during the contract, but will suffer if the market price falls.

Alternatively, if the contractor includes a buffer against a drop in the market rate, then the price that is offered to the authority will be significantly lower than the market rate.

There are two main types of profit share arrangements:

a) Excess profit agreements In integrated collection and reprocessing contracts, collection costs – such as a price per lift or tonne – are agreed, which will cover operational and communication costs, operator profit and funding of social value activity. Any revenue gained from sales above a certain level is owned by the authority, or shared between both parties.

If the authority requires a revenue stream, a variant of profit share can be introduced. This may then be topped up with negotiated revenue or a link to a price index when the market is buoyant.

For these reasons, it is advised that authorities encourage realistic bids and question prices significantly above market rate. Once awarded, fixed price contracts may contain regular price reviews to mitigate risks within the contract.

2. Licensing rights for bring bank sites

For bring banks at HWRCs and/or other sites, authorities can ask operators for a fixed fee per site. Whilst the simplicity of this type of licence may be attractive, if the site turns out to be a poor performer, the contractor is likely to reduce the incentive to service the bank regularly. If it is a good performer and only a fixed fee is agreed, then the authority will lose out.

Designing the service

The key for both parties is to establish agreements which are effective and resilient during the good and bad times.

17 WRAP | Textiles Collections Procurement Guide

b) Tracker agreements These use an index-linked price (as listed, for example, in industry journals) to determine the revenue the authority receives. For example, a price set at 20% below the quoted monthly midpoint price – to account for collection costs – may be agreed, to ensure that the authority does not pay a separate service charge.

Any income received may be fully owned by the authority, or shared 50:50 with the contractor. This type of profit share incentivises both parties to provide services and communications which capture a greater volume of textiles of higher quality.

Authorities which want to index-link revenues are advised to ask prospective contractors to show the full basis of their calculations when they determine costs in tenders.

To understand the risk, contractors will need to understand the tonnages, composition and quality of the collections and consider how frequent price reviews are held within the contract.

WRAP’s marketing materials serviceIn Wales, through the Collaborative Change Programme, WRAP provides a Materials Marketing Support Service (MMS) to local authorities. The MMS is free of charge, funded by the Welsh Government, and covers the marketing and sale of various grades of the following materials:

• card;• glass;• metals;• paper;• plastics;• textiles; and• small waste electrical and

electronic equipment (WEEE).

Designing the service

Case study:

Index-linked pricing for Air Ambulance Service bring bank collections

The Air Ambulance Service has developed a price tracking method for their bring bank contracts. A base price is set during the first month, with a corresponding published index price.

The price then moves up or down in relation to the tracked published price, to ensure fair movement for both parties. The Air Ambulance Service offers tracked prices on a monthly or quarterly basis.

18 WRAP | Textiles Collections Procurement Guide

Indices have not yet been developed for some types of collections, such as kerbside collections. In these cases, a proxy tracker price must be used, e.g. 20% more than the average mid-point price for charity shop rag clothing, in an authority which consistently provides clothing with a high proportion of high quality saleable items.

Maintaining trust and transparency between the contractor and the authority is essential. Regular price reviews are advised during the course of a contract to recalibrate tracking methods with actual obtained incomes in the market.

The service can advise on:

• cost models – the risks, and other contractual terms for the sale of the recyclable material;

• identifying and comparing commercial offers;

• negotiating with suppliers and reprocessors to find optimum prices and commercial offers; and

• informing authorities about the most favourable offers prior to contracts being entered.

Contract scale and longevityLarge, multi-authority contracts can offer savings – and even increased revenues – to authorities. Contractors may also prefer these types of arrangement because they help collectors to plan and invest in infrastructure.

Incentivising bring bank collectionsIn this example, a large waste management firm is contracted for ten years, with the possibility for a ten-year extension. The contractor receives all revenues from the sale of textiles but guarantees a collection service at no cost to the authority. The waste disposal authority pays the district authority recycling credits, but saves more than the value of the recycling credit on disposal.

