Attention, Mayors and City Finance Directors
Nothing seems to ignite public passion and debate quite like the local trash and recycling service. While every municipality needs trash service, handling the bid process internally can often be a confusing and frustrating task. And if handled incorrectly, it can result in considerable public outcry. Here are a seven important considerations and helpful hints for navigating your next waste contract.
1. What kind of Contract Does Your City Have or Need?
Residential Services –
The vast majority of municipalities have exclusive contracts for residential service. This means either the city themselves or a private contractor provides exclusive service for all residents. Other cities allow a full open market where any private hauler can pick up a resident’s trash and recycling.
There are positives and negatives to each scenario.
Cities that provide service directly to residents aren’t bound by some of the profit metrics of private haulers. However, the cost of owning and maintaining large equipment, running transfer stations or recycling centers, managing employees, and administration within a governmental system often ends up being more costly to residents than private providers.
Cities that use exclusive residential contracts with a private hauler often point to the benefit of having a single contractor using city infrastructure. Since the city is responsible for maintaining roads and managing traffic congestion, reducing the number of large trucks on the road during daytime hours can reduce stress on roads and limit public complaints. An exclusive contract gives the city a single entity to address issues and can increase the ability to provide expanded services. The selected waste hauler may be willing to offer specialized recycling services or help fund public outreach if they have exclusive access to residential waste.
That said, an exclusive residential contract doesn’t come without risks. If trucks break down, companies merge or change leadership, new needs arise, or your community experiences extreme weather or natural disasters you are contractually bound to handle the issues and associated waste with the exclusive hauler. Forethought when negotiating contractual terms can help plan for such situations, but ultimately an exclusive contract can leave you with a single option.
Cities that have open markets for residential service may not have some of these advantages, but when a provider’s service starts lacking the city doesn’t have to field complaints. Residents can simply choose a different provider.
Commercial Services –
In contrast to residential services, the majority of municipalities operate under an open market for commercial services. The most evident reason for this is that commercial businesses require specialized services. Most residents need a standard rolling cart for trash, possibly in a few available sizes, and a container for recycling. In contrast, businesses may produce anywhere from a few cubic yards of trash per week to a hundred times that.
Manufacturing businesses especially can produce materials that have to be disposed of as hazardous waste or collected in bulk to reduce costs. A municipality, negotiating on behalf of all the businesses within city limits, runs a high risk of excluding services that businesses need or tying their hands to use operators that may not offer services at the schedule they want. Furthermore, the price of commercial service is generally 10-100 times as expensive (or more) than residential service. Thus, it’s much more politically expedient to leave those issues up to the businesses themselves.
However, there are many municipalities that service businesses themselves or successfully operate under exclusive franchise agreements with private haulers.
Determining what type of residential and commercial service your city has or needs is the first and most critical step to a successful Waste and Recycling RFP.
2. Research, Research, Research.
Doing market research is one of the biggest keys to success in the RFP process and securing a new contract. Competition in the waste industry is constantly evolving. There has been a drastic increase in mergers and acquisitions within the waste industry in the last five years, increasing both risk and opportunity for municipal waste contracts. Mergers that gobble up local competitors can limit market competition; on the other hand, the combined resources of a newly merged company can provide needed capital for the services your city needs. Want that giant recycling center paid for? The newly merged company may be able to provide that. Conversely, smaller companies can often provide a more tailored approach to your municipalities’ needs provided their equipment and operations are adequate. Just because a particular waste hauler isn’t currently servicing your market, doesn’t mean they wouldn’t if given the opportunity. Many companies would drive the extra mile or even purchase infrastructure to service a municipal contract. This can lead to added competition and lower contract prices.
At the end of the day, market research is the name of the game. Look for government, non-profit, or private entities that provide information or advice on regional waste opportunities. Investigate regional players looking for infrastructure investment opportunities. Find out how your waste stream is currently sorted and where the different streams go. Set up facility tours of potential bidders and program reviews. Find municipal entities of comparable size for case studies.. The more market knowledge you have the more likely your new waste contract will be the envy of the region.
