MEMORANDUM. 1. The process used to solicit and analyze vendor proposals was thorough, comprehensive and fair.
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1 MEMORANDUM To: From: Mayor Anthony Calderone and Commissioners Timothy Gillian Date: May 09, 2014 RE: Waste Hauling Contract Dear Mayor, This memo responds further to the questions and discussion raised at the Village Board meeting of April 28, 2014, concerning the vendor proposals submitted for the Village s solid waste hauling contract. I again recommend that this contract be awarded to Republic Services, for the following reasons: 1. The process used to solicit and analyze vendor proposals was thorough, comprehensive and fair. 2. Republic s proposal will result in savings of approximately $80,000 per year versus our current contract, or $400,000 over the initial 5-year term of the new contract, and provide a higher level of service to residents (see point #4 below). 3. Republic was the lowest-price vendor on an apples-to-apples comparison basis (as described more fully in this memo). 4. All residential units in the Village will receive recycling carts, and all condominium units will receive in-unit containers, which help the Village to increase recycling. Summary of Procurement Process Before addressing the issues raised at the meeting of April 28, it is important to review the process that was used to obtain and review hauler proposals. During the Request for Proposal (RFP) process, extensive efforts were made to: 1) obtain hauler proposals that addressed the Village s requested services; 2) provide haulers with the opportunity to submit alternate proposals to the services identified in the Village s Request for Proposals (RFP); and, 3) compare pricing on an apples-to-apples basis. - On October 16, 2013, the Village issued the RFP for solid waste collection services. Copies of the RFP were sent directly to 8 known waste haulers in the Chicago area. Notice of the RFP was also published in local newspapers. Thus, extensive efforts were made to distribute the RFP to all potentially interested hauling companies. - The RFP requested haulers to submit any questions on the requested scope of services by October 23, Questions were received from 4 vendors. The questions and the Village s responses were consolidated into a single document and sent to all prospective vendors as Addendum #1 to the RFP on October 30, The question and answer PAGE 1
2 period was meant to provide clarity to all potential haulers on the RFP and services desired by the Village. - Proposals were received from 5 vendors by the due date of November 6, 2013: Groot Industries, Lake Shore Recycling, Republic Services (Allied), Roy Strom, and Waste Management. This indicated a general level of interest in the Village s hauling contract from a significant number of hauling companies. - After a detailed initial review of vendor proposals, it was determined that the proposals from Groot and Waste Management were significantly higher than the other three vendors, and therefore attention was focused on the proposals from Lakeshore, Republic and Roy Strom. The Village submitted clarification questions to the remaining three vendors on November 8, 2013, and received responses by November 13, Further review of the responses received from Lakeshore, Republic and Roy Strom allowed prices to be compared for a comparable level of services. The results indicated that Republic Services had the lowest-price proposal. Question: Were Hauler Proposals Compared on a Comparable Basis? Response: Yes. As an initial matter, the RFP was carefully written to include a clear scope of services that would facilitate the comparison of hauler pricing. The scope of the services in the RFP generally corresponds to the current service level in the Village; in a few instances, the current level of services was modified with the aim of lowering overall costs. The Base Proposal was to include the following services (changes from the current program are noted and explained): Provision of new 96-gallon and/or 64-gallon trash carts (for residents that desire the smaller cart) for all Residential Units in properties of 1-4 units. Contractor to own carts at end of contract term. Contractor responsible for collection and recycling/disposal of existing carts. (Note: the Village owns the existing trash carts under the current contract. New carts were requested in the RFP because, initially, it was unclear whether all haulers could make use of the existing carts. As it turned out, the three lowest-priced vendors -- Lakeshore, Republic, and Roy Strom -- all indicated they could make use of the existing carts. Use of the existing carts is a cost-effective approach for the Village.) Provision of new 64-gallon recycling carts for all Residential Units in properties of 1-4 units. Contractor to own carts at end of contract term. (Note: Under the current contract, which dates back to 2005, residential units are provided with 18-gallon recycling bins. In addition, the current contract specifies that 64-gallon recycling carts would be provided for up to 3.5 % of residential units -- approximately 135 homes -- at no charge. Additional homes that requested carts would be subject to a monthly rental charge for the carts; currently, approximately 1,619 homes have requested the carts. Since over 40 % of the residential units have requested carts, and because other communities have indicated that using carts results in greater amounts of recycling, it was determined to include Village-wide distribution of recycling carts in the Base Proposal.) PAGE 2
