An Open Letter to the Citizens of San Angelo from Texas Disposal SystemsSponsored Story
(Opinion) To the Citizens and Business Owners of San Angelo,
I believe it is appropriate and important for the citizens and business owners of San Angelo to have a thorough understanding of the issues surrounding the City’s mismanagement of its first ever known competitively bid process for solid waste and landfill management services, and the selection of Republic Waste Services of Texas, Ltd. (Republic) for new life‐of‐site landfill and 10 year solid waste collection service contracts. Recent statements regarding the 2014 Request for Proposal (RFP) process and the City’s new waste collection and landfill contracts by Mayor Morrison, among others, have necessitated a response, as the statements by Mr. Morrison and others miss wide the mark of the full truth.
Please see attached “A Preliminary Review of Republic Waste Services of Texas, Ltd. and Texas Disposal Systems RFP Response Proposed Residential and Commercial Rates, as Compared to Negotiated Rates Adopted by the San Angelo Mayor and City Council on July 1, 2014” for a more complete response and details outlining the significant mismanagement of the City’s RFP process.
Regardless of what Mr. Morrison would like you to believe, the fact remains that at the culmination of this flawed process the Council and City staff negotiated and adopted a contract with rates that provide Republic with at least $20.2 million, as my staff has calculated, in additional revenue over the rates that they proposed in their RFP response.
During his campaign to be reelected as San Angelo’s mayor, Mr. Morrison has circulated a handout purporting to tell the “true facts” about the new contracts with Republic, however that handout falls woefully short of telling the whole story. Rather, it appears to represent a spin of details designed to present what Republic and Mayor Morrison would like history to record.
He has stated several times that the City only received two responses to its RFP, and that Republic’s proposal was far superior to that received from Texas Disposal Systems (TDS). While the Mayor’s judgment on the merits of the proposals remains questionable at best, the City did only receive two responses to its RFP; however, it is important to understand why this happened.
The RFP process was based on a flawed premise. Specifically, it required the RFP respondents to assume all past, present and future liability for the City owned landfill, which had been operated by Republic and its predecessor for more than 30 years. Significant liability already belonged to Republic as the long-time operator of the landfill for the City, and that liability is potentially significant, due to the long-term apparent mismanagement of the landfill.
There are several indications that Republic has mismanaged the landfill, not the least of which include the fact that groundwater monitor well tests show that contaminants from the landfill are migrating offsite and to the south, as disclosed in the City’s RFP, contaminating the surrounding groundwater and potentially threatening the health and safety of citizens of San Angelo relying on that water; particularly some of the residents of Paul Ann Park.
Also, the fact that the permit for the landfill states that at the completion of the landfill, as permitted, there should remain a soil surplus of 297,900 cubic yards, while Republic’s management of the landfill will prematurely exhaust the soil balance, as disclosed in the RFP, several years prior to the landfill reaching capacity. While this reveals a shocking inefficiency of operation over a long period of time, what is more concerning is the squandered value of the City’s asset that was entrusted to Republic, and the complete lack of accountability that allowed landfill capacity to be so inefficiently consumed. No reasonable company would willfully assume the extensive liability associated with the landfill that rightly belongs to Republic, and indeed no other company offered to do so. That is most likely why there were no other respondents to the City’s RFP, other than TDS.
By structuring the RFP solicitation as they did, the City staff and City Council bound themselves to Republic, simply because Republic was the only company willing to assume the liability it created by its operation of the City’s landfill that had been entrusted to them for so long. In other words, Republic was rewarded for creating a huge potential liability that no other company wanted to accept, and the City gave credit to Republic for stating that they would assume liability that was already Republic’s liability, or liability that they already shared with the City.
All the City had to do was hold Republic accountable for their landfill management and negotiate fairly with RFP respondents for the collection of the City’s residential and commercial solid waste and recyclables. But the City officials chose to not structure a truly competitive process.
With the deck stacked in favor of Republic on the landfill portion of the proposal, it appears that City staff and City Council chose not to conduct an objective evaluation of the pricing for the solid waste and recyclables collection portion of the proposal. Apparently, the City staff and Council RFP review committee was committed to do pretty much whatever Republic required in order to get Republic to voluntarily accept liability for which they were already responsible.
TDS proposed rates for collection options based on hypothetical landfill disposal costs of $20, $25 and $30 per ton, because it was obvious to TDS that Republic should have been required to finish the closure of the existing landfill. Republic, as the operator of the landfill, charges its hauling company an internal rate for disposal that is based on its actual operating costs. The internal rate is not given to other companies, nor is it published in order for another company to calculate a comparable proposed rate.
