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HomeMy WebLinkAbout15 AWARD CONTRACT FOR SOLID WASTE AND RECYCLING SERVICESAGENDA REPORT MEETING DATE: OCTOBER 2, 2018 TO: JEFFREY C. PARKER, CITY MANAGER Agenda Item 15 Reviewed: City Manager / Finance Director FROM: DOUGLAS S. STACK, DIRECTOR OF PUBLIC WORKS/CITY ENGINEER SUBJECT: AWARD CONTRACT FOR SOLID WASTE AND RECYCLING SERVICES SUMMARY The current contract with CR&R Incorporated (CR&R) for both residential and commercial solid waste services will expire on March 31, 2019. Pursuant to the City's Purchasing Policy staff prepared a Request for Proposals (RFP) for new solid waste services. The City received proposals from CR&R Incorporated and Waste Management Collection and Recycling, Inc. (Waste Management). The proposals were reviewed by the Ad Hoc RFP Evaluation Committee and representative panels from each firm were interviewed by the Committee and City staff members. RECOMMENDATION The Ad Hoc RFP Evaluation Committee recommends that the City Council: 1. Award the contract to CR&R Incorporated; and 2. Authorize the Mayor and City Clerk to execute the contract on behalf of the City with any non -substantive changes approved by the City Manager or City Attorney. FISCAL IMPACT The contract includes a Regulatory Compliance Fee that is to be collected from CR&R annually. The fee will be used to pay for the City's costs of complying with the requirements of state laws (described below). The fee has been established at $210,000 during the first year of the contract based upon a build-up of estimated compliance costs, and will be adjusted annually based upon the City's actual and projected costs. A Solid Waste Fund (Fund 171) was created to track revenue and expenditures associated with the Regulatory Compliance Fee. CR&R will also be required to reimburse the City up to $300,000 for the City's actual costs associated with developing the RFP, administering the RFP process, and evaluating proposals. The reimbursement will be deposited into the General Fund (Fund 100) to offset the cost of staff, consultant services, and City Attorney services. Staff will return to the City Council for the setting of rates for the new contract in early 2019. Contract for Solid Waste and Recycling Services October 2, 2018 Page 2 CORRELATION TO THE STRATEGIC PLAN This item contributes to the fulfillment of the City's Strategic Plan Goal C, Financial Strength, specifically addressing Strategy 1, by outsourcing services to the private sector in a competitive way to obtain the lowest possible rates for the community. BACKGROUND An Ad Hoc Committee consisting of Councilmember Clark and Councilmember Bernstein was established to guide development of the RFP and to evaluate the proposals received. Staff and consultants provided technical support to the Ad Hoc Committee and the City Attorney provided legal guidance throughout the development of the RFP and during evaluation of the proposals. The Ad Hoc Committee met monthly with staff and consultants for a period of eight (8) months to develop the RFP. The development of the RFP was guided foremost by changes in State law pertaining to solid waste management and the City's service needs, which are outlined below. State Mandates In 1989, the State passed Assembly Bill 939 (AB 939), which requires cities to reduce waste by 50% from landfills. In 2008, the State passed Senate Bill 1016 (SB 1016) which modified the AB 939 calculations to include annual disposal amounts instead of calculated diversion rates. In order to determine compliance with AB 939, SB 1016 now focuses on the number of programs that a City implements instead of relying solely on calculated disposal to determine compliance. Currently, the City has a relatively high number of implemented programs and is meeting the required AB 939 diversion rate, as modified by SB 1016. However, the State is planning to discontinue some of the activities that the City currently uses and will require the City to implement more programs. In October 2011, Governor Brown signed into law Assembly Bill 341 (AB 341) requiring businesses that currently have four cubic yards or more of weekly garbage service, and all multi- family complexes with five or more units, to subscribe to recycling services. AB 341 also adopted a policy goal that includes a 75% statewide waste diversion rate by 2020. Currently approximately 69% of commercial accounts and 58% of multi -family accounts are compliant. Assembly Bill 1594 (AB 1594) was signed into law on September 28, 2014. The bill eliminates the use of green material as alternative daily cover at landfills. AB 1594 removes the definition of green waste as a beneficial use at the landfill and defines it as regular solid waste, thus counting against the City'sdiversion calculations. As a result, this will eliminate the diversion credit Tustin currently receives for the use of approximately 