CITY OF NEWCASTLE

Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 1

SUBJECT: CON 28/04/20 - TENDER - ORGANICS PROCESSING FACILITY

2019/144T

REPORT BY: INFRASTRUCTURE AND PROPERTY

CONTACT: DIRECTOR INFRASTRUCTURE AND PROPERTY / MANAGER
ASSETS AND PROJECTS

REASON FOR CONFIDENTIALITY

This report has been classified confidential in accordance with the provisions of the Local
Government Act 1993 (Act) as follows:

- Section 10A(2)(d) of the Act provides that Council can close a meeting to consider
commercial information of a confidential nature that would if disclosed prejudice the
commercial position of the person who supplied it.

- Section 10B(1)(a) and (b) of the Act provides that the discussion of the item in a
closed meeting must only:
(a) include as much of the discussion as is necessary to preserve the relevant
confidentiality, privilege or security; and
(b) occur if the Council is satisfied that discussion of the matter in an open meeting
would, on balance, be contrary to the public interest.

GROUNDS FOR CLOSING PART OF THE MEETING

In respect to section 10D(2) of the Act, the grounds on which part of a meeting is to be
closed for the discussion of the particular item must be stated in the decision to close that
part of the meeting and must be recorded in the minutes of the meeting. Accordingly, an
appropriate resolution to proceed is required first.

MOTION TO PROCEED

The discussion of the confidential report take place in a closed session, with the press and
public excluded, for the following reasons:

A The matter relates to tenders for the Organics Processing Facility - Design and
Construction - Contract 2019/144T.

B It is contrary to the public interest to discuss tenders in an open meeting because the
information provided to Council by tenderers is provided on the basis that it will be
treated by Council as commercial-in-confidence. A practice of disclosing sensitive
commercial information to the public, including competitors, could result in the
withholding of such information by tenderers. This would lead to a reduction in the
supply of information relevant to Council's decision. A disclosure of confidential
information by Council could result in Council being the subject of litigation for breach
of confidence.

C The closed session involves only as much of the discussion as is necessary to

preserve the relevant confidentiality, privilege or security.
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 2

PURPOSE

To accept a tender for the design and construction of an Organics Processing Facility
(Facility) for combined Food Organics and Garden Organics (FOGO) at the Summerhill
Waste Management Centre (SWMC).

As the value of the contract exceeds $1 million, the Local Government (General)
Regulation 2005 (Regulation) and the Chief Executive Officer's delegation requires
Council's acceptance of the tender.

RECOMMENDATION

That Council:

1 Reject the lump sum tender prices submitted and endorse the engagement with
Barpa Pty Ltd through an Early Contractor Involvement (ECI) procurement model
based on a target budget of $20,365,222 (excl. GST) for the Organics Processing
Facility for Contract No. 2019/144T.

2 Award the contract based on delivery being comprised of two separable portions.
Council shall fund Separable Portion 1 (Design and Approvals). During Separable
Portion 1 City of Newcastle (CN) will seek third party funding. Commencement of
Separable Portion 2 (Construction) will be contingent on CN Officers reporting back
to Council regarding the success of this funding.

3 This confidential report relating to the matters specified in s10A(2)(d) of the Local
Government Act 1993 be treated as confidential and remain confidential until the
Chief Executive Officer determines otherwise.

KEY ISSUES

TENDER

4 The project is for the design and construction of the Facility at the SWMC.

CONTRACT TERM

5 The term of the contract for design and construction is 22 months, with a 12 month
defect liability period.

ADVERTISING OF TENDERS

6 This tender was advertised as an open tender in the Newcastle Herald on

25 May 2019, Sydney Morning Herald on 28 May 2019 and nationally on the
Tenderlink website.

TENDERS RECEIVED

7 Tenders closed at 2pm on Tuesday, 23 July 2019. Tender submissions were

received from:

i) Kingston Building (Australia) Pty Ltd;

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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 3

ii) North Construction & Building Pty Ltd;

iii) Barpa Pty Ltd; and

iv) Bettergrow Pty Ltd **non-conforming submission**.

