talking trash: outsourcing waste management services · 2020. 6. 2. · new directions were sought...

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Talking Trash: Outsourcing Waste Management Services:

Observations and Lessons Learned by

City of Windsor and Niagara Region

Shelby Askin-Hager, Manager of Purchasing and Risk Management, City of Windsor

Elizabeth Isajiw, Legal Counsel, The Regional Municipality of Niagara

For IMLA, June 16th, 2011

Overview

In 2010, both the City of Windsor and The Regional Municipality of Niagara undertook procurement

processes for new waste collection contractors. Each municipality faced particular issues and pressures

related to the process, and in light of the continuing efforts to increase and maximize diversion of

material from landfill sites and recycling of all possible material streams, the waste collection servicing in

each municipality was a sensitive political issue, especially in a year where there would be municipal

elections.

The enterprise of garbage and recyclables collection and management is the single largest ‘business’

each municipality undertakes and a service which is vitally important for every resident and for each

community as a whole. Waste collection is often a symbol of the nature of municipal service, and any

change in the management of that service creates both operational and political concern.

New directions were sought in each case- privatization of the service previously provided by unionized

City of Windsor employees, and an expansion and changing of service levels in both municipalities.

Management of the business of waste collection had to be in line with increasing provincial mandates

requiring stewardship by the industries which create certain waste stream materials. There was a

recognition of the opportunity in available new technologies in fleet and management tools. Contracts

had to accommodate the shifting markets for recyclables. The procurement process would be run in the

context of the sharpened legal remedies courts were making available under a broad range of

circumstances.

Coming together to compare and learn from each others’ experiences, Niagara and Windsor staff found

several points of commonality gathered under the headings outlined with the aim of sharing how the

relevant legal principles were applied as they were lived out in the practical on-the-ground context and

some lessons learned for next time.

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Part I - Starting the Project

Forming the Project Team

No question, waste collection, landfill and recycling is big business today. A moderately-sized single tier

municipality, Windsor had never considered an outsourcing of this magnitude previously and until 2011

maintained collection by in-house union staff under what was arguably an efficient model for municipal

provision of this service. In Niagara, waste collection had been uploaded to the regional tier of local

government from its twelve local municipalities under provisions of the Regional Municipalities Act1,

which were amended by the Municipal Statute Law Amendment Act, 1993,2 providing in section 150 for

a double majority voting scheme to be used where an upper tier municipality could assume all waste

management duties. This transfer of powers was accomplished in 1996; it was a contentious set of

votes at the time and continues to provoke occasional questions about the efficiencies and efficacies of

the enterprise. This would be one example of the ongoing strength of local municipal identity within

Niagara Region, even though the regional tier celebrated its 40th birthday in 2010. For both

municipalities, the importance of conducting the procurement correctly could not be overstated.

The Windsor project team was anchored by the City Engineer and his executive initiatives coordinator,

the operations managers from the solid waste department, the Purchasing Manager, internal legal

counsel and a team of counsel from Miller Thomson LLP. Other finance, human resource and

operational resources joined the team at various points to provide support.

Niagara was not re-creating the wheel the way Windsor was; rather, it was seeking to use the

competitive procurement process to obtain the best price for the best service. It had been seven years

since the last competitive process, and the incumbent contractor, who was locally based, would likely

bid again and had loyal support in many corners for a job well done. The competition in the

marketplace was plentiful for this large contract and the bids would take an investment of months of

time and funding to put together. The process had to be fairly run so as to be defensible to answer to

the inevitable unsuccessful bidders. Some of the key staff had changed, some had been in place for the

last procurement. There was far more assistance available from internal legal counsel as the size of this

division had exponentially expanded in the intervening years. And the law on procurement had

expanded, so a more sophisticated and finely tuned process with good documentation was known to be

required.

Waste management staff worked on the scope of work, which was very complex in this situation, and

internal legal counsel started on the request for proposals (RFP) process terms as well as a fully drafted

contract which would be presented right in the RFP document. The intended approach was to reduce

uncertainty for the bidders despite the complexity of scenarios they had to bid on, so that no bidder

would find they had to increase their prices to control for risks they could not foresee. The team was

1 R.S.O. 1990, C. R.8,

2 S.O. 1993, C. 20

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led by the Public Works Waste Management staff who would manage the contract once awarded, with

Purchasing and Legal working collaboratively on the drafting. External legal worked with internal legal

and the operational team did their research and drew upon their considerable experience in the

industry and with the previous Niagara contract, all to improve and reformulate the last RFP document

and create an invitation for proposals which would elicit efficiency, innovation and process

improvements in all areas.

At the outset Windsor was aware that its external counsel would likely be forced to withdraw due to

conflict of interest issues following issuance of the tender as it also represented a major player in the

waste industry. Understanding this, the project team worked together intensely with outside counsel in

order to gain the same level of intimacy with the documents. While the “page-turn” approach to

reviewing this type of complex technical document is often seen as a poor use of time, in this situation it

was the ideal means of bringing all parties to a common understanding of both the service to be

provided as well as the rules around the procurement. Windsor did not use outside counsel to manage

or report on the tender, only to prepare it, and did so successfully due to the cohesiveness of the project

team.

