Procurement Best Practices: Local Government Billing or Lockbox
For stronger cash control and incentives, local government billing can be established. This is most easily done in jurisdictions that already bill for other utility services such as water, wastewater, or electricity.
Alternatively, a lock-box account system with payment instruction can be implemented where customers pay to the lock-box account, and that account pays the agreed upon costs, withholds a reserve and then pays contractor.
Case Study: Seattle, WA
Advantages
- Cost control: Putting the local government in charge of cash flow provides tighter control over the contract and contract payments.
- Bankruptcy protection: Protects the local government from potential contractor bankruptcy.
- Performance incentive potential: Local governments can easily tie hauler payments to performance.
- Payment system flexibility: Separate billing allows local government to implement billing changes, such as mandatory recycling or Pay as You Throw, without impacting service provider payments.
Disadvantages
- Local government and contractor workload: Integrated billing can be difficult to implement and requires the service provider and local government to reconcile accounts.
- Customer service gap: Creates distance between service provider payments and customers.