Index-linked contracts – a note of cautionVariable revenue arrangements can either be calculated on the actual price a contractor receives (open book accounting), or linked in some way to a price index (a percentage of the price or a price which is £x over/under the mid-point price).

Linking to a price index appears a simple and attractive approach. However, the typical or average prices quoted are a reference point and not likely to exactly represent the quality of specific material collected in an authority area.

Designing the service

19 WRAP | Textiles Collections Procurement Guide

Contract managementMonitoring contracts

Monitoring is crucial to ensure that contractors and partners are fulfilling agreement terms, generating a reasonable income, and helping authorities to meet diversion targets.

Data on the volume and tonnages of material collected, and other metrics such as number of lifts or weight protocols should be shared between both parties, together with supporting evidence (see Appendix 4 for examples).

Payments may be deducted for service failures; open book accounting arrangements may also be appropriate. Regular monitoring of tonnages can also help to identify weaknesses or malpractice such as under-declaring collections. If collection rates go below a certain level, this should trigger an investigation.

Regular contract review meetings provide a forum for authorities and contractors to discuss any issues, propose remedies for any underperforming aspects of the service, and suggest modifications.

Renegotiation and contract changes

Unforeseen changes and external influences are likely to necessitate modifications within the course of the agreement. Good relationships, trust, and the responsiveness of both the collectors and authorities are critical.

Expectations should be clearly stated in the contract or arrangement, and both parties must provide adequate time, personnel and effort to remedy any issues that arise.

Designing the service

Case study:

Generating income from bring banks – Hertfordshire Waste Partnership (HWP)

In 2011, HWP let its first consortium contract, which included an innovative clause allowing bidders to suggest an emptying charge per bring bank.

The contract involved the county’s 10 boroughs and districts as waste collection authorities, as well as the county council as waste disposal authority. The network involved approximately 200 banks on 140 sites across the county.

The contract included both a fixed income for the duration of the contract but also, unusually for textiles, it allowed bidders to suggest a charge per bank for emptying.

The purpose of the charge was to encourage each partner to optimise its bank network to ensure maximum tonnage was being

collected for the minimum number of lifts. This effectively prevented partner authorities from deploying too many banks.

The ability to charge for emptying also provided an additional source of income for potential bidders, and reduced dependency on sales income to cover costs. Each month, service charges are netted against income, with net payments made directly to each partner authority.

The consortium resulted in a number of ad hoc informal arrangements being replaced with a single, much improved service that generates income above the market average. KPIs not only help to manage

the arrangement effectively, but also enable performance-related payment.

20 WRAP | Textiles Collections Procurement Guide

Contract evaluation

Towards the end of an agreement, the strengths and weaknesses are assessed. New outputs/outcomes are defined, including non-cost considerations, which may represent best value.

Designing the service

Case study:

Updating the bring bank service – Brighton and Hove City Council and the European Recycling Company

In January 2016, Brighton and Hove City Council (BHCC) enlisted The European Recycling Company Ltd (ERC), part of the worldwide SOEX Group, to be their textiles bring bank provider and collector. ERC provided a shoe collection service to BHCC for many years and had the infrastructure in place to carry out a weekly clothing collection.

BHCC are now working in conjunction with ERC to increase the number of bring banks throughout the city, during a time when many authorities are reducing their bring bank provisions.

The scheme is supported through a communications campaign using social media and the local press.

The new contract included the following service conditions:

• all banks serviced a minimum of once a week, with some banks serviced two or three times a week;

• rapid response times with call out guaranteed within 48 hrs; and

• local employees dedicated to the BHCC Contract, with new jobs created in Brighton.

