Will “process” cost Sammamish taxpayers ~$7m?

  • Refuse, recycling, yard waste contract to be awarded
  • Waste Management (WM) claims its bid is $6m-$7m lower over seven years than Republic Services
  • The City Council was prepared to award contract to Republic Dec. 1
  • WM obtained injunction blocking action; court lifted injunction Dec. 22
  • Council to consider contract as early as Jan. 5 meeting
  • WM appeals to Council to overrule Staff recommendation
  • Sammamish taxpayers pay the bill
  • Full story below the page break

It’s not an issue that comes to top-of-mind when thinking of big-ticket items cities have on their list of priorities. For taxpayers, they usually think of schools, which are not actually a city service; roads, especially during rush hour; and development.

But trash, recycling and yard waste pickup happens every week and without it, the ambience of any city quickly goes downhill.

Here in Sammamish, it’s contract time for the City to award a seven-year deal to Waste Management (WM) or Republic Services serving “legacy” Sammamish. (The Klahanie area, which is annexed to the City on Jan. 1, is served by Waste Management for several more years under a pre-existing contract with King County government.) Waste Management serves the northern end of the City; Republic serves the southern end. The City Council wants to award the contract as soon as possible.

The process under which the City solicited bids from WM and Republic was complicated and technical in its methodology to establish rates under three basic collection scenarios. There was also a clause that warned the bid submissions would be “non-responsive” if the companies deviated from the formulae.

Waste Management concluded that some elements of the formulae didn’t make sense, but instead of asking questions about it, went ahead and recalculated the formulae under its own methodology. The City deemed this non-responsive and threw out the bid.

The City Council was prepared to award the contract to Republic at its Dec. 1 meeting. WM went to court and obtained an injunction blocking the action until the court could review the situation. The court did on Dec. 22, and lifted the injunction with the decision that the City could really handle the bidding and contract award under any mechanism and methodology it desired.

WM won’t appeal the court’s decision but it is appealing the Staff’s recommendation to the City Council, as early as the Jan. 5 meeting.

Republic bid is up to $7m higher, WM claims

Court documents and other public records reveal a complicated set of bid requirements prepared by an outside consultant to the City, based on three options of service.

WM said that the complex formulae in the Request for Bid (RFB) erroneously would have required some double counting, which would have boosted the cost to the taxpayers. Hence, WM computed its bid without double counting—but, according to John Chelminiak, senior manager of Public Sector Solutions of WM, the company also provided these numbers in a supplemental Excel spreadsheet.

In a Nov. 3 letter to Lyman Howard, Deputy City Manager, written after staff decided to award the contract to Republic (subject to City Council action), Chelminiak protested the recommendation. Republic’s bid was 11% higher than WM’s, or $6m-$7m depending on the final details, over the 7 ½ year life of the contract. The contract’s revenue is $6m, Chelminiak told Sammamish Comment, amounting to one year of free service to Sammamish residents.

WM wrote to Howard in its letter how it arrived at its bid prices, and explained in its RFB response how and why it did so. WM claimed Republic did not provide the amount of increase required in one of the Options, but only Gross Cost. WM claimed to Howard Republic “fails to conform to the direction to provide” amounts.

WM called the consultant’s “methodology for evaluating the proposals…mathematically absurd.”

Failed to protest

But all this comes after the fact. Chelminiak conceded to Sammamish Comment that WM didn’t object to the City’s process in a timely manner as provided in the RFB.

“We are long past the issue of the ‘process integrity’ clause in the RFB. That is active until the staff makes a recommendation and that has already occurred,” he wrote The Comment. Chelminiak also wrote:

We actually provided all the numbers the city needed. Our bid showed both the raw monthly total and the average increase/decrease. If you use the raw monthly total and add mutually exclusive alternatives together, you get a false number. We put the incremental increase in the form 2A excel spreadsheet and then put the raw monthly number below that. That way the city could use whatever number it wanted.

Republic is essentially being rewarded for quoting a lower price on three options, but you can only choose one option. When you choose any of those Yard Waste Options, our price is significantly lower. This is what the consultant calls “surprising” This happened because we provided a significantly lower price for the base service and a slightly higher price ($2.00 a month roughly) for the options. But by compounding the effect of the three options, it gives a false reading on who is lower.

This really boils down to the city saying we should have put a different number in two cells on the spreadsheet. But no matter where you put those numbers, WM’s price is significantly lower.

City desired winner takes all

Sammamish officials desired a contract with one, not two, service providers and constructed a process that amounted to a winner takes all RFB, according to the court Declaration from the consultant. The City did not want a bidder to be the lowest price on one aspect of the service and another bidder to be the lowest price on another.

The process did segment the types of services provided: refuse, recycling and yard waste collection.

The entire process was scored and, as previously noted, there was a provision in which the bid could be deemed non-responsive if the bidder deviated from the forms and formulae provided.

The consultant’s Declaration noted that WM did not question the methodology, though it did submit questions on other aspects of the bid.

The consultant declared, “I reviewed Waste Management’s [form] as submitted. I discovered Waste Management has made multiple modifications to the form and had not complied with the written instructions regarding responding to the City’s RFB.”

The court ruled that the City could handle the manner and in way it sees fit and on Dec. 22, lifted the restraining order.

Back to the City Council

The issue may be coming back to the City Council on Jan. 5, the first meeting of the New Year and the first with new leadership (as yet to be determined) and two new Council Members, Christie Malchow and Tom Hornish.