7,000 tons of green waste used to cover the trash in landfills annually. This regulation takes effect on January 1, 2020. The Mandatory Organics Recycling Law (AB 1826) was also signed into law on September 28, 2014 and requires that businesses arrange for recycling services for the following types of organic waste: food waste, green waste, landscape and pruning waste, nonhazardous wood waste, and food -soiled paper. AB 1826 requires multifamily complexes to arrange for recycling services for the same material with the exception of food waste and food -soiled paper. Most organic waste Contract for Solid Waste and Recycling Services October 2, 2018 Page 3 is recyclable through methods such as composting, mulching, anaerobic digestion and co - digestion within a wastewater treatment facility. Senate Bill 1383 (SB 1383) was signed into law on September 19, 2016. The law established targets to achieve a 50% reduction in the level of statewide disposal of organic materials by 2020 and a 75% reduction by 2025. Both CalRecycle and the California Air Resources Board have been assigned as regulatory and enforcement agencies and are involved in the informal rulemaking process, which is currently underway. SB 1383 will have significant impacts on solid waste management throughout the State. For example, SB 1383 requires all residents and businesses that generate food waste to divert the food waste beginning January 1, 2022. It also requires the City to require mandatory diversion (recycling) of food waste via an ordinance or other means, by January 1, 2022. This is one of the first municipal contracts that has been competitively procured that will provide the new and expanded recycling programs required by SB 1383. To ensure the City is in compliance with the new requirements, the contract includes mechanisms by which the City can implement new programs, if necessary and at the time the City desires. The contract also includes pricing for a variety of services and processing methods that may be necessary in the future given the State's direction in current legislation. Using this approach, the City will be able to select any programs required to meet State requirements at a future time without modifying the contract or increasing costs beyond those provided in the competitive RFP process. RFP PROCESS The City Council approved the RFP and directed staff to solicit for proposals at their March 20, 2018 meeting. The RFP was issued and a mandatory Pre -Submittal Conference was held on Monday, April 2, 2018. At that meeting, all potential proposers were asked to sign and submit a document stating they understood and agreed to follow the RFP Process Protocol approved by the City Council. Proposers were invited to submit written questions concerning the RFP to the City. The City responded to all questions submitted and also made certain revisions to the draft contract contained in the RFP, to certain proposal forms, added one proposal form, and made changes to the schedule for the RFP process, via issuance of five Addenda to the RFP. The RFP and the Addenda are attached to this report. DISCUSSION Two proposals were received in response to the RFP on June 18, 2018. Waste Management's proposal is Attachment 3 to this report. CR&R's proposal is an Attachment to the City-CR&R contract in Attachment 2. As noted above, the evaluation of the proposals was completed by the Ad Hoc Committee with support from staff, consultants and the City Attorney. Proposal evaluation was completed in several phases over a period of three months. Phase 1 Each proposal was reviewed to ensure it met the minimum requirements of the RFP and was considered responsive. Both proposals were found responsive. Contract for Solid Waste and Recycling Services October 2, 2018 Page 4 Phase 2 Thorough analysis was conducted of each proposal addressing each evaluation criterion listed.in the RFP (see the chart below and Attachment 1 for a list of Evaluation Criteria that were included in the RFP). Questions to each proposer were written, compiled and submitted to the proposers in order to clarify items in their submittals. CR&R received three sets of questions and Waste Management received two. Both proposers submitted timely responses to all questions. Phase 3 The Ad Hoc RFP Evaluation Committee met two times to discuss and compare the costs, each company's approach to diversion programs, and to discuss each proposal in light of the evaluation criteria provided in the RFP. The Ad Hoc Committee also further analyzed and discussed the strengths and weaknesses of each proposal. Staff contacted references for each firm and relayed the results to the Ad Hoc Committee. Phase 4 Interviews were held on August 17, 2018 with each proposer: Waste Management in the morning and CR&R in the afternoon. Each proposer was asked to make a 30 - minute presentation summarizing their proposal, qualifications, experience, proposed