Contract options for solid waste management service

Jose G. Gamboa
Superintendent of Solid Waste
City of Santa Cruz, California
Member, APWA Solid Waste Management Committee

During the last fifteen years every municipality in the country has had to design, implement and evaluate their effectiveness in meeting new and changing environmental mandates from federal, state and local regulations. For example, Subtitle D (1991) of the Resource Recovery and Conservation Act (RRCA) changed engineering design and construction criteria of landfills. While the RRCA is a federal mandate and the law does not include recycling mandates, some states have established recycling and waste reduction requirements on each of their municipalities and agencies.

Another trend influencing solid waste programs is the "re-engineering of government services"—a trend heavily promoted during the Reagan presidential era and a social movement to make government agencies more transparent and accountable to citizens. Therefore, as managers of public works responsible for meeting legal, political and public expectations, how we design and implement contracts can bring about beneficial, average, or devastating consequences. Ultimately, which contract option is chosen will affect the community; and regardless of the outcome, there exists a constant in the managerial nature of solid waste services: Change is in the nature of the environmental field because science and technology force evolution.

I will provide detailed information on what I have defined as self-contracts and managed competition (since they are far too rare), and general information on the more traditional contract agreements.

Self-Contract
The number of municipalities operating their own citywide refuse and recycling services has substantially declined in the last twenty years. Far rarer is the existence of municipalities with a public works department operating not only citywide collection services, but also a landfill and recycling processing operation. The City of Santa Cruz is one of the few, fully integrated solid waste services: It operates under its own self-contract.

The City of Santa Cruz has operated its own landfill since the early 1920s and solid waste collection some years later. Despite several generations of locally different political and economic climates, the municipality has not contemplated privatization or other type of contract performance model such as managed competition.

Instead, different generations of city councils and mayors have supported the utilization of city forces for the provision of solid waste services. Control of these services has been central to political philosophy. As a result, the City has implemented several cost savings programs to keep up with private sector or other efficiently operated, publicly managed services. This fiscal requirement needs to happen since there is always the possibility that a future mayor, public demand, or tough economic times will revise the self-contract.

In our self-contract salaries are negotiated with a citywide union. The solid waste (collection) and resource recovery (landfill and recycling) workers do not have their own contract. Instead, what the City has negotiated is the collapsing of job descriptions (from four to one) in order to create a more flexible solid waste organization.

In addition, the introduction of automated refuse and recycling collection has helped control costs, while at the landfill operational improvement include reduction of dirt consumption (850%), eliminating equipment valued at approximately $500,000, and reducing operational cost by $90,000.

Our self-contract includes a requirement for constant improvement in order to continue satisfying our leaders, the public and the environmental regulations.

Managed Competition
In the late 1970s the City of Phoenix faced serious economic times. As a way to control and reduce its solid waste collection cost, the City introduced the contractual concept of managed competition. The concept permits competitive bidding between publicly operated services and the private sector.

The core concept of managed competition is the assumption that while the private sector is driven by the profit motive, and therefore businesses must operate efficiently and earn a high level of customer satisfaction, the public sector tends to be driven by political and social pressures and, it is assumed, that there is a lack of entrepreneurial spirit. Therefore, if public services are forced to compete with private businesses, business attributes associated with private enterprises will need to be developed by government services.

Throughout the years, the City has developed an excellent, highly efficient, and service-oriented solid waste collection program. It has successfully competed against the private sector by creating a complex accounting system to track all expenses, changing work schedules to increase productivity, improving workers' safety through training and financial incentives, surveying customers to determine customer satisfaction, and better routing and equipment.

In the early 1990s, the citizens of the City of Indianapolis appointed a new mayor, Stephen Goldsmith. The new mayor's vision was a systematic, determined approach of privatization of city services, including solid waste collection. One of the motivating factors for privatization of city services came from a $20 million budget deficit.

The systematic approach to privatization in the City of Indianapolis included:

  • The formation of the Service, Efficiency, and Lower Taxes for Indianapolis Commission;
  • Introduction of activity-based cost system and its implementation through one of the most reputable consulting firms in the nation;
  • Public-unions, and union-management teams;
  • Performance indicators; and
  • Employee bonuses.

In 1994 the City operated eleven refuse collection districts and placed ten up for bids. A district was to be serviced with City forces to ensure that local government could react to unforeseen situations. The first competitive process mandated that contractors would first hire displaced city workers. Also, no bidder could win more than three districts. The Department of Public Works won successfully all of its three bids.

The City's solid waste program has become more productive, customer focused, and efficiency driven. With an accounting system capable of identifying and tracking all cost centers, the management-union team can better identify approaches to improvements and continue controlling or reducing expenses.

Non-Competitive Contract
Far too many agencies award a service contract agreement to a single company because it ensures continuity and a smooth transition. In fact, many large cities have for decades awarded their service contract agreement to a single service provider. While continuity is a valuable asset, it does not promote innovation and does not motivate the contractor to become efficient.

This type of contract agreement generally is designed to meet some basic levels of service but it tends to lack flexibility for rewarding service improvement and efficiency. Often contracts need renewing in order to meet new local expectations or regulations. A long-term agreement has existed between the City and County of San Francisco and its service providers.

In addition, a ten-year or longer-term contract, unless built into the agreement, cannot quickly adapt to changing regulations or new technology.

Request for Proposals
This type of contract agreement is a very flexible service contract capable of addressing not only local needs, but it provides the applicant with the latitude to propose different methods and approaches to manage and process the agency's solid waste stream.

The flexibility may include the privatization of some services, as Sumter County, Florida has included as an option for the candidates of its recently issued RFP (10/2004).

The RFP may be followed by a non-competitive contract process at the end of the contract period.

The flexibility of RFPs includes a bid scoring process that is not tied to cost, but on a combination of skill and competency.

Contracting for Services
Regardless of the contract option an agency selects, the reality is that as community leaders we are obligated to meet not only the expectations of our community, but also to anticipate and position our agencies in such a way that we ensure adaptation is possible and we remain flexible enough to absorb changes in the work environment.

The knowledge and systems for collecting, processing and disposing of solid waste are always evolving. In fact, solid waste management is one of the activities managed by most public works organizations. An understanding of why and how we have a contract agreement defines who we are and where we are going.

Jose G. Gamboa is a member of APWA's Solid Waste Management Committee as well as the APWA/AMMAC Task Force. Last year he was the recipient of a Jennings Randolph Fellowship for an exchange program with AMMAC, and submitted an article reflecting his experiences in the APWA Reporter (July 2004). He can be reached at (831) 420-6273 or at JGamboa@ci.santa-cruz.ca.us.