Niagara worked with Paul Emanuelli and his Procurement Office for a review of the first draft and advice

on the set-up of the procurement document with a view to creating a readable, workable document.

This experience helped avoid many potential pitfalls and assisted with language and readability. Counsel

provided specialized legal advice once the bids were opened and satisfied various questions as they

came up, which was very valuable- it is always a fine line to walk to avoid getting into potentially

litigious situations with either the apparent winning bidder or the layers of unsuccessful bidders. Some

in camera legal advice at the Council meeting where the successful proponent was to be chosen was

needed and useful.

In Windsor, working concurrently under the direction of the City Treasurer was a group of financial and

human resources staff gathering information to create the business case. Determining the actual

current cost of services plus the cost of outsourcing the service would form the basis of the

recommendation to City Council. Initially it was recommended to Windsor to engage outside advisors to

prepare this document, but the decision was made to rely on the expertise and institutional knowledge

of internal staff. The procurement team and the business case team carried out their functions

independently so as not to compromise the integrity of either process.

The Windsor council report was prepared by all participants in all aspects of the process. It was lengthy

and extremely detailed. Alongside the financial recommendations flowing from the numerical

comparison was the true crux of the issue – human resources management and potential scenarios for

dealing with displaced employees. The Niagara strategy was almost two reports in one- there were

service level changes being recommended but which had to be debated and chosen by Council before

the winning scenario in the RFP could be identified and the winning proponent confirmed.

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Tender or RFP?

The key difference between a tender and an RFP is the flexibility- or lack thereof- in the solution. A

tender is utilized when a specific solution is sought and the primary criterion for determination is price.

An RFP is better suited to situations where a range of solutions may satisfactorily solve a given problem,

and the criteria for determination are varied, including significant qualitative elements.

Despite the fact that the RFP has often been seen as the less rigid cousin of the tender, it has many of

the same interpretive and binding elements that characterize the tender. While Ron Engineering &

Construction (Eastern) Ltd. v. Ontario3 is recognized as the basis for tender law in Canada as well as

much of the Commonwealth, its underlying principle being the concept of a binding contractual

relationship governing the obligations and the relationship between the buyer and any compliant bidder

during the procurement process exists in the RFP context as well. The fact that an RFP often proceeds in

stages allows some flexibility in dictating when that binding relationship comes into being, but does not

generally do away with it altogether. Many of the traps and pitfalls of tendering apply equally strictly to

RFPs as well.

In any competitive bidding process, certain duties are recognized to apply under the broader description

of the general duty of fairness. This duty includes the duty to treat bidders fairly and equally, the duty

to run a fair process, the duty to disqualify non-compliant bidders, the duty to award to the winning

bidder, and the duty to award the contract as tendered. Regardless of whether the vehicle chosen is a

tender or an RFP, the terms of the document combined with the common-law requirements, treaty

obligations under the Agreement on Internal Trade, and applicable purchasing bylaws create a strict

regime in which the procurement must be conducted.

Because a tender is a bid for a clearly-defined good or service, the bulk of the resulting contract is pre-

determined. In the case of an RFP, negotiation often plays a role in settling the final terms of an

agreement. This flexibility can be either an asset or a liability depending on the needs of the purchasing

organization.

For the City of Windsor, the decision to outsource waste and recycling collection was not a foregone

conclusion. By means of a Council Question posed to administration in the summer of 2009 and a

subsequent resolution in November of that same year, Council began the process of exploring the

option without committing to actually changing models. Historically, Windsor has a strong labour

background and this move represented a philosophical shift.

While the political questions were beyond the scope of administrative responsibility, the goal of the

procurement process was to bring forward a comparison of the costs of internal service provision with

outsourced service provision. To do this, Windsor required two things of its procurement process: an

equivalent comparator as to service levels, and certainty as to price and terms. The political sensitivity

further demanded that the role of administration be as objective as possible in gathering the

information and making the business case.

3 [1981] 1 S.C.R. 111 (S.C.C).

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Windsor recognized that flexibility is an important tool to achieve optimum results from bidders;

allowing a range of proposed solutions through an RFP could conceivably have resulted in more

favourable systems or terms than those prescribed by Windsor. In order to compare the cost of the

existing service, however, it was necessary to ensure that the bidders were bidding on a set of

specifications and terms as close as possible to the conditions under which Windsor delivered the

service using its own forces. The best means to make an equivalent comparison with hard numbers and

little administrative intervention was to go to tender. In order to create a comprehensive tender and a

solid process, significant work was invested in the front end as the nature of a tender required that

nothing could be left for future determination.

As in any major procurement, the qualifications of the bidders had to be taken into consideration.

