July 15, 1998

    To:Budget Committee

 From:City Clerk

 Subject:Award of Contract for a Small Scale Mixed Waste

Recycling and Organics Processing Facility

  Recommendation:

 The Works and Utilities Committee on July 15, 1998, recommended to the Budget Committee the adoption of the report dated July 6, 1998, from the General Manager of Solid Waste Management Services, respecting the award of a contract for a Small Scale Mixed Waste Recycling and Organics Processing Facility.

City Clerk

 Attachment

 c:General Manager of Solid Waste Management Services

(Report dated July 6, 1998, addressed to the

Works and Utilities Committee from the

General Manager of Solid Waste Management Services)

 Purpose:

 The purpose of this report is to present the results of the Request for Proposals for a Mixed Waste Recycling and Organics Processing Facility, and provide the rationale for awarding the contract for design, construction and operation of the facility to a joint venture of Stone and Webster Canada Limited and Canada Composting Inc. This facility is required to support the City's target of 50 percent waste diversion by 2006.

 Funding Sources, Financial Implications and Impact Statement:

 The proposed Small Scale Mixed Waste Recycling and Organics Processing Facility has a total capital cost of $11.2 million after municipal GST rebate, including consulting fees and contingencies.

 Financing of $8 million for the facility has been provided for through the approved 1998 Capital Works Program under Project C-SW004 - Recycling Facilities, of which $927,000.00 is for 1998 requirements. This amount was projected to be the cost of the facility based on initial planning estimates. It is recommended that financing in the amount of $3.2 million be transferred from Project C-SW360 - Recycling to accommodate the shortfall in financing for this project.

 The small scale facility is projected to be operational in the second quarter of 2000, so there are no operating budget implications for 1998. The first year operating costs of $915,400.00 for the small scale facility will be offset by estimated disposal cost savings and tipping fee revenue of $412,000.00, for a net operating cost impact of $503,400.00 ($25.00 per tonne processed). This additional expenditure is recommended in view of the essential 3Rs systems planning information that will be provided by the small scale facility.

 The projected amortized capital and operating costs for the full scale facility are $6.8 million for 100,000 tonnes of mixed waste per year or $7.1 million for 165,000 tonnes of organic material per year. The $6.8 million cost for processing mixed waste would be more than offset by projected disposal cost savings, tipping fee revenue, electricity sales revenue and material sales revenue, the total of which is estimated at $7.1 million per year, for an estimated net benefit of $350,000.00 per year. Processing source separated organic material generates a net financial benefit up to $3.7 million per year, depending on the net additional costs associated with collecting source separated organic materials.

 Recommendations:

 It is recommended that:

(1)staff be authorized to enter into a contract with a joint venture of Stone and Webster Canada Limited and Canada Composting Inc. (a company designated by Stone and Webster Canada Limited) for:

(a)the design and construction of a Small Scale Mixed Waste Material Recycling and Organics Processing Facility at the Dufferin Transfer Station, at a total cost of $10.4 million after the municipal GST rebate, and

 (b)the operation of the facility and the marketing of the output material for a one-year term with options for two one-year extensions in accordance with the operating fee schedule contained in this report, such contract to be in accordance with the Request for Proposals and the Proposal submitted, modified as set out in this report, and on terms and conditions satisfactory to the Commissioner of Works and Emergency Services, including such financial and performance guarantees to be provided by Stone and Webster Canada Limited as deemed appropriate by the Commissioner, and in a form satisfactory to the City Solicitor;

 (2) a contingency amount of $500,000.00 be provided for any approved additional work in relation to Recommendation No. (1)(a);

 (3)subject to finalization of an agreement as set out in Recommendation No. (1), MacViro Consultants Inc. be engaged as project consultants to review the design of the facility, inspect site construction and monitor contractor progress and performance at a cost not to exceed $238,000.00 after the municipal GST rebate; and

 (4)financing in the amount of $3.2 million be transferred from Project C-SW360 - Recycling to Project C-SW004 - Recycling Facilities to accommodate the shortfall in financing resulting from the Request for Proposals process.

