1. Due Diligence In
Waste Service
Procurement
Greg
Freeman

2. This Presentation Look at what Due Diligence means
Focus on its importance in Procurement Process for Waste Services
Talk on the benefits of DD for new technologies in the industry
Show some Case Study examples

3. What is Due Diligence? Common usage: “Being cautious”
“Doing your homework”
Formal / legal usage:
“…whereby both (or all) parties undertake a process to test and verify their understanding of the contract and commitments to be entered into”
Concept originally developed in US share trading and common usage came later i.e. being diligent
Basically, “Making sure you get what you think you are paying for” or “buyer beware”
Most formal due diligence developed around acquisition of property; more recent work in environmental due diligence of mining; new area looking at waste contracts
NB other stakeholders may be doing their own due diligence e.g. Bank financing project

4. Why Do Due Diligence? Waste contracts larger, longer-term
Complexity of contracts increasing
Technical aspects increasing
Some previous history of shoddy operators in waste industry
Like project insurance
Larger e.g. $30mil. over 20 years
Complexity e.g. Across Councils, integrated services
Innovative and alternative waste technologies e.g. Energy from Waste
ICAC Investigation and guidelines

5. Types of Due Diligence Market Environmental Technical / design
Technological
Financial
Organisational
Market e.g. are market assumptions re demand, prices etc valid?
Environmental e.g. is baseline data sufficient to estimate impacts?
Technical e.g. are recovery rates really achievable?
Technological e.g. are claims re recoveries etc from AWTs valid in this context?
Financial e.g. is organisation really soluble etc?
Organisational e.g. are employee and other resources really as claimed?

6. Methods Checklist of information required
Review of documentation (e.g. environmental policies, permits, certifications; environmental sign-offs or audits; other contracts)
Reference checks, inspections
Expert opinions
Checklist – sample on next slide
Due diligence is more than a checklist – it’s a parallel process
Expert opinions esp. in technical aspects
Important to check reference facilities
This is an area Local Government has been neglectful on

8. PROCUREMENT PROCESS FOR NEW SERVICE DUE DILIGENCE REQUIRED1
STAKEHOLDER ENGAGEMENT 2
STRATEGIC OBJECTIVES 3
MARKET & TECHNOLOGY RESEARCH 4
PROCUREMENT STRATEGY 5
RISK ASSESSMENT 6
TENDER PROCESS 7
EVALUATION PROCESS 8
APPOINT PREFERRED TENDERER 9
COMMENCE CONTRACT
Include objective re due diligence
Plan for due diligence
Get appropriate information in RFT
Score points for due diligence
Final investigation (outsource)

9. Considerations Start early in procurement process
Document all dealings with tenderers and pursue specific information
Outsource final investigation
# independent
# multi-disciplinary
# expert opinions
# 6 to 8 months timeframe

10. Why not in Tender Process?
Tender process has multiple parties and is time bound
DD usually conducted on the preferred tenderer as very detailed confidential investigations need to take place
DD may be needed on certain but not all elements in the Tender
DD may be carried out by combination of internal and external personnel

11. Benefits of Due Diligence
Helps identify and mitigate risk (financial, legal, technical, financial etc)
Critical to validate claims esp. in alternative, innovative technologies
Demonstrates transparent process
May identify opportunities
Identifies deficiencies in tender process
A good due diligence process will enable parties to conclude a contract with a good understanding of the basis on which the contract is to be let and full awareness of resource implications and commitments. When entering into a major contract negotiation, the process will be greatly eased if the Council has everything in place for the due diligence process, including inventories and full financial information. Conversely, failure to undertake due diligence may result in a failure to conclude a contract, or failure during the life of the contract.
Important to look harder at locally untested technologies to ensure claims are valid
Opportunities e.g. due diligence investigation may unearth more potential technologies

12. Benefits of Due Diligence
Good DD process enable parties to conclude a contract with a good understanding of the basis on which the contract is to be let and full awareness of resource implications and commitments

13. Emerging Technologies
DD becomes critical as more AWT Facilities are proposed
Claims made in Tenders need to be validated
Thorough technical evaluations are needed, including overseas verification
As an industry we can’t afford more failures
Important to look harder at locally untested technologies to ensure claims are valid
Opportunities e.g. due diligence investigation may unearth more potential technologies

14. DD for Waste Collection Contract
You want best value for money, quality service, no unwanted claims and a long term player!
Human Resources
Company Experience
Company Financial Capacity
Quality of Equipment
Education and Complaints Management
Insurances
The Bid Price
Future Contract Management (CMP)
Human Resources – Check the management
Company Experience – How much do they have, what referees say?
Financial Capacity – Important to check viability
Equipment – Will equipment last distance?
Education more important these days
Insurances – how do you assess self insured??
Is the price around market average and sustainable?
How will the future contract be managed?

15. Case Study Examples
A council commenced MRF Processing Contract and 6 months later the Contractor came back to Council for increased rates
A Contractor stated in Tender they had an approved depot to house their vehicles but in fact approval was not gained and a new site had to be found
A Contractor stated they had no previous industrial claims but that was not the case

16. Status in Waste Industry
Very little happening in Australia; more in Europe, US
Not formalised process – some informal due diligence in tender evaluations etc
Some bad experiences already
Must become routine for larger tenders

17. Getting Help Some may be done internally Best co-ordinated internally
Use specialists for tasks (eg financial, technical etc)
There are variety of consultants in marketplace
Will add to Project costs so budget for it

18. Thankyou