3 Weekly collection of unlimited yard waste. The amount of Bulk Items that residents may place weekly outside the mobile carts was been reduced from 3 cubic yards to 1 cubic yard. (Note: this change was made with the aim of lowering overall service costs.) Collection of white goods (i.e., appliances) was eliminated from the base service and instead would be considered a special collection service with an additional per-item charge (Note: this change was made with the aim of lowering overall service costs and because it was believed that appliances are sometimes collected by scrappers and therefore not collected by the hauler.) Collection of Christmas trees has been removed from the scope of services. (Note: this change was made with the aim of lowering overall service costs and because Christmas trees are now being collected by public works crews.) Collection of brush/tree branches has been eliminated from the landscape waste collection program. (Note: this change was made with the aim of lowering overall service costs and because brush/tree branches are now being collected by public works crews.) Collection of garbage and recyclables from condominium units. Disposal of waste was not included in the Base Proposal. The Village is currently a participating member community of the Regional Disposal Project, a cooperative purchasing effort of the West Cook County Solid Waste Agency in which 14 neighboring communities participate. The Village pays for disposal costs directly. (Note: The Village has signed a contract to participate in the RDP; the benefits of the Village s participation in this regional program were summarized in my prior staff report dated April 23, 2014.) In addition to the Base Proposal, the Village requested pricing for one alternate scope of services (Forest Park Alternate 1), which would maintain the allowable bulk item set-out at 3 cubic yards per week as well as white goods collection as specified in the current contract. This alternate proposal was included to enable the Village to assess the cost of maintaining these current service provisions. The RFP also allowed vendors to submit their own alternate proposals, and included the following provision: The scope of services included in this RFP package describe the services which the Village feels are necessary to meet the performance requirements of the Village, and shall be considered the minimum standards expected of the Contractor. The scope of services is not intended to exclude potential Contractors. Contractors may indicate alternatives to the scope of services if the proposed changes are equal to or greater than what is required by this RFP. For instance, the Contractor may propose to continue using existing trash carts, which are owned by the Village, in lieu of providing new carts. PAGE 3
4 Discussion of Cost Proposals As noted previously, proposals were received from 5 vendors. Two of the proposals (from Groot and Waste Management) were significantly higher, and so the comments below address the proposals submitted by the other three vendors (Republic, Lakeshore and Roy Strom). Republic Services Republic was the only hauler to propose maintaining the Village s current one-day collection schedule. Republic s proposal provided identical pricing for both the Base Proposal and Forest Park Alternate 1. Republic proposed to use the existing trash carts and to provide recycling carts to all residential units. Republic also proposed to purchase the existing trash carts from the Village for $60,000. Republic accepted the annual cost escalation included in the RFP (Consumer Price Index or CPI, capped at 5 % per year 1 ). Summary cost data is provided below: First-year Collection and Disposal Costs = $803,213 (Note: reflects purchase of existing Village containers, amortized at $12,000 per year over 5 years) Five-Year Collection and Disposal Costs = $4,193,060 (Note: Based on RDP disposal. Includes impact of annual escalation of collection and disposal costs.) Republic s proposed pricing represents a savings of $79,213 versus our current contract rates. Clearly, the RFP resulted in lower pricing for the Village. Lakeshore Recycling Lakeshore proposed a four-day collection schedule. Lakeshore s proposal provided pricing for the Base Proposal and Forest Park Alternate 1. Unlike Republic s proposal, Lakeshore proposed higher pricing of $0.30/unit/month for Forest Park Alternate 1 (weekly collection of 3 cubic yards of Bulk Items and white goods) versus the Base Proposal. Lakeshore did not submit any alternative service options of their own, and agreed to the annual cost escalation in the RFP (CPI, capped at 5 % per year). Lakeshore s initial proposal was based on providing new trash and recycling carts. Their proposal indicated that lower pricing could be provided if the contractor s expense for the carts was eliminated, but did not quantify the reduction. As a result, the Village submitted questions to Lakeshore to clarify whether: a) their collection trucks could use the existing carts (the answer was yes); and, b) what the revised pricing would be if Lakeshore used the existing trash carts and provided only the recycling carts (the answer was a reduction of $0.25/unit/month from the rates in the initial proposal). Lakeshore s revised pricing is summarized below. Note that this based on using the existing trash carts and providing a new recycling cart, and assuming continued weekly collection of 3 cubic yards of Bulk Items and white goods. This is the most direct comparison of the pricing from Lakeshore and Republic, though it should be noted that Lakeshore proposed a four-day 1 The average annual change in the CPI over the past 10 years has been 2.1 % per year. PAGE 4