 Council Reference/Background/History:

 At its meeting on April 28, 1998, City of Toronto Council adopted Clause No. 4 of Report No. 3A of The Works and Utilities Committee, which recommended that:

"Staff be authorized to open the price proposals and complete the evaluation process for the short-listed respondents to the Request for Proposals for a Mixed Waste Recycling and Organics Processing Facility, and report back to Committee with recommendations."

 Council amended Clause No. 4 by adding thereto the following:

"It is further recommended that the Commissioner of Works and Emergency Services be directed to ensure that consultation takes place with the surrounding industrial and residential community and that a plan be developed for integrating the proposed facility into the industrial community in a way that makes the industrial community an integral part of the process."

 Background information on the Request for Proposals process previously reported to City Council is contained in Attachment 1.

Discussion and Justification:

 The Small Scale Mixed Waste Recycling and Organics Processing Facility is a key element of the City's waste diversion planning process, because it will be used to determine the role that mixed waste processing and source-separated organics processing facilities will play in achieving higher levels of waste diversion.

 The small scale facility will divert up to 22,000 tonnes of waste per year and will provide essential 3Rs system planning information. The full scale facility will be capable of diverting up to 150,000 tonnes of waste, or 15 percent of the total municipal waste stream.

 Outcome of Evaluation Process:

 Following a detailed analysis of the capital and operating costs contained in the price proposals, the submission from Stone and Webster Canada Limited, in association with Canada Composting Inc. (SWCL/CCI), was identified as the overall low cost proposal. Their submission provided the lowest capital cost and the lowest operating cost.

 SWCL/CCI received a high rating in the evaluation of their technical submission. On the basis of this rating, coupled with the lowest proposed cost, it was determined that the SWCL/CCI proposal provided the best overall value to the City.

 The key feature of the proposed facility is the patented BTA-Process, a proven German technology that combines sophisticated waste pre-treatment and separation techniques, along with advanced methods of anaerobic digestion within a fully enclosed, odour controlled facility. The facility captures recyclable container material and converts organic material into high quality compost and biogas. The biogas is then used to produce electrical and thermal power for the facility and other users.

 The facility has a capacity of 15,000 tonnes per year when processing mixed waste or 25,000 tonnes per year when processing source-separated organic material. SWCL/CCI is guaranteeing a 70 percent diversion rate for mixed waste delivered to the facility and a 90 percent diversion rate for organic waste. An overview of the proposed facility and its advantages are provided in Attachment 2.

 Capital and Operating Costs for the Facility:

 The capital cost for the SWCL/CCI facility is $10.4 million after municipal GST rebate. A contingency cost of $500,000.00 for any approved additional work, and a consulting services cost of $238,000.00 have also been budgeted for a total project capital cost of $11.2 million.

 The operating contract is for a minimum of one year with two one-year extensions, commencing in approximately May 2000. Under the terms of the operating contract, SWCL/CCI will be responsible for marketing all output material and will retain any revenue generated. A complete discussion of capital and operating costs, including an operating fee schedule, is contained in Attachment 3.

 The first year operating fees are projected to be $915,400.00, based on processing mixed waste for six months and source-separated organics for six months. This cost will be partially offset by estimated disposal cost savings of $150,000.00 and estimated net tipping fee revenue of $262,000.00 from private sector material delivered to the facility, for a net annual operating cost impact of $503,400.00. Any additional cost for a residential source-separated organics (SSO) collection pilot project during the SSO phase of operation could be avoided by processing municipally collected organics-rich commercial waste from the downtown core, or by co-collecting mixed waste and SSO on the same truck.

