GLENELG SHIRE COUNCIL
“Draft”
Best Value Service Review Report
Quarries
DJK CONSULTING
December 2006
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL
BEST VALUE SERVICE REVIEW REPORT
QUARRIES
TABLE OF CONTENTS
1.
2.
3.
4.
5.
Executive Summary
Page No.
2
1.1
Key Findings ................................................................................... 3
1.2
Key Recommendations.................................................................... 3
INTRODUCTION
4
2.1
Best Value Legislation and Principles.............................................. 4
2.2
Service Review – Terms of Reference ............................................. 5
2.3
Service Review Panel/Working Group ............................................ 7
2.4
Service Review Approach/Methodology.......................................... 7
SERVICE PROFILE
8
3.1
Introduction..................................................................................... 8
3.2
Services Provided and Structure ...................................................... 8
3.3
Resources Utilised........................................................................... 9
3.4
Financial Performance..................................................................... 9
3.5
Competitors....................................................................................10
3.6
Legislation .....................................................................................11
3.7
National Competition Policy...........................................................11
BENCHMARKING
14
4.1
Introduction....................................................................................14
4.2
Benchmarking Analysis..................................................................14
4.3
Observations ..................................................................................14
CONSULTATION
15
5.1
Introduction....................................................................................15
5.2
Analysis .........................................................................................15
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
QUARRIES BEST VALUE SERVICE REVIEW REPORT
5.3
6.
7.
2
Observations ..................................................................................16
SERVICE ANALYSIS/FUTURE OPTIONS
16
6.1
Introduction....................................................................................16
6.2
Service Provision Options ..............................................................16
6.3
Service Improvements ....................................................................17
6.4
Service Objectives..........................................................................19
6.5
Future Performance Measures ........................................................20
BEST VALUE REVIEW OUTCOMES
20
7.1
Introduction....................................................................................20
7.2
Quality and Cost Standards.............................................................21
7.3
Responsiveness to Needs of Community ........................................21
7.4
Accessibility to Users .....................................................................21
7.5
Continuous Improvement ...............................................................21
7.6
Reporting to the Community ..........................................................22
7.7
Conclusion .....................................................................................22
APPENDIX 1 –
23
Service Improvement Plan
23
APPENDIX 2 –
25
Quarry Location Maps
25
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
QUARRIES BEST VALUE SERVICE REVIEW REPORT
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The key findings of the Quarries Best Value Service Review, for Council's
consideration can be summarised as follows:
•
Council owns or leases a number of predominantly limestone quarry
pits which provide Council with the bulk of its road making materials
in an efficient and economically beneficial manner.
•
Whilst a number of potential improvement initiatives and options
have been identified for the quarry operations in this review, it can be
stated that Council's quarries are broadly meeting all key aspects of
the Best Value principles.
•
Management and operation of the quarry pits currently involves
minimal staff input on a day to day basis. Consequently operational
overheads are low.
•
Government regulation of extractive industries (quarries and mines)
has strengthened significantly over the last decade. There are aspects
of Council's current operations which may not fully comply with
regulatory requirements.
•
Council's quarries have a number of private competitors.
•
Council’s quarries operate on a cash surplus basis.
•
On a three year business span basis it can be demonstrated that
Council's quarries are compliant with National Competition Policy
and the associated Competitive Neutrality pricing principles.
•
The strategic value and extent of quarry reserves is currently
unknown.
•
The methodology underpinning the unit price of Council's quarry
products (gravel and limestone) is unknown.
•
The operation of Council's quarries (extraction and crushing) is
predominantly undertaken by contractors.
•
There may be commercial opportunities for the sale of Council's
quarry products, particularly with the Blue gum forestry industry.
That:
1. Council notes and endorses the findings of the attached report titled
‘Quarries Best Value Service Review’.
2. Council approves the conduct of a strategic review of its quarry
operations with a resultant report to be presented to Council by 31
December 2007.
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3. Council approves the implementation of the Service Improvement Plan
annexed to this report, subject to the conduct of the Strategic Review of
its quarry operations.
4. Council endorses the adoption of the Key Performance Indicators
contained in this report (refer Section 6.5) subject to the conduct of the
Strategic Review of its quarry operations.
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The Victorian Government in December 1999 introduced the ‘Local
Government (Best Value Principles) Act, replacing Compulsory Competitive
Tendering for Local Government. The Local Government Act was amended in
2001 to incorporate Best Value.
The Best Value approach includes community input, effective service delivery
and cost efficiency as key service outcomes, coupled with a commitment to
ongoing continuous improvement.
The Best Value principles listed hereunder reflect the Government’s intention
that local services must be a reflection of local community needs.