EVALUATION PROCESS

8 The tenders were assessed against the following criteria:

i) Financial – CAPEX (Phase 1, Phase 2 and

total Cost of Ownership) 30%

ii) Previous similar experience 15%

iii) Management systems (Work Health & Safety,

Quality Assurance, Ecologically Sustainable
Development, and Environmental) 10%

iv) Management and technical resources 10%

v) Methodology, functionality & conformance,

technical performance 20%

vi) Delivery program 15%

9 The Tender Assessment Panel (Panel) consisted of four CN officers. The Project
Manager, Contracts Specialist, SWMC Business Development Manager, and SWMC
Site Operations Manager.

10 The inclusion of a weighting related to local content was not included as the tender
evaluation criteria were set and communicated to the market prior to CN’s adoption
of a new policy. It is not appropriate to change evaluation criteria for a tender at this
stage of the tender process.

RECOMMENDED TENDER

11 Following a thorough review of the four tenders submitted, the Panel recommends
that the tender is awarded to Barpa Pty Ltd. Barpa Pty Ltd have submitted a tender
that demonstrates a clear and thorough understanding of the project requirements.

12 The recommendation is to reject the lump sum tender price submitted and engage
with Barpa Pty Ltd through an ECI procurement model. The intent behind rejecting a
lump sum offer and entering into an ECI procurement model based on a target
budget, is that further development of the design will result in a higher value outcome
for CN in regards to the ongoing operational costs, and is likely to result in savings
from value engineering.

13 The recommendation is to proceed to award a contract that comprises of two

separable portions. Separable Portion 1 - design and approvals and Separable
Portion 2 - construction and commissioning. Throughout all stages of the project, CN
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 4

will continually seek grant funding opportunities at both Commonwealth and State
levels.

14 CN can suspend or terminate the contract at the completion of Separable Portion 1

at an estimated cost of $2,200,981 (this includes various contingency and project
management costs). It is estimated $1,350,000 of this cost would be funded via an
existing grant from the NSW Environment Trust.

15 The recommended procurement approach will ensure that CN achieves a higher

quality outcome that offers value for money on the design and construction of the
facility.

FINANCIAL IMPACT

16 The estimated total capital cost of this project including the proposed target budget
amount, allowances for project management, consultants and other associated
project costs excluded from the tendered scope, is $24,630,838 (excl. GST).

17 The project will be delivered over multiple financial years with works commencing in
2019/2020 and continuing in the 2020/2021 and 2021/2022. CN received $1.5 million
towards this project from the NSW Government’s ‘Waste less recycle more’ program
and it is intended that additional work is undertaken to source additional grant funding
during Phase 1 of the project.

18 This project will be funded from CN’s Works Program over a three year period with
total forecast expenditure budgeted as follows:

Financial Year Amount

2019/2020 $0.55 million
2020/2021 $9.2 million
2021/2022 $14.9 million

19 The project has an estimated life of approximately 25 years. During this time the
facility can divert approximately 168,000 tonnes of food organics (FO) that would
otherwise be landfilled at SWMC. It is estimated that CN will save $32.5 million
through avoided Section 88 waste levy payments from FO, over the 25 years.

20 The project also has the ability to process CN’s garden organics (GO) which are
currently transported to Bettergrow, located 173 km return trip from SWMC. This
contract expires in 2021 and costs approximately $1.3 million per annum.

21 In total it is anticipated that the facility will divert approximately 900,000 tonnes of
FOGO over its 25 year life, resulting in reduced levy liability and levy savings of
approximately $168.5 million over the life of the facility.

22 Key financial benefits / outcomes of the project are summarised in the table below.
Note that these elements are discussed in further detail in the Background section of
this report.
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 5

Financial element Project cost/benefit Comment

Initial project capex $24.4M Funding already exists in
Reserve funded $13.0M reserves related to the
Domestic Waste
Grant funded $1.5M Management Service
Project capital Charge (DWMSC).
requirement $9.9M
Project opex Circa $120M Current cost of processing
Funded opex due to is $93.5M net opex (less
existing operations $93.5M revenue and levy savings)
is $26.5M.

