1. Glenda Gies WDO Moderator
Reasonable Cost Bands
Glenda Gies
WDO
Moderator

2. Blue Box Cost Containment
WDO’s Cost Containment Plan
submitted to Minister on July 12, 2004
approved on December 30, 2004
Minister requested
an accelerated timetable
Reasonable Cost Bands implemented in 2006 rather than 2008 as proposed

3. Blue Box Cost Containment
MIPC’s task
measure program performance
determine “reasonable” program performance
define Reasonable Cost Bands in relation to program performance
all to be completed by June 2006
to apply Reasonable Cost Bands to 2004 net system cost
for calculating 2006 stewards fees

4. Our Speakers for this Session
Guy Perry – E&E Factor
Technical Services, Stewardship Ontario
Stewardship Ontario representative on MIPC
Andy Campbell – Reasonable Cost Band Agreement
Director, Solid Waste Management, Region of York
municipal representative on MIPC
Question & Answer Session

5. Efficiency & Effectiveness Factor
Guy Perry
Stewardship Ontario
Member of MIPC’s Cost Containment Team

6. Measuring Recycling Program Performance
Dual objectives of Blue Box Program defined by Minister
increasing diversion (60% target)
cost containment – reducing system cost or minimizing increase as diversion increases
Typical measures
cost ($/tonne or $/household)
gross cost, revenue, net cost
recovery (kilograms/household/year or tonnes/year or %)
Blue Box Program Plan (BBPP) identifies these measures
Cost containment plan
measure both cost & recovery
proposed efficiency & effectiveness

7. Calculating Efficiency
Efficiency = program performance on cost
Measured using net program cost per tonne of Blue Box materials recovered
Net Cost/Tonne = Net Program Cost divided by Tonnes BB Material Recovered
Net Program Cost = Gross Program Costs – Program Revenues
Lower net cost per tonne indicates higher efficiency

8. Calculating Effectiveness
Effectiveness = program performance on diversion
Measured using program recovery rate (% recovery)
Recovery rate (%) = Recovery of BB material divided by Generation of BB material
Recovery = Tonnes of material marketed as reported in annual WDO Datacall
Generation = estimated materials generated based on historic province-wide waste audit data cross-checked with steward data
Higher recovery rate indicates higher effectiveness

9. Calculating Generation
Generation = estimated materials generated based on historic province-wide waste audit data cross-checked with steward data
Waste generation estimates are based on historic waste audits throughout province
audits in single-family (large & small urban & rural) & multi-residential
Cross-checked waste audit results with steward reports & for some materials, replaced waste audit figures
newsprint, LCBO glass, telephone directories, paint cans, aluminum foil

10. Calculating Generation (2)
For each municipality, calculated generation based on households of each type
Extensive waste audit program underway to refine these generation estimates over time
more than 28 SF audits & 12 MF audits

11. Combining Efficiency & Effectiveness
E&E Factor combines program efficiency & effectiveness for overall performance measurement
Better performers tend to have lower E&E factors
higher efficiency (lower cost) in numerator
higher effectiveness (higher % recovery) in denominator

12. Example: 2004 E&E Factor

13. Reasonable Cost Bands Agreement
Andy Campbell
Regional Municipality of York
Member of MIPC’s Cost Containment Team

14. Reasonable Cost Bands Agreement
What are “reasonable” costs?

15. MIPC’s Task
Given Minister’s request, identify options that would determine reasonable costs to achieve net system cost reduction
Negotiations took place in June 2005
Compromise reached & approved by AMO, WDO & Stewardship Ontario boards

16. Negotiated Options Option Description Pros Cons Program Net Costs
Include costs for each program up to a threshold
Simple to apply
Using net cost does not consider performance on recovery
Component Net Costs
Focuses on elements of each program
Considers variation program elements adding to precision of analysis
Effectiveness & Efficiency (E&E) Factors
Include costs for each program up to a threshold defined by the selected E&E factor
Considers performance on recovery & the effect on cost
More difficult to apply
Component Effectiveness & Efficiency (E&E) Factors
Include costs for each program element for each program up to a threshold defined by the selected E&E factor for each program element
Considers variation in individual program elements
Most difficult to apply
Problems with different aggregation of data