The six (6) Best Value principles are:
1. Best quality and value for money
2. Responsiveness to community needs
3. Accessibility of Services to those who need them
4. Continuous improvement
5. Community consultation on all services and activities
6. Regular community reporting on Council achievements
Consistent with the legislation Council published a timetable for a Best Value
Review of all services by 31 December 2000, and has conducted approximately
20 individual service reviews since that time.
Ministerial Codes of reporting also applied whereby Councils were required to
publicly report on their Best Value Service reviews conducted each year and
also to report to the Minister.
Whilst the Ministerial Codes of reporting have now been revoked allowing
Councils more autonomy and flexibility in the way they plan, schedule and
report on Best Value service reviews, the Best Value principles remain in the
Local Government Act. Councils are therefore still required to apply the Best
Value principles across their organisations.
To assist Councils to continue the application of Best Value principles,
particularly Continuous Improvement, the Local Government Professionals
group (LGPRO) in March 2006 produced draft guidelines. These guidelines –
titled – “Achieving a Whole of Organisation Response to Best Value” promote
a holistic “best value” framework.
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DECEMBER 2006
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The guide offers the following definition of a “whole of organisation response”
to Best Value –
“an organisation wide improvement framework which
incorporates the Best Value principles and acts on these
principles through an improvement process”.
Essentially the guide promotes the following key tenets for future Best Value
service reviews:
•
an organisation wide improvement framework is critical to sustaining
a culture of high performance and improvement.
•
organisational improvement frameworks can be strengthened and
made more relevant to local government by incorporating the Best
Value principles, and
•
the Best Value principles can be implemented most effectively when
they are built into an organisation wide improvement framework.
This Best Value Service review dealing with Council's quarries has been
conducted with the fundamental objective of achieving organisational
improvement.
To that end, Appendix 1 accompanying this report provides a Service
Improvement Plan inclusive of those matters identified during the review
which will achieve service and therefore organisation improvement.
The following service review for Glenelg Shire's quarries was conducted in the
second half of 2006. The quarries from which Council currently extracts
materials are detailed below.
Quarry
Location
Ownership
Argo's Quarry
Knights Road, Bridgewater
Council owned
Johnson's Quarry
Old Lindsay Road, Strathdownie
Leased
Klatt's Quarry
Telegraph Road, Bridgewater
Council owned
McInnes' Quarry
Bowd’s Lane, Dartmoor
Council owned
Morton's Quarry
Tyrendarra School Road, Tyrendarra Council owned
Stark's Quarry
Paramount Road, Lake Mundi
Leased
*Maps denoting the location of the above quarries are provided at Appendix 2
to this Report.
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The key objective of this review is to evaluate and ensure that the Glenelg
Shire's quarries operate in a manner consistent with the six Best Value
principles and, in areas where they are identified as being deficient, ensure that
plans and strategies are developed and implemented to improve any
deficiencies.
The focus of the review is aligned to the Shire's Best Value approach which
requires analysis to “Understand the Need” of the service prior to making any
decisions on future service standards or delivery options. This leads to the
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
QUARRIES BEST VALUE SERVICE REVIEW REPORT
6
second phase of articulating the “Agreed What Is Required” charter which then
extends to the third phase of a commitment to “Deliver What’s Required”.
Finally, the review results in a strong ongoing commitment to “Evaluate and
Continuously Improve” both the standards and delivery of the service through
the development and progressive implementation of a Service Improvement
Plan.
The process adopted for the Review included the following components:
•
Identification and documentation of the current Service Profile —
answering the question: Why do we do what we do?
•
Consultation with the service customers, where practicable, to establish
satisfaction levels and needs/expectations, including:
Feedback on the current service
Feedback on monitoring performance
Identification of innovative/creative solutions/suggestions
SWOT analysis;
•
Identification and documentation of the gaps in service level (if any)
•
Identification of innovative ways of eliminating or reducing any service
gaps identified
•
Identification of any budgetary implications
•
Development of a Continuous Improvement Plan for implementing new
service levels and delivering on continuous improvement
The anticipated outcomes of the Review include the following:
•
An improved understanding of the service level sought by the service
customers and the organisation
•
Improved delivery of quarry services
•
Improved certainty and understanding of the processes underpinning
the quarry’s service
•
Service compliance with Best Value principles
The outputs of the review comprise the following:
•
A Service Review Best Value report
•
Internal business process improvements
•
A service improvement plan (Refer Appendix 1)
•
A performance monitoring system
•
An improved costing methodology for establishing the pricing of
extracted quarry products
•
Options for Council's consideration in regard
operation/management models at the various quarries.
DJK CONSULTING
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A panel of appropriate personnel was convened to facilitate, direct and conduct
the Quarries Best Value Service Review.
