Relationship between purchaser and provider
The relationship developed between Timaru District Council and EnviroWaste Services for the provision of Timaru’s total waste management services encompasses aspects of both partnering and alliancing as they work towards common project objectives, using a relationship mechanism for problem solving, and sharing risks and rewards.
The parties’ individual objectives at the beginning of their relationship were as follows. The Council’s objectives were to:
- maximum diversion of waste from landfill
- maximise the life of the existing Redruth Landfill
- achieve the above objectives at an affordable cost to the community, but not necessarily the least-cost option
- provide services as a total facility package, which included:
- three-bin kerbside collection
- a composting facility to process food and garden material
- a recycle sorting facility
- operation of a landfill and transfer stations
- liaise with one contractual party only
- realise supplier performance/innovation and flexibility for alternative options suggested by the council.
EnviroWaste Services Ltd’s objectives were to:
- secure long term business with the council
- work in partnership with the Council - ‘partners for mutually beneficial success’
- have the ability to look at the big picture, demonstrate knowledge and willingness to learn, have the ability to adjust, and use systems thinking
- illustrate that a ‘landfill’ company can fulfil a waste minimisation contract.
The process the Council followed to reach this partnership-type arrangement began in 1999 with initial consultation with the community to help provide strategic direction. The outcome of this for the Council was to focus on developing alternative options for waste management instead of landfilling. An initial request of proposals was called for in 1999 to consider options and technologies instead of landfilling. The Council decided not to proceed with any proposals.
The implementation of any changes to waste management service provision then stalled until 2002, when the Council re-activated the process pending the requirements of the New Zealand Waste Strategy. A solid waste management plan was adopted by the Council in 2003 and forward budgets were approved in 2004, with a proposed implementation date of 1 July 2006. Council officers completed extensive research and trials of kerbside collection systems and processing of organic matter (of both food waste and garden waste). Visits to other locations and learning from best practice also helped to establish the type and level of service for the community.
Following the results of these trials, the Council endorsed a request for proposals (RFP) process in February 2005 for a total facility waste management service provision. The RFP process included the following steps:
- calling for proposals
- a briefing meeting held with all prospective submitters
- individual appointments and site visits with submitters
- evaluation of proposals received
- clarification questions asked of submitters
- shortlisting of submitters by the Council
- individual presentations from submitters to the whole Council (this step was taken due to the size of the contract, the largest the Council had ever let due to the scope of services and the length of term, as well as to achieve full buy-in from all elected members)
- further clarification questions and a breakdown of price (requested from submitters so that proposals could be fairly evaluated)
- Council acceptance of the EnviroWaste Services proposal in June 2005.
To ensure speedy implementation of the new services, a memorandum of understanding was developed between the parties. Its contents included:
- Timaru District Council’s Solid Waste Management Plan objectives
- expected major outcomes
- partnership arrangements
- capital sharing - assets transfer arrangements
- community engagement
- revenue sharing - agreed levels of recyclable products for five years, to be used as a benchmark
- an open book policy
- key performance indicators for measuring and monitoring
- objectives of a contract, which would be developed within 12 months.
The initial draft of the memorandum of understanding was written by Timaru District Council staff before discussion between the parties. Legal review was completed by legal advisors of both parties.
To assist with the transition to the new services, a seven-month interim contract was developed for the operation of the landfill and transfer stations. Complete provision of the new service began on 1 July 2006.
Some of the things that went well were:
- an overall willingness between the parties to make things work and achieve the Council’s objectives
- utilisation of proven technologies and support
- before the memorandum of understanding was finalised, a team of councillors, council and contractor staff completed a trip to the United States to view proposed composting systems, and both parties felt this was extremely beneficial in developing initial relationships and helped enable a preferred composting option to be selected
- people had a choice of bins, with flexibility for businesses and special cases relating to bin types and emptying frequency
- a proactive communication strategy - direct communication, especially with businesses and special cases, to determine individual requirements
- staged delivery of bins, which enabled time for staff to follow up on enquires
- hassle-free implementation for business areas
- the total collection and processing system operating within three months of full contract start, with objectives being achieved and overall community acceptance of the new system
- a special collection service of three crates for people where three bins are not suitable.
Some of the lessons learnt during the mobilisation period were as follows.