While an RFP could absorb the evaluation of bidder ability into the process as one of the evaluation

criteria, a tender does not extend so far. Instead, a prequalification process was established to vet the

experience, ability, references and qualifications of all interested bidders to choose those who would

participate in the tender. The prequalification process took place before the imposition of the

traditional Ron Engineering “Contract A” scenario, much like in most RFPs in which the binding

relationship commences as the opening of the cost envelope (Envelope 2).

The compressed timeline required that bidders submit both their prequalification information and their

bid at the same time. The bids remained sealed and were kept in a safe pending the prequalification

process. Prequalified bids were opened at a public opening, while non-prequalified bids were returned

unopened to the bidders. The practical result of the prequalification and tender process was that it

looked strikingly like an RFP: the qualitative evaluation determined those bidders with whom the City

would be willing to contract, and the low bid then determined the winner. The binding relationship

arose at the same time the financial aspect came into play, much like it does in a well-structured RFP.

In Niagara, using an RFP structure was unquestioned as presenting the best opportunity for strong

proposals, given its use in the previous contract. Room for innovation in service delivery routing, types

of trucks, formulation of work force and options for the use of both environmentally sound and

computer-age technology were underlying reasons for use of the RFP vehicle. There was a tender

concept at work within the RFP structure, though, since the principle that low price would win the

contract was the purpose of the two envelope system in this case. The proposal, with certain

mandatory terms and then the outline of how the work would be accomplished and how it would meet

general specifications for ability and experience, equipment provision and maintenance, required GPS

system, personnel, customer relations and service, hours of collection, containers, and provision of

many different types of actual collection services for both waste and recyclables, was all to be in

Envelope 1. Price for the entire service was in Envelope 2. If the proponent obtained 800/1000 points

on the evaluation grid for its Envelope 1 statement of work, it would be invited to ratify its price bid and

the bid would be opened. Clear wording was contained in the RFP to state that there would be no

“Contract A” relationship until the Envelope 2 was opened. The principle at work in this structure was

that any bidder which could get 800/1000 for the technical merits of its proposal could be trusted to be

able to do the contract work, even though their plans to do the work would be unique to them, and as

long as performance standards could be met, it was then affordability for the taxpayer which was key.

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It is interesting that both procurements ended up with the use of a similar structure and for similar

reasons, even starting from opposite ends of the spectrum in terms of instrument. The contract

interpretation principle that substance is far more important than form comes into play in this setting,

as in so many others.

Drafting the Procurement Document

The procurement document is the legal and practical basis upon which everything else is to be

considered. The creation of the document has to meet operational needs, anticipate bidder conditions,

and be as self-contained as possible.

Both Niagara’s RFP and Windsor’s tender contained three distinct but equally important drafting

elements: the specifications, the instructions to bidders and the final contract for services. The primary

risk of dealing with a tender is the need to ensure that the specification has considered all the potential

issues that might arise in the execution of the prescribed solution. Using a tender for service provision

means that all aspects of the service specifications have to be clearly and unequivocally spelled out in

the face of a large number of variables; unlike in an RFP, there is no provision to negotiate items that are

unclear. The supplier is being asked to commit to a price based on a set of terms and because of this the

baseline standard of performance needs to form part of the specifications. In fact, by its substance,

Niagara’s RFP did not allow for negotiation with bidders per se, though there was room for the

presentation of alternative proposals and there were many services for which proposals and prices were

required though their award would be dependent on a local municipality approving the price. The

contract price upon which the competition was based included certain Region-wide services, but

historically the local municipalities had requested and paid for specialized services, for example, bins in

parks or particular collection in business improvement areas.

A notable risk in either an RFP or a tender is the danger that the document will be so complex or difficult

to follow that bidders would not be able to submit compliant bids. One of the greatest challenges in

drafting the procurement documents for Windsor’s tender was to take a very particular set of needs and

distill them into a user-friendly format. In a tender, there is little room for error by a bidder and no

opportunity to correct mistakes in the submission. The exercise was a worthwhile one in that the only

errors noted were not errors in interpretation but simple carelessness. Niagara was engaged in the

same exercise to ensure readability in its complex three-collection-area multi-service-scenario RFP.

Correction of errors was restricted by the terms of the Region’s purchasing by-law, where no distinction

is made between tenders and RFPs. Errors like missing bid security or lack of signatures to bind the

corporate bidder would be fatal disqualifications, but other areas where clarification might be needed

were covered by a specific clause which allowed for additional information to be requested by the

Region, a clause which was used more than once.

The third major drafting element of both the tender and the RFP was the contract. In many areas in the

public sector, the contract is required to be contained in the bid documents, although that is not

generally the case for municipalities at this time. Despite time constraints which would have been

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better served by including only mandatory terms and settling the remaining non-essential terms after

award, the full contract was prepared and included so as to ensure that there was no ambiguity around

the service expected to be provided, and further to reduce the time between award and execution of

the contract, being mindful of the looming municipal elections. While this put significantly more

pressure on both teams at the front end of the procurements, it allowed both processes to unfold

cleanly. It also provided much-needed certainty to Windsor’s Council as to what the outsourced service

provision would look like. For Niagara, it allowed for reassurance to Council regarding the successful

proponent that there were sufficient already-set protective terms in the contract which could be called

upon as Council considered that the incumbent contractor would now be replaced by a new provider.

