Sunday, August 17, 2008

Why is garbage collection cheaper with $115 a barrel oil than with $60 a barrel oil?

Perhaps we should ask the SCLC why Richards Disposal is offering predominantly white Jefferson Parish a significantly lower price today than it negotiated with predominantly black Orleans Parish two years ago?

As you can see from the following, Richards Disposal submitted a bid price of $17.90 per household (per month) for semi-automated garbage collection in unincorporated Jefferson and Lafitte.

My apologies for not taking the time to make the chart easy to read, it's too late at night to decipher blogger instructions
Table 5
Alternative 2: Semi-automated Collection
Rank Proposer Unit Price Price Points Technical Points Total Points
1 Waste Pro $15.25 30.15 35.00 65.15
2 SWDI $13.44 46.75 16.04 62.79
3 Coastal $16.59 17.50 43.75 61.25 61.25
4 Richards $17.90 9.00 28.00 37.00

Two years ago, Richards negotiated a $22 unit price with the City of New Orleans, now it offers Jefferson Parish a $17.90 unit price.

I'll admit that I don't anything about the sanitation business, but I would assume that unit costs would be higher in Jefferson would be higher than in New Orleans because it's less densely populated. They should certainly be higher now than they were two years ago, because fuel costs are so much higher. However, before accusing the mayor of giving a sweetheart deal to a politically connected campaign contributor, we should examine other alternatives.

It's true that the Jefferson Parish committee rejected fully automated garbage because the cost would be prohibitive, however, New Orleans ended up contracting for semi-automated garbage collection rather than fully automated. The mayor's defenders often argue that he's not a crook, he's just a daft administrator who likes expensive machines that go ping, but the daft defense doesn't seem to cut it this time.

But the bids in Jefferson Parish don't cover unlimited bulk garbage collection, you might argue. Richards' contract with New Orleans didn't either.

The Jefferson Parish draft report does offer one possible explanation:
Alternatives that included a fuel surcharge and/orCPI adjustment clause were offered by Allied, IESI/Coastal, SWDI and WastePro. Fuel surcharge clauses will cause the unit price for service to increase or decrease in accordance market conditions as measured by a fuel price index such as provided by USDOE. Future spikes in fuel costs could result in higher fees to Parish residents since the fuel surcharge would pass through to the users. Over the past 10 years, fuel prices rose by approximately 10% per year on average. On the other hand, if no fuel adjustment clause is provided, the contractors typically try to cover this risk by increasing the initial cost of service. Several Proposers requested more frequent adjustment for spikes in fuel prices and have offered lower starting prices as a result. It should be noted that Jefferson Parish has a CPI clause in the existing RFP language which includes a fuel component.. The frequency of fuel adjustment requested by each company is listed below:

Allied -- Annual Price increase based on automatic 4% increase on 15% (assumed labor costs) of unit rate and the remaining 85% of unit rate increases by the CPI with a cap of 5 %. -- Adjusted annually

IESI/Coastal -- Fuel Surcharge based on Department of Energy Diesel Fuel Index -- adjusted monthly

SWDI -- CPI to be applied to unit price at start of contract in June 2009. -- adjusted annually

Richards' offer didn't a provision for rate adjustments, presumably because it had the highest base price. That doesn't explain why the mayor and Veronica White negotiated higher prices for garbage collection in Orleans Parish when oil was $60 barrel than firms are offering with with oil at well over $100 a barrel.

I think it's fair to conclude that the mayor successfully stonewalled a new city council until it had no choice but to accept inflated contracts for his major campaign contributors. I think I'll begin forming an Excellence in Plundering the Public Purse. More seriously, the city council seems to have abandoned its efforts to renegotiate the garbage collection contracts, it might be a good time to raise the subject. I'll repeat my advice about that matter:
To renegotiate the contracts, the city council would probably need to amend the foolishly rewritten sanitation ordinance, show that it's prepared to hold Richards and Metro to all of of the terms of their contracts, and make the companies beg to renegotiate, IMO.

I doubt the difference in costs is due to automated versus semi-automated pickup--after all, it's New Orleans and the Nagin administration--however, I can theoretically see how automated service might be cheaper despite the lower population density.

Oh, and I'm not any sort of expert on sanitation either, but I at least tried to do my civic duty and pay some attention when BR "modernized" their waste haul away service. My own neighborhood is one of the old parts of the city, and they do the semi-automated thing there, I guess because the streets are a little narrower than elsewhere (we also have sidewalks, which, amazingly, are NOT in all parts of the city.)
I don't see how it can have anything to do with automated vs. semi-automated, since I compared the price that Richard's charges for semi-automated in N.O. to what it offered for semi-automated in Jefferson. I suppose that their could be more frills with the N.O. contract tan with the Jefferson proposal.

When Nagin first proposed the more expensive semi-automated collection, I immediately thought of the expensive machine that goes ping. I understand that semi-automated has become popular elsewhere even though it's more expensive than manual and that places that can afford it are switching to fully automated, even though it's more expensive than automated. I imagine that trend will come to a halt as more municipalities have to deal with tight finances. At any rate, I don't know if the trend toward automated or semi-automated really reflects service that's so much better that it merits the extra cost, or it just reflects trendiness and a love of technology.

In the case of New Orleans, I might have thought that it merely reflected the mayor's failure to set budget priorities. Even if semi-automated would have been preferable in the long run, it was absurd to make the switch when city government was so understaffed that it impeded the recovery. The city looking cleaner since the switch is largely a red herring, that has a little to do with the advantages of semi-automated over automated.

The secrecy and stonewalling, the costs, the length of the contracts, and the fact that the two biggest contracts went to campaign contributors made this one seem especially suspicious. Remember, Nagin had an issue of campaign contributions only a few months earlier and the owner of one of the companies owns, or has an interest in, several companies that contributed to Nagin's re-election.
And, of course, those expensive contracts were signed when oil was $60 a barrel.

Does B.R. have two separate fee schedules for automated and semi-automated? I imagine that everybody pays the same, but do you if the city pays different amounts. The Jefferson report rejects fully automated, which it says B.R. uses, as being prohibitively expensive.
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