- There needs to be a longer timeframe for mobilisation (this is to be a 15-month period, continuing for four months after contract start date). This is to allow more time for civil construction, public information and consultation over service provision.
- More accurate assessment of people’s requirements for bin types and a deadline to confirm their bin choice was not really effective because the Council had allowed a six-month period to change or confirm bin choices, resulting in some extra delivery. However, people did get to select the level of service for the next 15 years.
- It is important to have direct access to the suppliers of plant and infrastructure.
The final stage of the procurement process involved developing a contract, which includes:
- incorporation of the concepts from the memorandum of understanding, initial proposal and RFP requirements
- recording of the specification developed during the mobilisation period
- facility management plans
- safety, health and environment plans
- the term of contract (15 years), with provision for further extensions
- a cost escalation provision (which is important due to the long term of the contract)
- key performance indicators and reporting
- risk assessment and management arrangements
- provision for future innovation and modification of the contract.
Milestones for the completion of this procurement process were:
- initial strategic consultation with the community – 1999
- New Zealand Waste Strategy - 2002
- Council Solid Waste Plan - 2003
- RFP process - February 2005 to June 2005
- memorandum of understanding began - July 2005
- interim contract for landfill and transfer stations - November 2005
- memorandum of understanding signed - January 2006
- contract development - three months 2006
- start date of full contract - 1 July 2006
- official opening of facilities - 3 November 2006.
Relationship between purchaser and provider
For 10 years Wastebusters Trust Canterbury (formerly Mid-Canterbury Wastebusters) has worked with Ashburton District Council in the area of waste reduction, successfully satisfying the needs of the Council and district in the ongoing management of the area’s waste. Wastebusters is a ‘community trust’ based at Ashburton, currently contracting to three different councils, with five different council contracts. The trust employs approximately 15 full-time equivalent employees and turns over nearly a million dollars annually.
With persistence and goodwill an excellent relationship has evolved. Quite a difficult start has evolved into a good partnership. What has made this alliance so successful and what can other districts learn from this?
- Personnel - the initiators of Wastebusters, Sheryl Stivens and Anita Coghill, both strong advocates for their community (and for waste minimisation), are seen as pivotal to starting this process. Council staff, Rob Rouse and councillors who have steered their council’s way through this, were also crucial in achieving the outcomes.
- Persistence – the community initiators lobbied the Council and gradually waste minimisation became the accepted precept.
- Patience - it took a number of years of tension between ideals and a business model for a working partnership to evolve.
- Education - the school’s waste minimisation programme was the starting point. Parents (some of whom were Council members) responded to the insistence of their children on ‘doing the right thing’.
- Ownership of the waste stream - the Council accepted responsibility for the entire waste stream. Ownership allowed the Council more control of the decision-making process.
- A strong sense of community - community ties are strong in the district, so the development of Wastebusters has been an extension of the natural involvement and co-operation that existed already.
- A growing sense of community - this is illustrated by:
- council and community recognition of those who work for the environment
- the responses of outlying rural communities to waste problems
- a dynamic business community gives good support at governance level, and there is good support and co-operation from the business sector
- new initiatives (such as the recent putrescible wastes trial) came from within the community, and were not perceived as imposed by the Council.
- A positive local media - tells the good stories as well as the bad.
- Celebrating success - celebrating the partnership allows it to rise above the constituent parts and embrace the whole community.
- The inclusion of social agendas – the employment of marginalised groups in the operation has been part of the social agenda from the beginning. Government financial support for this has led to a decrease in this community involvement.
The result of this arrangement is that the providers of the contract services (Wastebusters Trust and staff) are well respected for their:
- track record
- working relationships
- high output
Over time this has seen the development of a local contractor from within the community. This operation is locally ‘owned’, and draws its employees from within the local community and returns a significant amount of money within the district. The payout is in terms of contracts to local engineers, local cartage firms and wages to employees, which are basically spent in the local community. Profits can also be measured through other outcomes, such as a cleaner environment and future sustainability, which have resulted from the arrangements that have been put in place.
Comparison between a community group and a commercial contractor
In general, a commercial contractor will be driven primarily by the ‘economic bottom line’. In comparison, a community group will be driven by:
- a concern for the future
- community well-being
- sustainability of their local environment
- a concern for the welfare of marginalised people in their community.