Certainty as to costs for insurance, contract securities and fuel could be factored into bids by bidders,

hopefully resulting in bids which provided best value for the best price.

One criticism of a tender4 is the lack of flexibility to allow for creativity and cost reduction. Windsor

tried to address this problem by building processes for change and incentives for realizing cost reduction

into its contract. While it is not yet known whether this will result in any meaningful changes, the

motivation to make the changes has to exist for the supplier and can be recognized in the contract.

Inclusion of Privilege clauses

As the tender was, in many ways, an experiment for the City of Windsor, it was vital that Windsor

retained the right not to award were it to determine that it did not wish to go through with the

outsourcing. Niagara, similarly, wanted to retain its ability to cancel the process if an acceptable

proposal was not evident. Although the Supreme Court had already made its views known on privilege

clauses and freedom of contract via Tercon Contractors Ltd. v. British Columbia (Transportation and

Highways)5, it remains an open question as to what those views actually mean in practical application. It

is submitted that the Supreme Court simply did not wish to dismantle the Ron Engineering model and

made its decision for valid public policy reasons but hid that reality behind a tortuous interpretation of

the applicable exclusion clause. In the end, the only certainty brought about by Tercon is that privilege

clauses are not a guaranteed exit from a procurement, should be drafted with caution, and are to be

used only when absolutely necessary.

Windsor drafted its most important privilege clauses as specifically and clearly as possible to allow for

the fact that Council had to make a political decision as well as a financial and operational one. The

exclusion allowed that Windsor would not be required to make an award even if the business case

demonstrated that one or more bids offered a lower price than the current cost of services. It is

important to note that the exclusion did not purport to allow Windsor to defy the conventional laws of

tender by choosing anyone other than the low bidder. Council retained the ability to choose whether to

make an award or not, but not to whom the award would be made. The tender determined the low

4 D. Chamberland, “Procuring for Solid Waste Services – How to establish a successful long-term relationship”

Municipal World (May 2011) 35. 5 [2010] 1 S.C.R. 69 (S.C.C.).

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bidder to be compared against the business case, and the resulting decision for Council was either to

outsource or remain with the status quo.

Niagara’s RFP had several exclusion clauses, as well as being subject to a provision in its purchasing by-

law which allowed Council to disqualify bidders for stated reasons. It was a point of discussion whether

it would be prudent to use the purchasing by-law disqualifications given the Tercon outcome, though

notice that all purchasing by-law provisions applied to the RFP was given in the document, as well as

being a requirement of the by-law itself. Would such provisions, sitting outside the evaluation criteria in

the RFP, bring on claims of use of undisclosed criteria or unfair or unequal treatment? Perhaps this sort

of concern is behind the proactive use by municipalities of independent adjudicators called fairness

advisors to review RFP documents and processes and opine on the fair and equal application of both to

every bidder. This was the subject of a recent Municipal Law Departments Association of Ontario email

chain.

There are many cases in which the courts have been asked to adjudge the use of clauses such as waiver

of non-compliance or cancellation with subsequent re-tendering or negotiation and have upheld the

right of the owner (often a municipality) to use its clauses. In a novel approach in Russell (Township) v.

Dalcon Enterprises Inc.6, the Township asked the Court for its declaration as to which of two bids it

should accept. The Court refused to assist the Owner with the exercise of its discretion, instead noting

that they would “undoubtedly seek the advice of competent counsel, and...be guided by the many

principles set down by the various authorities” [par. 11].

Owners must, indeed, make their own determinations about the outcome of their procurement process,

but also must wend their way regarding compliance, error, fair treatment, and other issues even where

it can be difficult to find a case on point or to be certain which case law trend might prevail or apply.

Overall, the principles of fair and equal treatment lead to an absolute need for clear language in

procurement documents as the best way to set out intentions for process and decision making, though

there will be a need to interpret a situation once one comes up. Spending the time up front on the

formulation of the documents, both procurement and contract, is well worth the effort, though,

providing a solid basis for all future contract management issues.

Key Points:

The project team can make or break a procurement; make sure all relevant areas are

represented, appoint a coordinator, and ensure information and knowledge is shared fully.

6 2009 CanLII 31597 (ON S.C.)

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Rushing a complex document is almost always a guaranteed means of creating a disaster, but

timelines can be successfully compressed within reason with the use of a committed team and

the right professionals.

External advisors are invaluable on a complicated procurement, both for the extra capacity

needed for the project and for the specialized advice they can offer.

There is no one format which is preferred for this type of procurement; rather the preferred

format depends on the needs of the municipality using it.

An RFP is not less onerous or less binding than a tender.