approach, etc. Then specific questions were asked of each proposer team to further clarify points in the proposal and to learn more about each proposer team and their approach to fulfilling all the contract requirements. Phase 5 The Ad Hoc RFP Evaluation Committee met again the week after the interviews for a final discussion and to make its decision about which firm to recommend. The following table summarizes the results of the proposal evaluation by the Ad Hoc Committee. It is divided into the nine sections of the Evaluation Criteria contained in the RFP. A more detailed description of the components of each proposal applicable to each of the sub -categories of Evaluation Criteria in each section appears in Attachment 1 to this report. CRITERIA CR&R WASTE MANAGEMENT Organization *Existing operations & management team *Assigned personnel appear largely to be in Tustin is doing a good job. team currently serving Santa Ana. Listed personnel have demonstrated skills *Local, private corporation with clear required. structure, local senior management decision makers. *Less in-house experience with on-site field implementation of recycling and food *Assigned in-house personnel have scrap programs at businesses; usually extensive experience implementing uses 3rdparty consultants hired by cities. recycling programs. Has successfully implemented programs using this approach. *Reference checks completed by City staff. *Local subsidiary of very large company; - Proposer described as responsive. area and regional operations directed in - Few resident/business complaints large part by operating procedures from received by the cities contacted. corporate headquarters in Houston, TX. Proposal identified local, area and Contract for Solid Waste and Recycling Services October 2, 2018 Page 5 CRITERIA CR&R WASTE MANAGEMENT - Successful implementation of regional level team members responsible recycling and food waste programs for contract operations. highly dependent on contract requirements. No City faulted *Reference checks completed by City proposer for not attaining 100% staff. compliance when not required by - Proposer described as responsive to contract. City needs, but also limited by corporate decision makers in *Pending litigation in routine legal matters Houston. for company in this industry. - Few resident/business complaints received by the cities contacted. - Successful implementation of recycling and food waste programs highly dependent on contract requirements. No City faulted proposer for not attaining 100% compliance when not required by contract. *No pending litigation listed; stated none pending that falls within RFP parameters. Contract Exceptions *No contract exceptions. *18 contract exceptions, many that materially change the contract cost and shift risks to the City, including provisions for, - Extraordinary rate adjustments to avoid risks associated with commodity market conditions and unforeseen cost increases in almost all cost categories. - Elimination of certain indemnification provisions. - Customer penalty charges for contamination in bins and carts. - Limitations on a commercial customer's ability to make changes to collection frequency. - Limiting pollution liability insurance. - Requirement for financial compensation by the City should a Proposition 218 protest restrict rate adjustments and therefore reduce revenue to contractor. - Elimination of requirement to implement programs if no market is available for the recyclable materials. - Very broad expansion of Force Majeure to include "acts of a government" which includes actions by any government, tariffs, trade wars, the China green sword, Contract for Solid Waste and Recycling Services October 2, 2018 Page 6 CRITERIA I CR&R I WASTE MANAGEMENT I Technical Capability Proposed Approach *Public outreach targeted to a customer's particular needs or challenges. Public outreach materials provided to demonstrate how the programs operate. *Has demonstrated experience with providing good service in 8-10 yr. contracts: Orange, San Clemente, Laguna Niguel, Lake Forest and 8 other jurisdictions of 75,000+ population. *Currently employs an extensive network of 14 Recycling Coordinators serving cities in Orange County. Has recruiting and training programs already in place for Coordinators. *Number of FTE's proposed is adequate to perform work in contract. Proposed headcount similar for both proposers. *Number and types of vehicles proposed is adequate to perform work in contract. Proposed vehicle count very similar for both proposers. *Specific use and implementation of technology clearly outlined and included in rates provided. Includes (1) providing on -board scales to weigh each load on commercial/multi-family collection trucks; (2) pilot program for "Smart Bins" for City parks, other City facilities and then bus stops, where sensors on bins/carts alert dispatch when the