5 collection schedule. Compared to Republic, Lakeshore s cost would be $11,373 higher in the first year of the contract, and $52,507 high over the five-year term of the contract. First-year Collection and Disposal Costs (Lakeshore) = $814,586 First-year Collection and Disposal Costs (Republic) = $803,213 Increased Cost (Lakeshore) = $ 11,373 Five-Year Collection and Disposal Costs (Lakeshore) = $4,250,267 Five-Year Collection and Disposal Costs (Republic) = $4,193,060 Increased Cost (Lakeshore) = $52,207 In my memo dated April 22, 2014, I mentioned that Lakeshore had the lowest first-year collection cost by about $2,500. That was for the scenario in which Lakeshore would collect 1 cubic yard of Bulk Items per week, and collect white goods for a separate per-item charge. This represents a lower level of services than ultimately proposed by Republic. In my view, the annual savings were not sufficient to justify the reduction in services and the significant change to the current one-day collection schedule, which could result in lower customer satisfaction from our residents. Roy Strom Roy Strom proposed a two-day collection schedule. Strom provided pricing for the Base Proposal and Forest Park Alternate 1 (and assuming disposal through the RDP). Unlike Republic s proposal, Strom proposed higher pricing of $0.10/unit/month for Forest Park Alternate 1 (weekly collection of 3 cubic yards of Bulk Items and white goods) versus the Base Proposal. Strom s first-year costs were $140,340 - $144,964 higher than Republic s proposal, but included new trash carts and recycling carts. Strom was given the opportunity to submit revised pricing assuming only new recycling carts would be provided as described below. Strom also submitted two of their own alternate options, assuming disposal at their transfer station instead of the RDP. Strom Alternate 1 proposed new trash and recycling carts. Strom Alternate 2 proposed using the existing trash carts and the existing 18 gallon recycling bins; Strom would make 64-gallon recycling carts available to residents on a rental basis. Both of these alternates were proposed by Strom as cost-saving options to the Village. Analysis of the pricing, however, indicated higher costs than Republic, both in the first-year and higher five-year over the five-year contract term. Similar to Lakeshore, the Village asked Strom to clarify whether they could use the Village s existing trash carts (the answer was yes) and what the rate impact would be if only new recycling carts were provided (but still using Strom s transfer station). This resulted in final pricing that was more comparable to the pricing submitted by Republic and Lakeshore. Compared to Republic, Strom s cost would be $10,942 higher in the first year of the contract, and $146,522 higher over the five-year term of the contract. First-year Collection and Disposal Costs (Strom) = $814,586 First-year Collection and Disposal Costs (Republic) = $803,213 Increased Cost (Strom) = $ 10,942 Five-Year Collection and Disposal Costs (Strom) = $4,250,267 Five-Year Collection and Disposal Costs (Republic) = $4,193,060 PAGE 5
6 Increased Cost (Strom) = $146,522 Strom s proposal included several notable deviations to the RFP and in comparison to the proposals received from other haulers, noted as follows: - First, Strom s lowest pricing options assume disposal at their transfer station. This would necessitate the Village breaking its existing contract with the RDP, a serious matter, but would still result in higher costs versus Republic s proposal. - Second, Strom proposed a CPI-based escalation, with a floor of 3.5 % per year and a cap of 5 % per year. As was noted previously, the average CPI over the past 10 years has been 2.1 % per year, and over the last 5 years has been lower -- about 1.6 % per year. Strom s floor escalator of 3.5 % is higher than historical CPI and is projected to lead to higher collection costs over time versus Republic s proposal. The impact of the escalation is significant: while Strom s first-year cost is $10,942 higher than Republic, by the fifth-year of the contract it would be $49,012 higher. Further, at the end of five years, the monthly collection cost per household would be significantly higher under the Strom proposal; that would be the baseline for either extending the term of the contract or issuing a new RFP. - Third, Strom proposed a fuel escalation that would add to both collection and disposal costs if the quarterly average price of diesel fuel exceeds $4.00 per gallon. This could potentially further increase rates for the Village going forward. - Fourth, Strom proposed an escalator for the recycling portion of the contract in which the Village could pay higher rates for recycling in the event that Roy Strom incurs more cost, including loading and transportation costs, than revenue that it receives from the recycling processor. The Village requested clarification from Strom on this ambiguous provision; Strom indicated that this circumstance has yet to materialize and the impact would be minimal. Nonetheless, it adds another potential uncertainty in rates for the Village going forward. Summary The purpose of the RFP was to provide clarity on the services requested by the Village and