Depending on structure, there may be no practical difference between a 2-envelope RFP and a

tender with a prequalification component. There is no irony in the fact that both Niagara and

Windsor ended up with a format and process rules which looked quite similar; it is the actual

form with clearly stated rules which matters, not what you call it.

Privilege clauses should only be used with caution, but will continue to be desirable for

municipalities in preserving some flexibility in case, despite careful planning, bids arrive which

will not fit the needs of the project. Clear outline of such exclusion clauses is the key to their

enforceability.

Part II – Evaluation

Prequalification/ Envelope 1

As noted previously, both Windsor and Niagara used a two-step process to first identify acceptable

contractors and then to choose the contractor with the most advantageous pricing.

While Niagara used the first of two envelopes in an RFP to qualify its bidders, Windsor utilized a

separate prequalification process. The requirements of the prequalification submission were

established in the document, and included information about the company history and experience,

labour and health and safety environment, customer service practices and procedures, and equipment

and plant.

As part of the Windsor prequalification, bidders were asked for disclosure of any Government Ministry

orders as well as a five year litigation history with clients. The orders were assessed for relevance, and

the litigation history was intended as a glimpse into typical client relationship for the bidder; a bidder

who had to frequently defend against breach of contract lawsuits may have warranted investigation as a

performance risk, whereas a bidder frequently initiating lawsuits against clients may point to client

relations issues. These requests were not seen as significant aspects of the prequalification, but rather a

supporting collection of information in the process.

Unfortunately, it was discovered that the recommended bidder did not disclose the existence of certain

litigation during the five year period and the issue was only brought to light during the Council debates

on contract award at which time the principal of the bidder was questioned by members of Council on

the company’s litigation history. While administration determined that the litigation was not material

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to the contract with Windsor and would not have resulted in a failure to prequalify, the issue caused

significant difficulty and very nearly derailed the entire process. While it was not expected that anything

would turn on the answers to these questions, the resulting problems highlight the need to ensure

clarity in all requirements.

Niagara found that not all its bidders obtained the needed points totals in order to proceed to the price

envelope ratification and opening, a sign that the process was working to help narrow the qualified

candidates. Both of the two non-qualifying bidders made requests for debriefing as they were entitled

to under the process. The procurement document had made it clear, however, that no “Contract A”

relationship existed prior to the price opening, thus any remedy rights were extremely limited.

References

The technicalities of waste hauling are limited. Once it is determined that an operation has the forces,

equipment and experience to collect garbage or recyclables, what sets one hauler apart from another?

Examining complaints logs, customer service records and service initiatives help to understand an

organization’s document processes, but there is no objectively quantifiable standard applicable to waste

hauling. Instead, the most valuable tool is the reference.

The use of references is both vital and problematic. It is one thing to know what standard a company

sets for itself, but another to know whether it meets that standard. Communicating with municipal

counterparts is a means of ascertaining how a company actually performs on the job but the approach

to gathering this information must be fair and systematic. While a written response to pre-set questions

is probably the least biased means of assessing performance, a conversation often leads to more free

expression of impressions.

No matter the means chosen to obtain references, fairness to the bidder is paramount. The same

questions should be asked of all references, and all adjudicators should have equal access to the

answers, be it by receiving the written response or else by being present during the interview. The

procurement document must accurately disclose all evaluation criteria, including the use of references

or third party information. A sufficient number of references should be reviewed to give an accurate

picture and the materiality of the information being offered should be considered.

References were a difficult point for Niagara’s Council. References made up 10% of the points in the

evaluation criteria, but the Niagara purchasing by-law allowed an overarching ‘veto’ power. Council did

not use the by-law clause. But the concern raised by this situation led to a subsequent question to staff

to consider how references should best be done in the future. Objective, predetermined questions and

a pre-approval by Council of the evaluation criteria grid on larger or controversial projects going out for

competitive procurement are some of the ideas being discussed in the committee which has been struck

to address the question.

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Clarification Method

Because of the tender structure, the clarification process prescribed by Windsor occurred in the

prequalification stage. The procurement documents clearly disclosed Windsor’s right to contact any

bidder for clarifications while not obliging it to do the same for any other bidder. Despite these reserved

rights, it was necessary to ensure that any request for clarification did not extend so far as to permit a

bidder to rehabilitate a losing submission. Any need for clarification had to be agreed upon by the

evaluation team, including the form of question to be put to the bidder. Questions were provided by e-

mail and a written response with a set deadline was required.

Niagara had a right to seek clarification and supplementary information relating to the clarification in its

Envelope 1 process which was very similar to Windsor’s, and which did need to be used. The right to

interview any or all Proponents was also reserved, as was the right to revisit the Proponent’s evaluation

result in light of the clarifying information. It is always the case that situations can arise which cannot

have been anticipated and these rights allow for investigation rather than resulting in disqualification.

