With planning permission already granted for a site in Bradford, the 300,000-tonne capacity plant could be operational by April 2009.
The council chose autoclaving, which sterilises wastes and halves its volume using steam, on the basis of "price, site availability and because of the high diversion rates of biowaste".
The technology recovers recyclables and stabilises organic fractions into a fibrous material. The firms have secured markets for both.
The council expects the plant will enable it to achieve a municipal waste recycling rate of more than 50% and divert 75,000 tonnes of biodegradable municipal waste from landfill a year.
Waddington has used the autoclave technology for animal by-product rendering for years.
The five-year contract could be followed by a longer-term one supported by PFI credits. Bradford’s proposals are one of four projects at the final stages of securing credits for waste treatment infrastructure. Others include Suffolk County Council, South Tyne and Wear, and the South London Partnership.