Cost to landfill Circa $210 per tonne The cost per tonne for the
excl. GST and project is cheaper than
margin. landfill.
Project life cycle cost $154 per tonne. Total unit cost of project is
cheaper than landfill.
Levy savings - Total $168.5M
Levy – Garden Organics $136M Already saved.
Levy – Food Organics $32.5M New savings.
Landfill airspace (FOGO)
420Kg/m3 1.4Mm3 Based on 880K total FOGO
630Kg/m3 2.1Mm3. over life of project.
Capital deferred Cell 9 is 2.9Mm3
420Kg/m3 $12M Capex based on Cell 9 flat
630Kg/m3 $18M capex per cubic metre.

Transport costs to offsite $22M to $26M Using semi or B-Double.

facility Excluding loading
infrastructure.
Current facility cannot
receive FO.
Accounted revenue $7M to $18M Based on compost sales
streams only.
Plus potential upside.

23 The project will generate revenue from the sale of compost estimated at between $7
million to $18 million over the life of the project with significant upside potential.

24 The budget has an allowance for price escalation such as changes in labour costs or
FOREX rates. The approach to develop the design with the contractor not only allows
the project to investigate and seek cost saving opportunities but to also ‘design out’
solutions that are susceptible to fluctuations in the foreign exchange rate. Where
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 6

feasible, there is an opportunity to utilise locally manufactured material and

equipment in lieu of European equipment included within the tender price that will aid
in off-setting any price increases.

25 The COVID-19 pandemic may have some impact on the project. The construction
industry has adapted like many other industries with the use of communication
technology and remote working capabilities. It is expected that the design and
approvals phase of the project can be completed successfully without the ability to
hold person to person meetings and limited site visits. Engineering firms are equipped
to work remotely and have been undertaking work from distance for several years.

26 The social distancing measures currently in place would not prevent the construction
works commencing. Procedures and methods for construction have been
implemented across the industry to ensure social distancing can be maintained.
These measures may include larger site amenities, smaller worker crews, increased
hand washing facilities and clear protocols if a worker tests positive for the COVID-
19 virus. As the project is not multi-storey, it is possible to provide worker access to
the site in conformance with the social distancing rules without restricting productivity.

27 By awarding a contract with two sperate separable portions (ie. the contract is in two
stages), CN retains the ability not to proceed with the construction works should the
risk of impact from COVID-19 be assessed as too high.

IMPLICATIONS

POLICY IMPLICATIONS

28 This project aligns with the following Newcastle 2030 Community Strategic Plan
(CSP) direction:

Protected and Enhanced Environment

2.1.1 Improve waste minimisation and recycling practices in homes, work places,
development sites and public spaces.

29 CN incorporated the United Nations Sustainable Development Goals (SDGs) within

the updated CSP adopted by Council in June 2018. The provision of organics
processing delivers on the following SDGs:

i) Goal 6: Clean water and sanitation,

ii) Goal 8: Decent work and economic growth,

iii) Goal 9: Industry, innovation and infrastructure,

iv) Goal 12: Responsible consumption and production,

v) Goal 13: Climate action, and

vi) Goal 15: Life on land.

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30 The project is a key component of CN’s Draft Waste Strategy, currently under
development.

31 A summary of other non-financial project benefits/outcomes are as follows:

Environmental, social or
economic element
Diversion from landfill.
Reduced greenhouse gas
emissions.
Soil, water and fertilizer
benefits.
Energy
Employment
Community expectation
* compared to landfill with no gas collection
Project benefit/outcome
880,000 tonnes total organic material processed
(including 168,000 additional FO tonnes).
Over 900,000 CO2 eq – 242,000 cars for one
year*.
Improved soil productivity, useable product,
increased water retention, reduced inorganic
fertilizer.
Potential renewable energy source.
Construction plus five local jobs.
One in ten unprompted indicated they expect
organics similar to Lake Macquarie City Council.
98% believe increased diversion is important.