The members of the panel were:
•
Peter Gall – Engineering Services Manager
•
Wayne Frost – Works Co-ordinator
•
Janie Jacobson – Finance Manager
•
Karena Prevett – Accountant
•
Debra Clark – Finance Officer
•
Danny Keating – Independent Local Government Consultant
The respective knowledge and relevant skills of this panel combined to develop
the parameters and outline of the review.
Other Council staff were also involved in the review as required, particularly in
the identification of any service delivery gaps and identification of possible
service improvement initiatives.
The review process effectively extended over a four month period from
September to December 2006.
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The approach and methodology applied to this review involved the following:
•
Determining the needs of the service recipients in terms of access,
affordability, expectations and values.
•
Identifying the strengths and weaknesses of the present service profile
and service delivery methods and identifying the areas of possible
duplication or improvement.
•
Establishing the current level of satisfaction with the service.
•
Assessing the current level of service against equivalent services
offered by competitors or other agencies.
•
Considering innovative and creative ways to reduce any identified gaps
in current service standards and the development of these ideas and
options into strategies.
•
Analysing the historic and current cost of the service and assessing the
future financial implications of any proposed service improvements.
•
Consulting service recipients where possible and appropriate.
•
Engaging key staff in the review process.
•
Assessing the most appropriate method of future service delivery.
•
Developing a service improvement plan which is affordable,
measurable and achievable.
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DECEMBER 2006
GLENELG SHIRE COUNCIL:
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•
Committing the service to a program of continuous improvement.
•
Reporting the results of the review to Council and the community.
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The Quarries Best Value Service Review involves a review of the following
quarries from which Council extracts road construction and roads maintenance
materials:
Quarry
Location
Ownership
Argo's Quarry
Knights Road, Bridgewater
Council owned
Johnson’s Quarry
Old Lindsay Road, Strathdownie
Leased
Klatt’s Quarry
Telegraph Road, Bridgewater
Council owned
McInnes’ Quarry
Bowd’s Lane, Dartmoor
Council owned
Morton’s Quarry
Tyrendarra School Road, Tyrendarra Council owned
Stark’s Quarry
Paramount Road, Lake Mundi
Leased
*Maps denoting the location of the above quarries are provided at Appendix 2
to this Report.
Limestone is extracted from these quarries—the vast majority of which is
consumed by Council's Works Department in its roads program activities. The
products extracted from the various quarries are suitable for road making and
repairs, farm tracks and drainage bedding.
The quarries are conveniently situated throughout the Shire allowing for easy
and efficient access.
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All of the above quarries are Council owned i.e. located on Council land other
than the following which are leased from private land owners:
•
Stark’s Quarry
•
Johnson’s Quarry
The quarries provide stocks of limestone which is available in both crushed and
uncrushed form. Quantities extracted are largely dependent on Council road
works activity in any given year.
In high activity years approximately 100,000m3 of limestone (predominantly
crushed) may be extracted and used.
Council engages contractors to extract and crush the limestone when required
with material extraction undertaken by Council staff utilizing Council plant at
Council owned quarries and by the owners of the leased quarries.
Quarry operations are managed by Council’s Works Supervisor under the
overall direction of Council’s Engineering Services Manager.
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DECEMBER 2006
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None of the quarries are sophisticated commercial operations, but rather just
pits, from which Council only accesses materials on an intermittent part time
basis.
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Due to the nature of current operations at all quarries utilized by Council, day
to day Council resources applied to the quarries are limited.
Staffing resources are limited to high level management oversight by the
Works Supervisor and periodic (as required) plant operation by Council Works
staff.
However, asset values of resources utilised at the quarries are material. The
aggregate value of Council owned land upon which the quarries are sited was
$564,000 at 30 June 2006.
The value of Council owned extraction plant utilised at the quarries was
estimated at $550,000 at 30 June 2006. This plant is utilised for loading and
cartage of materials.
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The base financial performance (i.e. cash based performance as presented in
Council’s annual budgets and year end financial management reports) over the
last two financial years and the current 2006/07 year’s budget are presented
below.
