The problem with Sloan Vasquez’s approach

Don’t let Sloan Vazquez recycle your hard earned dollars!

(Cypress, 4/9/2014)  As we reported elsewhere, Cypress held two meetings to get resident and business input on what’s important  in the new trash franchise.  The last of those meetings was today , from 6:30-7:30 pm at the Cypress Senior Center.

It appears from the worksheet that Sloan Vazquez passed out at the Council’s workshop, they will be using a prioritized evaluation grid similar to what they used in Los Alamitos a few years ago.

This is the exact same approach S-V used in Los Alamitos to rationalize giving the contract to the second highest bidder!

Here’s what I wrote about that process four years ago:

Anyone who’s bid many jobs understands the hazards of going with the lowest bidder, but in the “weighted technical evaluation worksheet”  established by the committee, “lowest bid” wasn’t even a factor!

“Competitiveness of cost proposal” was the  closest thing to “lowest bid,” but, as any Angels fan during the Disney era knows, being “competitive” is a far cry from being “best.”  Lest there be any confusion here, Sloan-Vasquez defined “competitiveness of bid” in their Scoring and Evaluation of Proposals, another of the documents I was told to read, as “cost competitiveness relative to other proposals.”

In the last millenium I was taught that you can’t define something using the word you’re defining,  and I’m not sure that adding “relative to other proposals” really clarified anything, but “lowest bid” apparently isn’t part of Sloan-Vazquez’s weighted technical evaluation process, except when they’re explaining their rationale for not using the lowest bid.

The Sloan-Vasquez “benchmark pro forma” doesn’t make sense for Los Alamitos

This “pro forma” is the consultants’ educated guess of “the reasonable amount of service fee revenue. . . required in order to sustain the high levels of service expected by the City over a ten-year period.”   As former Chief Financial Officers for two very large disposal firms (Consolidated & Athens, both of whom submitted bids),  Mr. Sloan and Mr. Vasquez should have a very good idea what it would cost a firm to serve Los Alamitos, according to Mr. Stewart.

Well, in this economy, maybe so, but there are other factors to consider.  For example, Athens Disposal was the second-lowest bidder, just slightly higher than Ware Disposal and at least seven million dollars lower than Consolidated, the “winning” bid the Council chose.   Athens is the largest private Disposal company in all of Los Angeles County, but currently has no business in Orange County.  It could well be that Athens was willing to bid lower than anyone else in order to get a foothold in Orange County.  Our location right on the County Line and unique combination of businesses, apartments, and single family homes might make us even more appealing to them.

Athens Disposal’s second lowest bid won them 100% on S-V’s “Competitiveness” component of the “Cost Proposal”  category.   That’s versus 55% for the Council’s preferred candidate, Consolidated Disposal.  However, on the “Reasonableness” component of the “Cost Proposal” category, Athens scored only 40%, compared to 90% for Consolidated!

That’s because Athens’ bid was 37% lower than S-V’s “pro forma,” while Consolidated was only 10.5% lower!

Yup, both Athens and Consolidated were penalized for bidding too low!!  As were 6 of the 7 bidders!!

An outdated formula that would cost us millions!

Maybe it’s just me, but I’m thinking that S-V’s pro forma may be too high in today’s tight economic times. I’m guessing that Consolidated, who has serviced Los Al for the last ten years, has a better idea of what it’s going to cost than their former CFO, one of S-V’s partners.

Lets face it, a number of bids on city projects have come in lower than expected over the last few years.  I think S-V’s formula is out of date, and the fact that roughly 85% of the bidders came in below it would seem to bear that out.

It’s also overly complex, and anything but transparent, especially when you add in the other categories that our Subcommittee thought were worth 80%–eight times more than “cost competitiveness.”

If you take time to look over the documents, you’ll find lots of kind words for Athens, CDS, and at least 5 of the 7 bidders.  Frankly, they’d all do a job that’s more than satisfactory, they’re all huge, and they all have excellent track records.

And the chance of any of them going bankrupt over little old Los Alamitos contract is very remote.  Not nearly as great as the chance of paying seven to nine million dollars more if we take Consolidated’s bid over Athens’.  It’s a risk I’m certainly willing to take.

A logical next step:

What’s next?  The Council intends to sign the Consolidated bid as soon as the subcommittee works out the final details.  Go figure.

I don’t think the whole process needs to start over. We have at least five good, solid bids from five good, solid companies, but there are wide variations and some excellent ideas.

The first step should be to hold a public meeting to seek community input as to the framework for a standardized bid between all contractors meeting a minimum standard of service, stability, qualifications, & recycling.

There are also lots of details to sort through, for example:

  • Is it important to have all single family trash picked up on the same day?
  • Do we want to go with a flat franchise fee, adjusted with the cost of living, rather than a percentage?
  • How important is it for the company to bring tax revenue into the city by having a purchasing office in the city?

With public input, in public meetings, the subcommittee or the Council can work with the consultant to come up with a “standard” contract combining the best of the various bids.

Then resubmit the bidding to the 4 – 6 firms that meet those standards, asking for a “best and final offer” on the exact same bid.  That way apples could be compared with apples, and the winner would be obvious.

A Simpler Resolution:

I got to thinking over night, and realized there’s an even simpler solution that might work almost just as well.  Just go with the two lowest bidders of the 5 “finalists,” Athens, and CR& R.   Then let the subcommittee and consultant see if they can’t finalize details with Athens, with CR&R as backup.

Pretty much the same as what the Council did, but working with the 2 lowest bidders, rather than picking a high bidder because they’re a Fortune 500 Company.

Either way, our residents and businesses would save over five million dollars over the ten year life of the contract.

Sadly, Los Al’s Council majority rejected my approach, resulting in costing local businesses and residents $5,000,000 more than the lowest qualified bidders.  But Los Al’s majority was elected with help from Consolidated/Republic’s friends and consultant.

The result for Los Al was two wasted years of staff time and Council focus in litigation.  The judge ultimately ruled against the City, and 3 of the 4 Council Members who voted for Sloan Vasquez’s recommendation are no longer on the Council.  (2 were voted out, 1 chose not to run.)

Cypress two newest Council Members, Rob Johnson and Mariellen Yarc, were also elected with campaign support from Republic/Consolidated & their friends, including $1,000 each from Republic Services (the 460s are on file at City Hall).  They can demonstrate their independence by siding with Judge Andrew Banks and focusing on the best price, not penalizing low bidders, as S-V recommends.

The simplest way to bid a trash contract is to state exactly what is sought, and get bids from all qualified applicants.  Bonding can be required to make sure the contract is complied with.  The “Franchise Fee” to the city should be a fixed dollar amount, not a percentage that gives the City a motivation to take the highest bidder.  “Extras” like street sweeping, curbside Hazardous Waste pickup, etc. should all be specified in advance.  As should the ratio between residential (sfr) and commercial/apartment prices.

S-V could be of assistance in taking that approach.

Anything else is just a smokescreen for giving the contract to Republic.  They should earn it with a conpetitive bid.

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One Response to The problem with Sloan Vasquez’s approach

  1. Concerned resident says:

    Thanks for this very informative Post! We are watching the Cypress City Council on this – and we can tell you that “Cypress’ two newest Council Members, Rob Johnson and Mariellen Yarc,” took much more than the $1,000 you mentioned here. You just need to look deeper at the paper trail.

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