ENVIRONMENTAL IMPLICATIONS

32 The recommended tenderer has demonstrated an ability to construct the Facility in a

manner utilising best environmental management practices. The recommended
tenderer also has an environmental policy.

ECOLOGICAL SUSTAINABILITY

33 Barpa has an Environmental Management System (EMS) certified to ISO 14001

Within the EMS is an over-arching Environment Management Policy that will cover
various aspects of the Ecologically Sustainable Development (ESD) policy such as
recycling materials, reducing waste and sourcing renewable materials where
possible etc. The recommended tenderer has not been prosecuted for environmental
offences, nor is it involved in any of the prescribed activities such as uranium mining,
wood chipping, nuclear energy or timber harvesting.

IMPLEMENTATION

34 The Facility will require five full-time staff to manage ongoing operations.
Appointment of these roles will be required in the fourth quarter of financial year
2020/2021. At start up the financial analysis requires four operations staff (one per
5,000 tonnes of input material) and a Facility Manager to ensure, among other things,
quality control and assurance. This is discussed in the section relating to operational
expenditure.

CONSULTATION/COMMUNICATION
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 8

35 Included with the design and construct scope is the management of all approvals
required to construct the Facility. This will involve an Environmental Impact
Statement, Development Application and an Environmental Protection Licence
variation.

36 A workshop regarding the recommended tender was held with Councillors on

Tuesday, 21 April 2020.

37 Consultation will involve:

i) NSW Environmental Protection Authority;

ii) Mine Subsidence Board;

iii) The Department of Planning, Industry and Environment; and

iv) The Community.

BACKGROUND

Organics diversion

38 SWMC was originally conceived as a ‘waste precinct’ and in recent years, significant
work has been completed on the concept of a bio-hub.

39 Organics represent a significant portion of the municipal waste stream, typically

representing in excess of 30% of the material stream. Organics when correctly
processed, represent a commodity material (compost) which can be used beneficially
to improve soil and productivity. Contemporary waste strategies for large Councils
typically include the diversion of organics from landfill. Examples of benefits are as
follows:

i) Financial:
a) marginal cost to community, or nil additional cost where multiple revenue
streams,
b) reduction in landfill consumption – allows for commercial revenue, and
c) lower levy liability.

ii) Environmental:
a) reduced greenhouse gas emissions,
b) potential renewable energy source,
c) increased diversion of waste from landfill,
d) organic products displacing inorganic fertilizers, and
e) soil quality, water retention and soil productivity improvements.

iii) Social and economic:

a) generation of beneficial product which would otherwise be wasted,
b) reduced transport of bulk commodities, and
c) centre of gravity local transport hub.

iv) customer:
a) higher level of service, and
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 9

b) community expectation for implementation of service.

Project history

40 In the 2018/2019 Our Budget CN identified its intention to construct a Facility for
combined FOGO at SWMC. The Facility would accept source-separated organic
wastes currently disposed in both red and green bins and process the waste to
produce compost material that meets the requirements of AS4454-2012 as well as
relevant NSW EPA regulations.

41 Specifically AS4454-2012 specifies requirements for organic products and mixtures

of organic products that are to be used to amend the physical and chemical properties
of natural or artificial soils and growing media. It specifies physical, chemical,
biological and labelling requirements for composts, mulches, soil conditioners and
related products that have been derived largely from compostable organic materials
and which meet the minimum requirements as set out in this Standard. It covers
products marketed or distributed both in bags and in bulk in an unrestricted manner
in all market sectors including domestic use, urban landscaping, agriculture and land
rehabilitation. This Standard applies to organic products and mixtures of organic
products that have been treated by pasteurizing or composting procedures as
defined by this Standard.