to allow flexibility for haulers to propose alternatives that would result in cost savings or other benefits to the Village. Following the initial review of proposals, the Village requested clarifying responses from vendors to enable a fair comparison of services and prices. This was achieved to the extent possible (note again that Republic was the only vendor to propose a one-day collection schedule), and Republic was determined to provide the services desired by the Village at the lowest cost. Question: Were Soft Costs Considered in Reviewing Proposals? Response: Yes. Each of the vendors identified benefits with their proposed approaches and equipment. These benefits were considered during the evaluation of proposals, although they could not be quantified into an actual monetary benefit. In my view, these benefits would be appropriately used to weigh proposals that have substantially similar costs. Because Republic offered demonstrable and significant cost savings, both versus the current contract and other hauler proposals, the soft benefits, which varied from hauler to hauler, are not in my view sufficient to warrant going with a higher-cost vendor. PAGE 6
7 Republic Services. Republic s proposal stated the following benefits to their approach: - Maintain one-day collection schedule. Republic stated that this would provide continuity in current services. Republic also said that because trash containers, recycling containers, yard waste containers, construction material, and bulk items would all be set out for collection on a single day, a one-day service schedule would maintain a clean, tidy appearance in the Village for the remainder of the week. Republic also stated that the one-day collection schedule reduces the impact of truck traffic and noise. Republic stated that the one-day schedule would also facilitate code enforcement by the Village (reducing Village staff time), and would allow their field supervisor to spend more time in town. Finally, Republic stated that under the one-day collection schedule, all areas are treated uniformly and no one could claim that one area is being given preference. - Provide condominium units with in-unit recycling containers. Republic stated that they would provide six-gallon recycling containers designed for apartment-type use to all of the condominium units served under the contract. The recycling containers could be stored under sinks and have handles to make transporting recyclables to outdoor containers more convenient. Republic said that in a pilot program in a west suburban apartment complex, the containers increased recycling volumes by over 90 percent. Republic stated that increased recycling from the condominiums would reduce the Village s disposal expense. - Recycled content in equipment. Republic stated that they recover re-usable parts from collection carts and dumpster containers such as wheels and lids. Damaged carts are returned to the manufacturer for recycling. Republic said they recycle motor oil, antifreeze and transmission fluids from their collection vehicles, and that their dumpsters, roll-off containers and vehicles are made with recycled steel. Lakeshore Recycling Lakeshore s proposal stated the following benefits to their approach: - Biofuel Use. Lakeshore indicated that all of their trucks use an ultra-low sulfur biodiesel fuel, and that they have begun purchasing compressed natural gas trucks. (Note: This appears to be a company-wide initiative, and the proposal did not state which type of vehicles would be used to serve Forest Park.) - Synthetic Oil Lakeshore stated they also use synthetic oil and lubricants to maintain their vehicles. - Education Plan. Lakeshore said their plan is to dedicate time to providing community outreach that will educate local schools on the benefits of recycling and sustainability. (Note: Details on this outreach, however, were not provided in the proposal.) Roy Strom Strom s proposal stated the following benefits to their approach: PAGE 7
8 - Dual-Collection Vehicles. Strom stated that they would use a two-compartment truck to collect recyclables and garbage in a single vehicle (the garbage would not be mixed with the trash). Strom stated that this approach reduces the number of large truck passes need to collect refuse and recyclables on Village streets and alleys by 50 %. Strom stated this would reduce damage to Village infrastructure (fewer large trucks on Village streets), enhance traffic safety, reduce noise pollution, and reduce the possibility of a missed customer by 50 %. (Note: Staff considered the dual-collection format and, while considering its potential benefits, did not find the benefits to be conclusive. Since Strom proposed to utilize a standard truck to collect yard waste, the potential reduction in the number of trucks used to serve a given street or alley in the Village is 33 %, not 50 % (i.e., 2 trucks versus 3, a reduction of one third). Further, Strom did not indicate whether the dual-compartment trucks would be used to collect the condo units; it seems possible that standard collection vehicles would be used because the condo buildings may utilize dumpster containers instead of carts. Moreover, it is not clear whether the dual-collection trucks would reduce the aggregate truck traffic in the Village in a given week. This is because the tonnage of trash, recyclables and yard waste collected in the Village would be the same for any hauler; assuming all haulers operate efficiently to maximize the amount of material collected