EFFECTIVE PUBLIC PROCUREMENT SAVES MONEY & PROTECTS THE ENVIRONMENT

Lessons from the UK

Adam Read – Practice DirectorWaste Management & Resource Efficiency, AEA

AWMA 201219th – 22nd JuneSan Antonio, Texas

A world leadingenergy and climatechange consultancy

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Overview … in 20 minutes …

+ Personal welcome

+ Introduction to municipal waste management in the UK and the current drivers to improve service performance

+ UK economy impacts on waste services

+ Background to local authority (LA) procurement

+ Introduction to the Case Studies

+ The essentials of ‘getting it right first time’

+ Key Outcomes

+ Current UK Procurement Trends

+ Summary & Lessons learned

A personal welcome

+ Adam Read- Practice Director @ AEA - 18 years of operational expertise in recycling service design and

procurement- Leading AEA support to a large number of UK authorities and private

sector waste management companies on new scheme delivery and improvement

- Staff of 75 plus consultants (UK and US)- Leading MBT procurement for a number of UK authorities- Specialise in waste infrastructure siting and community liaison

+ Role on the projects- Project Director and lead policy advisor to Charnwood Borough

Council, Milton Keynes Council and Thurrock Council

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Acknowledgements

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+ Jim Perkins Thurrock Council

+ Andy Hudson Milton Keynes Council

+ Neil Greenhalgh Charnwood Borough Council

+ Hannah Lawrie AEA

+ Ken Hall AEA

+ Bob Read AEA

+ Martin Rivers AEA- Thanks to them all for their contributions to the projects & the paper

My sponsor ….. www.aeat.co.uk

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Our US sponsors

+ We are here exhibiting with ERG

- we acquired them in 2010+ Come and see us on Booth #118

- ERG and AEA Technology Group+ Franklin Associates (ERG division)

- extensive experience in all aspects of solid waste management (over 30 years of practice)- integrated solid waste master plans- full life cycle analyses of solid waste- waste stream evaluations for local,

regional, state, and national agencies

UK Waste Management Drivers

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Past UK Waste Management

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Over-reliance on landfillCheap and readily available waste disposal optionLarge number of sites suitable for filling

Recent legislation and policy has led to landfill no longer being the most viable option EU Landfill Directive requires ‘diversion’ Landfill Tax (discourage disposal to landfill) Waste Strategy favours the ‘hierarchy’ approach

to waste management Closure of most of the 8,000 licensed landfills in the

UK Need to look at alternative sites, technologies

and waste services Massive programme of expansion in curbside

recycling!!

EU Landfill Directive

+ UK must adhere to EU law- EU Directives require member states to achieve end results in set

timescales- Free to adapt laws to meet goals set

+ Landfill Directive imposes legally binding targets to limit biodegradable municipal waste (BMW) sent to landfill

+ Failure to meet targets will result in heavy fines - Potentially £150 per tonne above the target levels

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BMW levels allowed to landfill

Target Year for UK

75% of 1995 quantities 2010

50% of 1995 quantities 2013

35% of 1995 quantities 2020

Need for change…

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Non-biodegradable Municipal Waste

Biodegradable Municipal Waste Requiring Diversion

Biodegradable Municipal Waste Allowed to Landfill

Source: Defra Data, assuming 3% annual growth of MSW

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Landfill Tax

+ Key UK driver for public sector and private sector alike

+ UK Government announced in the Budget 2010 that rate for ‘active’ waste will escalate by £8/yr until at least 2014/15- Will reach £80 / tonne in 2014/15 (£64 / tonne currently)- Was only £48 / tonne 2010/2011

+ Strong disincentive to send waste to landfill- Instrumental in pushing waste up the waste ‘hierarchy’- Making recycling collections are real ‘must have’

Revised Waste Framework Directive

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+ Overarching legislative framework for the collection, transport, recovery and disposal of waste across Europe

+ Drives waste services and infrastructure up the waste hierarchy towards prevention, preparing for reuse and recycling

+ To recycle or prepare for reuse 50% of household waste by 2020 from a current level of 41.2% (2010/11)

Waste Prevention

Preparing for re-use

Recycling

Other recovery

Disposal

The UK Economy

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UK Economy

+ Increasing financial pressures from the UK’s biggest ever peacetime deficit - LA funding grant has been cut so LA’s need to introduce 15-20% cuts

year on year to remain viable organisations- Central government spending review also in progress which won’t

directly affect LAs but will indirectly hit organisations providing LA funding (banks etc.)

