Report to:
General Committee Date
Report Authored:
SUBJECT: Waste Management Residential Collection Contract Renewal
PREPARED BY: Claudia Marsales, Manager, Waste Management Ext. 3560
1) That the report entitled ‘Waste Management Residential Collection Contract Renewal’ be approved;
2)
That the Request for Proposal process be
waived in accordance with Purchasing By-Law 2004-341, Part II, Section 7, 1(c),
Non-Competitive Procurement, when the extension of an existing contract would
prove more cost-effective or beneficial;
3)
That the Waste Management residential curbside
collection contract with Miller Waste Systems be extended for a contract term
of 8 years at an estimated total cost of $63.4 million exclusive of HST ($64.5
million inclusive of HST);
4)
That the contract be funded from the annual
Waste Management Operating budget;
5) That the CAO and Waste Management staff be authorized to execute an agreement under the terms, rates, and conditions outlined in this report, in a form satisfactory to the Town’s Solicitor;
6) That the Mayor and Clerk be authorized to execute the contract;
7) That staff complete a service level review for multi-residential, depot and Town facility collection services as Phase 2 of the negotiation process and report back on the outcome;
8) And that Staff be authorized and directed to do all things necessary to give effect to this resolution.
PURPOSE:
The purpose of this report is to outline the results of the collection contract renewal negotiations and recommend entering into a contract with Miller Waste Systems for residential curbside collection services.
BACKGROUND:
Waste
and recycling collection is one of the Town’s most visible services and the largest
service contract. Miller Waste
has been the Town’s collection provider for over several 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.
This extended
collection contract with Miller Waste Systems is set to expire on November 30,
2011. In preparation, staff presented contract renewal options at the February 22,
2010 meeting of General Committee. Council supported Option #3 which directed
staff to negotiate with Miller Waste in order that Council could then determine
to either renew with Miller Waste or issue a RFP document in June 2010.
OPTIONS/ DISCUSSION:
Negotiation meetings between Miller Waste and Town staff for the residential curbside collection services began March 9, 2010 and concluded on May 14, 2010.
An in-house negotiation team was established comprised of Peter Loukes – Director, Operations, Claudia Marsales – Manager, Waste Management, Alex Moore – Manager, Purchasing, Mark Visser – Manager, Financial Strategy & Investments and Joel Lustig – Treasurer.
As Miller Waste
currently provides two distinct collection services, the negotiation process
was divided into 2 phases:
Phase 1 -
Residential curbside collection services
Phase 2 -
Front end, cart, roll-off services to the recycling depots, apartment buildings
on
Town collection and all Town
facilities
Phase 1 negotiations
have concluded and have resulted in reduced rates and service enhancements
which are summarized below. Completion of Phase 2 requires additional study and
will be brought forward in September 2010.
RESIDENTIAL CURBSIDE
COLLECTION – FINANCIAL CONSIDERATIONS
For purpose of analysis, the figures below are exclusive of HST. However, the award will be inclusive of HST impact, which is an additional 1.76%.
Assuming the Town continued under the same parameters of the existing contract and making reasonable assumptions (i.e. Consumer Price Index (CPI) of 1.5% per year, growth in the number of households of 2% per year), the collection of organics, recyclables, residual, and yard waste would be expected to cost the Town $67.38 million over the next 8 years (spanning the December, 2010 to December, 2018 time period).
By applying the same assumptions for growth (2%) and CPI escalation (1.5%), it is estimated that under the proposed contract, the Town would now pay $63.40 million over the same 8 year period, representing a cost avoidance of $3.98 million (an average of $497,000 per year) from the current contract:
|
Year |
Existing
Contract $ 000’s |
Proposed
Contract $ 000’s |
Difference $ 000’s |
|
2011 |
7,436 |
7,140 |
296 |
|
2012 |
7,699 |
7,281 |
417 |
|
2013 |
7,970 |
7,520 |
451 |
|
2014 |
8,252 |
7,766 |
486 |
|
2015 |
8,543 |
8,020 |
522 |
|
2016 |
8,844 |
8,283 |
561 |
|
2017 |
9,157 |
8,555 |
602 |
|
2018 |
9,480 |
8,836 |
644 |
|
TOTALS |
67,380 |
63,401 |
3,980 |
The proposed contract, through negotiations with Miller included the following cost containment items to begin December 2010:
· CPI minus fuel factor agreed to for basis of future increases
· CPI adjustment on 84.5% of contract (currently at 100% of contract)
· Contract to begin a year early (December 2010)
· No CPI adjustments until Dec 2012 (fuel adjustments only)
· Fuel Adjustment calculated monthly and paid annually
In addition, the following growth related items were negotiated:
· $1.25/tonne rebate on annual tonnage over 85,000 tonne (currently no volume rebate, 2009 actual tonnage was 80,254 tonne)
· Annual rebate of $25,000 (currently no annual rebate)
The 2010 budget for curbside collections is $7.182 million. Since the new contract is commencing on December 1, 2010, the 2011 budget is now expected to be $7.140 million. This represents a potential budget decrease of $42,000.