bin/cart is full and treaties made or broken, etc. Such acts could excuse performance of many contract requirements. *Public education utilizes corporate database of outreach materials, social media, data -driven targeted public outreach. Sample materials provided. Focus is on customer buy -in. *However, proposer has taken an exception to the contract that would authorize charging a contamination fee as a penalty which somewhat departs from concept of "customer buy -in". *Has demonstrated experience in providing good service in 8-10 yr. contracts: Mission Viejo, Santa Ana, Laguna Beach, Irvine and 31 other listed jurisdictions of 75,000+ population. *Very limited deployment of Recycling Coordinators with respect to the amount of field work required for successful program implementation. In-person contact to encourage participation, and "boots on the ground" field work does not appear to be a current part of the organizational culture. Usually uses 3rd party consultants hired by cities to implement programs. Expressed willingness and interest in hiring Recycling Coordinators assigned to Tustin during interview. *Number of FTE's proposed is adequate to perform work in contract. Proposed headcount similar for both proposers. *Number and types of vehicles proposed is adequate to perform work in contract. Proposed vehicle count very similar for both proposers. *Pilot tested Smart Bin technology in Mission Viejo. Pilot now completed. *Open to "discussing use of that technology"; but no use of Smart Bins proposed and none included in rates provided. *9 light -weight collection vehicles for recyclables proposed to weigh 1,700 Contract for Solid Waste and Recycling Services October 2, 2018 Page 7 CRITERIA I CR&R I WASTE MANAGEMENT Financial needs to be emptied, saving time, cost and energy. If cost effective, results can be used to expand program to commercial customers. *4 light -weight collection vehicles for recyclables proposed to weigh 5,000 pounds less than traditional collection vehicles. Comprehensive design incorporates changes from company's previous generation of light weight vehicle currently used in Lake Forest. Savings of $38,880/vehicle clearly identified and the total savings for the four vehicles of $155,520 is incorporated into proposed rates. *Currently owns and operates an anaerobic digestion facility in Perris to process food waste and yard trimmings. *Proposed to provide composting services at three sites owned and operated by CR&R: Lakeview, CA — permitted for composting of yard trimmings; South Orange County — permitted for composting of yard trimmings; Yuma, AZ — permitted for composting of yard trimmings and food scraps. Proposed Sage Ranch site in Riverside County as backup while it completes permitting process. *Proposed to provide food scrap processing at LA Sanitation District's digesters. *Implementation plan provides clear tasks and schedule for acquisition and deployment of new vehicles and equipment, public outreach, other tasks to transition to new contract and rates. *Sufficient financial capacity and strength. Large privately held 54 year-old regional company serving 2.5 million customers. Has 50+ franchise agreements/contracts throughout 5 counties in California plus operations in Arizona & Colorado. Owns 10 transfer stations/MRFs, AD facility, 3 composting facilities. pounds less than WM's traditional collection vehicle by reducing 4 axles to 3. Similar to light weight vehicle currently in use by WM in Laguna Beach. No specific figures provided on cost savings. WM is pilot testing hybrid vehicles but no specific proposal to use these in Tustin. *Owns and operates CORe Facility in Orange that processes food scraps into slurry (bioengineered feedstock) and delivers to LA Sanitation Districts' digesters at Sewage Treatment Plant. *Has secured capacity for Tustin with Agromin Composting Facility in Chino for the processing of co -collected yard trimmings and food waste. Has long- standing relationship with Agromin and they produce quality products. *No proposal for use of anaerobic digestion facility (Anaerobic Digestion which was requested in RFP but was not required) Waste Management is exploring development of an AD facility on property in Adelanto (San Bernardino County). ' *Implementation plan provides clear tasks and schedule for acquisition and deployment of new vehicles and equipment, public outreach, and other tasks to transition to new contract and rates. *Sufficient financial capacity and strength. Large national and global company with annual revenue over $414 billion, asset base of $22 billion, debt of approx. $8.7 billion. NYSE -traded company subject to SEC regulation. *Has financial capacity to handle risk but willingness to accept risk questionable. Took exceptions to contract seeking cost Contract for Solid Waste and Recycling Services October 2, 2018 Page 8 CRITERIA I CR&R I WASTE MANAGEMENT