The new arrangement has resulted in:

• improved service levels across all sites, with greater controls for the council;

• better maintained banks with quick response rates;

• a dramatic reduction in reported bank overflows and a significant

increase in the number of banks the public can use;

• increasing collection volumes and decreasing volumes of textiles in the residual waste stream; and

• a local collection service supported by a global export network, extending the life of clothing and textiles and significantly reducing the amount of waste sent to landfill.

The scheme also benefits local community groups with 40% of the revenue raised being allocated to good causes throughout the city.

21 WRAP | Textiles Collections Procurement Guide

Appendix

Introduction to appendicesThe following appendices provide you with links to the information and resources referred to throughout this guide. They also provide information for additional tools you can access to develop or improve your textiles collection services. The appendices are broken down into six sections so you can easily find the information most relevant to your needs:

Appendix 1 Further information to help drive change 22

Appendix 2 Prequalification questionnaire 24

Appendix 3 Example multi-criteria award 24

Appendix 4 Cost clauses 25

Appendix 5 Performance standards and monitoring 26

Appendix 1 Further information to help drive changeRelevant publications

Guidance on the EU public contracts regulations

Guidance on the Public Services (Social Value Act)

Textile Recycling Association Code of Practice Code of Practice for TRA members which covers collection standards for kerbside, textile bank, charity shop and other collections.

R&W UK Managing the Risk from Secondary Raw Material Price Movements Guidance to help manage the risks related to secondary resource prices.

WRAP Textile Collection Guide Aimed at increasing textile re-use and recycling, the report provides practical guidance and examples for kerbside textile collection services, bring banks and community re-use initiatives.

WRAP Approaches to the Materials Sales Guidance to help local authorities maximise revenues from dry recycling collections. The guidance provides example pricing mechanisms, material quality standards and operational requirements, and includes a number of example contract clauses.

WRAP Cymru Materials Marketing Support A guide to using the WRAP Cymru’s Materials Marketing Support to optimise income from dry recycling (available upon request).

WRAP Bulky Waste Guidance – commissioning and procurement, including the legal framework This document provides information on the process and options available for the provision of a service by another organisation. It explains the differences between commissioning and procurement, contracts and grants, and outputs and outcomes.

WRAP Bring Recycling Guide Designed to help local authorities improve performance and ensure that sites represent a valuable element in the overall recycling service local authorities offer to residents.

WRAP (2016) Textiles Market Situation Report This report examines the market, past and present. It summarises key trends and highlights opportunities for creating new sustainable end markets, both in the UK and abroad.

Appendix

22 WRAP | Textiles Collections Procurement Guide

WRAP How to include re-use in local authority HWRC procurement.

letsrecycle.com materials pricing Provides an indicator of the prices paid for collected materials, including prices for bank collected materials, shop collections and textiles delivered to rag sorting plants.

MRW materials pricing Subscription service which provides prices paid for collected materials, including prices for bank collected materials and charity shop grade clothing.

Guidance: Social Value Act: Information and Resource

Charity Retail Association Stock Markets: Working with local government for charity retailers (November 2011).

HSE guidance for procuring waste management services

Relevant links

Textile Recycling Association The UK’s trade association for used clothing and textile collectors, sorters and reprocessors.

Charity Retail Association Set up in 2000, the Charity Retail Association is the only body in the UK to represent the interests of charity retailers. The association has over 330 members which, between them, operate over 7,000 shops.

Recyclatex (The Re-use and Recycle Group) A trading group made up of a select number of companies which are members of the Textile Recycling Association. Together, the companies offer a nationwide service to charities, retailers, local authorities, schools and local community groups.

Bureau of International Recycling (BIR) The largest international recycling federation, with over 800 member companies from the private sector and 34 national associations in more than 70 countries.

LARAC Represents local government recycling officers throughout the UK.

Sustainable Clothing Action Plan (SCAP) The SCAP 2020 Commitment sees leading organisations from across the clothing sector – supply, re-use and recycling – working together to reduce the environmental footprint of clothing.

