Breaking news
Cr Rhonda Clark has told fellow councillors that she could become manager of Cleanaway’s metropolitan waste contracts (including Port Phillip) if their acquisition of CityWide is approved by the ACCC. She is currently managing Cleanaway’s Western Victorian waste operations.
Questions about process, probity and corporate power plays as City of Melbourne sells Port Phillip waste contract to Cleanaway
Last week [24 June] the City of Melbourne (CoM) announced a $110M deal to sell Citywide’s Municipal and Commercial collection contracts and associated assets to Cleanaway Waste Management. This includes waste services for the City Port Phillip.
In their media release announcing the sale, the CoM boasted that the proceeds from the sale to Cleanaway will provide a once-in-a-generation opportunity to establish a City of Melbourne Future Fund for the debt burdened mega council. The sale is subject to ACCC regulatory approval.
Lucky for some, secret for others
Meanwhile at Port Phillip, the language is more muted and mired in secrecy.
Just a week before [19 June] Council endorsed a confidential settlement with Citywide about the service failures that happened in July 2023.
In the latest Divercity e-newsletter, Mayor Heather Cunsolo disclosed the settlement with CityWide writing, ‘The commercial settlement includes shortening Citywide’s contract from seven to three years. The only detail we can’t, at least currently, provide publicly is the cost of the settlement.’
In an additional statement for TWiSK, Mayor Cunsolo wrote:
‘The commercial settlement does not involve compensation. Part of the settlement covers bins which hadn’t been identified for the original contract – this would be payable to any contractor undertaking this service.
‘The other part of the settlement ensures the continuity of these core services and avoids either party resorting to expensive legal action. We can confirm that Citywide made significant concessions during the settlement negotiations.
‘As part of the negotiations, each party agreed to bear their own costs incurred when responding to the initial service disruption. Council paid $126,000 to redeploy our own staff to collect missed bins. Citywide’s costs significantly exceeded Council’s.’
Reading between these very carefully worded lines
We know that over 7,000 bins went uncollected in July 2023. We know that Council spent $126,000 to redeploy staff to collect missed bins. We also know that CityWide says ‘that Council misrepresented the nature and scope of the works which prevented Citywide from accurately pricing and adequately resourcing the contract.’ Ouch.
We also know that Council feared the CityWide might walk away unless a settlement was reached. In short, the settlement shortens the contract by several years, brings forward the retender process to next year and while council pays extra for the services that were not properly specified.
Intriguing.
Is sale to Cleanaway the real bombshell?
The sale to Cleanaway raises a cluster of new questions about the process, probity and the apparent ‘pawns’ in the process.
We don’t use the term pawn lightly. It’s apparent that Port Phillip [and Four Seasons – the previous waste contractor for 20 years] were mere pawns in a bigger stakes ‘game’.
The results of this game are that CoM created an impressive $110M Future Fund , Cleanaway acquired the Port Phillip contract with a renegotiated remuneration and Port Phillip has been left picking up the extra bill.
This is simultaneously more intriguing and flabbergasting with two additional facts in mind:
#1 Cleanaway was one of the unsuccessful tenders
#2 A Cleanaway senior executive is a current City of Port Phillip councillor and could become the contract executive.
(TWiSK accepts that all councillors have followed the Council probity processes during the waste contract decision.)
Maybe it’s too early to close the matter
In keeping with Council’s assertion that it is committed to transparency, we asked the Mayor if the Audit Committee would look again at the waste procurement. Here is the Mayor’s reply:
‘Council’s Audit & Risk Committee has conducted an extensive independent review of the procurement, transition and commencement of the waste collection contracts. These reports were published in March 2024. It is open to the elected Council and the Audit & Risk Committee to conduct further investigations if they see fit, but we consider this matter closed and are focused on the delivery of the Management Action Plan released in June. For clarity, the tender commenced in the first half of 2022 and the contract was awarded in October 2022. The sale was announced in June 2024 and is subject to several conditions including ACCC approval.’
FYI In September 2023, Herald Sun reported that a debt burdened CoM was looking to sell CityWide waste for a rumoured $300M. (Source)
FYI Read TWiSK’s report on Port Phillip’s Independent Waste Review [March 2024]
Response to TWiSK from Port Phillip Council Mayor Heather Cunsolo in full.
Q. How can the public be reassured about the waste contract procurement when an employee of City of Melbourne owned Citywide (the winning bidder) was a voting member of the assessment panel, a current councillor was a senior executive with an unsuccessful bidder (Cleanaway) and now it transpires that Cleanaway has purchased Citywide Waste from the City of Melbourne?