Diversion Strategy Cost Evaluation *Capacity to handle risk demonstrated through lack of exceptions seeking cost recovery should recycling market conditions change, and by confidence in selling into markets where company has long-term relationships. Demonstrated capability to anticipate market downturns and tightened standards for clean materials and has responded proactively, *Detailed comprehensive approach to maximize participation and diversion while minimizing contamination. *Achieved 80% compliance with AB 341/AB 1826 (Tier 1 and 2) in Lake Forest and 99% AB 341/AB 1826 (Tiers 1 and 2) compliance in Laguna Niguel using in-house Recycling Coordinator staff to implement programs. *Identified Supervisor responsible for hiring Recycling Coordinators. Promoting existing Tustin Coordinator to new City Liaison position. *Proposal included clear, concise program -by -program diversion chart including sub -waste streams showing projected diversion for each program at beginning of operations (4/1/2019) and by 1/1/2022. Projected 11% increase in diverted tons appears reasonable. *Year 1 estimated cost/revenue = $10.8M. This is lowest cost proposal. *CR&R proposed monthly residential rate for three cart system with yard trimmings hauled to composting facility: $18.03 (a 4.3% increase compared to current residential rate of $17.28) *CR&R proposed monthly residential rate for three cart system with co -collected yard trimmings and food scraps hauled to composting facility: $18.40 (a 6.5% increase compared to current residential rate of $17.28) *CR&R proposed monthly commercial rate for 3 -yard trash bin serviced 1 da recovery should market conditions change or costs to perform contract increase beyond annual cost adjustment. Hesitancy about global markets for recyclables expressed in proposal and in responses to written questions. Additional contract exceptions indicate strong desire to cover as many potential future financial risks as possible by shifting risk and costs to City/ratepayers. *Exhibited understanding of need for implementing programs in a comprehensive manner in broad terms. *Has achieved near 70% AB 341/AB 1826 (Tiers 1 and 2) compliance in Mission Viejo using City -designated 3rd party consultants for program implementation. *Included description of all diversion programs required. *Willing to hire Recycling Coordinators for Tustin and identified Manager responsible for Recycling Coordinators. *Submitted chart showing projected diversion in response to Question Set #2 and clarified chart after follow-up questions in interview. Projected 11 % increase in diverted tons between contract start on 4/1/2019 and 1/1/2022 appears reasonable. *Year 1 estimated cost/revenue = $12.1 M. Approximately $1.3M more than other proposer for year 1. *WM proposed monthly residential rate for three cart system with yard trimmings hauled to composting facility: $18.19 (a 5.3% increase compared to current residential rate of $17.28) *WM proposed monthly residential rate for three cart system with .co -collected yard trimmings and food scraps hauled to composting facility: $18.75 (a 8.5% increase compared to current residential rate of $17.28) Contract for Solid Waste and Recycling Services October 2, 2018 Page 9 CRITERIA I CR&R I WASTE MANAGEMENT per week: $138.12 (a 13.7% increase compared to current commercial 3 -yard trash rate of $121.49) *CR&R proposed monthly commercial rate for 3 -yard recycling bin serviced 1 day per week: $68.61 (a 15.7% decrease compared to current commercial 3 -yard recycling rate of $81.39) *CR&R proposed monthly commercial rate for 2 -yard food scrap recycling bin serviced 1 day per week: $47.22 (a 5.5% increase compared to current commercial 2 -yard food scrap recycling rate of $44.74) *Analysis of rate impact on six individual commercial customers (two restaurants, two businesses, and two multi -family properties) indicated that CR&R's proposed rate would result in an average rate increase of 9% if no service adjustments were made. If additional recycling was implemented and trash service 'right -sized', the rate impact would be a 3% rate reduction. *CR&R's proposed residential rates would be 16th lowest in County or in the 48th percentile (currently 14th lowest and in the 42nd percentile out of 33 cities) *CR&R's proposed commercial 3 -yard trash rates would be 16th lowest in County or in the 48th percentile (currently 12th lowest and in. the 381h percentile out of 33 cities) *CR&R has a projected annual revenue of $906K for roll -off services, a decrease over current revenues of $956K. *CR&R provided residential rates for all 16 requested service lines. *WM proposed monthly commercial rate for 3 -yard trash bin serviced 1 day per week: $147.41 (a 21.3% increase compared to current commercial 3 -yard trash rate of $121.49) *WM proposed monthly commercial rate for 3 -yard recycling bin serviced 1 day per week: $73.71 (a 