Southland DisAbility Enterprises Chairman Responds To Joint Statement By Mayors Tong And Hicks

Jun 07, 2019
3170 Views

SdE has been concerned that a lot of misinformation has been circulating within the three Councils which to date SdE has refrained from addressing through the media. It is unfortunate that the joint statement by Southland District Mayor Gary Tong and Gore District Mayor Tracey Hicks has not provided an accurate account of how the Council’s have found themselves in the current position.

Mayors Tong and Hicks say “WasteNet has worked closely with SdE over the eight years of the contract and has tried very hard to roll it over last year. We negotiated with the management of SdE for more than six months, but they wanted more money for less production.”

For the new contract terms of eight years, WasteNet asked for a price based on an increased tonnage of 9,000 tonnes per annum compared with 7,000 tonnes received currently. The price proposed by SdE was for more production not less.

Mayors Tong and Hicks say:

SdE then asked for an extra $700,000 above its contract of $1.13M annually to see it through to the end of 2019.

Negotiations were stalled while WasteNet offered a loan and financial expertise to assist.

While WasteNet never got clarity on SdE’s finances we did advance a total of $380,000 in monthly payments which would be taken off the exit payment should the contract not be renewed.”

SdE reply:

The current contract price (which varies subject to rubbish disposal costs) is approximately $1.36M per annum not $1.13M as stated. On 15 June 2018 SdE did make an initial request to WasteNet for a variation to the contract to provide for an extra $700,000 per annum. This request was based on the dramatic changes in the recyclables commodities market and increased operating costs. The contract price had not been reviewed in 7 years and SdE, like other recyclers throughout New Zealand was severely effected by the collapse of the recyclable commodity market. The request for the variation was revised downwards by SdE on 31 July 2018 to an increase of $380,000 per annum. WasteNet refused to vary the contract but agreed to lend SdE $380,000 (paid monthly) on the basis that it would be repaid to WasteNet at the end of the contract. During these discussions, and throughout the contract renewal negotiations, SdE has made available all of its financial information to WasteNet. Contrary to what the Mayors say, WasteNet has never offered financial expertise to assist SdE.

Mayors Tong and Hicks say:

“Tong and Hicks said SdE management would not budge on its demands and WasteNet could not justify renewing the contract for another 8 years without considering other options first.”

SdE reply:

During the contract negotiations WasteNet told SdE that while it acknowledged the social and community benefits provided for under the contract with SdE it was unable to take these benefits into account and had to make its decision based on price. The current price of $1.36M is based on a contract negotiated 8 years ago. SdE cannot continue to offer the service at that price.

On 19 November 2018 SdE received a letter from WasteNet which read as follows:

“The Waste Management Group presented your final proposal to the Waste Advisory Group on Thursday 15 November 2018. The Waste Advisory Group was unable to accept your proposal. The main reason for this decision was Councillors were not able to justify the 35% cost increase without market testing this contract price.

WasteNet Southland will be issuing an open tender for recyclables accept in service before Christmas for 1 July 2019 commencement.”

The tender specifically does not allow the Councils to take into consideration the community and social benefits that SdE provide.

SdE reply:

If the Southland and Gore District Councils have the best interests of SdE’s 82 disabled workers in mind, how did they allow an open market tender process to be run without this consideration being taken into account?

The results of the tender which have now been disclosed by Mayors Tong and Hicks confirm that SdE was never going to be able to compete with what we now know is a proposal to use fully automated equipment rather than the current manual sorting process.

Mayors Tong and Hicks say:

“Tong and Hicks state that there was an $11M difference in pricing between the two parties over the 16 year contract.”

SdE reply:

The tender was not for a 16 year contract. The tender documents provided to SdE upon which it submitted its proposal were for an 8 year contract commencing 1 July 2019 expiring 30 June 2027.

If the preferred tenderer has been offered a 16 year term then SdE is not aware of that.

Based on the figures provided by Mayors Tong and Hicks, the difference in price per annum is $687,000 per annum.

The cost of the WasteNet contract is shared by the WasteNet Councils based on population.

The individual percentage shares and increased cost are as follows:

Invercargill City Council          56% $385,000
Southland District Council      31% $213,000
Gore District Council                13% $89,000
Total                                                      $687,000

Based on these figures Mayors Tong and Hicks and their respective Councils have voted to displace 82 disabled workers to save $213,000 per annum for SDC and $89,000 per annum for Gore.

In the case of Invercargill whose share of the increase cost would be $385,000 then based on Invercargill City Council’s own figures, the annual cost for an average ratepayer (paying $2,000 rates per annum) would be less than $16 per annum.

Mayors Tong and Hicks say:

“WasteNet has offered to roll over SdE’s present service on the same terms and conditions for another 12 months to allow for a transition period.

However to date SdE has rebuffed this offer.”

SdE reply:

SdE offered to extend the existing contract for a further 12 months subject to it being paid the same price as it had tendered.

WasteNet declined that offer.

What WasteNet actually offered SdE in response was an extension of up to 12 months on the current terms subject to a CPI adjustment with WasteNet being entitled to give three months notice of termination.

Alternatively, WasteNet offered a two month extension on current payment terms “to allow each party some time to consider their position once the results of the tender process are known and negotiate further arrangements as appropriate.”

SdE, as requested, has agreed to a two month extension subject to it being paid the contract price it tendered. To date there has been no response from WasteNet to that offer.

Mayors Tong and Hicks say:

“Invercargill City Council’s decision last night has not ensured any job security for the people who matter most in this debate and that is the SdE workers.”

To date WasteNet and the three Councils have showed no regard for the job security for the SdE workers. As SdE has long suspected the issue is about money not the people.

Had SdE not earlier informed its staff that it was not the preferred tenderer, those staff would have first read about their demise in the Southland Times on 5 June when it would have been announced (without any prior public consultation) that the three Councils had decided (with public excluded) to award the contract to a third party as the lowest tenderer. It lacks credibility for WasteNet or the elected representatives to say that they had the interests of the SdE workers in mind when they set up a tender process which did not allow for their interests to be taken into account and for a decision to be made primarily on price.

It is fortunate that some of the Invercargill City Councillors and Mayor Shadbolt had the courage to vote against the WasteNet recommendation. Those Councillors clearly had the SdE workers interests at the forefront and had obviously listened to the community and ratepayers support for SdE.

SdE’s purpose is to enrich the lives of people with disabilities by providing meaningful employment and personal development opportunities. That has always been SdE’s priority and still is.

SdE has performed the existing recycling contract according to its terms for the last eight years. SdE would welcome the opportunity to re-engage constructively with WasteNet about SdE’s future involvement in the recycling services.

Stephen O’Connor
Chair Southland disAbility Enterprises
Date: 7 June 2019

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