Report to: General Committee Date Report Authored: December 16, 2009

SUBJECT: Waste Management Collection Contract Renewal Process

PREPARED BY: Claudia Marsales, Ext, 3560

Alex Moore, Ext 4711

RECOMMENDATION:

1. That the report entitled ‘Waste Management Collection Contract Renewal Process’ be received;

2. That Option #1 as outlined in this Report be approved;

3. That the Manager of Purchasing be authorized to issue a ‘Request for Expression of Interest’ (REOI) for the provision of 3-stream collection services for Markham;

4. That a technical staff committee with representatives from Operations, Finance, Purchasing and Legal be established to oversee the process;

5. That staff report back to Council on the REOI results and subsequent process to finalize a contract for 3-stream collection services;

And that Staff be authorized and directed to do all things necessary to give effect to this resolution.

1. Purpose 2. Background 3. Discussion 4. Financial

5. Others (HR, Strategic, Affected Units) 6. Attachment(s)

PURPOSE:

The purpose of this report is to provide an update on the Town’s existing collection contract term, and recommend contract renewal options.

BACKGROUND:

Markham’s 3-stream collection services are provided by Miller Waste Systems under a contract due to expire on November 30^th, 2011. The contract does not contain provisions to extend the contract term beyond the 2011 expiry date.

This contract provides waste management collection services for all single family units, apartment buildings, condominiums, BIA’s, white goods, municipal facilities and leaf and yard materials with a 2010 budget amount of $7,658,434.

A lead time of a minimum 16 months is required to transition to a new collection contract. This timeframe takes into account time required to prepare a bid document, 6 month timeframe to order and obtain a new collection fleet, and other transition issues such route reconfigurations and transfer station logistics.

Contract Renewal Process	Key Dates
Issue REOI	February 2010
Report REOI results to Council	April 2010
Prepare documents	February - June 2010
Issue bid documents	June 2010
Bidders meetings/Bid Evaluation process	June - October 2010
Prepare Report for Council approval – award contract	March 2011
New collection contract begins	December 1, 2011

In order to complete this process by November 2011, it is necessary to select the preferred contract renewal option:

• a competitive bid process – REOI and RFP or,
• a competitive bid process – REOI and Tender or;
• negotiation with preferred supplier - Miller Waste Systems

Outlined below are the opportunities, risks, and value of each option.

OPTIONS/ DISCUSSION:

Waste and recycling collection services have become financially risky as a result of soaring insurance and fuel costs, increased regulations, an ageing work force and WSIB claims, and the need to supply expensive specialized collection vehicles.

‘Mom and Pop’ waste management companies are a thing of the past, replaced with multinational or large private waste management companies who are financially able to manage the risk. Several years ago, large Ontario municipalities were challenged to receive competitive collection bids from qualified vendors. Recently there have been indications of a reversal of this trend. After decades of consolidation and instability in the industry, several new players have entered the marketplace.

Currently there are at least 6 waste management collection companies operating in Ontario of sufficient size to provide collection services to municipalities the size of Markham.

SERVICE PROVIDER	EMPLOYEES & FACILITIES	SIMILAR RESIDENTIAL CONTRACTS
Miller Waste Systems	450 Transfer /recycling facilities	Markham, Richmond Hill, Vaughan, Halton Region, Pickering
Turtle Island Recycling	250 Recycling facility	Northern 6 York municipalities, Toronto (Etobicoke)
Waste Management (Canadian Waste)	3,400 116 operating locations 20 recycling facilities; 18 landfills.	Region of Peel
National Waste Services	200	Hamilton, Durham Region (Blue Box: Whitby and Oshawa)
Modern Corporation	500 Transfer facilities and landfill	Region of Niagara
BFI Canada	500+ Own operate transfer/landfill	Ottawa, Kitchener, Kingston, Toronto –commercial collection

A competitive bid process is one of the best methods for leveraging negotiating ability and purchasing power with potential vendors and insuring the prices received reflect current market pricing.

OPTION #1 – Competitive bid process including issuance of a REOI and RFP (Request for Proposals)

A RFP is public invitation to suppliers to submit proposals and is used when there may be alternative ways to meet a specific need. The suppliers are invited to respond to the proposal and propose what they consider to be the best way of meeting the specified needs and requirements. Potential suppliers describe how their services, experience, equipment, or products can meet the request and at what cost.

The RFP process brings structure and accountability to the public procurement process while providing the flexability to weigh innovation and value in addition to cost as part of the evaluation criteria and award decision.

When awarding contracts in the RFP process to other than the lowest bidder, the determination is based on several factors including qualifications, safety record, similar projects, references, fit to the organization's goals and objectives, and cost. Each criteria is assigned a maximum score. The evaluation team reviews each submission and assigns a score for each category. At the end of the process it is the highest ranked proposal that would be recommended for award and in some cases this may not be the lowest cost submission.  

The purpose of advertising and issuing an REOI prior to a RFP is to identify potential service providers and signal to the marketplace Markham’s intentions. Responders to the REOI will be requested to provide: company profile, relevant experience, proof of ability to provide Performance Bonds/Letters of Credit, and facility locations. Staff will report to Council the results of the REOI process and outline next steps in the process.

The RFP process can be a fairly complex, high-profile activity involving multiple stakeholders and requires a significant investment in staff resources.

OPTION # 2 – Competitive bid process including issuance of a REOI and Tender

An invitation to tender is a formal, less flexible sealed-bid process. Bids and prices are provided without condition and the award is made without negotiation. Submissions are compared to the specifications and criteria contained in the tender documents. The contract is awarded to the vendor whose bid meets the specifications and is the lowest cost.