(i)
(ii)
Aggregate Analysis
2004/05
2005/06
2006/07
Actuals
Actuals
Budget
$
$
$
Total Operating Income
632,601
387,356
320,000
Total Operating Expenditure
399,563
325,489
239,800
Surplus (Loss)
233,038
61,867
80,200
2004/05
2005/06
2006/07
Actuals
Actuals
Budget
$
$
$
632,601
387,356
320,000
77,754
49,598
22,200
5,903
786
10,360
Operate Johnsons Pit
104,466
111,218
40,000
Operate McInnes Pit
122,784
115,350
74,000
Individual Quarry Analysis
Total Operating Income
Gravel Limestone Royalties
Operate Argos Pit
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
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Operate Mortons Pit
84,471
45,036
74,000
Operate Warrick Pit
6,840
(720)
5,920
(2,656)
4,007
7,400
Operate New Pits
Operate Klatts Pit
–
Operate Gills Pit
–
Surplus (Loss)
233,038
213
–
5,920
61,687
80,200
Observation
•
on a cash basis, Council’s quarries operate at a profit or on a surplus
basis
•
the above figures do not include asset depreciation expenses or any
indirect overheads
•
both income and expenditure can vary significantly from year to year
depending on quarry activity, which is directly related to Council’s road
program
•
all income is denoted as ‘internal revenue’ i.e. derived from Council’s
usage of quarry materials i.e. no revenue from external or private sales
•
The three most active pits are Johnsons, McInnes and Mortons
•
Amounts are transferred annually from the operational surplus to a ‘Pit
Restoration Reserve’
•
The above figures do not include any adjustments for National
Competition Policy/Competitive Neutrality implications
•
Royalty payments relate to the amounts paid to the owners of the leased
quarries for materials extracted
•
Income is not allocated to individual quarries
•
Any external sales of materials are costed through Private Works and
therefore associated income is not reflected in the above figures
(External sales are limited)
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There are competing quarry operations located at Bridgewater, Tyrendarra,
Dartmoor and Casterton. These are as follow:
Bridgewater
– Kalari Quarry (Knights and Parkers Road)
– Porthaul Quarry (Knights and Parkers Road)
Dartmoor
– Mumbannar Lime (Marp Road)
Tyrendarra
– Tyrendarra Mix (Schools Road)
DJK CONSULTING
DECEMBER 2006
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Although private or external sales from Council’s quarries are negligible,
technically Council still competes with the above private quarries as these
competitors also extract and sell limestone, which feasibly could be purchased
by Council for its road program activities.
Currently, the setting of product fees at Council’s quarries does not include an
analysis of prices charged by the competitors.
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There are a number of Acts of the Victorian Parliament that potentially, in part,
impact on the operation of Council quarries.
The main Acts and Regulations that are applicable to the various quarries are:
•
Mineral Resources (Sustainable Development) Act 1990
•
Extractive Industries Development Act 1995
•
The Extractive Industry Regulations 1996
•
Crown Land (Reserves) Act 1978
•
The Mineral Resources (Health & Safety) Regulations 1991
•
Environment & Effects Act 1978
•
Planning & Environment Act 1987
•
Environment Protection Act 1970
•
Water Act 1989
•
Occupational Health & Safety Act 1985
•
Catchment and Land Protection Act 1994
•
Extractive Industries Development Regulations 1996
•
Extractive Industries Regulations 1989
Council, as the manager of the quarries located on Council land, is responsible
to ensure that the operation of all quarries is in compliance with any related
provisions of the above Acts.
Importantly, under the Extractive Industries Development Act, Council is
required to submit approved work and rehabilitation plans and to lodge a
rehabilitation bond for each quarry.
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Under National Competition Policy (NCP) Councils are required to comply
with the Competition Code of Victoria and to apply Competitive Neutrality
Policy (CNP) to their Significant Business Activities. As part of this CNP
compliance process, Councils must self assess which of their commercial or
quasi commercial activities are Significant Business Activities (SBA's). Of
DJK CONSULTING
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course a competitive market must exist for the council service or activity to be
implicated under NCP/CNP.
The four key criteria for assessing SBA's are:
•
The size of the activity relevant to the market;
•
The influence/competitive impact the activity has on the market;
•
The resources the activity commands;
•
The effect the activity has with respect to poor performance.
If an activity is assessed as being an SBA, Council must apply the principle of
full reflective costing to the SBA including the application of notional costs for
any net competitive cost advantages it may have over its private competitors.
This process determines whether or not the SBA is being subsidised by
Council.
The combined operations of Council’s limestone and gravel quarries have
previously been determined by Council to be a Significant Business Activity
for NCP purposes.
Consequently Competitive Neutrality costings are undertaken to establish a full
reflective costing model for the quarries each year.
The results of these calculations for the 2005/06 financial year are presented
below.
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
QUARRIES BEST VALUE SERVICE REVIEW REPORT
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COMPETITIVE NEUTRALITY CALCULATIONS
Limestone and Gravel Quarries
2005/2006 Actuals
$
$
Income
Internal Revenue
387,356
Total Operating Income
387,356
Expenditure
Operating Costs
Indirect Overheads
Depreciation of Assets
325,488
16,274
Nil
Total Operating Expenditure
341,762
Operating Profit (Loss)
45,594
CN Adjustments
For the Cost of Capital
47,480
Total Other CN Advantages
5,029
Total CN Disadvantages
1,000
Net CN Adjustments
51,509
Competitive Neutrality Profit (Loss)
(5,915)
This full reflective costing model essentially applies commercial accounting
principles to the quarries, including an 8% return on capital and other minor
competitive advantages.
