Up to half a million pounds will be spent replacing the company which collects bins and provides other street cleaning services in Peterborough.
The city council has set aside the money from its reserves as it prepares next week to cancel a 23-year contract with Amey more than 16 years before it is due to come to an end.
The council said the decision was due to recycling rates in the city only reaching 45 per cent - compared to Amey’s target of 60 per cent - and because it wanted better value for money.
But Labour’s council group leader Cllr Ed Murphy said: “This Conservative administration has wasted millions, their record is poor and they have made too many mistakes.
“It is my opinion that this half a million would be better spent on bringing the services in-house and improving services in Peterborough. Contractors have to make a profit whereas the city council could provide the service itself or with other public sector partners, and all the money spent would be used on delivery.”
Liberal Democrat group leader Cllr Nick Sandford said he wanted the council to consider moving the services in-house, adding: “We were told 12 months ago they were terminating Amey’s contract and were going to make £100,000 worth of savings by going into a joint venture arrangement, and that’s not happened.
“It all seems quite chaotic what’s going on.”
It is expected that a replacement for Amey will be in place for autumn 2018.
The council is looking to split the contract up and have different providers for each service. Cllr Gavin Elsey, cabinet member for waste and street scene, said: “It has been clear for some time that our contract is no longer meeting either of our needs and is no longer compatible with the tough financial landscape we are operating in.
“A key driver for the proposal is the council’s current recycling performance which does not meet the targets set out in the contract.”
The council said it will consult with Amey’s staff.
A spokeswoman for the council denied that the contract had failed. She said a change was needed because the council’s finances have “changed dramatically since the contract was originally put in place.”
Amey said the termination of the contract is by mutual consent as it “no longer meets the needs of either party.”
It added: “We are committed to delivering the highest possible standards of service until the current contract ends.”