The baseline for setting a fee for services rendered remains a holistic assessment of costs. While this is a basic, and core principle, it is often neglected in practice. I hope this provides the insight required in implementing an adequate system that ensures your waste business costs are covered by your inflow.
Costs allocation for waste management services should be based on a proper accounting system identifying the cost components separately for each type of activity: collection and transport to disposal both for mixed waste and separated fractions(in saner climes); transfer and long haul transport; landfilling (often open dumping) and other treatment options; street cleaning; market cleaning; third party contracts; and any other services such as sorting of pre-separated recyclables. Overhead costs normally include costs for office space, general and operational management, communications, and enlightenment activities.
Cost components normally include wages; third party contracts; energy, fuel, lubricants; maintenance and repair; energy; tires; insurance; amortization, including interest and depreciation; and banking costs. The costs will be influenced by the number of shifts/day, working hours/day, working days/week and working days/year, capacity of trucks, distance to final disposal, waste composition, and frequency of collection.
Cost estimates based on the international experience can be compared with actual costs and might reveal inefficiencies, especially when Key Performance Indicators (KPI) are introduced, such as the percentage breakdown of total cost/ton into wages; maintenance and repair of trucks; fuel and tires; and overhead. For example, a high percentage for wages might indicate overstaffing, a high percentage for truck costs might indicate depreciated equipment, and a high percentage for fuel might indicate inadequate route planning or the need for a transfer station.
Where I come from (in Nigeria), we love to compare ourselves with others but benchmarking with other cities / provinces / states / countries will only be useful if the services covered by the cost calculations are clearly defined and similar in nature, i.e., they are similar in population density; method of collection, such as communal containers versus curbside containers; waste density; waste quantities; taxes; transport distance to final disposal; and frequency of collection.
A proper reporting and registration system remain critical to accurately establish the costs for each activity.
Cost calculations should preferably be based on “sound business” principles – with the exclusion of the profit principle for services to households.
Cost calculations are needed for financial planning, investment decisions, and improvement in operational performance.
PS: You can contact me for more details.