MacNamee: Delray’s Cost of Not Bidding its Trash Contract– $12,544,886!
Commissioners Frankel and Gray:
The SWA’s bid results and backup information are now available. I stated in the email below that Delray trash customers lost millions $ because you extended WM’s contract without competitive bids. Now let the truth be told!
Based on the SWA’s bid results, I was wrong.
Delray trash customers lost tens of millions of dollars on the 8 year, $65M extension you voted for in August 2012.
Let’s review the results of the County’s (SWA) bid process completed last week and extrapolate it to Delray:
1)- For Residential customers, the County reduced their total cost from $43.7M to $33.7M– a savings of over $10M (23%). Clearly demonstrates the value of competitive bidding!
2)- For Commercial customers, Delray rates are now 37%- 47% HIGHER than County Commercial rates! Delray commercial customers are billed approximately $4M annually so they will be overpaying approximately $1.2M annually compared to their County competitors.
3)- For Curbside Container Residential customers, WM will charge Delray customers a 16% premium vs. the County rate for the contiguous area (west of Military Trail). For Delray Multi-family, the premium will be 4%.
(2 &3 above assume a conservative 2% inflation increase by WM effective 10/01/13).
So, here is the mathematical summation of Delray’s overpayments for the next 8 years because it didn’t bid:
1)- Commercial- $1.2M for 8 years equals $9.6M
2)- Residential Curbside Container cost- Delray $12.10- County $10.44 = $1.66 X 12 mos. X 8 yrs. X 16,646 Delray customers = $2,652,707.
3)- Residential Multi-family cost- Delray $6.08- County $5.87 = $.21 X 12 mos. X 8 yrs. X 14,493 Delray customers = $292,179
4)- Total Delray 8 year premium for trash service– $9.6M + $2,652,707 + $292,179 = $12,544,886
It appears you made an egregious mistake in not getting competitive bids but you can correct it if the Commission has the courage to do so.
You were erroneously told by the then City Manager (Mr. Harden) that the trash contract did not require competitive bids because it was a “pass through” contract, i.e., the City is only acting as an intermediary between WM and the City’s customers. The Office of the Inspector General told the City that said statement was fallacious. The City bears the risk of not billing its residential customers and bad debt write offs. In a “pass through’ contract, these risks would be borne fully by WM. The City would only pass through the money it “collected” from its residential customers
As such, the contract is not a “pass through” contract and thus the City’s procurement Ordinance #36 applies which requires the City to bid contracts in excess of $15K. By not bidding the contract, the City violated its Ordinance and thus the contract extension was illegal and can be voided.
Now that I have disclosed the magnitude of your no bid decision, hopefully the Commission will take the necessary corrective action.
P.S.– City Staff had first hand knowledge that WM did not offer competitive rates within the City. C&D (construction and demolition) roll offs within Delray has been an open and competitive market since 10/08. WM prior to that had the monopoly. In 2012, WM’s share of this market had fallen to 28% and one competitor (SWS) was doing double the volume of business that WM still retained. How could Staff have not seen the need to bid the contract and inform the Commission accordingly?