+ BUT the public still expect better services

+ AND increased service provision and performance is integral to meeting UK and EU targets

+ UK is now focusing on how this can be achieved whilst delivering the cost savings desperately needed through the effective procurement of waste services …

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Background to LA Procurement

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LA Procurement Regulations

+ LA procurement in the UK is legislated by the Public Contract Regulations 2006 for contracts above £156,442 ($255,110)

+ Underpinning objective of the Public Contracts Regulations 2006 is for LAs to ensure they don’t provide information or treat bidders in a discriminatory manner

- Must not give any bidder(s) an advantage over others+ Notice must be published in the Official Journal of the

European Union (OJEU)

- Notifies potential service providers and provides service detail

+ Provide details of the procurement route to be adopted

- Open, Restricted, Negotiated and Competitive Dialogue16

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Restricted Procedure

+ Typically takes 12 to 18 months

+ Most suitable where there is a defined specification

- Utilising defined methods and equipment already selected prior to the commencement of the bidding process

+ Completed in a shorter timeframe

- But does not allow for the potential flexibility and innovation offered by the Competitive Dialogue process

+ Bidder numbers reduced through a pre-qualification stage (PQQ)

+ No negotiation or dialogue permitted at Invitation to Tender (ITT) stage

- Only questions of clarification are permitted

Competitive Dialogue Procedure

+ Introduced in January 2006 - typically takes 18 to 24 months

+ Used where no pre-determined method or equipment defined or unable to define technical, legal or financial contractual detail

+ Bid against waste projections and expected outcomes or achievement requirements

+ PQQ stages used to reduce bidder numbers

+ Tender stage

- Bidder numbers are reduced and bid submission requirements become more onerous over a series of stages where dialogue with bidder is permitted

+ Final stage reverts back to Restricted - closed bidding18

Introduction to the Case Studies

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Our Approach

+ Case studies show a range of UK LAs with different demographics that as a result of going out to procurement (for recycling collections) in the last 3 years have achieved

- Cost benefits- Improved performance and / or - Increased environmental benefits

+ Each case study shows different aspects of best practice in procurement that helped achieve the outcomes

+ Use these to provide guidance and key messages when considering letting waste services

Background

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Charnwood• Waste collection authority• 27,906 ha• 155,000 population• 68,000 hhlds• Majority live in university town of Loughborough

Milton Keynes• Unitary authority• 31,000ha• 232,185 population• 99,486 hhlds• One of the fastest growing areas in SE England

Thurrock• Unitary authority• 16,500 ha• 150,600 population• 63,300 hhlds• Majority live in the 7 main towns

Scope of services

2009-2010Lot 1: Collection

Lot 2: HWRCsLot 3: MRF

Lot 4: CompostingLot 5: IVC/ADLot 6: Landfill

2005-2010Collection and

CleansingMRF

(Community Recycling Centres)

(Organic Treatment)

2008-2009

Waste collection and cleansing

services

Evaluation Stage only

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Scope of the presentation?

+ This presentation covers the procurement of

- Waste and recycling collection - Household waste recycling centre (HWRCs)- Materials recovery facilities (MRFs)- Composting (windrow)- In-vessel composting (IVC) / Anaerobic digestion (AD)- Landfill

+ It does NOT include

- Residual waste treatment facilities X

The ‘essentials’ of getting it right!

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Project Resourcing

+ Assess the capacity and capability of the internal (Council) team- Identify gaps and put in place an adequately resourced internal team

with the necessary decision making powers

+ Value of retaining external technical, legal and financial advisors cannot be underestimated- Considered as ‘costly’ in the short term - BUT have access to additional resources which can be used as and

when needed- AND can benefit from the added experience gained from other

projects (helps minimise risks)

+ Develop the internal contract management team- Ensure they have the skills and knowledge necessary to effectively

manage the contract going forward (post procurement)25

Project Scope and Design: Milton Keynes

+ Undertook a detailed options appraisal and modelling exercise upfront, and prior to commencing procurement

- Provided assurance that the solution was affordable and capable of meeting targets- HOWEVER this can only be fully tested on going to market

+ Project was designed to mitigate risks of the service being unaffordable

- Market testingoHelped inform the procurement strategy and documentationo Identified and removed barriers to opening up market e.g. land ownership

and contract packaging

- SpecificationoUsed the modelling work to inform the specification development and use

optional service enhancements to manage service costs26

Project Scope and Design: Milton Keynes

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Project Scope and Design: Charnwood

+ Identified gaps and inefficiencies in the old contract

+ Sought views and experience of contractors through a market testing exercise

+ Consulted with residents and members of the Borough

- Addressed areas of concern with the old contract- Influenced the weighting of the evaluation

criteria developed- Ensured it delivered what was important

to the customers!!

