Negotiating Contract for Waste and Recycle Services

Both the need and opportunity to renegotiate our long-term evergreen (auto renewal) contact occurred in October-November, 2014. The Board charged President Vaughan with negotiating the critical elements and equivalent comparison between vendors of our historical long-term contract for 238 households plus an added site pickup at the North Pool Recreation Area. The monthly disbursement pays the waste vendor for ALL households through HBL CPAs (our accountants) electronically. That convenient service for all Homeowners is included as a benefit in the annual Homeowner dues. Such a convenient Board arrangement thereby negates the unacceptable option that would expect each Homeowner to negotiate personally their own curb service pickup each year. Moreover, an exclusive contract keeps the narrow SMVE streets uncluttered with multiple trash pickup vendors often on a daily basis throughout the year.

Issues selected in the negotiations that needed to be included

1. Curbside pickup of solid waste and recyclables weekly,
2. The chosen contractor (vendor) must be large enough to serve our 238 unit community consistently with adequate backup trash vehicles and enough ancillary equipment to manage inevitable equipment breakdown and unintended delays.
3. The chosen contractor must warranty a responsive route structure with robust dispatch services integrated to problem solve same day delayed pickups.
4. Contractor must also be willing to offer discounts for seasonal pickups, deal with the unit size of the HOA, must allow for variation in container size for both trash and recyclables, and provide flexibility to work toward a reduction in overall costs while maintaining chosen frequency of curbside service expected by Homeowners especially during the hot summer season and holidays.

Facts Regarding the Tucson Waste Market

1. Within the last 3-5 years, the number of waste contractors has decreased substantially from about 5-7 to 2 major providers. A third waste vendor (Saguaro) has just begun the process of being bought out by Republic Services.
2. Thus, mergers and acquisitions have accelerated to allow only two qualified providers: a) Waste Management and b) Republic Services to compete for our substantial contract. Waste Management incorporated in 1987 now serves 25 million customers in the USA with a major western regional office in Phoenix. Republic Services was incorporated in 1998, serves 12.5 million customers, and also has its office in Phoenix.
3. Both waste haulers are licensed, bonded, and insured with appropriate general liability and workman’s compensation insurance to cover all Tucson services provided. Both haulers seem focused for the future on safety and innovative use of natural gas fueled vehicles as well as a commitment to good long-term community relations.

Cost Summary

Only Waste Management was structured to negotiate our present service which allows Monday and Thursday curb side trash pickup and Tuesday recycle service (e.g. 2+1). Republic Services was unable to bid on 2+1 because of inadequate route configuration, company changes, seasonal issues, and equipment capacity to accommodate 2+1 services with redundant backup. Such capacity must allow same-day delayed pickup when hauling equipment periodically breaks down.

After three meetings over 6 weeks, the usual back and forth discussions with a number of special discounts granted, Waste Management agreed to lower our present contract annual fee by about $5,500/year with a 5-year contract as requested with automatic self-renewal each calendar year including electronic billing through the SMVE HOA account, HBL CPAs.

We were also able to secure a bid from Republic Services for 1 trash pickup and 1 recycle/week plus another bid (1+1) from Waste Management. The two bids were within 5.6% of each other keeping as close as possible comparable services, e.g. negotiating “apples to apples” which is consistently challenging between competitors (i.e. disclosure issues).

Conclusion

The previously detailed facts, comparative costs, and hauling services by providers plus community needs were presented by President Vaughan and extensively discussed at the November 17th, 2014 meeting of the Board of Directors and Guest Homeowners (6) representing three households. The latter group presented their opposition verbally to the 2+1 services to the Board. A warm, quite lively, and spirited discussion ensued with anecdotes, personal preferences presented, and emotional feelings shared from guests. President Vaughan was asked to present the incremental cost to a household of the extra trash pickup per week for solid waste curbside pickup. Because of the size of the SMVE HOA waste service and written agreements already negotiated, and reached as noted previously, Waste Management proposed to provide each household the extra trash pickup for $0.67/week when the 2 + 1 service was selected. Consequently the Board members were quite pleased with the proposal for an identical service level, (i.e. 2 + 1) presently received by all Homeowners. The Board was reluctant to make the more radical change (i.e. 1 + 1) of reducing year round services to 1 trash +1 recycle pickup/week with such a satisfactory service previously that the majority of Homeowners have expected. Moreover, in the last 4 years, only one written opinion letter had been sent to the Board to request 1+1 pickup and only the three households represented in person at the November 17, 2014 Board Meeting advocated the change. Board members reiterated the long summer period as needing two trash pickups because of odoriferous ripening of garbage in closed garages, family visits during summer and the holidays, additional need for capacity for Homeowner’s green waste trimmings during much of the year, and a 20+ year experience with the workability of 2 trash + 1 recyclable pickup per week. Subsequently, the assembled six duly elected Board members voted unanimously to support the elements of an agreement, the costs, and the negotiated bid presented from Waste Management. President Vaughan was instructed to move forward promptly to sign the contract and arrange with HBL CPAs to set in place electronic fund transfer each month for all Homeowners as part of the dues structure. These arrangements are now in place as of November 20, 2014. The results should be invisible to Homeowners except for the negotiated discounts and cost savings reflected as the 2015 Budget progresses.

Finally, in reaffirming two trash pickups per week, the Board was mindful of the SMVE demographics and health status of many community members. For example, the majority of Homeowners selected this Community (SMVE HOA), in part, for retirement amenities and because of the HOA’s reputation for good leadership and management plus personal self-management by concerned homeowner volunteers. Those unique personal characteristics play out in a concerned and sensitive attitude by not forcing or expecting older members to wrestle with large trash containers with once a week trash collection or pay extra for two smaller containers. Moreover, even when physical limitations force selection of two smaller containers ¹, the extra cost billed directly to a Homeowner of $5.00/month became an important criterion in the negotiated discount of around a 40% reduction if an additional container was requested now or during the 5-year contract. The Board endeavors to serve each Homeowner by careful representation of all, including older members. All 238 SMVE households have a voice and are heard in considerations of the Board actions. Said succinctly, the cost and risk benefit analysis based on facts drove the Board’s decisions for the benefit of all members of the SMVE Community.

✉ Bob Vaughan, President SMVE HOA

Ref: Fall 2014 SMVE Newsletter