RESIDENTIAL CURBSIDE
COLLECTION - SERVICE ENHANCEMENTS
Staff requested a
proposal from Miller Waste based on existing services plus the following
service enhancements outlined below:
|
Service Enhancement |
Impact/Benefit |
Estimated Value |
|
4 day collection schedule
|
·
Decreased
number of collection day changes due to holidays ·
Decreased
Town advertising costs ·
Re-route
November 2010 coincide with 2 year schedule mailing |
5 statutory holidays fall on Monday Value of service level estimated to be worth $100,000/yr
based on prior costing of 4 day and 5 day service Included in per tonne rate |
|
Split body rear loader vehicles |
·
2
person per vehicle - enhanced safety ·
Ability
to service high density areas ·
Reservoir
to prevent leakage and spills |
Included in per tonne rate |
|
Enhanced GPS in every vehicle
|
·
Real
time collection and route information connected to Town ACR system |
Included in per tonne rate |
|
Promotional Signage on collection vehicles |
·
Town
educational/promotional information on Miller vehicles to promote
environmental initiatives |
Included in per tonne rate |
|
After call hour service
|
· Miller call staff will respond to resident calls after hours · Tuesday – Thursday 4:30 – 5:50 · Friday 4:30 – 6:00 |
Included in per tonne rate |
|
Super mail box service
|
· Miller will service the estimated 1,000 to 1,500 recycling containers at super mail boxes |
Estimated at $1.00 stop Estimated value of $50,000/yr |
|
Weigh scales |
· Miller will provide weigh scale data and certification to the Town as requested |
Included in per tonne rate |
|
Side door service for disabled |
· Miller has agreed to provide side door collection on private property for pre approved persons with disabilities |
Program to be established 2011 |
|
Green Fleet |
· Miller to Green fleet over term of contract - bio-fuel |
Supportive of bio-fuel as available |
Cost Comparison with other Municipal Programs
The proposed new
rates compare favorably to GTA municipal rates. Staff benchmarked the proposed new
rates against recent municipal RFP’s including Halton Region and Vaughan.
|
Municipal Benchmarks |
2010 |
2011 |
2012 |
|
Municipality #A |
109.5% |
116.2% |
117.9% |
|
Municipality #B |
103.2% |
109.6% |
111.3% |
|
Municipality #C |
99.8% |
104.6% |
106.2% |
|
Municipality #D |
94.0% |
99.8% |
101.1% |
|
Markham |
100.0% |
100.0% |
100.0% |
Although rates
can be compared, the array of services offered by each municipality is more
difficult to compare. For example, collection at super mail box locations is
unique to Markham.
Contract Term
In order to amortize the cost of new vehicles, industry standard is to
award collection contracts over a fixed term of 7 to 8 years. Staff are
recommending an 8 year term. This would extend the current contract to 2018.
Clauses will be included in the contract to provide term extensions subject to
agreement by both parties.
Key Benefits of Negotiated Contract with Miller Waste
Staff is of the
opinion the rates and service levels achieved through the negotiation process provides
real value to the Town and are recommending their acceptance. Key benefits of
renewing the residential collection contract with Miller Waste include:
ü Competitive
service delivery cost, with an estimated $3.98M cost avoidance over the 8 year
contract term;
ü Improved
customer service with return to 4 day collection schedule and after hour call
service;
ü Recycling
collection at all Town super mail locations;
ü New ‘side
door’ collection program for person’s with disabilities;
ü
Contractor with history of sound operations, stability,
experience, knowledge, business reputation, and
financial stability;
ü Easy implementation. Since Miller is the incumbent service provider, there is minimal risk of service interruption;
ü
Town avoids significant additional cost of
conducting a competitive bid process.
Non Curbside Services: Multi-residential, Depot and Town Facilities
Historically, the Town’s non curbside services
were automatically grandfathered into the residential contract as new Town
facilities were opened and recycling expanded to apartments. As a result, staff
are undertaking a complete review and inventory of the non-residential service
level and pricing as Phase 2 of the contract renewal process. Opportunity
exists to improve efficiencies, increase diversion, provide specialized collection
such as electronics and bulky item reuse for this sector.
While non curbside collection
currently represents less than 10% or approximately $600K of the overall annual
collection budget, planning studies indicate that this sector will grow during
the term of the contract. At the beginning of the negotiation process, staff
requested, and Miller agreed to undertake the negotiations in two phases. Staff will complete the Phase 2 service level
review and report back to Council.
CONCLUSION:
Staff propose
authority be given to conclude a contract with Miller Waste consistent with the
terms outlined in this report. Staff request
that the Mayor and Clerk be authorized to execute the contract with Miller
Waste Systems after it has been finalized to the satisfaction of the
Commissioner of Community and Fire Services and the Town Solicitor.
HUMAN
RESOURCES CONSIDERATIONS:
None.
ALIGNMENT
WITH STRATEGIC PRIORITIES:
N/A
BUSINESS
UNITS CONSULTED AND AFFECTED:
Staff from Finance and Purchasing have been actively involved in the negotiations and will be involved in finalizing the contract as required.
RECOMMENDED BY:
Q:\Commission Share\Operations and
Asset Management\Reports\2010\Waste\Waste Management Residential Collection
Contract Renewal.docx
Waste%20Management%20Residential%20Collection%20Contract.pptx