9.4% decrease compared to current commercial 3 -yard recycling rate of $81.39) *WM proposed monthly commercial rate for 2 -yard food scrap recycling bin serviced 1 day per week: $65.89 (a 47.3% increase compared to current commercial 2 -yard food scrap recycling rate of $44.74) *Analysis of rate impact on six individual commercial customers (two restaurants, two businesses, and two multi -family properties) indicated that WM's proposed rate would result in an average rate increase of 26% if no service adjustments were made. If additional recycling was implemented and trash service'right- sized', the rate impact would be a 9% rate increase. *WM's proposed residential rates would be 17th lowest in County or in the 52th percentile (currently 14th lowest and in the 42nd percentile out of 33 cities) *WM's proposed commercial 3 -yard trash rates would be 24th lowest in County or in the 74th percentile (currently 12th lowest and in the 38th percentile out of 33 cities) *WM has a projected annual revenue of $891 K for roll -off services, a decrease over current revenues of $956K and a lower expected revenue than that proposed by CR&R. *WM provided residential rates for 4 of 16 requested service lines. Rates provided for 2 options (Options 7 and 7.1 4 -cart service) were lower than those proposed by CR&R. Procedural Compliance I *Complied I *Complied Contract for Solid Waste and Recycling Services October 2, 2018 Page 10 CRITERIA CR&R WASTE MANAGEMENT AB 1669 Employment N/A — CR&R is incumbent Indicated company would offer Offers to Incumbent's employment to employees of the City's Employees current contractor. SUMMARY AND CONCLUSION The Ad Hoc Committee found that both proposers have the financial capacity and technical ability to perform the basic collection of trash and recyclables as has been done in the past. However, the change to 75% diversion from 50% in the past will require a profound industry transformation. Due to the changes in state law described above, this contract requires a new approach and the implementation of many new and enhanced recycling and food scrap programs for all ratepayers. That requires innovation, creativity and enthusiasm for fulfilling all of the requirements contained in the City's contract. The Ad Hoc Committee is recommending that the contract be awarded to CR&R for the following reasons: 1. Lowest overall proposed costs/rates. 2. No exceptions to the contract. 3. Approach to diversion program implementation was precise, well thought out, fully coordinated to the requirements of the Scope of Work in the contract and the overall intent of the contract. 4. Deep and broad history of successful marketing of diverted recyclables, including anticipating and successful resolution of the current tightening of China imports restrictions. Demonstrated development of additional export and domestic market outlets for the full range of recyclables identified in the City's contract. 5. Specific phased plan for the introduction of technology including Smart Bin, on board truck scales and advanced lightweight truck manufacturing design. 6. Demonstrated a consistently enthusiastic approach to implementing all required diversion programs in the proposal, responses to questions and interview. 7. Ability to quickly obtain decisions from local senior management. The Committee found that the Waste Management proposal would not be the most beneficial to the City and its ratepayers for the following reasons: 1. Exceptions to the contract (18 total, many shifted significant cost and market or legal risks to City) 2. Proposed costs/rates are higher. 3. Less specificity regarding operational details for on -the -ground program implementation and less experience with in-house Recycling Coordinators providing on-site program implementation at businesses and multi -family complexes. 4. Concerns about the mixed message Waste Management conveyed regarding its ability to market a wide variety of diverted materials and how it is obtaining new markets to replace Chinese markets, which contradicted the contract exceptions that shifted Contract for Solid Waste and Recycling Services October 2, 2018 Page 11 financial risks and cost arising from the a lack of markets to City/ratepayers; and in two contract exceptions that could excuse failure to perform if there were no markets for recyclable materials (proposed change in definitions of `Recyclable Materials' and of `Force Majeure". 5. No immediate or definitive proposed use in Tustin of Smart Bin technology. RECOMMENDATION Based on the findings listed above, it is recommended that the City Council award the attached contract to CR&R. a S. Stack, P.E. r of Public Works/City Engineer Attachments: Attachment 1: Summary of Proposal Evaluation Attachment 2: Contract with CR&R Incorporated Attachment 3: Waste Management Proposal Attachment 4: Complete RFP Including Five Addenda Stacey Cuevo Public Works Manager