As a consequence, the levels of commitment and service are higher with a community group operation.
A commercial company needs certainty of the term of the contract to commit the required resources to cover capital costs. The key to getting a council and community group to form a successful long term relationship is for each partner (council and community group) to understand the other’s roles and views, which are often very different. Community groups are driven by environmental and community concerns and have an urgency to move forward. Council officers are governed by council policy and the need to follow the correct bureaucratic and democratic process.
With a commercial operator, the contract relationship is more fiscal in nature. A common consequence of this is that the contractor operates at a greater distance from the Council. This may lead to less frequent communication and the arrangement being viewed as solely a financial transaction. An appointed trustee of Wastebusters Trust Canterbury and the chief executive officer (CEO) of the Trust meet with the Council CEO each month. This gives the opportunity to have a less formal, ongoing examination of both current issues and wider activities in the ever-changing world of waste. There is an opportunity to share ideas and respond to concerns. This is a useful mechanism to discuss changes that affect the contracts (eg, the recent problems with recycled glass).
The local media have helped in this evolution by telling the good as well as the bad stories. Working constructively with the media has helped promote the good stories and the successes of the partnerships.
Finally, community groups can look outside the square. They are prepared to trial new initiatives, are elastic, and will take into account factors not always appreciated by commercial operators. This flexibility gives them a great advantage, but requires continuing liaison with all parties involved, including their community and the Council.
The role of education
When asking a community to change its habits and minimise waste, it is important to do the basics well. From the beginning, education was seen as being essential for all those involved.
A comprehensive education programme was established to service schools and the community, including a telephone helpline, composting demonstrations, and an education centre open seven days a week. Wastebusters continues to run courses for individuals wanting to learn about the Wastebusters system. The education programme run in the local schools meant that the children and grandchildren of the decision-makers were soon bringing the messages home.
After 10 years members of the community now feel they are an integral part of the programme, and take responsibility for helping solve the problem rather than seeing it as a Council problem.
In retrospect, education was an excellent starting place and it continues to be important in terms of the mature response of the ratepayers of Ashburton when dealing with managing waste and recycling.
There is the regular annual consultation through the long term council and community plan (LTCCP) process and a two-monthly newsletter to the public from the Council. This newsletter informs the community about waste-related news. Further consultation is undertaken when there is a proposed change in the level of services.
Wastebusters always plays a prominent role by taking a position on the issue and explaining the situation. Wastebusters’ work with the business community has led to a supportive environment within the Ashburton business community.
The contract process
The first contract between the Council and Wastebusters was for the delivery of an educational programme to the schools and preschools of the region. This started the process of learning to work together.
The contract for the processing of recyclables was preceded by a transitional agreement, which protected both the Council and the community group. This contract allowed a period of time (six months) to confirm quantities of recyclables and prices paid for them, staffing requirements, report forms and communication needs. This period also allowed time for trust and confidence to develop on both sides.
The problem of changing commodity prices was accommodated by costing the contract to the processing and disposal of the various waste streams and not considering the revenue from the sale of the sorted material. However, as volumes increase, so do operational costs, so there are adjustments for cost fluctuations (eg, hourly wage rates, which are indexed to inflation rates). Naturally neither party wants to be exposed to extreme risk.
The down sides
Both sides agree that at certain stages during this process they have needed to take big leap of faith. It has taken a long time for a level of confidence to develop between both parties. The wider role of Wastebusters includes lobbying the Council and councillors, and this lobbying can generate tension between Wastebusters and its staff and the Council and its officers. To some extent this has prevented the development of trust between the Council officers and Wastebusters. The Council officers feel exposed as they are ‘attacked’ from both sides.
To help resolve this it has been suggested that the contract should include some strict lines of communication to try to mitigate the lobbying roles of the community group. Conversely, the community group often feels it is hard to have a direct voice. Because of the high level of communication, there is an intimate knowledge of each other’s activities, so the community group is not treated like just another contractor.
Community group members may take individual stands over environmental issues. This can blur lines in the public’s mind between official group opinion and a Council contractor’s stance. While the group has an official role, it is also a community opinion leader role. Individuals within the group can sometimes be seen by the public as representing the whole when they are in fact expressing a personal opinion.