 After operating the small scale facility for a one-year period, a decision can be made on expansion to a full scale facility processing either 100,000 tonnes per year of mixed waste or 165,000 tonnes per year of SSO. Based on an assessment of all projected capital and operating costs, disposal cost savings, tipping fee revenue, energy revenue, and compost and recyclables revenue, it is estimated that the full scale facility could provide a financial benefit to the City of between $300,000.00 and $3.7 million per year. The complete financial analysis for the small scale and full scale facility is provided in Attachment 4.

 It is proposed that the RFP consultants, MacViro Consultants Inc., be retained at a cost not to exceed $238,000.00, after municipal GST rebate, including contingencies, to provide contract administration and construction supervision services.

 Management of Risk:

 As with any waste management facility, there are financial risks and operational risks associated with this facility. The strategy of developing a small scale facility, which can be expanded later, was chosen to manage financial risks by allowing the City to evaluate different processing approaches at a small scale before committing to constructing full scale capacity. After the evaluation stage, the City can choose to expand to a full scale mixed waste processing facility or a full scale organics processing facility, based on an assessment of financial and operational viability. In the event that Toronto decided not to expand capacity, the facility can continue to be operated at the small scale capacity for either mixed waste or source-separated organics at no additional capital cost.

 With respect to financial risk associated with marketing of material, SWCL/CCI has assumed the risk by being responsible for marketing all output material, and by providing a processing fee that is net of any material revenue they receive.

 A strategy has also been developed to minimize operational risks by:

(1)choosing a proven technology with a demonstrated track record;

(2)requiring that the facility be fully enclosed with all exhaust air processed through a bio-filter;

(3)allowing no outside storage of compost material;

(4)using the Dufferin Transfer Station site which, in the unlikely event of an operational problem, will allow received material to be immediately re-directed to the waste transfer station; and

(5)requiring Stone and Webster Canada Limited to provide a $250,000.00 letter of credit to secure their obligation to ensure the proper operation of the facility.

SWCL and CCI will be forming a joint venture company for the purpose of executing the project. However, Stone and Webster, one of the largest and oldest engineering companies in Canada, will continue to have complete responsibility for the financial and performance obligations pertaining to the project.

 Project Schedule:

 The project schedule for the small scale facility, based on the SWCL/CCI submission, is as follows:

 Public Consultation Strategy:

 Two public meetings were held on June 16, 1998, to update the local community about this project and to gain knowledge of how this new facility might develop complementary relationships with the local business community. These public meetings were scheduled in the afternoon and evening at the Toronto Ambulance Headquarters near the Dufferin Transfer Station so that both local businesses and residents could attend. The meetings were advertised in the North York Mirror and in flyers distributed to all residents and businesses in the area bounded by Finch, Shepherd, Wilmington and Keele.

 Although staff also telephoned local organics producers, there were no attendees from local industry at the afternoon session. Two local residents and one business owner attended the evening session. A staff person and a consultant presented the project in detail and addressed questions pertaining to the project.

 Over the next several months, staff plan to meet with local businesses that generate organic waste to discuss potential linkages with this project. One possibility is to work with the businesses' waste haulers to arrange for delivery of waste material to the facility. Another future possibility is the sale of plant generated electricity to local businesses.

 Further public consultation will include:

1. follow up activities to build complementary relationships with the local business community;

(2)newsletters (with feed-back questionnaires) for site neighbours on a regular basis;

(3)a 24-hour telephone message line to receive any concerns during the construction phase of the facility; and

(4)establishment of an odour monitoring committee with public participation, if requested by site neighbours.

 Conclusions:

 The Small Scale Mixed Waste Recycling and Organics Processing Facility proposed by SWCL/CCI provides a cost effective opportunity to test the viability of processing both mixed waste and source-separated organic material to produce compost, biogas and recyclable material in an environmentally sound manner. It is therefore recommended that the City of Toronto proceed with construction of the facility.