in each truck, the aggregate number of vehicles required to collect all of the tons in the Village would appear to be similar.) - E-waste Collection. Strom stated that We can arrange a program with the Village whereby we provide a permanent disposal site that is identified and our e-waste partner will pick up the material on an on-call basis, or we can initially set up E-Waste Days when the recycler will come to a designated location in the Village to accept the e-waste on advertised days for the Village. The Village will receive a rebate for the recycled materials. (Note: It was not clear from this statement whether such a program was included in Strom s pricing, or an additional service to be negotiated. The Village currently has a drop-off location at the Public Works facility for residents to drop-off their electronics. This program is operated at no cost, and the Village receives revenue for certain electronic devices). - Shredding. Strom stated that We can develop a program with the Village to set up Shredding Event Days when our shredding partner will come to designated locations in the Village on a periodic basis to shred the residents paper on-site. (Note: Again, it was not clear from this statement whether such a program was included in Strom s pricing, or an additional service to be negotiated.) - Main Street Litter Baskets. During the April 28, 2014 Board meeting, a Commissioner mentioned that Strom had proposed collecting litter baskets along Main Street as part of their services. There was no commitment to provide this service, nor any mention of such a service, in Strom s proposal. Summary Each of the proposed vendors highlighted what they thought were the environmental and service benefits to their approach. Since each vendor identified different benefits, there was no to compare them on an apples-to-apples basis. Moreover, some of the benefits were identified as programs that could be developed and not as services actually included in the proposal pricing. Again, in my view these benefits would appropriately be used to weigh proposals that have substantially similar costs, but not to select a vendor that had significantly higher costs than Republic. PAGE 8
9 Question: Is there any benefit to excluding condominiums from the contract or issuing separate RFPs for single-family homes and condominium units? Response: No. As an initial matter, the Village s Code includes condominium units in the Village s garbage collection program (Section A.1). The Village s Code was adopted to promote the orderly collection of waste materials in the Village. Second, by including the condominium units in the Village s solid waste collection agreement, a large pool of households is included, with the aim of obtaining lower rates from haulers. Third, the RFP allowed all haulers to submit pricing for a consolidated group of condominium buildings. The monthly unit pricing proposed by Republic, Lakeshore and Strom differed by a few pennies. Because the variation in condo pricing was small, there is no reason to conclude that a separate RFP targeting just the condo buildings would result in lower costs for either the condo buildings or the single-family households. In fact, as was noted at the April 28, 2014, meeting, just the opposite might occur -- removing the condo buildings from the current contract could risk higher costs being proposed for the single-family households. Based on our latest building counts, there are 59 condo buildings in Forest Park with 1,798 units. The RFP included 42 condo buildings with 1,204 units. It is our understanding that a number of condo buildings have obtained services outside the Village contract. This is a code enforcement issue, which the Village is investigating. Note that the Village does not pay for the condo buildings which aren t serviced by the Village s contract hauler. Question: Was composting included in the RFP? Response: Yes. Yard waste collected under the Village s contract is either composted or land applied to farm fields. This question may have been directed at whether the RFP included food waste composting. The answer to that question is no. As discussed at the April 28 Board meeting, food waste composting is being evaluated by some communities but is still in a very early stage of development. Oak Park recently implemented a voluntary subscription-based program for food and yard waste, with a monthly cost of $14/household/month (with similar pricing proposed in Highland Park). That would more than double the average monthly cost of the Village s current garbage, recycling and yard waste program. Conclusion I hope this memo further explains the comprehensive process the Village conducted to obtain hauler proposals on the Village s solid waste collection contract, and answers the Board s questions. The process was fair, and will result in first-year savings to the Village of approximately $80,000 versus our current contract. Recycling service will be expanded by providing carts to all single-family households (up to 4 units), and in-unit recycling containers will also be provided to condominium households. Since the pricing provided by vendors is now public information, issuing a separate RFP for the condos (or a new RFP entirely) would be unfair; would have questionable benefits (if any); and could jeopardize the savings obtained through the current RFP. I recommend that the solid waste hauling contract be awarded to Republic Services. PAGE 9
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