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Procurement Strategy

+ Contract packaging – disaggregated or aggregated contracts?- Both Milton Keynes and Thurrock disaggregated theirs to

oOpen up the market to niche providers for different service areaso Loosen the hold those with existing waste facilities in area may have

- This created more competition and drove down prices

+ Procurement route – Restricted or Competitive Dialogue?- Seek advice from market, and internal and external project team- Needs to be assessed on a project by project basis - How long have you got to deliver? How much is going to change?

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Procurement Strategy (continued)

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•To accommodate a very tight timeframe•Due to the complexity and scale of the contract•Experience and knowledge of the project team

Thurrock - Restricted procedure

•Council knew exactly what they wanted due to the upfront modelling & design work•Could go straight to market and procure without the additional expense of Competitive Dialogue

Milton Keynes collection and

cleansing contract – Restricted procedure

•Required flexibility to explore bidder’s proposals for sharing income with the Council•Needed proposals for increasing capacity of the MRF and / or number of material streams

Milton Keynes MRF contract –

Competitive Dialogue procedure

Documentation Development: Thurrock

+ Poor existing documentation required a great deal of upfront work- Needed to be robust so those managing the contracts had the tools to

do this effectively over the contract lifetime

+ Proposed changes or variations to the service anticipated over the contract were incorporated at this stage to gain competitive quotes

+ Documents provided guidance on the scope and level of service required and the extent of information needed from bidders- This reduced the possibility of under (or over-pricing) by different

interpretations of service quality- Resulted in bids being received which were reasonably close to each

other in terms of service level provision and price31

Documentation Development: MKC

+ Used aspects of the old contract which were proven to be successful- Collection and cleansing specification, plus added more “aspirational”

elements designed through the modelling- For the MRF contract “aspirational” elements encouraged by bidders

through the dialogue process

+ Tested the specification early on allowing bidders to have a positive influence upon service operation

+ Essentially output based and used key performance indicators (KPIs) (linked to incentive payments)- Drive the “right” performance in important areas of the service

+ Also incorporated input information- Ensure the service was compatible with other Council services and to

deliver the level of service required by the Council 32

Documentation Development: Charnwood

+ Adapted existing contract to an output based performance driven contract- Enabled Council to deliver continuous improvement in service

performance over the contract life

+ A reward and deduction system was introduced- Bidders were rewarded for meeting KPIs (linked to Council needs and

UK standards) and penalised for failing to meet them

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Tender evaluation process: Thurrock

+ Evaluated bids to ensure the best possible deal for LA

+ All contracts used Most Economically Advantageous Tender (MEAT) evaluation process - Takes into account price and quality of bid and therefore the overall

benefit to the LA

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Contract Lot Price Weighting Quality Weighting

Lot 1: Collection and recycling 55% 45%

Lot 2: HWRCs 55% 45%

Lot 3: MRF 60% 40%

Lot 4: Composting 60% 40%

Lot 5: AD/IVC 60% 40%

Lot 6: Landfill 80% 20%

Tender Evaluation Process (continued)

+ To assist in the evaluation process a rigorous evaluation methodology was developed - Enabled bids to be thoroughly and independently assessed

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The Evaluation Team

+ Experienced evaluation team with a high level of technical understanding was integral (and essential)- Particularly where bidders could suggest their own methodologies- Fully understand cost submitted against service level offered- Identified areas of clarification to ensure what was and wasn’t

included in the evaluation

+ Where skills gaps are identified these should be addressed- Milton Keynes held training before the CD process as it was a new

process which bidders were much more familiar with- They also identified the need for an experienced commercial

negotiator to add weight and skills to the Council’s dialogue team- Used draft submissions as a “dummy run” and enabled the team to

fully understand the bidder’s solutions and prepare to get the best from each solution during dialogue

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Project Processes and Procedures

+ Key to the success in delivering these projects- The project team met regularly at

(or used teleconferencing) to discuss the project development

- Continuity in the project teams were maintained throughout

- Team flexibility – working unsociable hours at times at short notice to get the job done!