 Contact Name:

 Andrew Pollock, Senior Manager - Waste Diversion and Planning

Solid Waste Management Division, Metro Hall

Phone: (416) 392-4715; Fax: (416) 392-4754

E-mail: Andy_Pollock@metrodesk.metrotor.on.ca.

 ATTACHMENT 1

 Background Information on Request for Proposals Process

 History:

 At its meeting on April 9, 1997, the former Metropolitan Toronto Council adopted, with amendments, Clause No. 1 of Report No. 4 of The Environment and Public Space Committee, which recommended, in part, that:

"The Commissioner of Works be authorized to issue a Request for Proposals for the design, construction and operation of a 20,000 tonne per year composting and mixed waste processing facility capable of processing both source-separated organic waste and mixed waste".

 In September 1997, a Request for Proposals (RFP) was issued for the design, construction and operation of a 20,000 tonne per year Mixed Waste Recycling and Organic Processing Facility at the Dufferin Transfer Station located in the former City of North York. The proposal call was a two envelope process in which the price information was opened only if a respondent's technical proposal was short-listed, based on pre-determined evaluation criteria.

 The RFP closed on January 8, 1998, and a total of seven proposals were received. MacViro Consultants Inc. (the consultants who prepared the RFP document) and Solid Waste Management (SWM) staff conducted an evaluation of the Technical Proposals to develop a short list, which was reviewed by an RFP Evaluation Committee consisting of staff from SWM, Finance and Legal Departments.

At its meeting on April 28, 1998, City of Toronto Council adopted Clause No. 4 of Report No. 3A of The Works and Utilities Committee, which recommended that:

"Staff be authorized to open the price proposals and complete the evaluation process for the short-listed respondents to the Request for Proposals for a Mixed Waste Recycling and Organics Processing Facility, and report back to Committee with recommendations".

 Council amended Clause No. 4 by adding thereto the following:

"It is further recommended that the Commissioner of Works and Emergency Services be directed to ensure that consultation takes place with the surrounding industrial and residential community and that a plan be developed for integrating the proposed facility into the industrial community in a way that makes the industrial community an integral part of the process."

 RFP Evaluation Process:

 Seven proposals were received in response to the RFP for a Mixed Waste Recycling and Organics Processing Facility from the following respondents:

(1)AGRA Monenco Inc., in association with Wright Environmental and Machinex Inc.;

(2)B.W.S. Composting, a joint venture of M. Sullivan and Son and Bennett and Wright Group Inc.;

(3)Groupe Conporec Inc. and Kamyr Enterprises Inc.;

(4)Miller Waste Systems;

(5)Organic Waste Conversion;

(6)Recycling and Composting Alliance, a joint venture of Stinnes Enerco, The State Group, and RRT Design and Construction; and

(7)Stone and Webster Canada Limited, in association with Canada Composting Inc.

 The proposal screening and evaluation process undertaken by MacViro and Solid Waste Management staff, and reviewed by the RFP Evaluation Committee, involved the following four steps:

Step 1:Initial screening of the technical proposals to ensure compliance with the minimum requirements set out in the RFP.

 Step 2:Detailed technical evaluation of the remaining submissions.

 Step 3:Requests for supplemental technical information and cost information from selected respondents to obtain comparable information required for decision making. At the completion of this step, proposals undergoing further consideration will form the short list.

 Step 4:Opening of Price Proposals from the short-listed respondents and determination of the proposal that provides the best overall value to the City of Toronto.

After the completion of the technical evaluation, proposals from the following respondents were short-listed and the price proposals opened:

(1)AGRA Monenco Inc., in association with Wright Environmental and Machinex Inc. (AGRA);

 (2)Miller Waste Systems (Miller);

(3)Recycling and Composting Alliance, a joint venture of Stinnes Enerco, The State Group, and RRT Design and Construction (The Alliance); and

 (4)Stone and Webster Canada Limited, in association with Canada Composting Inc. (SWCL/CCI).