This internal disposal rate gives Republic a decided advantage when proposing rates for collection, and prevents an apples to apples comparison of Republic’s and TDS’ pricing proposals for collection services. TDS needed the City to determine the landfill disposal rate TDS would be charged.
Nevertheless, in the handout he uses to defend the Republic contracts, Mr. Morrison has chosen just one of twenty‐one separate TDS pricing proposals to compare to Republic’s proposal, illogically added $3 per month per residence to TDS’ proposed rate, and touted that as evidence that TDS pricing was not worth the slightest consideration. Had the City staff or City Council had even one negotiation meeting with TDS representatives, they could have at least said they attempted to fairly evaluate the TDS proposal.
In our RFP response, TDS noted the serious issues with the past management of the landfill and recommended to the City that the existing landfill was not a good candidate for expansion, and that Republic should continue to be engaged to operate the existing landfill until the remaining permitted capacity is filled. TDS proposed several options to permit, construct and operate a new landfill for the City, either on City owned land or on land owned by TDS, with TDS assuming all liability or the City indemnifying TDS for its operation of a City owned landfill.
What we tried to make clear to the City was that they had several options and they did not have to reward Republic for turning the landfill from a City owned asset to a potential liability for both the City and Republic. But, the City used the RFP anti‐lobby provision to keep TDS from speaking directly to public officials to explain the merits of our RFP responses prior to the completion of the City’s two new contracts with Republic.
If the review of the RFP responses seems to you like a complicated issue that was worthy of careful consideration, that’s understandable; however, after receiving the voluminous RFP responses on a Friday last spring and holding one evaluation meeting on the next Monday, the evaluation committee chose to forgo asking for even one clarification from TDS or conducting respondent interviews which were planned prior to the City receiving proposals.
Such a hastened evaluation timeline for a contract of this size and importance is disturbing. I believe it shows a willful commitment on the part of the evaluators to continue to do business with Republic, regardless of the merits of the proposals, as they certainly did not have time to consider or evaluate the value to the City of the numerous options proposed by TDS for future landfill services. It also shows a shocking lack of concern for the problematic nature of Republic’s management of the landfill.
On top of all of this, the City was apparently unconcerned that Republic may actually have charged every San Angelo business utilizing commercial trash service unauthorized fuel and environmental surcharges for over fourteen years, in direct violation of the terms of their contract and City ordinance, estimated to total over $9,200,000. In the process of preparing our RFP response, we discovered these unauthorized charges and made the City aware of them in the cover letter of our RFP response. We thought that this might cause some concern among the evaluators and Council as to the wisdom of continuing to contract with a company that has demonstrated a willingness to flout the requirements of past contracts by abusing the monopoly over commercial customers granted to them by the City, but it apparently didn’t even make them blink.
The City staff did hold a press conference on April 30, 2014 where in the midst of praising Republic, they did state that they were working with Republic to determine if any unauthorized amounts were actually charged to customers. They also stated that upon completion of their investigation that they would privately inform the Council of the results of the investigation, but there would be no written report and they would not release their findings publically. Seriously? What kind of relationship is shared by Republic and the City officials, which would justify such an accommodation?
After a competitor pointed out gross violations of Republic’s contract and the public trust, the staff and Republic conducted a joint secretive investigation, while pressing forward with a new long-term contract for Republic. Remember, Dwain Morrison has been on the Council for twelve years, and apparently at no point in that time did the Council or staff fulfill their responsibility to hold Republic accountable.
While not admitting to doing anything wrong, Republic did agree to refund certain overcharges to commercial customers, after a lawsuit was filed seeking punitive damages and class action status. However, there has been no detailed public disclosure to suggest that Republic has refunded in full all that each business had been overcharged for more than fourteen years, or whether there should be further penalties assessed to Republic for these unauthorized overcharges. We are simply asked to trust Republic to do the right thing and forget about it.
This should not be acceptable to anyone.
That is why Mayfield Paper Co. and Acme Iron & Metal Co. have sued Republic on behalf of all of the several thousand overcharged businesses to determine how much was overcharged, and to determine whether Republic knowingly applied these overcharges in violation of their contract and City ordinance. I believe it is highly possible that evidence will show that Republic knowingly charged these customers more than was authorized, relying on the environment of almost zero accountability provided them by City staff and Council.
I assure you, waste services companies like TDS and Republic are aware that when they receive an exclusive contract, an effective monopoly like Republic has in San Angelo, they are not given carte blanche authority to tack on fees in addition to established City ordinance approved rates in order to achieve what they deem to be “an acceptable operating margin” as Republic did in this case. That is the point of a municipality having exclusive contracts; to control the fairness of the price and the quality of the services. I believe that it is unlikely that this was a simple clerical mistake allowed to go on for fourteen plus years and totaling more than an estimated nine million dollars in overcharges.