Love Your Clothes WRAP’s ‘Love Your Clothes’ consumer campaign aims to raise awareness of the value of clothes, and to encourage people to make the most of the clothes they already have. The campaign has been developed as part of the Sustainable Clothing Action Plan.

Appendices – Example documentsPlease note that example text and contract clauses provided in the following Appendices 2–5, or linked to from the Appendices, are not intended to be legally or technically comprehensive. They are intended to be used as a guide to those drafting collection arrangements, and should not simply be copied and pasted into a draft contract.

The examples express the concepts described in the main body of the guidance but are, by necessity, generic and simplified to illustrate a range of possible approaches. As such, they may provide a useful starting point to some authorities but, in most cases, will require significant editing.

WRAP cannot be held responsible for any errors or omissions, factual or otherwise, arising from reliance on the example text and/or clauses. This document is not a substitute for independent professional advice.

Appendix

23 WRAP | Textiles Collections Procurement Guide

Appendix 2 Prequalification questionnaire (PQQ)An example PQQ might cover:

• company information – company/charity registration number, conflicts of interest, blacklisting;

• mandatory exclusions – no criminal offences etc;

• financial information – acceptable risk level/credit worthiness (e.g. turnover exceeds contract value by threshold), self tax certification evidence; and

• insurances – stipulated level of insurance premiums.

The Crown Commercial Service provides a standard pre-qualification questionnaire. This form is mandatory for PQQs by authorities in England, Wales and Northern Ireland.

• health and safety – policy and procedures, compliance;

• equal opportunities – equal opportunities policy;

• environmental sustainability – policy, standards, legal compliance;

• quality management – systems, standards, electronic record keeping, end markets; and

• technical & professional ability – proven capacity, similar contracts, no penalties/default notices/terminations, contingency arrangements, multiple references.

A PQQ may also provide a channel for contractors to comment on the proposed service requirement at the pre-tender stage.

Appendix 3 Example multi-criteria awardThe London Council’s consortium developed a set of non-cost criteria for the bring bank collections contract that it developed in 2012. Detailed sub-criteria were defined for non-cost aspects, under the following headings:

• Technical Ability to Deliver the Service

• Quality and Operational Competence

• Service Development, including social value

• Health and Safety• Environment & Sustainability

Together, these non-cost criteria comprised 40% of the total award. Cost comprised 60% of the award.

The cost was judged on a fixed price fee proposed by the contractor for the first 12 months of the contract. This price was banded to encourage contractors to offer services which captured higher collection rates for textiles. In addition to the fixed price per tonne, a banding mechanism was introduced for ranges of tonnages, to encourage contractors to offer services which capture higher collection rates for textiles. Each year, a price review occurs within the contract, although the banding remains unchanged.

Appendix

24 WRAP | Textiles Collections Procurement Guide

Appendix 4 Cost clausesA range of different profit share contract clauses are possible. WRAP’s Approaches to the marketing of dry recyclables by local authorities provides examples which share some of the contractor risk with the authority:

Tracker clause (Section 13.2)

Under this clause, the income received from the sale of recyclable materials is deducted from the amount paid to the contractor. As such, the contractor is responsible for marketing the recyclables, but the authority in effect receives the income from their sale as a discount from the service price.

An adjustment value is used to reflect the contractor’s view as to the difference between the market value of the material collected under the contract, and the value in a published price index. If the market price is high, the authority will receive an overall income.

Excess profit sharing clause (Section 13.3)

Under this clause, the contractor is allowed to keep all overall profit up to a certain level but, above that level, any ‘excess profit’ is shared with the authority. The authority is not exposed to downside risk (price fall), as the contractor has to absorb the impact of profits that are below an agreed excess profit threshold.