42 Compliance and generation of a product which meets the standard ensures the
product generated is fit for sale.

43 The Organics Facility project objectives were to deliver the following benefits
i) Economic: to minimise waste management costs to CN and ensure adherence
to waste diversion targets established by the NSW Government Waste
Avoidance and Resource Recovery Strategy 2014-2021 (WARR Strategy);

ii) Security of Service: to provide an effective and ongoing resource recovery and
disposal service;

iii) Waste Minimisation: to provide a sustainable resource recovery and waste

management system that minimises the amount of organic material disposed
of to landfill;

iv) Environment: to secure a resource recovery and waste management system

that has minimum adverse impact on the environment;

v) Social: to provide a best value solution for CN while meeting the community’s
existing and future needs and expectation for waste management, having
regard to transport and other community impacts; and

vi) Innovation: to provide a resource recovery and waste management system

that will maximise future opportunities for economic and environmental benefits,
in response to industry and technology development and changes in the waste
and resources stream.
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 10

44 CN originally made application to the New South Wales EPA for a grant to construct
an organics processing facility and in December 2014 received a $1.8 million grant
(50% of an estimated $3.6 million project spend).

45 A multidisciplinary project team was assembled and put an expression of interest to

market for an open windrow composting processing facility. Four expressions of
interest were shortlisted to provide a tender to CN. Upon completion of that tender
capital costs were presented by the market which typically represented a capital cost
which exceeded $10 million.

46 A value for money assessment was completed which concluded at +$10 million the
project remained viable.

47 In December 2015 Councils received a notice limiting local government decision

making related to any proposed mergers. This limitation remained in place until
March 2017. As a result of the limitations, CN could not meet its milestones under
the original grant.

48 In April 2017, CN indicated its intent to continue with the project. The EPA however
rejected the extension of the project and in September 2017 the original grant was
formally terminated.

49 In August 2017 CN submitted a second grant application, which was successful in

the amount of $1.5 million. At this point the capital cost of the project was estimated
at approximately $13 million and the project remained a compost facility with open
(not enclosed) windrow maturation.

50 A design and construct tender went to market in May 2019 with tenders closing in
July 2019. Evaluation was completed over a four month period with a presentation to
Councillors held in December 2019 and a second presentation in April 2020 to
identify further components of the contract and identified risks.

51 The calling of tenders was in accordance with the requirements of Section 55 of the
Act. The process followed was in accordance with Part 7 of the Regulation. Council
is required to accept tenders in accordance with clause 178 of the Regulation (see
Options).

52 Since this time additional work on risk and sensitivity modelling of financial outcomes
has been completed.

Increased capital cost and change to procurement model

53 Most recent tenders received represent a significant increase over the $13 million
capital estimate resulting from the previous tender process in 2014. There are several
reasons for this increase in capital cost, including:

i) the original estimate is over five years old,

ii) the original estimate was based on an open windrow maturation composting
process,
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 11

iii) since this time, it has become apparent that unless the entire facility is fully
enclosed it is unlikely to receive the appropriate approvals due to concerns
regarding the likely impact of odour from the project on nearby residents,

iv) during the tender evaluation process referee checks of reference operations
indicated a fundamental constraint and failure of existing projects related to
odour controls and under sizing the facilities – several facilities reported
requiring significant upgrades shortly after opening due to inadequate design,

v) learnings from the recent Lake Macquarie City Council project, indicated that
an unenclosed facility resulted in significant odour complaints and that the
facility was undersized,

vi) the most recent capital estimate is market tested based on contemporary
technology and approvals requirements, with only the recommended tenderer
complying with what are the contemporary requirements for the project
(capacity, residence time and being fully enclosed).

54 A design and construct tender model typically incentivises a lower capital cost. During
tender evaluation and analysis of the project, it has become apparent that operating
costs represent the largest cost driver of the project. As a result, a design and
construct tender model does not necessarily result in the best outcome for CN.

55 Further to this, during the tender process, representations were made to CN by

Hunter Water with potential material streams which may add benefit to the project.
The design and construct tender model would preclude CN from considering these
other opportunities.

56 By opting not to proceed with a lump sum contract award, there is a risk of financial
over runs that require targeted management and mitigation. This financial risk can be
managed by the following:

i) validation of the budget through market tender - not just preliminary feasibility
budgets,

ii) identification of contingencies and allowances for project risks before

commencement,

iii) contractually separating design/approvals from construction and retaining the

ability not to proceed with the construction phase of the project,

iv) utilising independent cost checks by a third party construction cost consultant
to validate the costs,

v) development of a design that considers total cost of ownership (TCO) and

operational costs rather than only capex costs and technical compliance,

vi) utilising independent technical reviews by a third party peer review consultant
to validate the design,

vii) locking in preliminary/staff rates and profit margin before awarding the contract,
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Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 12

viii) tendering all trade and supplier trade packages, and

ix) letting sub-contract trade packages as fixed price lump sum awards.

