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EPWM:CP:JR:mch:srrecyc3
Council Meeting: June 27, 1995
Santa Monica, California
JUN 2 7 1995
TO: Mayor and city Council
FROM: city Staff
SUBJECT: Recommendation to Authorize the city Manager to Negotiate
and Execute Amendments to the Agreement between the city
of Santa Monica and the Allan Company for the operation
of the Santa Monica community Recycling Center (contract
No. 6053 CCS).
Introduction
This staff report requests the City Council authorize the city
Manager to negotiate and execute amendments to the Agreement for
the operation of the Santa Monica community Recycling Center
between the city of Santa Monica (city) and the Allan Company
(Contractor).
There are three provisions in the Agreement that
staff recommends be amended. These provisions include 1) altering
the compensation paid to the city for newspapers from a flat rate
to a floating door price; 2) increasing the compensation paid to
the City for commingled cans, glass and plastics; 3) and extending
the term of the Agreement for an additional five years.
Bac}loqround
In August 1993, a Request for Proposal was issued seeking qualified
vendors to operate the Santa Monica Community Recycling Center
(Center). The RFP called for a contractor to operate the City's
Buy-back and Drop-off Recycling Center and market the materials
collected by the city's Recycling Division for a five year term.
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JUN 2 7 1995
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Proposals were received from seven prospective contractors, all of
whom were subsequently interviewed for further evaluation. A
selection committee determined that Allan Company offered the best
proposal and recommended that they be selected to operate the
Center. A five year Agreement was subsequently finalized between
both parties effective June 1, 1994.
The current Agreement specifies that the city will receive a flat
rate of $6jton for all old newspaper (ONP) delivered to the Center
from the City'S residential recycling program. At the time of the
Agreement, prices paid for ONP averaged less than $20jton, however,
recent domestic and foreign demand has driven market prices as high
as $120 jton. As a result of this increased demand and higher
prices, the Contractor approached the City and offered to change
the compensation structure by paying the city a floating door
price for ONP, with a minimum floor price guarantee of $45jton.
The "door price" is defined as the publishedjposted price which the
Center pays to the general public for materials delivered to the
Center. The term "floating" is used because prices will float or
fluctuate, based on market demand. The City currently collects an
average of 100 tons ONP per month.
In addition to increasing the compensation paid for newspaper, the
Contractor has also agreed to increase the price paid to the city
for commingled cans, glass, and plastics from a current flat rate
of $lOjton to a new flat rate of $20jton.
The City currently
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collects an average of 70 tons per month of these commingled
materials.
In return for increasing the compensation paid to City for its
recyclables, the Contractor has requested that the term of the
contract be extended for an additional five year period, through
May 31, 2004. This will allow the Contractor to extend the period
of amortization on the more than $450,000 in capital improvements
they have made at the Center. These improvements include
installation of a high speed baler, construction of a pit and
concrete pad for the baler conveyor system, installation of an
electric power transformer, construction of a 20 I truck scale,
expansion of a sorting hopper, purchase of a new front loader
tractor and construction of onsite restroom facilities.
staff believes that extending the term of the Agreement will not
compromise the competitive bidding process, based on the proposals
received from the August 1993 RFP. with the exception of the Allan
Company, each respondent proposed charging the City a service fee
for all materials collected and delivered to the Center. The Allan
Company was the only viable contractor willing to assume all
financial risk without requiring the City to pay monthly service
fees to cover their costs in the event of a downturn in the
recycling market. Although market conditions have substantially
improved from two years ago, staff believes that the City would not
find another contractor at the completion of this Agreement who
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could offer more favorable financial terms than are currently being
proposed by the Allan Company.
In any event, the City has no
opportunity to rebid the contract until 1999 at the earliest if we
do not avail ourselves of the Allan Company proposal.
Budaet/Financial Imoact
- - -
Amending the existing Agreement as described above will
significantly increase revenues earned by the City for its
recyclable materials. Because of fluctuating market demand and the
impact of unauthorized scavenging, ONP revenues cannot be precisely
projected.
However, at the minimum floor price of $45/ton, the
City will increase its ONP-derived revenue by $46,800 per year. In
addition, amending the compensation received for commingled cans,
glass and plastics will increase annual revenues by an additional
$8,400 per year. At the new floor prices, therefore, the estimated
minimum total annual revenue increase will be $55,200.
Currently, total ONP and commingled materials revenue estimates ln
the Proposed FY 1995-96 Budget are:
Recycled Materials
27-500-443-00000-0158-10000
$85,000
Recommendation
staff recommends that the city council authorize the city Manager
to negotiate and execute amendments to the existing Agreement
between the City and the Allan Company to change the payment
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structure to the City for newspapers delivered to the Center from
a flat rate of $6/ton to a floating door price, with a minimum
floor price guarantee of $45{ton; increase the compensation paid
for commingled cans, glass and plastics from $lOjton to $20jton;
and extend the term of the Agreement between the city and Allan
Company for an additional five years to May 31, 2004.
staff also recommends that Council increase the budget at revenue
account #27-500-443-00000-0158-10000 from $85,000 to $140,200 to
reflect the impact of the proposed new fee structure.
Prepared by:
Craig Perkins, Director of Department of
Environmental and Public Works
Jon Root, Waste Reduction Coordinator
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