The meeting’s agenda hasn’t been posted on the City website yet.

Whether Republic completely followed the bid requirements, which WM charges it did not, or whether WM erred in its modifications-with-supplemental information as concluded by the consultant and staff may be an issue that can’t objectively be resolved. What is more important is WM’s claim that its bid is $6m-$7m less than Republic’s and that taxpayers will have to pay the higher cost—if WM’s claim is correct.

The court ruled the City has the authority to do what it wants. The City Council faces a question of whether to award the contract to Republic, accepting the Staff recommendation and conclusion that WM’s bid was non-responsive; to start the process over again; or to accept the WM bid despite the supposed flaws in its bid process.

Any action other than to award the bid to Republic might invite a lawsuit from Republic.

The two leading fiscal conservatives on the Council are Tom Odell and Ramiro Valderrama. The $6m-$7m difference claimed by WM should be enough to generate a Council-level examination of the facts and claims.

Malchow and Hornish campaigned as fiscal conservatives. They may be facing their first test of these campaign claims far sooner than they expected.

Looking out for the taxpayer

The ultimate question to the City Council is whether the RFB process was or was not flawed, and if so, was it fatally flawed? For Odell, a former Boeing salesman, the competition for the USAF KC-X tanker program may be an instructive example to follow. The team of Northrop Grumman/EADS (Airbus) won the contract on a bidding process the Government Accounting Office deemed fatally flawed. In a re-bid, Boeing won the contract at a substantial savings to the taxpayers.

It may be the best course for Sammamish to re-run the bidding process. With the bids now known by WM and Republic, the pencils could be sharpened even further—to the benefit of the taxpayer. In any event, with a purported $6m-$7m difference, this is worth a second look by the City Council.

The current contracts run through next December, so there is time to look at this or undertake a complete rebidding.

 

 

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7 Responses to Will “process” cost Sammamish taxpayers ~$7m?

  1. Sean Smith says:

    $7m / 90 months (7.5 years) = $7777.78/month in extra costs for all households if WM is correct. Divide that by the 2010 census 15,154 households and you get $5.13/month in extra monthly cost per household.

    Given how bent most of us get by increases of that amount on our monthly costs, seems like we should know more before being sticklers about process.

    That said, the company I do work for bids on UN projects (UNDP) and other government bids so I am sympathetic to WM here. There is like ZERO mercy if you get it wrong. And usually there is not an opportunity for redo if your bid is kicked back to you. But I agree that all sucks for bidders. There has to be a better way. But there probably isn’t a perfect process to be had. Hence the current quagmire.

    But as much as I decry strictures that seem unreasonable, there is a point to striving for a fair process. You can’t muddy waters by having separate methodologies between bidders. That just doesn’t work. So that’s what the comment period addresses. Bidders get to call BS on bad criteria/process during that time. Are we supposed to believe that the need for for WM to make digressions made could not have been foreseen before the end of the comment period?

    WM failed to put the right modelers on the task before the end of the comment period. What the heck is the city staff supposed to do when a bid comes in that is wayward, even if only slightly as in this case? City staff went by the book. I applaud them for sticking to their process.

    So is it that WM was trying to play games with the numbers? And was the city was being punitive? I guess we should tune into the next city council meeting to know more!

    In this case the dollar amounts are high enough that city council will have to decide what to do. Legally, it is clear the city is free to ignore the WM bid. But given the pressures of leaving that much money on the table, something else will have to be done.

    I propose “we” should go to Republic and together guess on what the legal costs on both sides would be if the city started from scratch, divide that number by two and get Republic to agree to either a “convenience fee” discount on our monthly bills, or for Republic make a donation in that amount to a common good like city-wide rain gardens, or land acquisition for parks or trails

    • cityhamilton says:

      Sean is correct: WM is not without error in all this with respect to the process. That said, if the difference between the bids was “small” (a relative term, to be sure), then I’d say tough luck. But at $6m or $7m, I believe it is worth a second look by the Council.

  2. Sam Nader says:

    Waste Management? The company that didn’t pick up my garbage because they were on STRIKE? The same Waste Management that sued the city and COST US any savings we could have hoped to see? THAT Waste Management? No thank you! How can they hope to be responsible in my neighborhood and keep my recycling out of the dump if they can’t even follow simple directions?

    • cityhamilton says:

      I can’t speak to the service issues but if by suing the city you mean the injunction, that’s a couple of thousand dollars in taxpayer legal fees at best–not $6m or $7m. Just sayin’.

  3. Concerned Citizen says:

    I echo Sean’s comment. I would rather haul my trash to Factoria then deal with another 10 year contract with Waste Management. I have had multiple missed pickups this year, and yes, they’ve had two strikes in the last five years. They do nothing to adjust the bill (you’re expected to pay, even during a strike!), and regular missed pickups result in a make-up a full 96 hours later following the missed pickup (Monday morning following the scheduled Thursday pickup).

    You might also note that on the city’s website, there is a list of customer complaints from each hauler that were collected during the bid process. Councilmember Valderrama’s wife is among those who have had issues with Waste Management… that might play into this decision as well

    Frankly I would pay double to be a customer of any other company other than Waste Management. Sometimes it is not always just about the money.

  4. Pingback: Sahalee Way design contract, award to Republic Services on agenda for first Council meeting of 2016 | Sammamish Comment

  5. Pingback: Looking ahead to 2016 in Sammamish | Sammamish Comment

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