Revised Business Case with updated cost profile

57 A review of the feasibility of the project has been completed since the provision of
higher capital costs from the market. Some of the major benefits and outcomes of
this assessment as summarised below under the key headings of:

i) financial,

ii) environmental,

iii) social and economic, and

iv) customer expectations.

Financial

58 The current cost to landfill exceeds approximately $210 per tonne, excluding GST
and margin. The cost of processing organic material under the revised business
model is approximately $154 per tonne. Approximately 74% of this cost is
operational.

59 Various sensitivity analysis were conducted over the base case as summarised in
the following table:

Scenario Cost per tonne

Cost to landfill (excl. GST and margin) + $210
Base Case $154
10% capex increase $161
20% capex increase $167
10% opex increase $163
Compost revenue $10 per tonne $168
Compost revenue $0 per tonne $176
Upgraded off site version (Ravensworth) $186

60 Other savings as a result of the project include:

i) avoidance of levy,

ii) deferred capital due to diversion of waste from landfill, and

iii) avoidance of out of LGA travel costs if an alternative organics facility is utilised.

61 The revised procurement model is also designed to allow CN to take advantage of

the potential to partner with other major sources of organics waste streams, and to
consider the potential for additional revenue streams as a result.

62 The value of levy potentially saved (compared to landfill) is shown in Figure 1.

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Figure 1 – Cumulative levy liability including Food and Garden Organics.

63 If the organic material is not diverted from landfill, the additional tonnes to landfill will
use up airspace in Cell 9. Using the per cubic metre capital cost of Cell 9, and
considering the amount of space the organic waste would take in the landfill, a high
level estimate of the potential deferred capital costs are shown in Figure 2.

Cumulative airspace saved - capital deferred

$20,000,000 2,500,000
$18,000,000
$16,000,000 2,000,000
$14,000,000
$12,000,000 1,500,000
$10,000,000
$8,000,000 1,000,000
$6,000,000
$4,000,000 500,000
$2,000,000
$- 0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Cumulative airspace saved - 420Kg/m3 Cumulative airspace saved - 630Kg/m3

Cell Capex spend deferred - 420Kg/m3 Cell Capex spend deferred - 630Kg/m3

Figure 2 – Capital deferred as a result of reduced landfill airspace consumption.

64 Organic material is currently transported to a location at Ravensworth near

Muswellbrook. CN is advised that this facility cannot process FO. The ongoing
viability of this site is in question due to increased environmental requirements from
the NSW EPA.
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65 The current contract is also due to expire in approximately 12 months. Nevertheless,

the cost to transport organic material to a site such as this for a range of transport
options, is shown in the Figure 3. Note that this cost does not include the capital and
operating cost of loading requirements which would require a dedicated transfer
station and add further to the cost below (except for the side loader direct haul).

Cumulative additional organics transport cost (ex loading

infrastructure) – 80-90 km one way
$60,000,000

$50,000,000

$40,000,000

$30,000,000

$20,000,000

$10,000,000

$-
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Side loader Side tipper B-Double

Figure 3 – Increased potential transport costs (80+ km one way excluding loading capital and operating
requirements).

66 Financially it can be shown that even with an increased capital cost of over $24 million
(total current capital requirement including $20 million construction), the project:

i) remains cheaper than landfill by more than $50 per tonne,

ii) has the potential to result in a reduction in levy liability when compared to landfill
of over $168.5 million – with new savings of at least $32.5 million,

iii) would otherwise use up at least $12 million in landfill capital requirements, and

iv) locating the facility close to CN results in bulk transport savings which exceed
$20 million (excluding loading capital and operating expenses) over the life of
the project.