On this basis the full reflective costing model demonstrates that Council has
subsidised the quarries by $5,915 during 2005/06.
However, this is considered an immaterial subsidy. Further it needs to be noted
that for the 2004/05 financial year the quarries produced a substantial
Competitive Neutrality Profit of $193,000. Moreover the CN projections for
2006/07 predict another CN profit of $17,000. Based on these figures the
Council quarries are NCP/CN compliant.
Under the provisions of Competitive Neutrality Policy Council may conduct a
Public Interest Test to establish whether retention of a SBA, i.e. the quarries, is
in the public interest, even on a subsidised basis.
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However, this is not currently required for Council’s quarries, as they are not
subsidised when their business performance over a three year period is taken
into account.
Observations:
Given that the full reflective pricing model demonstrates that Council currently
does not subsidise the Council limestone quarries when competitive neutrality
pricing principles are applied over a three year period, no further action is
required. However, Council needs to continue its annual CN pricing
assessment to ensure that the quarries do not lapse into a subsidised situation.
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As noted in Section 3.5 of this report the Council quarries have a small number
of local competitors located in the municipality.
For benchmarking purposes three of the larger privately owned quarries which
offer similar products, e.g. crushed and uncrushed limestone, have been
selected for benchmarking comparisons.
The benchmarking approach is financially focussed whereby fees are
compared. This information is publicly available whereas other information
e.g. expenditure and revenue levels, upon which other benchmarking measures
could be based, is not readily available from private operators.
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Council
Quarry
Quarry
Quarry
Quarry
A
B
C
$
$
$
$
m³
m³
m³
m³
Crushed
Limestone
8.50
9.03
10.40
8.52
Uncrushed
Limestone
8.00
6.83
8.25
6.73
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Council's charge out rate for crushed limestone is cheaper than all
competitors and substantially cheaper than two of the three
benchmarked competitors.
•
Two of the three competitors offer uncrushed limestone at a cheaper
rate than Council.
•
As discussed in other sections of this report Council needs to review the
methodology applied for establishing unit rates for quarry products.
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DECEMBER 2006
GLENELG SHIRE COUNCIL:
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Consultation with key service stakeholders is an important element of the Best
Value review process. Obviously, the key stakeholders for Council’s quarries
are internal staff as currently the vast majority of extracted product is
consumed internally.
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Key Council staff were engaged in interviews/discussions including a
consultative SWOT analysis which revealed the following:
Strengths
Weaknesses
•
Material accessibility
•
Capacity to extract
•
Cheap prices
•
Reliance on contractors
•
Unlimited supply
•
Regulatory compliance obligations
•
Good site locations
•
Rehabilitation requirements
•
Community economic benefit
•
Safety issues
•
Transport cost saving
•
Site security
•
Simple/efficient operation
•
Unknown quantities
•
Lack of work plans
•
Lack of strategic business plan
Threats
Opportunities
•
Theft of material
•
Commercial markets
•
Environmental implications
•
Forest Industry requirements
•
Increased regulation/security
•
•
Budget constraints
Continuance of cheap road making
materials
•
Competitors
•
Safety/OH&S inspections
•
Insurance liabilities
•
Continuance of leased pits
•
Increased royalties
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
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•
Internal consultation revealed a relatively high level of satisfaction with
the current quarry arrangements tempered by an acknowledgement that
there is limited operational planning or strategic business planning.
•
The consultation also revealed the spectre of increased regulatory
compliance obligations.
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Glenelg Shire Council’s current Council Plan was prepared to meet the
evolving needs and aspirations of Council and its community.
The Council Plan articulates a number of goals and objectives which by
extension are related to the successful operation of Council’s quarry
operations.
Of particular relevance is Council’s strategic commitment to the goals of ‘High
Standard of Service Delivery; Improved Infrastructure and the Maintenance
and Enhancement of Liveability in the Shire’.
The importance of Council’s quarries and their provision of cheap road making
materials and their associated economic benefits to the community is
undeniable. The continued availability of relatively cheap quarry products will
assist Council in achieving its strategic goals.
As part of this best value review a SWOT analysis was undertaken with key
staff, which on balance concluded that the strengths and opportunities existent
and available to the Council quarries justifies their continued ownership and
operation by Council.
However the SWOT analysis and other aspects of the review also identified a
number of issues which could improve service delivery at the limestone
quarries and ensure improving Best Value in the future.
