May 2018

Equilibrium has developed a tool with the Metropolitan Waste and Resource Recovery Group (MWRRG) to assist local councils and kerbside service operators to assess changes to contracts.

The methodology comes off the back of China’s National Sword policy, which has spurred on numerous contract renegotiations across Australia. It is intended to act as a guide that councils and others can use to suit their particular circumstances and requirements, rather than being prescriptive. It includes examples, instructions and indicative responses aiming to make it simple to use.

MWRRG developed the tool in consultation with councils, industry groups, materials recovery facility operators and other states.

MWRRG is using the system with Victorian Councils, and it has been widely circulated to all states, major recyclers and industry groups. The methodology assists parties involved in kerbside recycling arrangements to make informed decisions on ongoing arrangements based on principles of accountability, transparency and reasonableness when negotiating and agreeing to service arrangements.

It sets out the principles of kerbside recycling, considerations for assessing kerbside recycling service arrangements, commodity price indices, factors and calculations to inform financial considerations and monitoring and verification of agreements.

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Equilibrium Managing Director Nick Harford said the current issues surrounding contract stability have highlighted that the community wants and supports kerbside recycling. He said it is incumbent on the waste industry to ensure services are sustainable.

“The current situation with kerbside recycling has motivated an update of kerbside arrangements by some materials recovery facility (MRF) operators and collectors, as they have expressed concerns about meeting current contractual obligations. In Victoria, there is a requirement for councils to update arrangements with MRF operators in order to be able to access the state government financial support,” Mr Harford said.

The tool calculates the market commodity prices for materials such as mixed paper, paper grade, cardboard grade, mixed grade, PET plastic, HDPE plastic, aluminium, steel and glass. In addition, it shows the percentage of total materials in kerbside by weight and the average tonnes processed per annum. Operating expenditure is divided into labour, repair and maintenance, consumables, waste to landfill, rent, rates, interest, business insurance, legal compliance and reporting, systems accreditation and certification and a range of other key metrics.

Mr Harford said the figures included in the template method were based on current market intelligence and reported composition of materials in kerbside.

“Having said that however, the figures are indicative and as a guide only, it is intended that the method and tool is adapted to each individual circumstance and the numbers re-entered to reflect actual specific arrangements,” he said.

He said kerbside recycling is a relatively complex arrangement when all factors are considered and it is not homogeneous. Mr Harford noted that council contracts differ and companies use varying business and operational models.

“It is therefore necessary to assess a broad range of activities to determine whether the service being offered is adequate, the price is reasonable and the operation is sustainable. The risk assessment is a process to navigate what may or may not be a priority for a particular arrangement. The most significant risk factors depend on each circumstance.

“For some councils, security of downstream markets for commodities may be paramount, while for others it may be business contingency and insurance. The method and tool enables assessment of a wide range of risk factors.”

Mr Harford said general feedback has been positive and that the information is helping people work through reviewing and, where needed, updating kerbside arrangements.

“Equilibrium doesn’t present this is as being anything entirely novel as most people with a working knowledge of kerbside would be aware of these issues, but it is a way to bring more transparency and accountability to current considerations. The method and tool is being updated based on further feedback and to also account for other factors that some operators have requested – one being an ability to assess capital expenditure impacts on ongoing arrangements.”

MWRRG Chief Executive Officer Rob Millard said the organisation has shared the tool with other jurisdictions to inform and support a consistent approach to dealing with recycling challenges across the country.

To request a copy email info@equil.com.au or call + 61 3 9372 5356