There is always pressure from operational groups to proceed with a given procurement practice even

where there is unclear or missing data, so these clauses allow for limited abilities to continue on with a

process despite small flaws. Much careful analysis should be done as to whether the fairness and equal

treatment principles will be violated, but a balance between rigour and flexibility serves the Owner best

in terms of not having to abandon a process which is not perfect but is not fatally flawed, thereby losing

that time and effort and having to start again. Here is where specialized legal advice is very useful and

reference to known cases must be made.

Key Points

Despite the fact that the prequalification or Envelope 1 evaluation may be outside of Contract A,

rules of fairness still apply

If information is being requested, understand why you want it and how you intend to use it

Information gained during the qualitative analysis may become relevant in the final decision

A clearly-defined right to clarify is useful in most situations, but that right should only be

exercised with caution and cannot extend to bid-repair

Part III – The Final Decision

Political Role in Procurement Process

Madam Justice Bellamy was clear in her Report recommendations that politics has no role in the

conduct of any procurement.7 Equally clear, however, is the fact that the higher the political stakes, the

more likely it is that elected officials will want to have input. This input is appropriate in the planning

stages of a procurement – understanding the wants and needs of Council and incorporating them into

the procurement avoids difficult questions or challenges later. Maintaining separation between Council

7 Bellamy J. Report on Toronto Computer Leasing Inquiry (12 September 2005)

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and administration during a sensitive or controversial procurement is key to protecting a municipality

from the types of problems that result from political intervention in a procurement process. Once the

process is completed and the recommendation made, Council once again becomes the final decision

maker, although it must clearly understand the boundaries of this role and the consequences for

exercising its decision-making power.

It appears to be a trend in both corporate boards as well as the municipal councils for there to be

greater scrutiny and management of the operations of the enterprises. This would be fall-out from the

mismanagement disasters such as Enron or e-Health, just to name a few. There is also pressure under

the Municipal Freedom of Information and Protection of Privacy Act8 to make procurement processes

within municipalities more transparent. Transparency to taxpayers and other stakeholders has to be

balanced with the right of bidders to keep their commercially sensitive information private. Municipal

Councils must be briefed on the advisable limits of their involvement in procurement matters and

careful crafting of privacy/confidentiality clauses must state clearly that the final decision to hold back

information does not rest with the municipality per legislation.

Careful briefing, often solicitor-client-privileged, must be done with Councils and staff to ensure the

avoidance of potential land mines seen in case law. Here is where both internal and expert external

legal counsel worked very hard for Niagara. Informed decision makers and staff are more likely to be

able to stay within the proper procurement operating principles of Canadian law. Exploring of concerns

about the process and bidders is going to be requested by Councils, and was, but careful separating of

roles seemed to work.

Service Level Decisions

Unlike Niagara, Windsor did not wish to consider changes in the frequency, manner or even scheduled

days for collection. Windsor’s Council had directed administration to consider full outsourcing of

recycling, but directed the exploration of a range of scenarios for waste collection including 25%, 50%

and 100% outsourcing scenarios. With the end goal being a strict numerical comparison, the

development of the service levels took significant effort. Instead of choosing areas of different density,

Windsor instead opted to choose a core area to represent the 25% option and then to expand it to the

remaining options so as to avoid a potential unplanned 75% option which could result in two separate

companies engaged in collection in different parts of the city alongside municipal forces.

Because of the prequalification process required by Windsor, the differing service level options created

some complexity, albeit not as complex as Niagara. Because, in addition to considering status quo, any

one of seven potential service scenarios were possible, bidders were required to disclose what they

intended to bid upon: recycling, recycling plus any waste service level, any waste service level alone, or

any available combination. This information had to be used carefully in prequalification; smaller firms

may not have been able to handle the maximum potential contract liability. Language had to be built

8 R.S.O. 1990 c. M.56.

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into the tender to consider all the possible ramifications of the prequalification process, including

prequalification by a supplier for some but not all of the service levels bid.

Niagara was looking at moving from every other week alternating grey and blue box collections to every

week for both, and a resultant drop in garbage collection due to greater recycling. Grass clippings had

been overwhelming the organics management system so a ban on them was proposed. Maximum

flexibility for bidders to offer the best prices meant that bidders were given options to bid for one, two

or all of the three collection areas in the Region, an additional complexity to the bidding structure. In

the end, there were 36 scenarios to be bid upon, and many other smaller side services upon which non-

binding pricing could be offered. The lowest priced bidder for one scenario might not be lowest on

another. As it happened, one bidder was low bidder on multiple scenarios, which simplified the

appearance of the situation, though all calculations had to be carefully performed. If it had been

possible for there to have been space and time between the service level decisions and the

procurement decision, the risks would have been smaller. Council wanted to know the overall pricing

differences, though, before choosing a particular service level. Bidders did not seem to be troubled by

this juxtaposition. Clear explanation of the decision making process of Council on the service levels

seemed to allay concerns about bid shopping.

Windsor faced fewer issues with service level decisions than Niagara. While the tender document could

have been streamlined somewhat and bidders’ attention focused had the service issue been narrowed

at the outset, the inclusion of the differing service levels did not have a negative impact on the process.

