Unstable markets, altering materials compositions and growing older infrastructure can all be addressed with the fitting municipal MRF contract. Business consultants mentioned the way to obtain such preparations on the Useful resource Recycling Convention.
The convention was held Aug. 15-17 in Austin, Texas.
Throughout the Aug. 16 “Rethinking MRF Contracts” session, Stephanie Sidler, director of enterprise growth for recycling at GFL Environmental and Natalie Betts, director of partnerships and municipal relations for Balcones Sources, provided their recommendation.
Sidler mentioned GFL prefers to start out the contract course of with an intensive request for proposal (RFP) from the municipality.
“RFPs can actually be a necessary instrument in procuring recycling companies and set the stage for collaborative partnerships, the place there’s potential to extend the operational, monetary and innovation capability,” she mentioned. “A well-structured RFP can result in well-structured contracts which improve the worth of the public-private partnerships for each the municipality and the service supplier.”
Associated to recycling, there are two types of RFPs: one for working a municipally owned facility and one for vendor-run amenities. Sidler mentioned the latter are “actually those that may assist municipalities to bridge the hole between their out there capital and infrastructure wants.”
For both model of RFP, Sidler mentioned it’s important to have clear necessities about what companies must be offered, to verify “all distributors are bidding apples to apples.”
Time for distributors to assessment the gear at municipal-owned amenities is necessary as properly, she added, to grasp what upkeep prices can be and decide any investments which will must be made to run the power correctly.
Complete information, together with contamination ranges and materials composition, is one other factor GFL seems for in a powerful RFP, Sidler mentioned, as are detailed efficiency measurements and language that tackle what occurs if there are important modifications over the time period of the contract.
“These are actually long-term relationships we’re speaking about, these are 10-year contracts, and so much can change over that point,” Sidler mentioned. “Look how a lot has modified over the previous 10 years. So what occurs if materials composition modifications, what occurs if contamination will increase, what occurs if there’s a change of regulation and an EPR program comes into place in your municipality? That type of stuff is necessary to get out within the RFP course of.”
Betts mentioned she’s discovered that transparency, communication and co-investment for each the seller and the municipality are integral elements of a great contract, as are contingency plans.
“On the municipality aspect, that basically seems like treating recycling because the utility and important service that it’s, and never a ‘nice-to-have,’” she mentioned.
Whereas transparency could be difficult when many distributors don’t publicly disclose the tip market clients for his or her materials, Betts advised having municipal companions are available to take a look at finish market data however not sharing it. Sidler mentioned offering reviews of the overall “chain of command” for materials might help municipalities belief that materials goes the place it ought to.
Betts additionally beneficial asking for references about vendor openness and communication, requiring in contracts that cities meet with distributors at the very least quarterly and utilizing historic information to judge bids.
“We’ve been in recycling for some time now as an trade and we will use that information from the previous years of markets, we will use our expertise with understanding that new expertise will come and finish markets will shift, to plan forward,” Betts mentioned. “And we additionally know that issues we don’t foresee are going to occur, so we must be constructing that relationship and that partnership so you’ve somebody in it with you.”
Sidler mentioned a case examine GFL labored with is town of Winnipeg in Manitoba, Canada. Within the late 2010s, it issued an RFP to extend diversion from landfill and cope with altering markets.
Town offered a minimal annual tonnage assure, detailed materials composition information and an allowance for the seller to obtain third-party tons. Town laid out clear efficiency requirements, “so we understood entering into what we might be evaluated on, but additionally what could be the efficiency requirements through the contract,” Sidler mentioned.
GFL constructed a state-of-the-art MRF that opened in October 2019, and in 2020 gained the Nationwide Waste and Recycling Affiliation facility of the 12 months award.
“It’s most of these collaborations, the place we share data, the place we work collectively, the place we implement end-market partnerships and supply for steady enchancment all through the time period of the contract that each one assist to make sure long-term sustainability and viability of the mission,” Sidler mentioned.
Assessing prices and incentives
In response to an viewers query about connecting inbound contamination charges to income share as an incentive, Betts mentioned she helps “something that financially incentivizes all events to scale back contamination.”
The general construction of most contracts “actually acknowledges the distinctive economics of recycling,” Betts mentioned, with a processing payment to cowl the working value of the MRF and a income share settlement.
She advised municipalities do a full calculation earlier than accepting a bid, as there are professionals and cons to the 2 types of charges and shares. With a low payment and low share, there’s much less variation in value, but additionally much less potential for income on the municipal aspect.
“Your good years are going to be much less good however your unhealthy years are going to be much less unhealthy,” she mentioned.
With a better payment and better share, the upper processing payment covers the price of a better high quality operation, and since the income share is greater there’s extra funding from all events within the high quality of recycling, Betts mentioned.
For instance, say a metropolis acquired two bids, one with a $98 per ton processing payment and a 80% income share and one with a $78 per ton payment and a 40% income share.
Betts mentioned whereas “at first blush the $20 much less processing payment may appear the higher option to go,” as soon as efficiency in a mean market is calculated, the upper payment and better share would really find yourself costing town much less.
“Authorities is a risk-averse place, which is why it’s necessary to do the calculation and never simply go to the extra steady choice,” she famous.
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