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As with most Council services a number of service provision options are
available to Council in relation to its quarry operations. These include:
•
Continued management and operation of the quarries as currently
exists.
•
Continued limited direct management intervention and input.
•
Contract management and operational arrangements for all Council
quarries.
•
Discontinuance of the quarry operations.
•
Continued quarry operation with improved business planning, strategic
planning and regulatory compliance.
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17
Sale of the Council owned quarries, and relinquishing the lease of all
Council managed quarries.
It is apparent that the current quarry management and operational arrangements
work efficiently in terms of assuring an economic and accessible supply of
road making materials for Council. This supply of affordable quality quarry
products (limestone) satisfies a number of the Best Value principles.
Consequently this review supports the retention of Council’s quarry operations
and their continued administration and management by Council staff with
operational assistance from contractors.
However, the Best Value review has revealed a number of potential service
delivery improvements which are detailed in the following section and
addressed in the Service Improvement Plan (Appendix 1).
These service enhancements, when implemented (particularly those relative to
strategic planning and improved statutory compliance) will ensure that Council
maximises its full achievement of all Best Value principles, particularly the
principle of continuous improvement.
5-
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The conduct of this review has identified the following potential service
improvements which are listed and detailed below:
(i)
Strategic Planning
The extent of the depository reserves in most of Council’s quarries are
unknown although it is known that a number of the quarries have extensive
reserve deposits.
To assist Council in strategically planning the future operation of the quarries
and by extension quantifying the future availability of critical road making
materials, reserve deposits need to be professionally surveyed and quantified.
On obtaining this information Council will be in a position to strategically plan
for its quarry operations in the medium to long term.
(ii)
Regulatory Compliance
The Victorian Department of Primary Industries (DPI) Minerals and Petroleum
division (MPD) is responsible for all aspects of extractive industry regulation
in Victoria, although responsibility for Occupational Health and Safety
regulations will transfer from DPI to the Victorian Work Cover Authority from
January 2008.
The Extractive Industries Development Act 1995 was proclaimed in June 1996
and repealed the Extractive Industries Act of 1966. The new Act is intended to
provide a contemporary legislative framework for the administration of
extractive industries in Victoria.
Key Aspects of the Act which can impact on Council’s quarry operations are:
•
planning permits for quarrying operations are generally required for
the life of a resource
•
requirement to have a Work Plan which must include a rehabilitation
plan approved before a Work Authority for a quarry is granted. Work
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Authorities are granted by the Minister only after planning permit
approvals, landowner's consent on approved work plan and
rehabilitation bond are submitted and approved
•
requirement for the formal appointment of a quarry manager
•
quarry operators incurring liability under common law for persons
entering a quarry
•
the development of formal rehabilitation plans demonstrating:
the rehabilitation of the land to a safe, stable and visually
acceptable condition
the time when rehabilitation work will commence and
cease
the protection of the local environment
the protection of the amenity of the area
the protection of the ground water
•
documented safety management systems ensuring the safety of
workers and the public
•
the lodgement of rehabilitation bonds
•
requirement to ensure noise and dust suppression
•
requirement for the development of emergency response plans
•
requirement to provide annual quarry returns to DPI
The operational commencement of many of Council’s quarries pre-dated these
more stringent regulatory conditions. Consequently some of Council’s quarries
are not technically compliant with regard to current work authorities, etc.
However, Council has lodged rehabilitation bonds for six of the quarries and
has established a ‘Restoration Pit Reserve’ which as at 30 June 2006 contained
$473,644 set aside for rehabilitation works, which at some pits, have already
commenced.
Nevertheless this review has exposed a need for a review of the regulatory
compliance status of all Council quarries, including leased quarries. The
Extractive Industries Development Act prescribes various penalties for noncompliance.
(iii)
Pricing Methodology
The methodology underpinning the annual unit prices for quarry products has
not been reviewed for some time. For example, the current unit costs for
limestone ($8.00 per m3 for uncrushed and $8.50 per m3 for crushed) includes
rehabilitation levies of $0.50c and $1.00 respectively but apart from some
limited benchmarking comparisons (refer Section 4.2 of this report) the
relevance or adequacy of the remaining unit price portion is not known.
An objective pricing methodology should be developed and reviewed annually.
(iv)
Adequacy of Rehabilitation Reserve
DJK CONSULTING
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The future cost of quarry rehabilitation works has never been comprehensively
developed, partly due to the fact that the extent of quarry reserves and
Council’s future requirements is unknown. The adequacy of the reserve or its
optimum quantum is therefore unknown. This needs to be established to ensure
that Council is not materially exposed to significant future liabilities.
