Why waste service procurement is becoming more complex, and what to do about it

The introduction of the Queensland Waste Levy and Container Refund Scheme has had a significant continuing impact on local government waste management and service procurement, as have big changes in the international recycling market. These developments – and the politically-sensitive and high-value nature of waste contracts – make it essential that procurement strategies and contracts be fit for purpose.

Factors relevant to waste service procurement and contracting affected by the industry-wide changes include:

• the cost of service delivery;
  
  
• a more volatile commodity market for recyclables;
  
  
• a heightened focus on risk and revenue sharing;
  
  
• the increasing diversion of waste from the traditional waste stream;
  
  
• the introduction of new infrastructure and technologies; and
  
  
• determining the best time to go to market.

The strategies that local government should adopt will depend on considerations such as the type of waste services being procured, the level of competition in the market, and the amount of time available before having to go to market. Here are some options:

• early preparation for waste service procurement, with community consultation;
  
  
• obtaining professional advice from experienced waste consultants and legal advisors who know and understand the waste industry;
  
  
• if time permits, conducting an expression-of-interest process to determine whether there are better, more cost-effective, or more innovative ways of delivering the waste service;
  
  
• if time permits, considering going to market with neighbouring local governments to improve efficiencies and buying power (ACCC authorisation is generally required);
  
  
• if time does not permit, considering whether existing contracts can be extended, keeping in mind that a procurement exception under the Local Government Regulation 2012 (Qld) may need to be obtained;
  
  
• structuring tender documents to maximise competitive tension, enabling a wider range of tenderers to respond;
  
  
• drafting tender response forms to cater for multiple pricing options, to enable financial modelling to be performed against available budgets;
  
  
• being prepared for the new ‘battle-ground’ contractual terms that contractors will now negotiate more intensely. These include change in law clauses, rise and fall formulas, price variation terms, subcontracting clauses, and force majeure clauses;
  
  
• conducting a thorough evaluation process that tests tenderers on representations they make in their tenders, and how well they have considered and prepared for industry changes; and
  
  
• carefully considering how waste contract terms should be drafted to address industry changes – particularly those relating to pricing terms, changes in law, contract variation, rise and fall, performance security and guarantees, subcontracting, reporting on data and audit rights. Many of these contract terms are likely to be more heavily negotiated by contractors, so it is important that a local government understand both their purpose and their effect on waste services delivered under the new regulatory environment.

Corrs has a team of multidisciplinary lawyers who specialise in legal issues affecting the waste industry. We have advised both city and regional local governments on waste procurement and contracting strategies, and look forward to continuing to support you in these activities.