Southern Sydney Regional Organisation of Councils

Key highlights

• Phased implementation: The misalignment of council contract expiry dates required a phased approach with councils progressively entering the contract. Two councils needed to go to market earlier than the others.
• Market sounding: Responses to the market Expression of Interest (EOI) were encouraging, but the commercial market conditions proved challenging and affected competitive pricing.
• Memoranda of Understanding (MOU): Two MOUs were established. Under the first, councils agreed to work together on scoping, strategy and contracting preferences. The second MOU was an ‘Intent to Procure'; a commitment from councils to tender together.
• Contracting strategies: SSROC uses a Preferred Supplier Master Agreement (PSMA) between SSROC and supplier/s which sets out the broad terms of the contract, while a Preferred Supplier Agreement (PSA) between councils and suppliers specifies individual council terms.

Project overview

CRESS focused on processing commingled recycling from yellow-lidded kerbside bins.

SSROC has considerable experience with joint procurement projects. It manages 51 joint council contracts including four waste processing contracts. Although SSROC councils are accustomed to working and tendering together, CRESS represented some unique challenges. The two key challenges included participating councils having different contract expiry dates and the limited contestability in the Sydney recycling marketplace. According to the CRESS market EOI, SSROC understood that new processing capacity was projected to be operational in early 2025, but until then prospective tenderers are faced with securing development approval for their Materials Recovery Facilities (MRFs), finalising building works, or securing environment protection licensing.

Key objectives of the CRESS procurement include:

• cost-effective processing
• capacity and price stability
• recycling targets that meet council diversion and recycling goals
• supporting investment in recyclables processing capacity in and around Southern Sydney
• securing strong relationships with processors that build in shared risk, ensure tonnage flexibility and good quality inputs, and provide data transparency
• promoting innovation in secondary processing capacity for recycled materials (e.g. the output from MRFs).

Project timeline

Stage 1: Strategy and Scoping

During this stage, several workshops were conducted covering project rationale, contracting preferences, expectations of delivery, tender development, and identifying key performance indicators (KPIs). An EOI to the marketplace yielded an encouraging seven responses (of which three were non-conforming).

Misaligned council contract expiration dates led to two groups: councils whose contracts expired earlier and those expiring later. New market entrant processing capacity would not be fully operational in time for early expiring contracts. Therefore, the tender approach was divided into CRESS 1 for two councils needing immediate services and CRESS 2 for the remaining councils. The challenge was not to unnecessarily tie CRESS 1 needs and timeframes to the CRESS 2 desired outcomes. The decision to separate the two tenders was followed by a series of workshops for CRESS 1 councils only, which came to agreement on service specifications, pricing, performance monitoring, and measures to prevent service disruption.

Stage 2: Intention to Procure

With service specifications and contracting preferences largely agreed upon, SSROC distributed a second MOU ‘Intent to Procure’, signed by council General Managers / CEOs to establish the commitment to tender together, and to nominate roles and responsibilities of SSROC and participating councils. This MOU was critical to re-establish the collective partnership between tendering bodies and lay out a guideline for tendering, negotiation, engagement and service transition.

The governance framework included the SSROC project manager who led the project and was guided by an advisory group of council waste and contract managers. A Steering Group consisting of one General Manager, one Director, one Manager and SSROC's Procurement and Programs Managers who met infrequently to discuss high level matters. The SSROC CEO was heavily involved at times, supported by communications and administrative staff. Councillors were briefed through reporting updates and a briefing titled ‘The benefits of joint procurement through CRESS.’  The briefing served as a useful rationale and set of speaking points for the Executive teams, Mayors and non-waste staff.

In December 2023, a surprise regulation amendment was announced by the NSW Government to protect waste workers’ rights and entitlements following contract transfers between entities. SSROC sought and coordinated legal and probity advice on the amendment’s interpretation and operational risk. A strategy was developed in consultation with participating councils. This delayed the market release date of the CRESS 1 Request for Tender (RFT) by four months and the loss in time severely impacted the CRESS 1 councils.

ACCC application

Obtaining Australian Competition and Consumer Commission (ACCC) authorisation to tender and carry contracts on behalf of councils took time. SSROC secured interim and then final authorisation for 11 years.

Key planning aspects

• Contestability training: SSROC engaged Clayton Utz in 2022 to develop and deliver this training for councils. It focused on using commercial principles and understanding market trends, particularly the health of downstream markets, to inform the tender process. It covered several key themes including:
  • trends in contestability
  • traditional vs. collaborative contracting
  • early contractor involvement
  • KPI regime
  • contract drafting for the future.

• MOU process: To ensure buy-in and commitment from member councils, SSROC developed two MOUs, which have proven effective in sustaining commitment and ensuring that executives are aware, can give guidance and buy into the approach.
  • MOU 1 - Strategy and Scoping: This initial MOU outlines the rationale and approach for exploration of joint tendering, explains a nominal contribution fee for cost recovery from councils, and summarises roles of project stakeholders.
  • MOU 2 - Intent to Procure: This MOU summarises the procurement strategy and rationale, key documentation, tactical considerations informed by market EOI responses, and names key personnel.

• Contract approach
  • SSROC’s Preferred Supplier Management Agreement (PSMA) and Preferred Supplier Agreement (PSA) is a ‘nesting’ of contracts.
  • The PSMA is a contract between SSROC and each supplier. Key purposes of the PSMA include:
    • Performance management: conducted annually to assess overall adherence to performance criteria and service delivery
    • Support role: SSROC identifies its legal and technical advisory resources, customer service and reporting, and offers dispute resolution support
    • Contingency planning: high-level disaster mitigation planning to ensure continuity of services
    • Limited day-to-day involvement: SSROC does not manage daily operations such as billing or operational needs which are handled by the councils to meet their specific needs and preferences
    • Contract management fee: which is the supplier’s responsibility.
  • The PSA serves as a template for contracts between councils and suppliers.
    • Contracts are developed as a template which is largely agreed upon amongst participating councils.
    • Councils may add special conditions to this template for their specific needs.
    • There are benefits to alignment and standardisation of service expectations between the councils. It allows for innovations or changes to carry across more seamlessly and to ensure more relevant information is shared between participating councils.

• Probity and evaluation plan
  • This was used to establish principles, policies, key documentation and codes of practice in the evaluation and negotiation process. SSROC developed this plan according to each tender using industry insights and context. The plan was shared with an external Probity Advisor for review. The Evaluation Team signed off on the evaluation criteria, criteria weightings and format for assessment. The plan also identified the individual stakeholders and their roles. 

Challenges, solutions and tips