At times the trust between the group and the Council has been stretched, but the partnership has been preserved. The Council has accepted that a community business enterprise can perform well as a business, operate a range of equipment and deliver excellent service. The community group is driven to deliver 150% and is providing good value for the council.
Many hours of volunteer time have been spent developing solutions for the waste issues facing the Ashburton District. This commitment and drive have grown a reputation for innovation for the district. The research and development component, however, is generally perceived by Wastebusters as lacking recognition.
Although some changes were not popular at the time, a staunch attitude and plenty of education have led to an acceptance within the community. Difficulties frequently relate to the need for spending money now to get benefits down the track.
Conclusion and summary
- The relationship between the Ashburton District Council and Wastebusters has been difficult at times, but there is now a good supportive working partnership.
- Some difficulties still remain on both sides, but that may be the nature of the relationship.
- The Council needs to ensure the Wastebusters community group continues to be enthusiastic and robust, and to balance its needs with those of the Council.
- The community as a whole is involved in and owns the entire process.
- The interaction between Wastebusters and the Council has meant there is a shared understanding of the whole system. Both partners are able to drive change.
- Wastebusters has developed systems to meet the requirements of contracting to the Council.
- The Council has the support of Wastebusters.
- Wastebusters takes a consultation and leadership role within the wider community.
- The Council is happy with the commitment, output and reliability of their contractor.
- Ashburton has built a sense of community, and this is reflected in the choices of the population.
- Ashburton has an international reputation for this partnership.
- Mayor of Ashburton District, His Worship Bede O’Malley
- Ashburton District Council CEO, Brian Lester
- Deputy Mayor of Ashburton, John Leadley
- Ashburton District Councillor, Bev Tasker
- Ashburton District Council Engineer, Rob Rouse
- Ashburton District Council Recycling Officer, Tammara Page
- Wastebusters Trust Canterbury General Manager, Sheryl Stivens.
This case study was prepared and written by Jo Knight of the Zero Waste New Zealand Trust.
Manukau City Council’s planning for the procurement of the city’s future recycling services involved a process that included:
- confirmation of the future service objectives
- elected member endorsement
- choosing the right procurement process.
The legislative requirement for councils to develop and maintain waste management plans (WMPs) provided the catalyst for this process to begin. A review of the Council’s WMP in 2005 presented the opportunity to review the current recycling methodology.
Any envisaged change to a service must comply with the special consultative procedures of the Local Government Act and be aligned to the Council’s long term council community plan (LTCCP). Manukau complied with these requirements, both through public consultation completed while reviewing the WMP and also their LTCCP.
Council officers considered shared future services with adjacent authorities and sought approval from elected members for this direction, and also to develop a memorandum of understanding that would record this relationship. The outcome has been the sharing of contract procurement with Auckland City Council.
Confirmation of service objectives
The next stage of the planning process involved the development and confirmation of service objectives. To do this, first internal discussion papers were prepared that outlined subjects for consideration and further research, and then relevant research was completed by external parties before considering any preparation of a tender document. This research took the form of support documents that looked at issues with the present kerbside recycling collection contract, including type of receptacle, health and safety, litter, types of materials collected, collection method, and future collection methods with different receptacles (eg, Mixed Recycling Bin, material recovery facility ownership). Consideration was also given to whether any trials or pilot studies were required. Council officers considered the implications of any option selection on their existing waste collection contracts for kerbside refuse and public areas.
Elected member endorsement
The third stage of the planning process involved elected member endorsement for the service objectives and entering into a shared services arrangement. A Council officer and an elected member visited some Australian sites to observe first hand the collection, acceptance and processing of recyclables. This enhanced political understanding was invaluable and helped when explaining the service options to the wider Council.
Through all the planning stages a robust political process was followed. An elected member Sounding Board met regularly to be kept informed of progress and discussed waste management policy direction. Following their endorsement, reports were made to both the committee and the full Council seeking endorsement of the different project stages. These will continue regularly during the procurement until the award of the contract.
A valuable lesson which Manukau staff had formerly learnt is the need to consider local body election timing when setting the timeframe for any changes to service delivery. A newly elected council may not share the same political will for a service as their predecessor, and, as with most councils, value for money drives political decisions.