Key Points:

Political will can be accommodated in procurement planning, but Council should not participate

in the process.

Clearly stated rules about process are critical to complexity and overlapping decision-making

issues.

The field of waste management is one where collection of different materials is frequently

changing today, so perhaps these contractors are not as concerned about complexity as in other

industries.

Part IV – Special Issues

Labour Issues

Had the matter been solely one of money, Windsor’s waste tender would have been just another large

project. However, this change would be a significant ideological shift watched closely by employees,

residents and social and labour groups.

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The legalities were fairly simple; as required by the collective agreement, Windsor gave notice of its

intent to explore outsourcing and observed all subsequent rights and obligations as to timelines and

other relevant issues. Potential staff complement issues were addressed in accordance with the

collective agreement, although certain assumptions had to be made with respect to union concurrence

in different areas. Far more complicated was the actual matter of interacting fairly with the union

during the tender and recognizing the uniqueness of their situation. The imposition of a

communications protocol did not change the fact that employees continued to deliver the service during

the tender period, nor the fact that unionized employees were involved in the conduct of a procurement

that could result in the outsourcing of jobs from a companion union. Confidentiality and sensitivity were

perhaps more important in this procurement than any other to date.

One of the issues faced during the Windsor tender was how to address the service provided by the

bargaining unit employees as the alternative to the procurement being carried out. It was impossible

for the union to make a compliant bid in accordance with the terms of the tender, but it was recognized

that the employees and their union had the right to be heard by Council and to make presentations that

would be considered by Council in the final decision. Correspondence from the union was included with

the final council report. During the tender, the union was given all information provided to bidders but

was not given access to the business case under development nor the determination of current cost of

services. In accordance with the tender, however, they were given access to all the raw data for analysis.

This was not necessarily well-received, and a deferral was sought to rebut the business case given the

ten day lead time from the release of the council report to the hearing of the matter before Council.

Ultimately no deferral was granted on the basis that the raw data had been available for analysis

throughout the process.

Part of the Windsor Council decision involved determining the manner in which the outsourcing would

affect employees. After significant debate, Council opted for a scenario that did not represent the

maximum potential cost savings, but also did not result in the loss of any full-time jobs. It is anticipated

that the change to outsourced service provision will save approximately $8 million over the life of the

contract. The affected employees were redeployed in other City departments, primarily Parks and

Recreation. Staffing levels are increased in these areas until numbers stabilize via attrition.

Some waste haulers are unionized and some are not. While an understanding of the supplier’s

collective agreement is important for a municipality, the terms of that collective agreement are not

determinative of the relationship between a municipality and a supplier. Accordingly, drafting must

recognize the potential for the supplier to be unionized, not unionized, or to become unionized at some

point during the contract. The potential for labour issues between a supplier and its union must be

addressed, and the municipality must be protected both from feeling the impact of a work stoppage by

the suppliers’ employees and from rising prices based on labour cost. In May 2011, a certification drive

took place at Windsor’s supplier, which raised concerns as to the impact on the city’s contract. Although

the move to unionize was defeated, ultimately Windsor’s agreement with the supplier governs that

relationship while employee relations are a matter for the supplier alone.

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Niagara’s outgoing provider was a unionized employer and Niagara’s new provider is presently not

unionized. Concerns about opportunities for employment for those whose jobs would be ending were

addressed proactively by the new provider any time they were speaking to Council from the date of

award on. Wage levels were promised to be on par or better, job fairs were promised, and in fact about

80% of the former personnel were hired by the new provider. Here, since questions were coming post-

award, it was a simpler exercise for Council to be more directly involved in obtaining answers to their

concerns or those of citizens who were consulting with them. While the new contract continues to

receive intense scrutiny from many angles, it is thought that there will be benefits to taking an open,

transparent approach to communications over time. The collection work began February 28th, 2011, in

Niagara, so it is still early days but there have been more positives than negatives thus far.

Due to concerns about reduced performance and reliability amongst temporary workers, there was a

requirement in the Niagara RFP that a contractor’s workforce be at least 80% permanent fulltime

employees. Questions about owner/operators were addressed up front in the pre-drafted contract-

only allowed with permission of Niagara Region. There have not been any major difficulties to date.

Fleet Issues

Windsor recognized that, were it to outsource its service, it would no longer have use for its fleet of

vehicles. As the recycling option was simply full outsourcing, Windsor required bidders to purchase the

recycling fleet at a set cost as part of its bid. Differing service levels would have meant different fleet

needs for both Windsor and the supplier, so the issue of dealing with any surplus packer fleet was left

until after the conclusion of the tender.

Windsor opted to sell its full surplus fleet to the supplier following the award of the tender. Careful

scrutiny was applied to the purchase price and all terms, including finance terms, to ensure that

Windsor’s purchasing bylaw was fully observed.

