Analysis. Waste Mgmt requested exceptions to MV trash hauling contract

Superior carbon footprint for collecting trash

My earlier post on our trash hauling contract addresses Joe Holtzman’s observations on the pending 10 year, almost $100 million dollar, exclusive Agreement for the City of Mission Viejo. It is possible that this Contract could be awarded at the May 17th council meeting.

What  follows is F. K. (Joe) Holtzman’s Analysis:

Waste Management Requested Exceptions to the Proposed Mission Viejo Waste Hauling Contract

Waste Management is the only proposer to request exceptions to the City’s Agreement.  Below are the clauses of the contract from which Waste Management has requested relief. 
Text in bold and italics reflect the “added exceptions” Waste Management has requested to the Proposed MV Collection Agreement.  The entire clause is noted for context, but the changes are simple and the intent is obvious.
Rather than strike outs Sections 9.05 of Joe’s analysis reflects the original text followed by the requested changes as noted. Joe’s observations follow each exception:
5.07 MINIMUM  RECYCLING  REQUIREMENTS 

 #3  –  If the state increases waste diversion requirements, or the City increases waste diversion requirements, Contractor may request and shall receive a rate adjustment for the additional waste diversion requirements services that may be required in accordance with Section 14.07 and the provisions of this Section will apply using the higher diversion rate.

Net Effect:  These three simple words guarantee Waste Mgmt a rate increase.  Who would want to live under the pesky requirement to prove a rate increase rather than simply demand one via the contract?
7.03.11  Commercial Bin Overflow

  #1  –  In the event, Contractor cannot successfully contact the Commercial Service Customer Management after three attempts, or cannot reach an agreement with such management regarding the change in service, Contractor shall advise the Contract Administrator, either by Fax or e-mail, of the details of the Commercial Solid Waste overages, and the attempts at communication with the Commercial Service Customer Management. The Contract Administrator shall respond to Contractor’s report and make a final written determination. Within five (5) Work Days of receipt of the Contract Administrator’s written determination, Contractor shall change the Collection Service in accordance with such written determination.  Notwithstanding the above, Contractor is entitled to an appropriate change in Bin size, Collections frequency, or both, where there have been documented instances of overflows on three (3) or more occasions within any consecutive twelve (12) month period at a Commercial Premises.  

Net Effect:  This is a handy tool.  Authority to impose on a business owner and they have no recourse per contract.
9.04.1  SFD Rate Adjustment Method

  #5  —  Step Five – Multiply the weighted percent change in maximum rates by the then existing maximum rates to calculate the rate change. Add the percentage of rate revenue otherwise indicated for a prior year rate adjustment but not implemented due to the 5% cap, provided that the percentage increase for any given Contract Year does not exceed 5%.  Add the rate change to the existing maximum rates to determine the newly adjusted maximum rates.

Net Effect:  Maximum rate increases to the homeowner via the accrual method.  A very innovative tactic to achieve the maximum charge to the customer in any given year.  Nice-I wish I could do that in some of my consulting contracts.
9.04.2  Bin Rate Rate Adjustment Method

  #5  —  Step Five – Multiply the weighted percent change in maximum rates by the then existing maximum rates to calculate the rate change. Add the rate change to the existing maximum rates to determine the newly adjusted maximum rates. Add the percentage of rate revenue otherwise indicated for a prior year rate adjustment but not implemented due to the 5% cap, provided that the percentage increase for any given Contract Year does not exceed 5%.  Add the rate change to the existing maximum rates to determine the newly adjusted maximum rates.

Net Effect:  This does the same thing to the businesses as to the homeowners (above).  Why leave any money on the table I say.  Don’t call it greed – call it equal treatment to all customers.

9.05 EXTRAORDINARY ADJUSTMENT Original text note: W/M deletion requests highlighted in bold

Original text.  #4  —  The City may request from the Contractor such further information as it deems necessary to fully evaluate the request and make its determination. City may request a copy of the Contractor’s annual financial statements in connection with the City’s review of Contractor’s rate adjustment request. City shall review the Contractor’s request and, in City’s sole judgment and absolute, unfettered discretion, make the final determination as to whether an adjustment to the maximum rates will be made, and, if an adjustment is permitted, the appropriate amount of the adjustment. City may consider increases or decreases in the Contractor’s total revenues and total cost of services when reviewing an extraordinary rate adjustment request.

 W/M’s Requested text. #4  —  The City may request from the Contractor such further information as it deems necessary to fully evaluate the request and make its determination. City may request a copy of the Contractor’s annual financial statements in connection with the City’s review of Contractor’s rate adjustment request. City shall review the Contractor’s request and, in City’s reasonable judgment,  make the final determination as to whether an adjustment to the maximum rates will be made, and, if an adjustment is permitted, the appropriate amount of the adjustment.