While it is mystifying that City staff and Council were willing to ignore all of the serious issues regarding Republic’s past performance, the Council did approve long term contracts with Republic for both solid waste and recyclables collection and landfill management. At the time the contracts were approved, the Mayor and Council members made several statements to the effect that their goal was to achieve the best deal for the ratepayers. While we knew that their analysis was incomplete, and it was certainly unwise to actually award contracts out of such a flawed RFP process, we had no idea just how misleading these statements were until we received a copy of Republic’s RFP response.
While the City posted the TDS RFP response on its website several weeks before signing its new contracts with Republic, the City withheld Republic’s RFP response from public disclosure until they were ordered to release it by the Attorney General 75 days after the contracts had been executed. It seems apparent why the City fought so hard to avoid releasing the Republic RFP response.
I urge you to review the attached detailed analysis, done by TDS, of the differences in the rates proposed by Republic in their RFP response and the rates that Council approved and contracted. You can also see them at www.texasdisposal.com/sanangelo. The short story is our calculations show that, in negotiations, the City allowed Republic to significantly raise the rates for trash and recyclables collection above those Republic proposed in its RFP response, to the tune of at least $20.2 million over the life of the contracts. The rates were raised during negotiations to such an extent that through the increase in rates over the RFP response, Republic will more than recoup the value of upfront payments to the City related to the landfill, and also will recoup the amount that Republic has reportedly paid back to businesses for unauthorized overcharges for ten of the fourteen years overcharged.
It is the first time I have heard of a city negotiating significantly higher rates than what was proposed, and is certainly not consistent with an effort to achieve the greatest value for the ratepayers or to honor the intent of the RFP process.
Mr. Morrison has effectively accused anyone that does not join him in defending and praising the RFP solicitation process and the collection and landfill contracts of being uninformed or of spreading half‐truths and misinformation.
However, Mr. Morrison himself has spread half‐truths and misinformation.
To cite a good example, Mr. Morrison, at the April 14, 2015 Tea Party Mayoral Forum, in response to assertions that there was not enough transparency in the RFP selection process, said, “Nobody that plays cards ever shows their hand before the bets are made. And had Republic known that they were paying us tens of millions of dollars and TDS was paying us nothing, that TDS was going to charge us $22 for what Republic was charging us $15, we would have not had a trash contract as good as the one we have now.”
Setting aside the inaccuracy of the numbers quoted by Mr. Morrison, this statement completely seeks to rewrite history and mischaracterize the nature of the Republic negotiations. Mr. Morrison would apparently like us to forget that on April 30, 2014, a full 86 days prior to the execution of the Republic contracts, the City did exactly what Mr. Morrison recently claimed they did not do. On that date, the staff publically “showed its hand” in its press conference by disclosing (sometimes inaccurately) the contents of TDS’ RFP response. The staff’s statements included the inaccurate claim that TDS’ proposed rates were 64% higher than Republic’s; that TDS offered no lease payment for the existing landfill; that TDS did not propose to provide the City with any upfront payments; and that TDS did not propose to accept the past, present and future liability for the landfill. Further, Mr. Morrison’s statement implies that Republic would have refused to honor the negotiated rates, higher than those Republic proposed, had Republic known the details of the TDS proposal.
This ignores the facts that RFP responses are binding on the proposer for 150 days per the terms of the RFP, that the City allowed Republic to significantly raise its rates during the negotiation process, and that the City had posted the TDS RFP response on its website several weeks before the Republic contracts were executed.
Mr. Morrison also stated “this is a contract that is paying us tens of millions of dollars.” Mr. Morrison’s statements regarding TDS’ proposal, the Republic contracts and the rationale for the lack of transparency in the RFP process, are not even half true, they are a gross mischaracterization of the facts as set forth above.
I believe it is important for you to have a thorough picture of what took place throughout the City’s flawed RFP process, in order for you to fairly judge the performance of the City staff, City Council and Republic.
Unfortunately, that is impossible if you only listen to statements of Mayor Morrison, the Council members voting with him at that time, and City staff. That is why I feel it necessary to respond to their inaccurate and self‐serving statements. I urge you to visit www.texasdisposal.com/sanangelo to learn more about these issues and to monitor the ongoing litigation involving Republic, TDS, Acme Iron and Metal, and Mayfield Paper. Also, I urge you to hold public officials accountable for their statements and actions.
President and CEO
Texas Disposal Systems, Inc.
Acme Iron & Metal Co.
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