ATTACHMENT 2

 Overview and Advantages of SWCL/CCI Facility

 Process Overview:

 Waste entering the proposed facility will be discharged onto the tipping floor of the existing 700 Building at the Dufferin Transfer Station site and conveyed to a pre-sort station where oversized and unprocessable materials will be removed. The material continues through a trommel screen with two screen sizes to separate fine (mostly organic) materials, medium sized (mostly container) material, and large assorted materials such as newspaper, cardboard, film plastic and textiles. The medium and large material streams are manually and/or mechanically processed to sort out recyclable materials and residues. The remaining materials are organic rich and ready for the digestion process.

 This organic rich waste is fed to the BTA-Process where a hydropulper eliminates the remaining inorganic contamination from the waste and defibres the organic elements, creating an organic pulp. The pulp is fed to a hydrocyclone where sand and grit is removed before the pulp is pumped to an anaerobic digester for decomposition into high quality compost and biogas.

 The compost that meets the Provincial requirements for unrestricted use will be delivered to The Nu-Gro Corporation in Woodstock, Ontario, for final curing, bagging, and distribution to retail horticultural outlets. Compost material that does not meet the Provincial requirements will be applied to beneficial land uses.

 The biogas will be fed to a small on-site cogeneration plant (a turnkey installation and operation from Tormont Energy Ltd.) that will use the gas to produce electricity and heat. The entire plant will be energy self-sufficient with excess energy being available for use on site or for possible sale. The intent is to utilize all of the biogas generated for electrical and thermal power generation. A gas storage tank will be provided on site, which will enable the facility to store gas during scheduled or unscheduled interruptions in the availability of the co-generation system. A flare will be installed for emergency backup, although it is unlikely that it will be used.

 The receiving, processing, pre-treatment and digestion areas are all fully enclosed and all exhaust air will be processed through a biofilter to remove odour causing contaminants before discharge to the atmosphere.

 Advantages of the SWCL/CCI Facility:

 The SWCL/CCI proposal incorporates many features which make it well suited for the facility:

(1)The anaerobic digestion of solid waste to produce compost and methane followed by the utilization of the methane to cogenerate both electricity and heat provides the lowest green house emissions of any mixed waste management process (Environment Canada Report, 1995).

 (2)The proposed single step anaerobic digestion process produces compost material after 15 days of digestion. This compost material requires significantly less curing time than aerobic composting to produce a stabilized end product.

 (3)The BTA process effectively removes contaminants, such as plastics, broken glass and grit, from the organic fraction. This enhances the probability of producing marketable compost materials, particularly from a mixed waste stream.

 (4)The facility can be expanded to process 100,000 tonnes per year of mixed waste or 165,000 tonnes of organic material by converting to a two-step digestion version of the technology with a shorter retention time for digestion. This would enable Toronto to increase the processing capacity by five times with a minimal increase in the footprint of the small scale facility.

 ATTACHMENT 3

 Capital and Operating Costs for SWCL/CCI Facility

 Once SWCL/CCI was identified as the preferred respondent, staff entered into negotiations with them to identify opportunities to reduce the gap between the proposed capital cost of their facility ($11.0 million before taxes) and the capital budget of $8.0 million identified in the 1998-2002 Capital Works Program, without compromising the performance of the facility.

 These negotiations resulted in $1.5 million in capital cost savings, based on modifications to the requirements for the facility. The RFP required that the facility be capable of processing 15,000 tonnes per year of mixed waste and 5,000 tonnes of source-separated organic waste concurrently. By adjusting this requirement to allow processing the two waste streams sequentially (one stream for a period of several months, followed by the other stream), SWCL/CCI was able to eliminate one of the two digester units, thus giving them the capacity to process either 15,000 tonnes of mixed waste or 25,000 tonnes of source separated organics per year. In addition, by reducing the material storage requirements and locating the administrative area in temporary facilities, SWCL/CCI was able to make more cost effective use of the existing composting building at the Dufferin Transfer Station site.