Net Effect:  Is this delete the sole or soul of city?  Waste Mgmt shouldn’t have to argue with the city over rates.  Just shift everything to a “reasonable test” where political patronage-called whatever– can do the advance work.  Let’s just expediently dilute city authority, discretion and power to administer rate increases now before contract signing.
10.02.2 Inspection of Records

  #1  —  City shall have the right to inspect or review the payroll tax reports, specific documents or records required expressly or by inference pursuant to this Contract, or any other similar records or reports of Contractor or its Affiliates that City shall deem, in its sole discretion, (sole discretion replaced by the words reasonable judgement) reasonable judgment necessary to evaluate annual reports, compensation applications provided for in this Contract, and Contractor’s performance provided for in this Contract. 

Net Effect:  Waste Mgmt can’t afford to have the city asking for background on the corporation if there is a dispute.  How can they function with city demands to poke around actually trying to administer the monopoly?
10.02.3 Retention of Records

  #3  —  Records and data required to be maintained that are not specifically directed to be retained that are, in the (sole opinion replaced by) reasonable judgment of the City, material to the determination of Contractor’s compensation or rates or to determine Contractor’s performance under this Contract, shall be retrieved by Contractor and made available to the City in a timely manner (which shall not exceed ten (10) Business Days unless Contractor obtains prior written approval from the City). When records and data are not retained or provided by the Contractor, the City may make reasonable assumptions regarding what information is contained in such records and data, and such assumption(s) shall be conclusive in whatever action the City takes.

Net Effect:  Call this the “Tricky Dick” Nixon amendment.  Is it not clear that some records have to disappear in order to receive “reasonable” treatment from the city in matters of rate setting?  For Heaven’s sake – be reasonable.
12.01 INDEMNIFICATION 

 #1  —  Contractor shall indemnify and hold harmless City, public officials, officers, directors, employees, agents and other contractors, from and against any and all claims, costs, losses and damages (including but not limited to all fees and charges of engineers, architects, attorneys and other professionals as well as all Court or other dispute resolution costs), liabilities, expenditures or causes of action of any kind (including negligent, reckless, willful or intentional acts or omissions of the Contractor, any subcontractor, any supplier, any person or organization directly or indirectly employed by any of them to perform or furnish any services or anyone for whose acts any of them may be liable), arising from, relative to or caused by the performance of the services authorized or required by this Contract. This indemnity includes but is not limited to claims attributable to bodily injury, sickness, disease or death and to injury or destruction of tangible property. Contractor agrees, at Contractor’s expense, after written notice from the City, to defend any action against the City that falls within the scope of this indemnity, Note: W/M requests that the following text be deleted (or the City, at the City’s option, may elect not to tender such defense and may elect instead to secure its own attorneys to defend any such action and the reasonable costs and expenses of such attorneys incurred in defending such action shall be payable by Contractor.) Additionally, if Contractor, after receipt of written notice from the City, fails to make any payment due under this Contract to the City, Contractor shall pay any reasonable attorneys’ fees or costs incurred by the City in securing any such payment from Contractor. Payment of any amount due pursuant to
the foregoing indemnity shall, after receipt of written notice by Contractor from the City that such amount is due, be made by Contractor prior to the City being required to pay same, or in the alternative, the City, at the City ‘s option, may make payment of an amount so due and Contractor shall promptly reimburse the City for same, together with interest thereon at the rate of 12% per annum simple interest from the date of receipt by Contractor of written notice from the City that such payment is due.

Net Effect:  Plain and simple here:  Waste Mgmt wants off the legal hook and relief from liability plus insulation from having to pay the city’s legal costs.  Where is all the safety and integrity I heard about at the council meeting?
12.03 THE ACT INDEMNIFICATION AND GUARANTEE

  #2  —  Contractor warrants and represents that it is familiar with City’s waste characterization study as set forth in City’s Source Recovery and Recycling Element (SRRE), and that it has the ability to and will provide sufficient programs and services, consistent with the services and programs contemplated under this Contract, to ensure City will meet or exceed the diversion requirements (including, without limitation, amounts of Solid Waste to be diverted, time frames for diversion, and any other requirements) set forth in the Act.

Net Effect:  God forbid that the city may ask for more services after granting the highest revenue franchise to Waste Mgmt.  How “unreasonable” should the city be allowed to be on behalf of its residents?  How uncivilized.

 
ITEMS OF NOTE:

This analysis is garnered from years of experience/training and contract analysis at MDC.  Normally I would charge a client $15,500.00 for this service.  I love my city so I do it as a service to the citizens!!!

There is no language proposed in the contract exceptions that outline unlimited financial commitment for public education and instruction to increase recycling for Sloan Vasquez to evaluate.  Did Joe Sloan divine its value?  This is duplicitous at best!!!

I question the representation in the Sloan Vasquez report that these contract exceptions are minor and not worthy of mention to the council.  Where is our staff with regard to these demands?  Is anyone watching the store?  Ohhhh sorry there are no procurement folks like Holtzman with years of experience at MDC to ride herd here—

F. K. (Joe) Holtzman


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