67 When previous tenders were not accepted (2017) CN entered into a short-term
contract with a firm to process GO at Ravensworth. The initial term of this contract
expired in January 2020. A 12 month extension at CN’s discretion has been executed
which takes this contract through to January 2021. Only one further extension option
remains, meaning this contract will expire in January 2022.

68 It is not possible to directly compare, nor is it feasible to continually extend the current
option with the organics project for the following key reasons:
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i) the current operator leases land and there may be limitations to the long term
ability to utilise the site,

ii) the current operation is not licensed to process FO,

iii) the current operator has sought to increase capacity, however the NSW EPA
has advised any new facility must be fully enclosed (similar to what has now
been proposed for CN), at much greater cost than originally factored – as a
result the feasibility of this upgrade is being reviewed, and

iv) CN’s recent experience with the EPA related to its temporary bulk up facility for
recyclables, indicates that any long term transfer arrangement is likely to require
a dedicated fully covered and enclosed shed – this will add additional capital to
meet this requirement.

69 There is also a significant risk in the future that organics may be banned from landfill.
This has occurred in many European countries including the UK, and is currently
being debated in some Australian States.

70 A key reason to consider the potential for working with other partners (such as Hunter
Water) includes the potential to unlock anaerobic digestion options. This can result
in an additional revenue stream from options such as renewable gas, power
generation, or displacing the use of diesel.

71 Figure 4 demonstrates the headline value of various commodity to market options

where the facility generates renewable gas from the organic material as part of the
biological degradation process. REDACT GRAPH

FFF

Figure 4 – Potential headline market displacement value of gas to various markets.

Environmental
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72 There are significant environmental benefits from the diversion and processing of
organics from landfill. These include lower emissions, the ability to displace fossil fuel
(where a gas is generated), the ability to displace inorganic fertilisers, much improved
soil characteristics and productivity.

73 Whilst starting at around 20,000 tonnes per annum of garden organics diverted from
landfill, this facility is expected to grow in capacity (under current scenarios) to around
50,000 tonnes per annum. FO is currently planned to be introduced in around year
4, to allow for collection configuration planning and community education. There is
the potential to divert more material if CN is able to partner with other sources of
organic feedstock such as neighbouring councils, commercial sources or Hunter
Water, for example.

74 Over the life of the facility under current scenarios, the facility will divert over 880,000
tonnes of organic material from landfill, to be turned into useable compost and other
products as shown in Figure 5.

Cumulative Tonnes - Garden and Food Organics

1,000,000.00
900,000.00
800,000.00
700,000.00
600,000.00
500,000.00
400,000.00
300,000.00
200,000.00
100,000.00
-
2044
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043

2045
2046

Cumulative Tonnes Garden Waste Cumulative Tonnes Food Organics

Figure 5 – Estimate diversion from landfill over life of current scenario

75 When compared to landfill, the project has a significant reduction in greenhouse gas
emissions.

Social and economic

76 The project will produce a useable product from otherwise discarded materials.

Customer expectations

77 CN conducted a community survey in September 2019. One question in this survey

allowed for CN residents to unprompted identify the key thing they thought CN could
do to improve service. After reducing bulk waste wait times, the key response from
the community related to the introduction of an organics service where one in ten
CITY OF NEWCASTLE
Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 17

residents responded they’d like to see an ‘organics service similar to Lake

Macquarie’.

OPTIONS

Option 1

78 The recommendation as at Paragraphs 1 to 3. This is the recommended option.

Option 2

79 Council defers a decision at this time to allow further consideration of the tenders
received. This is not the recommended option.

Option 3

80 Council resolves not to accept any tender and invite fresh tenders. This is not the
recommended option.

Option 4

81 Council resolves not to accept any tender and enter into negotiations with any party
with a view to entering into a contract. Council must state a reason for this in its
resolution. This is not the recommended option.

Option 5

82 Council resolves not to accept any tender and not proceed with the contract. Council
must state a reason for this in its resolution. This is not the recommended option.