The revised capital cost for the SWCL/CCI facility is $10.4 million after municipal GST rebate based on processing the two input streams sequentially. A contingency cost of $500,000.00 for any approved additional work, and a consulting services cost of $238,000.00 have also been budgeted for a total project capital cost of $11.2 million.

 Financing in the amount of $8.0 million has been provided for in the approved 1998 Capital Works Program under Project C-SW004 - Recycling Facilities, based on initial planning estimates. It is recommended that financing in the amount of $3.2 million be transferred from Project C-SW360 - Recycling to accommodate the shortfall in financing resulting from this Request for Proposals process. Total financing in the amount of $31.1 million has been approved for the Recycling Project to date. Expenditures totaling $26.1 million for the period ending December 31, 1997, have been incurred. Of the remaining $5.0 million available, an amount of $1.0 million is required in 1998 for backyard composter and public education. Should the transfer be approved, the Department will be required to seek additional financing for recycling activities as they are required in future years.

 An additional $28.7 million has also been identified under Project C-SW004 for the proposed expansion of the facility after the evaluation phase. The projected capital cost for expansion of the facility, based on the selected technology, is now estimated at $19 to $22 million, and therefore the additional $3.2 million required for the evaluation phase would be potentially offset by an estimated saving of $6.7 to $9.7 million at the expansion phase.

 The revised operating fee schedule, based on processing the two streams sequentially, is shown below:

Operating Fee Schedule

 (1)Mixed Waste (based on 15,000 tonnes per year input):

 Total OperatingOperating Cost

Cost Per Tonne

 Year 1$960,805.00$64.05

Year 2$1,019,496.00$67.97

Year 3$1,019,496.00$67.97

 (2)Source-Separated Organics (based on 25,000 tonnes per year input):

 Total OperatingOperating Cost

Cost Per Tonne

 Year 1$870,061.00$34.80

Year 2$945,542.00$37.82

Year 3$945,542.00$37.82

 Notes:(1)All fees exclude any applicable GST.

 (2)Year 2 and 3 fees are subject to inflation indexing based on the Consumer Price Index.

 (3)If both streams are delivered to the facility during a one-year period, the operating fees will be pro-rated based on the number of weeks each stream is delivered.

ATTACHMENT 4

MIXED WASTE RECYCLING AND ORGANICS PROCESSING FACILITY

FINANCIAL ANALYSIS

 (1)SMALL SCALE FACILITY

 Capital Cost:$10.4 million

Annualized Capital Cost:$1.2 million

 Operating Costs/ (Benefits)

*MW = mixed waste; SSO = source separated organics

 NOTES:

1. Disposal cost savings based on marginal cost savings at transfer stations and Keele Valley Landfill of $12/tonne for 3,500 tonnes of mixed waste (MW) and 9,000 tonnes of source-separated organics (SSO) in Year 1, and for 7,000 tonnes of MW or 18,000 tonnes of SSO in Year 2. Disposal savings for Year 3 based on avoided transfer and contracted disposal costs of $60/tonne for 7,000 tonnes of MW or 18,000 tonnes of SSO.



2. Tipping fee revenue in Year 1 based on 2,500 tonnes of MW at $60/tonne and 2,500 tonnes of SSO at $50/tonne delivered by the private sector, less $12/tonne for disposal of residual material. Year 2 and 3 tipping fee revenue based on 5,000 tonnes of MW at $60/tonne or 5,000 tonnes of SSO at $50/tonne, less residual disposal costs.



3. SSO collection costs estimated at $60/tonne for 50% of collected tonnes. Assumes that 50% is kitchen organics and other 50% is yard waste currently collected separately. Cost may be reduced to $0 if facility receives organics rich mixed waste from downtown core instead of SSO, or if mixed waste and source-separated organics are co-collected on the same truck.

1. FULL SCALE FACILITY

Estimated Capital Cost:$30.1 million