(v)
Potential for Commercial Quarry Product Sales
The Best Value review identified the potential for commercial sales to the Blue
Gum forestry industry as harvesting comes on-line. It is likely that the forestry
industry will require quarry products to establish transport tracks within the
plantations.
The commercial viability of pursuing this and other private markets could be
analysed including marketing strategies.
(vi)
Site Access and Security
A number of the quarry pits are easily accessible and when stockpiles are held,
products could be stolen.
The cost benefit of introducing improved site security measures could be
investigated.
(vii)
Contractors
In the 2005/06 financial year, Council paid contractors $284,693 or 87% of
total expenditure for quarry works and plant hire. In 2004/05 (a year of much
higher quarry activity) the figures were $321,380 and 80%.
If Council was to expand its quarry activities the feasibility and cost benefit of
undertaking all quarry works in-house and acquiring required plant should be
investigated.
52
')
89
)
This review has identified the following key service objectives for Council’s
quarry operations.
• to investigate and address all associated regulatory compliance
obligations
• to develop more objective product pricing methodology
• to undertake a strategic review of the depository reserves
• to review the adequacy of the rehabilitation reserve and establish its
desired quantum
• to investigate potential of private markets, particularly potential to
supply the forestry industry
• to investigate site access and security improvements
• to investigate the replacement of contractors with in-house resources
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
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54
$ $' & ', '
20
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A key to ensuring continuous improvement for any municipal service is the
establishment of performance measures.
Practical performance measures not only result in a means of establishing
growth and service improvement targets but also provide structure to
operational and management plans and allow for performance to be measured,
monitored and reported.
Future performance measures for the quarry operations could be:
•
the development of annual business and marketing plans
•
the increase of revenue and profit by agreed annual growth factors
•
the incremental growth of commercial markets
•
the conduct of required rehabilitation works
•
the establishment of OH&S management plans
•
the conduct of customer surveys
•
the implementation and operation of strong financial costing and
analysis
6
"
6
%
'
/
$
As indicated in Section 2 of this report Council must comply with the ‘Best
Value Principles’ as prescribed in Section 208A of the Local Government Act
1989. In other words Council is subject to a Best Value duty to review and
assess its performance against the following Best Value Principles:
“
(a) all services provided by a Council must meet the quality and cost
standards required by section 208D;
(b) subject to section 6(1)(c), all services provided by a Council must be
responsive to the needs of its community;
(c) each service provided by a Council must be accessible to those
members of the community for which the service is intended;
(d) a Council must achieve continuous improvement in the provision of
services for its community;
(e) a Council must develop a program of regular consultation with its
community in relation to the services it provides;
(f) a Council must report regularly to its community on its achievements
in relation to the principles set out in paragraphs (a), (b), (c), (d) and
(e). ”
The industry approach has been to use the Best Value Service Review process
to assess services against the principles but to view the principles as goals to be
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
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21
obtained rather than rules to be observed, therefore identifying any gaps in Best
Value service delivery.
The outcomes of the review in this regard are presented as follows:
6
:$ #
'
Whilst the consultation processes conducted for the quarry operations indicate
that the quality of services and facilities is of a satisfactory nature, as judged by
customers, the financial analysis undertaken indicates that the financial costing
and analysis systems could be improved. However, it is known that Council is
fortunate to have access to very competitively priced quarry products which
has great economic benefit to the Glenelg community.
As indicated in the body of the report, anecdotal and inspection evidence
suggests that the quality standards for quarry operations could be improved
particularly in relation to regulatory compliance. The quality of service
standards could be improved through various measures, but would require
careful financial and business analysis to ensure that Best Value cost standards
were achievable and sustainable.
6-
(
)
,
$
Council’s quarry operations in their present format clearly meet and respond to
the needs of the Glenelg community through providing Council and therefore
the community accessible and affordable road making materials.
However, some aspects of regulatory non-compliance e.g. work and safety
plans, impact on the current responsiveness to overall community needs.
62
8#
'
The level and type of quarry facilities and operations provided by Glenelg
Shire Council has evolved over time to meet a perceived need of the Council
and the community in terms of Council accessibility to road making materials.
Accessibility of these services and facilities is appropriate for the Council. The
location of the quarries meets community needs with physical accessibility and
convenience of location and adjacent facilities very favourable to Council’s
Works department and contractors.
However, accessibility in terms of legitimate physical access at many of the
quarries is in fact too available, with site security requiring improvement.
64
$ $
(' )
Three key elements have been identified or established for the ongoing
evaluation and continuous improvement of the service as follows:
•
Ongoing Service
DJK CONSULTING
– This plan provides an ongoing framework
for accommodating service improvements
DECEMBER 2006
GLENELG SHIRE COUNCIL:
QUARRIES BEST VALUE SERVICE REVIEW REPORT
Improvement Plan
22
and initiative and any service
modifications required to respond to
identified service issues.