Choosing the right procurement process
The Council considered a number of procurement options, including expressions of interest (EOI), requests for tender (RFT) and requests for information (RFI), either on a standalone or shared service basis with adjacent local authorities. Having undertaken thorough background investigations and located experienced specialist consultant advisors, it was decided that there was sufficient knowledge and understanding of the industry and processes to use the RFT process.
RFT requires less time than EOI or RFI. Working through developing shared services had taken some time, and therefore time constraints also became a consideration. To enable the shared procurement of recycling contracts with Auckland City, Manukau City Council negotiated rolling over its existing kerbside recycling contracts for two years so that Auckland and Manukau contract terminations were aligned to June 2008.
From investigations and noting trends in Australia, a decision was made to tender for separate MRF (materials recovery facility) and collection contracts. This enables the opportunity for specialisation, greater competition, and better matching of the effective life of plant and machinery to the contract term to maximise contract capital efficiency. The contract term for the MRF is expected to be around 14 years, while collection contracts are around seven years.
Manukau consider that planning is extremely important for the procurement of services and envisage that a three-year roll-out for the recycling service is required. Components and their timeframes include (some occur concurrently):
- preparation of internal discussion papers 2 months
- completion of research papers by external parties 4 months
- discussion and agreement for a shared services arrangement with adjacent authorities 6–9 months
- elected member endorsement (different aspects throughout the process) 18 months
- development and agreement of service objectives 6 months
- preparation of tender documents 2 months
- tender process and award of contract (may include EOI and RFT) 6 months
- mobilisation and contract commencement 12 months
Choosing the right procurement process
Fonterra Co-operative Group (Fonterra) has a centre-led procurement team which carries out category reviews for the whole Australasian business. This team approaches procurement decisions from a total cost of ownership perspective, ensuring alignment with the wider strategic direction of Fonterra. So while there is a strong commercial focus, additional factors such as reduction in consumption, sustainability and increased innovation are considered.
This centre-led model may differ from that of many local authorities, whose services are usually procured by an individual authority, but the focus on sustainability and innovation provides many similarities to local authority procurement.
Fonterra’s focus on total cost of ownership and sustainability can be clearly seen in the recent review Fonterra procurement completed for waste management services. The key factors driving the review for Fonterra’s waste management procurement were:
- reduction in total waste cost
- overall reduction in waste to landfill through recycling
- alignment with the objectives of the Packaging Accord
- ongoing sustainable vendor performance through innovation.
Fonterra is also focused on reducing waste creation by encouraging its own organisation as well as key vendors to minimise waste through smarter production processes.
This approach has resulted in significant benefit to Fonterra. Over the past 2½ years Fonterra has reduced the total amount of waste to landfill by 60%. Fonterra’s waste management vendors are now working closely with the co-operative to ensure these benefits are sustained and even improved.
The Fonterra procurement process
The Fonterra procurement team uses well-defined procurement processes, including standard tender, contract and evaluation procedures. The procurement process includes a review of industry trends at that particular time and the capability of the market to meet Fonterra’s existing requirements, as well as the ability to be innovative.
Stakeholder engagement and communication is a key requirement to make sure all stakeholders are identified and aligned with proposed solutions. Business stakeholders develop and confirm the service specifications to ensure all the business drivers are met, including consideration of the future direction of the co-operative.
Waste management procurement strategy
Fonterra has a strategy to divert more waste from landfill. To achieve this, it has become more proactive in looking at and evaluating all the waste stream components. In addition, as a member of the Packaging Accord it has agreed to a number of waste reduction objectives that are considered important commercial factors. It was recognised that Fonterra’s waste management vendors need to have similar values and goals. Therefore the process used for the waste management go-to-market process was a request for proposal (RFP), and not the conventional request for tender process. Fonterra sees the RFP as a method through which it can learn from vendors and ensure the best overall solution.
The key stakeholders involved in the waste management review and their roles in the procurement process included the procurement team, the eco-efficiency team (part of Fonterra’s environmental team), and a number of key site and facilities managers. The implementation included defining a small number of targeted KPIs to drive the appropriate behaviours to ensure a sustainable lowest total cost solution. Fonterra’s KPIs for waste management are:
- minimising waste transportation costs
- minimising disposal costs
- maximising recycling
- health and safety on site
- hygiene factors.