The sale of a vehicle fleet in the context of an outsourcing raises the potential issue of successor

employer for labour purposes. Care must be taken not to cross the line between outsourcing a service

and selling a business as a going concern. Vehicles and GPS monitoring could create such problems if

not considered from a labour perspective.

In Niagara’s case, there was a business requirement for a fleet of new vehicles, as the reliability of the

trucks declines severely with their age. It takes approximately ten months to order new specialized

waste collection trucks and this was why the contract needed to be awarded well in advance of the date

the work would start (in fact, it was awarded April 20th, 2010, and work began February 28th, 2011).

When the contractor had supply issues with one of its truck manufacturers, it was impressive to see the

effort they put out to obtain a temporary fleet so that they were ready to start work on time. Such

operational hiccups are going to occur regularly in a contract of this scale, and there are contract

provisions for liquidated damages where losses occur for the Region. While there are contract

termination provisions, it is everyone’s last resort to have to consider replacement of a contractor in

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such an enterprise; better to have excellent dispute resolution options and to foster a collaborative

working relationship between provider and municipality to ensure that citizens receive the best

collection service possible and that the disposal and recycling sides of the business can go on efficiently,

especially where revenues from recyclables are so critical to the overall operations.

Key Points

A good contract will insulate a municipality to a great extent against labour issues between the

supplier and its employees

Be mindful of the potential labour impact of transferring too much of a business to a supplier

Be realistic about time lines and supply chain issues unique to the waste management industry

as the terms and enforcement of the contract are developed

Part V - Lessons Learned

The Importance of Teamwork

Building a proper project team and spending the necessary time and effort to create complete, fully self-

referential documents is the foundation for a successful procurement of this type. Educating all

members of the team about the primary elements of the job – from the requirements of the service

specification to the enforcement provisions of the contract to the basic laws of competitive bidding –

creates a cohesive environment and focuses the goals. While the members of Windsor’s project team

worked on a nearly full-time basis on the tender for three months, once the document was issued the

process required very little additional management by staff. Similarly, Niagara staff were diverted full

time for many weeks to put the procurement documents together, but the roll-out of the new contract

has gone relatively smoothly due to the up-front investment.

Workable Time Frame

Realistic deadlines are important to creating a good product. While tight timelines can motivate a team

to stay on target and produce strong material, an overly ambitious deadline could result in errors,

missed opportunities, and increased cost of external service providers. It is important to recognize that

while a project team can be pushed to meet a deadline, bidders who do not feel they can submit an

informed bid in the time allotted will simply not bid. The goal of any such project is to get the maximum

number of good, qualified bids. To that end, a workable time frame has to be presented to bidders as

well.

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Frontloading Specificity

These contracts have to be detailed and lengthy given the complexity and scope of the services being

delivered. The competition to obtain the contracts is substantial in today’s waste management industry

and the sophistication of the bidders has to be recognized in the quality of the procurement effort.

Municipalities must perform the procurement exercise with full knowledge of the extensive case law

and keeping in mind the importance of the service to the public. Serious preparation and staff time

investment is absolutely required but also absolutely effective.

The Right Level of Detail

Provision of a service always includes more variables than constructing a building or supplying a product.

Much case law exists around lack of disclosure of material facts during the bidding process. The best

practice is always to err on the side of caution and to provide as much data as possible to allow bidders

to make an informed bid. Windsor required a per-tonne price for waste, but a flat fee for recycling

collection. Niagara called for one overall price, but on several scenarios. In both cases, years of

collection data, budget information, housing statistics, routings and other details were provided

electronically to bidders. Addenda were issued as required to answer questions the bidders had.

Niagara found that its GPS specifications seemed to attract a lot of questions; perhaps it was inevitable,

but it is possible that a simpler presentation of the information might have helped.

Election Year Impact

While Niagara was forced to conduct the procurement in an election year due to the need to make new

service level decisions, Windsor was deliberate in this move. Regardless of what drivers fuelled the

exploration of the outsourcing, the resulting social and political climate coupled with the upcoming

election arguably created an environment to consider making that move. With final Windsor Council

decisions being made in July and the first wave of transition taking place only two weeks prior to the

election, the political impact of the decision would be felt just as residents took to the polls. In Niagara,

there was concern that the service level decisions might dominate as election issues, so those choices

might have been made more easily if the election spotlight were not shining. But, as is the case with any

large project, putting time between the procurement and an election would ease pressure on both staff

and councillors.

Summary

Windsor and Niagara have both achieved their stated goals in this complex procurement exercise and

both are currently enjoying success with their new contractors. There were many common experiences

between the two, despite the distinct differences in history and context. At each stage in the process,

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from the up-front document preparation through the technical evaluations through to contract award

and beyond into contract management, there were lessons to be learned as the work was accomplished

in the shadow of competitive procurement law in Canada today. Sensible application of guiding legal

principles seems to be carrying the day, which is reassuring in light of the complexities of the waste

management enterprises of both municipalities.

talking trash: outsourcing waste management services · 2020. 6. 2. · new directions were sought...

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