•
Customer Service
Quality
Performance
Indicators
– The Best Value service review has
revealed the need for periodic customer
surveys as well as better financial costing
and analysis systems upon which future
management decisions and delivery
improvements can be based.
•
Key Performance
Indicators
– The Best Value service review has also
established a need for the development
and inclusion of operational KPI’s for
future quarry operations.
65
( '
3
$
The Glenelg Shire Council Quarries Best Value Service Review will be
available for public inspection at key Council locations and on Council’s
website.
66
#$
Whilst a number of potential improvement initiatives and options have been
identified for the quarry operations it can be stated that Council’s quarries are
broadly meeting all key aspects of the Best Value principles.
Nonetheless some service aspects, particularly regulatory, could be improved.
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
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23
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GLENELG SHIRE COUNCIL
QUARRIES – BEST VALUE SERVICE REVIEW SERVICE
IMPROVEMENT PLAN
Service Issue
Proposed
Improvement Action
1. Future of Quarry
Operations
(Implementation of
the remaining
service
improvements will
be subject to the
results of the
strategic review.)
Undertake a strategic
review on the future
of Council’s quarry
operations, including
assessment of
commercial
opportunities in the
short, medium and
long term
Determine the future
level of quarry operations
and set a strategic
direction for the quarry
business
2. Product and price
list
Develop an annual
product and price
schedule
Publicise availability of
quarry products and their
prices
3. Competitiveness
of product prices
Undertake annual
benchmarking of
competitors product
prices before
determining
Council’s prices
Establish prices which
are competitive but also
maximise external
revenue
4. Operational Cost
Analysis
Review costing
model for each quarry
to ensure that
sufficient financial
information is
available to undertake
accurate production
cost analysis
Improved financial
information for business
decisions
5. Product Volume
Statistics
Establish systems to
capture accurate
statistical information
in relation to
production volumes
of each product
Provision of statistics,
upon which business
decisions can be better
based
6. Efficiency of
quarry pit
machinery
Undertake operational
efficiency and safety
review of Councils
quarry machinery
Establish current
efficiency and safety
standards of quarry
machinery and
equipment
DJK CONSULTING
Time
frame
Responsible
Officer
Desired Result
DECEMBER 2006
GLENELG SHIRE COUNCIL:
QUARRIES BEST VALUE SERVICE REVIEW REPORT
Service Issue
7. Maximising
External Sales
Proposed
Improvement Action
Analyse the volume
cost of material
extraction against the
potential for
increasing external
sales if product
stockpiles were
produced
Time
frame
24
Responsible
Officer
Desired Result
Quantify economic
benefit of increasing
production against the
likely increase in external
sales
8. Quarry Marketing If it is determined that
and Publicity
it will be
economically
beneficial to increase
production and
external sales,
develop a
marketing/advertising
campaign to increase
external customer
base
Increased market
exposure and increased
revenue
9. Emerging need
for quarry products
by Forestry industry
Liaise with and
ascertain the future
quarry needs of the
Sth West Victorian
Forestry industry in
relation to
construction of
harvest tracks etc
Identification of potential
external market
10. Quarry
Management Plan
Investigate the
feasibility and benefit
of developing Quarry
Management Plans
and Work
Authorities, etc. for
each quarry site in
accordance with DPI
Work Authority
guidelines
Compliance with
regulatory best practice
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11. Budget
Development
Methodology
Review and refine
methodology for
developing annual
quarry budgets
Improved accuracy of
annual quarry budgets
12 Community
Consultation
Introduce periodic
customer
satisfaction/feedback
surveys
Gauge community
attitudes towards service
13. Occupation
Health and Safety
Quarry extraction
contractors be
requested to supply
Council with
evidentiary
assurances of their
OH&S policies and
practices
Assurance that
appropriate OH&S
standards apply at all
quarries
14. Review Service
Improvement
Plan (SIP)
Annually Review the
SIP
Annually
Identification of new and
additional Service
Improvement issues
ensuring an ongoing
continuous improvement
program
15. Knowledge of
contemporary
practice and
regulatory
obligations
Subscribe to the DPI
‘Minerals and
Extractive Operations
Newsletter”.
Ongoing
Increased knowledge of
contemporary quarry
practice and regulatory
compliance obligations
DJK CONSULTING
DECEMBER 2006
GLENELG SHIRE COUNCIL:
QUARRIES BEST VALUE SERVICE REVIEW REPORT
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GLENELG SHIRE COUNCIL
QUARRIES – LOCATIONS OF PITS
DJK CONSULTING
DECEMBER 2006