At the end of the first year the new vendor arrangements have been considered a success. The arrangements have provided Fonterra with a strong platform on which to continue building its eco-efficiency programme and to ensure it achieves the goal of reducing the amount of waste it sends to landfill by 90% by June 2010.
Council officers providing best waste management outcomes
There were a number of key reasons why Council officers chose to follow a request for proposal (RFP) procurement process for the future processing of recyclables in Palmerston North City. These included:
- a community desire to move towards a waste minimisation and resource recovery culture, and a target recycling rate of at least 50% within five years
- adoption of a long term partnership approach with local and New Zealand recycling businesses to maximise recycling from Palmerston North and the region to provide long term improvements for the community
- a desire to retain the material in New Zealand, where possible
- current recycling processing facilities were inadequate to achieve the city’s waste minimisation objectives
- the closure of the city’s Awapuni Landfill in February 2007, which offered relatively low disposal costs
- the need to implement their Waste Minimisation Plan 2005 objective for the development of the Awapuni Resource Recovery and Renewable Energy Centre by February 2007, with complementary Council services
- Council officers’ responsibility for providing best outcomes for waste management and minimisation for Palmerston North City in the long term.
Level of service consultation
The process of implementing a new service began with public consultation via a survey in July 2005. A key outcome of this survey was that the community wanted to improve and expand waste minimisation and recycling initiatives throughout the city, including for green and commercial waste.
Waste Minimisation Plan consultation
The next step, which formalised the community’s wishes, was through the development of the Waste Minimisation Plan 2005 (WMP). Following public consultation of the draft WMP, it was evident that there was strong community support for Strategy 3: Resource Recovery Park, with a mix of business and community involvement as the desired outcome. In support of this strategy, a firm plan was developed for the construction of the Awapuni Resource Recovery and Renewable Energy Centre, with a desired opening date of 4 December 2006 to fit with the planned closure of the Awapuni Landfill on 31 January 2007. In addition, Strategy 2 of the WMP stated a desire to increase recycling in Palmerston North.
Implementing planned service provision
To overcome the inadequate recycling processing facilities in the city, Council officers developed a Request for Proposal for recycling processing services. They also indicated that there would be possible further options for service provision, including:
- green waste, food waste and compost collection and processing
- pre-sorting of recyclable material from refuse, and possible compaction of residual waste
- a recycling service review and trial of kerbside recycling systems (including mobile recycling bins) with adjacent councils.
Recycling processing services RFP process
The Council issued an RFP calling for a long term partner to process and market recyclables (preferably located at the proposed Awapuni Resource Recovery Centre), with a future link to a visitors centre at the processing site. The Council would be actively involved in the processing and sale of all or some of the recycled material.
The proposer was asked to:
- co-operate long term with the Council to maximise recycling from Palmerston North and the region
- provide a joint sorting and processing facility
- process materials to produce a high-quality recycled product
- define service levels and/or key performance indicators for sorting, processing, contamination rates, damage rates, baling, etc
- suggest improvements to the collection service
- suggest data recording system per product
- assist with community education
- include community groups in the process (the Council supports subcontracting of appropriate activities to community groups)
- share risks and returns from selling the recycled material at a product class level
- provide a risk management plan to cover:
- market volatility
- failure of the collection system
- failure of processing
- contamination and damage rates
- discuss treatment of technological and other advances, with an option for quarterly reviews.
Outcome of the RFP process
The outcome of the RFP process is that a long term recycling partner has been chosen and the Council plans to develop a heads of agreement with them, followed by a contract in a few months’ time. The services began on 1 November 2006. After the first six months settling-in period, the Council officers propose to undertake further procurement through requests for tender for specialised automated sorting equipment.
Level of service public consultation July 2005
Waste Minimisation Plan 2005 October-December 2005
RFP processing of recyclables January-March 2006
Heads of agreement and contract development April-July 2006
RFP for sorting equipment and buildings July 2006
Implementation period August 2006 to January 2007
Service start date Phase 1: 4 December 2006
Phase 2, including an office block and visitors centre, is planned for completion by February 2007