Risk sharing with floor price and composition risk share (Section 13.4)

Risk is shared between the authority and contractor, and a price index is used as a benchmark for price change. The risk of fluctuation in composition is also shared (i.e. a shift in the proportion that is high grade clothing, relative to other textiles, or an increase in contamination). A floor value is used to ensure that downside risk to the authority relating to the materials markets is limited.

Appendix

25 WRAP | Textiles Collections Procurement Guide

Further contract clauses/tender examples include:

Simple condition for fixed price per tonne contract

The contractor shall provide the Authority with tonnages of textiles collected from each bank in the form of a monthly report. This must be submitted on a monthly basis, on the first working day of each month, to enable x Council to invoice you by the xth of each month.

Data should be submitted electronically in Microsoft Excel format, or otherwise to be agreed with the Authority’s Representative. The report must include the date, tonnage, price and x Council’s ticket number as a minimum.

Example price schedule for a DSO arrangement (authority collects) requiring a variable price for materials collected from a single storage point

Please provide a price for the following:

• Transport cost per tonne for collection of material from storage point.

• Authority share of the MRW price index.

For this either provide:

a) The per tonne price you will pay relative to the index mid-point rate. Also provide an explanation of how you have factored in costs/risks e.g. ‘We will pay £20 per tonne less than the quoted mid-point price. This accounts for the difference in quality between the market quoted price and that locally collected. The difference also includes reprocessor costs associated with sorting and selling the material.’

b) The percentage share the authority will receive from the index. Confirm the percentage of income the authority will receive for the following price bands: £0-£50 per tonne, £50-£100 per tonne etc, up to £450-£500 per tonne, and the percentage for >£500 per tonne.

Appendix 5 Performance standards and monitoringThe London Council’s consortium contract for bring bank collections provides an exemplar set of performance standards/KPIs covering, amongst others, collections frequency, overflowing banks, bank maintenance, communications and data reporting, and end destinations for collected materials.

Further guidance on performance and monitoring can also be found in WRAP’s Textile Collection Guide.

Appendix

26 WRAP | Textiles Collections Procurement Guide

Acknowledgements

We would like to thank the SCAP Re-use and Recycling Working Group and, specifically, the following people for their assistance in compiling this guidance:

Alan Wheeler (Textile Recycling Association)

Andy Haws (European Recycling Company, part of the SOEX Group)

Catherine Inglis (Salvation Army Trading Company)

David Roman (British Heart Foundation)

Hilary Garlick (Suffolk County Council representing LARAC)

Karen O’Donoghue (British Heart Foundation)

Phil Geller (I&G Cohen Ltd, representing Recyclatex)

Ross Barry (LM Barry & Co)

Sam Kirk (Lewisham Council)

Sally Talbot (Staffordshire County Council, representing LARAC)

While we have tried to make sure this guide is accurate, WRAP does not accept liability for any loss, damage, cost or expense incurred or arising from reliance on this guide. Readers are responsible for assessing the accuracy and conclusions of the content of this guide.

Quotations and case studies have been drawn from research for this guide, with permissions sought from the relevant organisations. This guide does not represent endorsement of the examples used and has not been endorsed by the organisations and individuals featured within it.

This material is subject to copyright. You can copy it free of charge and may use excerpts from it provided they are not used in a misleading context and you must identify the source of the material and acknowledge WRAP’s copyright. You must not use this report or material from it to endorse or suggest WRAP has endorsed a commercial product or service. For more details please see WRAP’s terms and conditions on our website at www.wrap.org.uk .

Appendix

27 WRAP | Textiles Collections Procurement Guide

WRAP Second Floor Blenheim Court 19 George Street Banbury Oxon OX16 5BH

wrap.org.uk/sustainable-textiles@WRAP_UK

WRAP’s vision is a world in which resources are used sustainably. Our mission is to accelerate the move to a sustainable resource-efficient economy through re-inventing how we design, produce and sell products; re-thinking how we use and consume products; and re-defining what is possible through re-use and recycling.

28 WRAP | Textiles Collections Procurement Guide