ATTACHMENTS

Attachment A: Tender Evaluation Matrix Summary

CITY OF NEWCASTLE
Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 18

TENDER EVALUATION MATRIX SUMMARY (CONFIDENTIAL)

TENDER - ORGANICS PROCESSING FACILITY 2019/144T

Construction

Bettergrow
Percentage

(Australia)
Weightings

& Building

Barpa Pty
Kingston

Pty Ltd**
Building

Pty Ltd

Pty Ltd
North

Ltd
ASSESSMENT CRITERIA

Previous Similar Project Experience 15 10.5 9 12 Non-conforming

Management Systems (WHS, QA,
10 7 7 8 Non-conforming
ESD/Environmental)
Management & Technical Resources 10 7 7 9 Non-conforming
Methodology, Functionality & Conformance,
20 12 12 18 Non-conforming
Technical Performance
Delivery Program 15 9 10.5 12 Non-conforming
Financial - CAPEX (Phase 1, Phase 2 and
30 18.1 15 12.6 Not submitted
Total Cost of Ownership)
Total Score 100% 63.6 60.5 71.6 Non-conforming

RANKING 2 3 1 Non-conforming
Tender Price*
$14,073,180.78 $17,978,226.87 $20,910,676.55 Not submitted
(GST exclusive)

*Estimates for items that will be required that were excluded from the tender prices have been added to ensure a “like for like”
comparison for the evaluation process.
** Bettergrow Pty Ltd did not submit a tender for a FOGO facility. Relevant schedules (including pricing) and other documentation were
not provided.
CITY OF NEWCASTLE
Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 19

NOTES:
1 The two key considerations that were identified throughout the assessment were odour risk and quality of compost produced. The
potential damage caused by odour issues extend to: continual community complaints, WHS issues for CN staff, breaches of EPA
licensing conditions, limitations imposed on existing SWMC operations, devaluation of the value of the SWMC site and potential
negative impacts on the surrounding residential market value. A poor quality of AS4454 compliant compost product could result in
the stockpiling of product, with limited demand creating a logistical challenge and an ongoing waste levy liability.

2 Barpa Pty Ltd have proposed to partner with Waste Treatment Technologies (WTT) as their ‘waste technology providers’. WTT
have an extensive list of references for design and construction of anaerobic digestion, waste to energy, mechanical treatment,
mechanical biological treatment and composting. WTT have designed approximately 120 composting facilities world-wide over a
period of approx. 30 years. WTT have two Australian based reference projects with a list of 27 other comparative projects in Europe.

3 Barpa Pty Ltd’s proposed design and methodology is superior and more robust than the offers from Kingston and North. The risk
of odour issues to the surrounding residential areas are substantially better addressed with the Barpa Pty Ltd solution due to
examples such as: increased allowance in scale for a longer composting process time (72 days), more air changes per hour
throughout the building (2-4 per hour), larger bio filters to manage odour, increased segregation of areas within the building, 100%
fully enclosed operation, incorporation of an ‘air scrubber’ and more advanced control systems. An increased processing time
provides more certainty of producing an AS4454 compliant product that is of high quality and in high demand.

4 All of the items noted above provide greater flexibility in regard to responding to equipment failures or changing external variables
such as environmental/weather conditions and organic feedstock. Barpa Pty Ltd have allowed for a more advanced design for not
only fire detection but also suppression systems within the facility which provide a higher degree of life safety and overall protection
of the asset.

5 A thorough review of the Kingston proposal has identified that the tendered solution has technical shortcomings and would produce
a compost product that would be AS4454 compliant but of lower grade and more difficult to sell. This is supported by the fact that
the design is based on a total composting process time that is 40% shorter than not only the other two tenders submitted but also
shorter than the processing times of four reference facilities contacted throughout the evaluation. Furthermore, the shortcomings
identified would increase the risk of odour issues due to an inadequately sized mechanical ventilation system. Reference checks on
two similar facilities involving the waste technology partner of Kingston Building have required upgrades in the order of $2.5-5M in
the years following to address the issues identified in the evaluation.
CITY OF NEWCASTLE
Confidential Report to Ordinary Council Meeting on 28 April 2020 Page 20

** CONFIDENTIAL **