3. Establish and Maintain Your Criteria for Selection.
Having a well-defined set of criteria for selecting your provider is paramount to the process. State law not only establishes the criteria defining responsible actors to service your municipality, it also defines what should be considered in selecting a winning proposal. Make sure to research and clearly print the criteria in your Request For Proposal and on any paperwork relevant to selection committees. When judging proposals, build a prioritized list of criteria. Choose the values that best reflect your community desires (price, infrastructure investment, recycling opportunities, etc.) and tie them to your state’s criteria for adjudicating proposals. This will make the bidding process clear and help guide an objective selection process.
4. Assign a Value to Fringe Benefits.
When reviewing bids for waste service, put monetary and social value on any services or equipment offered for free. Often haulers will include amounts to pay for roads, community outreach, and education programs. These gifts of infrastructure, equipment, or services should be quantified and weighed against the total cost of the service to make sure you have the most accurate comparison between bids. When well documented, this also ensures that you have met a justification of your decision.
5. Build Room in Your Process for Clarifications.
If needed, extend the bidding process to allow for typed clarifications between the proposal submission and committee selection. Make any clarification questions universal so you can send an identical sheet to each responsible actor. Ask for pictorial descriptions of equipment or signage as well as the specific monetary commitment of each investment to be made (e.g. $20,000 for a recycle drop-off facility or $15,000 for education programs). No matter how perfect your Request for Proposal is, there will always be some back and forth with bidders for clarification. Keeping the channels of communication open and transparent will lead to the best proposal for your municipality and limit recourse of non-selected parties.
6. Fees and Price Increases are Negotiable.
When drafting an RFP or negotiating a final contract, ask for language that specifically addresses any current or future fees. Base rates for scheduled trash are often increased by as much as 35 percent by internal hauler fees, especially when your contract covers commercial service as well as residential services. One way to protect against this is to specify in the RFP that any pricing bids should be inclusive of all fees and represent an ‘all-in’ price. Also, work to address how the price can or should increase over the term of the agreement. If the provider wants to work with your municipality enough you may have a contract that has no price increases for the entire term of the agreement. Other contracts may allow for annual CPI increases or passing through of landfill price increases. Either scenario may make sense, depending upon, your local market conditions and what your research has shown. At the end of the day, you need your provider to be happy. As with any contract, the most important things are that it’s clearly defined, understood and fair for both parties.
7. Begin the Process Early.
Getting started with adequate time before the contract end date will allow for a smooth process. Most municipal waste and recycling contracts range from one to five years with a heavy emphasis towards longer-term contracts as it’s not desirable (or necessary, when done right) to be constantly reworking an agreement. When determining how far out to begin the process, consider if there are going to be any changes to the level of services needed. For example, are you going to go from an open market to an exclusive franchise arrangement? Have you had any perpetual issues or requests from the public? Are you hoping to change or expand your city’s recycling program?
If there’s any change to the status quo, we recommend getting started at least one year prior to the end of your current agreement. Big changes will require a large amount of research and public outreach to ensure it goes smoothly. If you are keeping the same services but wish to re-bid to ensure your city gets a quality provider at fair market rates, we recommend getting started about six months prior to the contract expiration. This will allow enough time to manage the formal RFP process and execute a new contract with ample time for auditing your current operation, soliciting bids, and asking for public feedback.
Any RFP or contract for your municipality requires hard work and attention to detail, especially when it comes to waste and recycling. While rare, everyone has heard of haulers failing to honor their agreement, trash piling up, and public outcry pouring in. Following these seven points will help ensure your municipality gets a quality waste contract and provider, and your trash affairs come out smelling like a rose.
Rob is a Senior Consultant at P3 Cost Analysts. P3 works with thousands of clients across the US and specializes auditing and reducing telecom, waste and utility expenses for businesses and governments. If you are interested in our consulting services you can reach out to us at email@example.com.