Following years of conflict, and a long arbitration process, a commercial arbitrator has ruled that Orgaworld Canada must accept leaf and yard waste in the City of Ottawa’s green bin program and dismissed Orgaworld’s claim against the City. The decision is a win for Ottawa taxpayers, but a critical internal audit of the City’s contracting process shows that whole Orgaworld deal was still unnecessarily expensive.
Orgaworld has applied for judicial review of the Green Bin arbitration decision.
In 2008, the City of Ottawa signed a 20-year contract with Orgaworld Canada to process organic material from its green bin program. Although the contract required Orgaworld to process leaf and yard waste, Orgaworld refused to accept this material, arguing that it was excluded from the initial request for proposals. Orgaworld’s refusal forced the City to pay to have it processed elsewhere.
Following 71 days of hearings between June 2012 and December 2013, as well as written submissions, a commercial arbitrator dismissed Orgaworld’s $1.3 million claim against the city and ruled that leaf and yard waste could be included in the City’s green bins. The arbitrator also ordered Orgaworld to pay for the additional costs incurred by the City to process the leaf and yard waste that Orgaworld refused to accept.
One has to wonder how a $1.3 million dispute could possibly justify 71 days of hearings – the legal, arbitration and transcript costs could easily exceed the amount in dispute, especially if one adds in a judicial review.
The City’s internal audit review of the Orgaworld contract found significant and embarrassing errors. In particular, under the contract the City is required to pay Orgaworld $8 million a year to process a minimum of 80,000 tonnes of organics. However, the auditor’s analysis found that the range of available organic matter, excluding leaf and yard waste, was only 21,000 – 57,000 tonnes per year. If separated out, leaf and yard waste could be processed elsewhere at a much lower rate than the cost per tonne charged by Orgaworld. As Auditor General Ken Hughes explained when tabling the report to Council:
“Ottawa has been paying a premium to send some of its leaf and yard waste to Orgaworld on one hand while not being able to meet guaranteed volumes at the plant on the other. Together these penalties to date total $7.7 million…”
Orgaworld recently filed an application for judicial review of the arbitrator’s decision. Reportedly, they are arguing that the arbitrator erred:
- In defining source-separated organics to include peak season leaf and yard waste to the extent that it allows the city to bring such waste to Orgaworld, subject to limitations, during peak periods in the spring and fall.
- Allowing the City’s damages associated with the diversion of fall peak leaf and yard waste from Orgaworld that occurred while the matter was before the arbitrator.
- Refusing to grant Orgaworld compensation for its losses associated with being forced to accept spring peak leaf and yard waste while the matter was before the arbitrator.
Both this arbitration and the ongoing arbitration regarding funding for municipal blue box programs demonstrate the huge costs and complexity of municipal recycling programs, and the enormous legal and cultural challenges of public-private partnerships in the waste diversion area. We should not take those coloured bins for granted.