The curbside recyclable materials processing and marketing contract between the City of San Diego and their current service providers (Contractor) was set to expire in June 2009. The City was interested in evaluating the current contact’s revenue structure, terms and conditions. Based on the results of the final report, the City would consider negotiating an extension of the existing contract or a competitive bid process.
HF&H Solutions
This process included meeting with City staff to discuss its goals and objectives; reviewing the existing agreement; preparing recommendations for modifications to the existing agreement; and negotiating the final terms of the new contract.
The City and HF&H staff selected similar processing contracts from five other California cities to compare to the existing agreement. These contracts were selected because they were with private companies who process commingled recyclables collected by municipal employees. HF&H staff reviewed each contract and interviewed representatives of the other cities. We also compared key provisions of the five contracts to those of the City’s current agreement.
The City’s contract key terms and conditions are comparable or more favorable when compared to the contracts surveyed. The provisions in the City’s contract are fairly comprehensive and define clear roles and responsibilities for the Contractor. The cost of disposal provision creates incentives for each party to manage what is within their control thus leading to increased revenue.
HF&H staff calculated the amount of compensation that would be paid to the City, under the five other contracts. Based on the analysis, we found that all five contracts yielded less favorable revenue results. Under the City’s current contract, the average revenue per ton paid to the City from the sale of recyclables increased from $18.23 per ton in 2002 to $63.12 per ton during 2007, which is more than the other operations.
We reviewed the Contractors’ compliance with the current contract. We conducted a financial audit of the current service providers to ensure compliance with payments made to the City. Based on our review the Contractor was in compliance with the terms of the agreement.
Based on the results reported by HF&H, the City conducted sole-source negotiations with the current service providers instead of competitively soliciting other proposals.
Results
The City extended the existing processing contract by four years.
The City was paid a $400,000 signing bonus from the existing service providers.
Revenue to the City increased due to higher per-ton material prices and revenue sharing of material sales.
Wire transfers of monthly payments to the City resulting in an additional $60,000 annually from interest payments alone.
City of San Diego