- Team ethic fostered and maintained throughout

+ Thurrock project delivered in only a 9 month timeframe!!

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Key Outcomes

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Summary of Achievements

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LA contract Savings achieved

Service performance Other service improvements

Thurrock Approx. £2M ($3.18M / yr)

From 36.56% recycling and composting to being on target to meet 40% 2010/2011 target

Strong contract documents and empowered contract management team

MKC Collection and Cleansing

Additional services at no extra cost

From 38.19% to 47.7% (forecast to reach 54% in 2010/2011)

Enhanced service levels – additional organics service

MKC MRF Overall five fold increase in income

50% reduction in rejected materials following infrastructure improvements

Capacity and range of materials processed increased

Charnwood £1.3M ($2.06M) / yr

From 42% looking set to achieve 57% in 2011/2012 (top quartile in UK)

High levels of customer satisfaction

Current UK Procurement Trends

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Efficiency programmes and projects

+ Strong drive towards efficiency programmes and projects to save money without compromising quality

- Joint or partnership working to jointly procure or share services, infrastructure and / or equipment

+ We have supported partnership work in Essex (12), Surrey (10), North London (8) and Clyde Valley (8)

+ Dorset Waste Partnership

- Looking to save £1.4m by running a joint in-house service for 5 of 7 Dorset Councils including oWaste minimisation initiativeso Joint procuremento Increasing trade waste collectionso Sharing infrastructure and vehicleso Introducing collections across Council boundaries 41

Procurement Frameworks

+ The Improvement and Efficiency South East programme (iESE) & London Waste and Recycling Board (LWARB)

- Developing the UK’s first framework for waste and recycling collection, street cleaning, grounds maintenance and bulky waste collection services

+ To short list short list a number of major service providers against each service with outline unit prices for specified services

+ Estimated savings = £85m across 140 local authorities

+ Only 11 of 23 companies invited actually bid back as the private sector did not believe it provided value for money

- All 11 selected to be on the framework- Now waiting for an LA to choose to use it ….. 42

Standardisation of procurement docs

+ We worked with the Lancashire Waste Partnership as far back as 2007 developing a standard specification, conditions of contract, pricing schedule, etc., for collection services for 12 LAs to use

+ This is being replicated elsewhere with iESE developing standard documents for use by London and South East based authorities

+ Standard documents can be tailored to suit individual authority needs saving time and money (and external support)

+ Doesn’t replace the need for bespoke sections!

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Efficiency Reviews

+ Service efficiency reviews often undertaken prior to procurement of their new services

- Identifies savings that can be made before going to market+ These ensure that Councils are in the best possible position

to design their new service and review the tenders received

+ In some cases funding is being made upfront to support these reviews with funds being repayable from the savings made

- Current support funds from WRAP, LWARB and WG

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Summary

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Summary

+ Procurement is integral to ensuring services and contracts are delivered that drive up recycling and composting rates, increase diversion from landfill and promote sustainable waste management

+ The financial climate in the UK means these services need to deliver not only enhanced performance but enhanced performance at a reduced overall cost to the Council

+ This is being delivered in the UK by:

- Good practice procurement - Efficiency and service reviews- Document standardisation

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Lessons for the US

+ Procurement is not a necessary evil

+ Going out to tender can drive performance improvements

+ Competition will save you money

+ Procurement programmes needs to be well designed and managed

+ Procurement is most effective when linked to efficiency reviews @ outset

+ Don’t be afraid to use consultants to bring ‘experience’ and ‘insights’

+ Learn from the UK’s experiences

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Thank you!

Come and see us …. Booth #118

Adam Read

Practice Director - AEA

Waste Management & Resource Efficiency

cell: 0044 7968 707 239

email: adam.read@aeat.co.uk

web: www.aeat.co.uk

Shelly Schneider

Franklin Associates (ERG)

Waste Management & Resource Efficiency

tel: 913-800-8276

email: Shelly.Schneider@erg.com

web: www.aeat.co.uk