Council has been transparent with the community in engaging and publicly releasing the independent audit reports into the procurement of Council’s kerbside waste and recycling collection services. While the reports identified areas for improvement in how Council manages these procurements, they did not make findings of corruption or wrongdoing.
The independent probity adviser involved in the procurement process concluded that the procurement was “in all material respects, developed, managed and completed in accordance with relevant documented procedures and probity requirements” and that the appointment of the City of Melbourne (CoM) staff member to the panel did not materially impact the outcome of the tender. The independent probity audit concluded that while there were material findings, they did ‘not consider that they compromise, in a material manner, the tender outcome’.
At the time of the tender, several long-standing Council staff in the waste team had left the organisation. To ensure that we had the right mix of expertise on the tender evaluation panel, we drew upon the support of an officer with extensive waste sector experience from the CoM. This person was also a former employee of Council in the waste area and had knowledge of Council’s waste services. The potential for a conflict-of-interest was considered and the relationship was declared and subject to review by the independent probity advisor. It was determined that no material or general conflict-of-interest under the Local Government Act arose. Controls were put in place on the advice of the probity advisor and the CoM staff member participated in the tender evaluation alongside four other voting members.
We do acknowledge the finding of the independent auditor that while no material conflict of interest under the Local Government Act took place, in their view, the person should not have been allowed to be a voting member of the panel and their expertise could have been applied as a non-voting member. Based on the findings of the probity audit, Council officers have discussed the situation with a representative from the Local Government Inspectorate (LGI) and they have advised that based on the information provided the approach appeared reasonable. However, they did note that perceptions of conflict of interest can be difficult to manage, and that this could be an area of further work for the City Of Port Phillip and that the LGI would be happy to provide input into Council’s review of policies and process.
We are now taking a more conservative approach to managing perceptions of conflicts-of-interest. This is part of the general strengthening of our probity and procurement processes outlined in the Management Action Plan made public at the 19 June Council Meeting.
When the tender award was considered by Council at its meeting on 18 October 2022, one Councillor declared a material conflict of interest and removed themselves from decision-making for the tender. The Council organisation has processes in place to ensure confidential briefings, confidential Council meeting reports and confidential minutes relating to the tender and contract are managed appropriately. We would do this for any Councillor or officer with an ongoing conflict to ensure we adhere to the Local Government Act 2020 and our Council’s Governance Rules.
Q. Will the Council and the Audit committee look again at the procurement process now that you know that Cleanaway was interested in purchasing Citywide and that City of Melbourne was interested in selling to Cleanaway, and that the sale has been announced less than a year later? How will Council address the concern that City of Melbourne may have been in discussions to sell Citywide to Cleanaway during the procurement process at CoPP?
Council’s Audit & Risk Committee has conducted an extensive independent review of the procurement, transition and commencement of the waste collection contracts. These reports were published in March 2024. It is open to the elected Council and the Audit & Risk Committee to conduct further investigations if they see fit, but we consider this matter closed and are focused on the delivery of the Management Action Plan released in June. For clarity, the tender commenced in the first half of 2022 and the contract was awarded in October 2022. The sale was announced in June 2024 and is subject to several conditions including ACCC approval.
Q. And lastly, can you confirm that CoPP has paid compensation to Citywide for council failures that contributed to the high rates of failed bin pick up during the transfer of service last year?. If so, can you describe the order of magnitude of any payment/s? Will there be any payments from the supplier to CoPP for their failures?
The 19 June Council Meeting included discussions on the settlement reached with Citywide, which brings a close to negotiations following the bin collection disruption which followed Citywide taking over our kerbside waste and recycling service on 1 July 2023. The settlement of this matter ensures continuity of these important services for our community and enables Council to move towards retendering the services in early 2025.
We cannot disclose the financial details at this stage without risking the retender, as it is happening relatively soon. By protecting the commercial elements of the settlement, we can achieve the best outcome for ratepayers by avoiding giving potential tenderers an insight into our current costs.
I can say that the commercial settlement does not involve compensation. Part of the settlement covers bins which hadn’t been identified for the original contract – this would be payable to any contractor undertaking this service. The other part of the settlement ensures the continuity of these core services and avoids either party resorting to expensive legal action. We can confirm that Citywide made significant concessions during the settlement negotiations. As part of the negotiations, each party agreed to bear their own costs incurred when responding to the initial service disruption. Council paid $126,000 to redeploy our own staff to collect missed bins. Citywide’s costs significantly exceeded Council’s.
We can now move forward with re-tendering ahead of a decision in mid-2025, while Citywide continue its role until a successor is fully prepared to take over.
