October 04, 2012If the City of Greensboro's recycling request for proposal (RFP) process has proven anything, it's the importance of competition in keeping companies honest, particularly the city's current recycling contractor, ReCommunity.
The city has paid $22 million to ReCommunity since 1992 for the privilege of unloading recyclables at their materials recovery facility (MRF). And even though in February 2012, ReCommunity offered to renegotiate the contract to start paying the city for recyclables, competitive pressure from the RFP process, requested by Greensboro City Council, has led to a series of dramatic improvements in ReCommunity's offer.
As it stands now the offer from ReCommunity includes both a minimum price floor to be paid to the city per ton of recyclables, and a share of the net revenue from the marketing of those recyclables. Winston-Salem has been paid for its recyclables by Waste Management since the mid 1990s, while Greensboro was paying millions to ReCommunity for the same services.
Before the competitive pressure of the RFP process, the offer from ReCommunity did not include a price floor for recyclables, only a share of revenue from the sale of the material. Since the value of recyclables fluctuates with the markets, the amount paid to the city could go up or down dramatically.
At the time Greensboro Field Operations Director Dale Wyrick told the City Council that he was confident that he would be able to negotiate a good deal for Greensboro with ReCommunity without an RFP, and his recommendation to let him continue negotiations was backed by the research of Joe Readling of HDR Engineering.
However, once the RFP process began and ReCommunity was forced to compete with other companies, including Waste Management Inc., a significant price floor was added to their offer, which included three pricing options of a guaranteed payment of between $10 and $31 to the city per ton of recyclables.
The offer improved yet again when the City Council voted to enter a "best and final offer" phase of the RFP and invited ReCommunity and Waste Management to submit their best and final proposals, showing that ReCommunity was able to offer a better deal all along.
After hearing the "best and final offers" from the two vendors, councilmembers raised questions about the offers and the city's relationship with ReCommunity, and, when pressed, the offer from ReCommunity continued to improve dramatically
Councilmember Nancy Hoffmann asked if ReCommunity would let the city out of its current contract before it expires on April 1, 2013, so that the city could start making money on recycling instead of paying ReCommunity for it. ReCommunity had been insistent on the April start date, and was asking the city for a $1.3 million fee to leave the contract early.
Now, after being pressured by Waste Management's offer, ReCommunity has changed its stance and is willing to end the current contract before April 1, without the termination fee if awarded the new contract.
Councilmembers also expressed interest in shorter contract terms, citing concerns that long terms may prevent the city from taking advantage of opportunities afforded by newly emerging technologies and markets.
Greensboro has signed 10- and five-year contracts with ReCommunity since 1992, and the city has been losing money on recyclables the entire time, while other cities made a profit.
ReCommunity's initial response to the RFP was for a 10-year contract, which ReCommunity said it had to have to pay for improvements to its facility, but their "best and final" offer included a five-year option.
Mayor Robbie Perkins asked if the company would be willing to enter into a three-year contract. ReCommunity has responded that they are still unwilling to offer a contract term shorter than five years. Waste Management on the other hand has stated that it will sign a three-year contract.
Some of the information about the offers is coming out late in the RFP process at least in part because of a "no contact provision" included in the RFP by Greensboro City Attorney Mujeeb Shah-Khan.
The provision dictates that councilmembers can have no contact with the vendors they are considering outside of official council meetings.
During a special work session on the best and final offers, Councilmember Trudy Wade asked about the total cost and said he didn't have the number on hand but Wyrick gave the estimate of between $10 million and $15 million. He later corrected that in a memo with the actual total being $22 million.
Readling continues to recommend ReCommunity, with most of his analysis hinging on the cost to the city for transporting recyclables 15 miles to Waste Management's MRF in Winston-Salem over the cost of transporting recyclables to ReCommunity's MRF in Greensboro.
Stan Joseph, manager of community and municipal relations for Waste Management, continues to say that Readling's estimation of the hauling costs at between $10 and $11 per ton is "grossly overestimated" and that a more realistic number of $7 a ton would show Waste Management's offer to be more lucrative for Greensboro.
Joseph has also stated that Waste Management could help revamp Greensboro's collection routes to reduce the number of trucks Greensboro uses for recycling.
Readling determined that Waste Management's first offer, not their best and final offer, was the most advantageous for the city, and so included it in his calculation.