Managing and Transforming Waste Streams – A Tool for Communities

Contracting Best Practices: Separate Compensation from Rates

Contractor compensation can be based on cost of service and/or number of customers rather than the rates charged to customers. This approach compensates the contractor for their work and allows them to “right-size” customers service levels without losing compensation.


  • Flexibility:  Allows contractors to work with their customers to reduce disposal services and disposal container sizes.
  • Cost buffer for contractor:  Avoids rate-based windfalls and shields contractors from cost impacts of pay-as-you-throw rates.


  • Local government risk:  Local government rate setting that is not tied to contractor compensation rates may result revenue surpluses and shortfalls. Government agencies can set up a balancing account to manage this risk.
  • Local government workload: Careful oversight of contractor costs through a reviews and/or more frequent competitive procurements is needed.