17. Reasonable Cost Principles
All programs have room for improvement
Reasonable costs are better than current costs
Effectiveness & Efficiency (E&E) Factor will be used to measure performance of better performing programs
existing eight municipal program groups used
Defined by a percentile
percentiles will be decreased for 2007 over 2006 so that cost bands in 2007 reflect better performance over 2006

18. Reasonable Cost Definition
E&E factor calculated for each program in each “cost band” grouping
Reasonable Cost E&E factor calculated as mean plus one standard deviation of E&E factors for better 75% performing programs
Reasonable Cost E&E factor converted to Reasonable Costs for each affected program by multiplying by its recovery rate

19. Municipal Cost Band Groupings

20. How Reasonable Cost Was Applied

21. The Negotiated Compromise
$24M reduction to overall net system cost over two years
$10M in year 2006
$14M in year 2007

22. Reasonable Cost Impact (2006)

23. How is Program Funding Calculated?
Apply Municipal funding Allocation Model (MFAM)
Reduce funding for programs higher than the Reasonable Cost E&E Factor for each municipal grouping

24. MFAM Elements & Factors
material density factor
population density factor
revenue discount factor
Municipal Elements
tonnage marketed by material by municipality
population per hectare based on 2001 census data
Note: that there is a glass factor separate and apart form the other ‘Material density factors’
“it is simply a further adjustment to the density of glass to account for extra costs for glass despite its high density.”

25. MFAM & Reasonable Cost Municipal Datacall submission
$5M funding reduced from poorer performing programs based on E&E factor
MFAM
Max & min threshold applied
Adjustments made to correct for any reporting corrections from previous year
10% late submission penalty applied to applicable programs

26. 2006 Impact

27. “Best Practice” by 2008 What does “Best Practice” mean for you?
identifying “Best Practice”
possible further reduction in funding
financial incentive to modify your program to align with “Best Practice” performance

28. Summary 2006 funding 2007 funding 2008 funding
$10M reduction applied to 2004 net Blue Box system cost
applied to poorer performing programs based on E&E factor
minimum threshold set at 23%
2007 funding
$14M reduction will be applied to 2005 net system cost in the same way as for 2006
2008 funding
“Best Practice” costs

29. Questions & Answers

30. Break

31. On-line ‘What-If’ Tool
Glenda Gies
WDO
Moderator

32. What-If Tool Municipal Funding Allocation Model
four workshops in spring 2004
municipal participants consistently requested
user-friendly model
so municipalities could run their own scenarios
MIPC responded by developing a
‘What If’ tool

33. What-If Tool
Designed to test how program changes would have affected funding, revenue & recovery rates
By modifying material recovery rates & households served in your last Datacall submission
Identifies what your funding would have been if the program changes had been implemented prior to that Datacall year
Cannot predict future funding as this is affected by
actual Blue Box system gross cost, revenue & net cost in future years
materials collected & tonnes marketed by all other Ontario Blue Box Programs in future years

34. Our Speaker for This Session
Bob Argue – Demonstration of ‘What If’ Tool
President, REIC Perth
Executive Director of ecoPerth, (a non-profit, volunteer organization working on climate change)
consultant to IWDO on development of Municipal Funding Allocation Model (MFAM)
consultant to WDO on modifications to MFAM
retained to develop a user friendly ‘What If’ version of MFAM for municipal use

35. Live Demonstration of the ‘What-If’ Tool
Bob Argue
REIC Perth

36. Log-In

37. 2004 Municipal What-If Tool

38. Summary Funding

39. Example of a High Recovery Scenario

40. Table of Contents

41. Household Equivalents

42. Available Materials

43. Table of Contents

44. Build Your Own Scenario

45. Example of Scenario Graph

46. Questions & Answers

47. Thank You! Waste Diversion Ontario, www.wdo.ca
Stewardship Ontario,
Association of Municipalities of Ontario,