Risks of the tender process include: receiving only one or two responsive bids, potential price escalation, implementation challenges if a new vendor is selected, and the uncertain nature of the future relationship between a new vendor, the Town and its residents.

A 16 month timeline will be needed to complete Option #1 or #2. This allows sufficient time for development of bid specifications, preparation of contract documents, contract award by Council and lead time for the selected vendor to obtain new collection vehicles. Delivery of new vehicles can take up to 6 months after contract award by Council.

OPTION # 1 & #2 ACTIVITY SCHEDULE	COMPLETION DATE
Issue REOI	February 2010
Report REOI results to Council	April 2010
Issue bid documents	June 2010
Council approval – award contract	March 2011
New collection contract begins	December 1, 2011

If Options #1 or #2 is the preferred approach, the bid documents must be issued in June 2010, process completed, and contract awarded and approved by March 2011. Any slippage of the schedule could impact the ability to complete the process, secure a new collection fleet and have a vendor in place by the December 1, 2011 deadline.

Both Options #1 and #2 comply with the Town’s Purchasing By-Law to obtain competitive bids for goods and services over 25K.

OPTION #3 – Negotiation with preferred supplier Miller Waste Systems

Miller Waste has been the Town’s collection provider for over 20 years with a history of sound, reliable operational performance. In 2003, Council approved extending (in mid term) the 1999 contract to 2011, in order to launch ‘Mission Green’ and provide green bin organics collection.

Miller Waste has a reputation for excellent customer service and they have worked cooperatively with the Town on numerous pilot projects and new programs throughout the term of the contract. The Town’s ACR program is directly linked to Miller which provides timely response to day to day collection issues. Current operations are seamless and efficient with value, not lowest cost, a primary driver.

If Option # 3 is selected, contract rates, new or enhanced programs, and service levels can be benchmarked against similar recent municipal contracts (RFP issued by Halton Region and Vaughan) and desired service enhancements negotiated as part of the contract development process. A negotiated contract can realize the same favorable and comparable terms achieved through a bid process.

Authority exists to award municipal contracts without a competitive process, under the Town’s Purchasing By-Law Section 7.1 (c):

“When any of the following conditions apply, the Treasurer and the Manager of Purchasing may, in consultation with the appropriate Director, negotiate a contract for the supply of goods and services without a competitive process. The condition is as follows: 

(c) When the extension of an existing contract would prove more cost-effective or beneficial;”

and the direct approval of Council.

In order to amortize the cost of new vehicles, industry practice is to award collection contracts for a minimum fixed term of 7 years. This would extend the current contract to 2018.

If Option #3 is selected, staff strongly recommends a parallel process be undertaken. The REOI will be issued and bid document prepared at the same time negotiations are underway. Negotiations must be completed and the final outcome approved by Council in May 2010 to provide time to complete the competitive bid process as outlined in Option #1 and #2 if negotiations are unsuccessful. Failure to bring negotiations to a close by May 2010 will not leave sufficient time to complete a competitive process and could compromise staffs ability to negotiate an advantageous contract.

OPTION # 3 ACTIVITY SCHEDULE	COMPLETION DATE
Begin negotiations to extend contract	February 2010
Issue REOI	February 2010
Complete negotiations	May 2010
Report to Council – extend contract or proceed to bid	May/June 2010
If negotiations fail – Issue bid documents	June 2010
Council approval – award contract	March 2011
New collection contract begins	December 1, 2011

Staff Recommends Proceeding with Option #1

Staff recommends proceeding with Option #1 – RFP in preference to a Tender. The Tender process is seldom used by municipalities for collection services. The RFP process provides flexibility, and signals to the marketplace transparency and fairness in the award of contracts for public goods and services, and may create real value for the Town. Options #1 and #3 provide the flexibility needed to be able to respond to the fast changing, dynamic waste management industry.

It is important to note that Waste Diversion Ontario (WDO) considerers obtaining competitive bids for waste management collection and processing services a ‘Best Practice’ and starting in 2010 will link WDO funding payments to municipal compliance.

Staff Team will Oversee Process

It is recommended that an in-house staff team be formed to evaluate the REOI responses, develop the bid documents and oversee the process. In order to proceed with a competitive bid process there is preliminary work that must be completed to create a credible bid document that will elicit high quality proposals and competitive prices.

The in-house staff technical team will include staff from Operations, Waste Management, Finance, Purchasing and Legal. Assistance from Development Services and Auditor General will be obtained as required.

CONCLUSION:

Waste and recycling collection is one of the Town’s most visible services and largest contract. Markham residents are proud and passionate about their recycling and waste collection programs and demand a high level of service, including good housekeeping practices, clean vehicles and reliable service.

Staff is recommending proceeding with Option #1 – REOI and RFP to select a vendor which provides the best overall value to the Town based on experience, knowledge, business reputation, and financial stability, length of time in business, references and cost.

If Council wishes to defer or proceed in a different direction, and if the March 2011 date to award a new contract cannot be achieved, Staff will need to seek a one year extension from Miller Waste Systems to the existing contract to ensure service continuity.

FINANCIAL CONSIDERATIONS AND TEMPLATE:

None.

HUMAN RESOURCES CONSIDERATIONS:

None.

ALIGNMENT WITH STRATEGIC PRIORITIES:

N/A

BUSINESS UNITS CONSULTED AND AFFECTED:

Finance and Legal

RECOMMENDED

BY:

________________________ ________________________

Claudia Marsales Peter Loukes, P.Eng.

Manager, Waste Management Director, Operations

________________________

Brenda Librecz

Commissioner, Community

& Fire Services

Q:\Commission Share\Operations and Asset Management\Reports\2010\Waste\Waste Management Collection Contract Renewal Process.doc