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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.