Franchise Bid Irregularities Might Justify Second Vote. Nickel Says

San Bernardino City Councilman Henry Nickel this week said the council should entertain revisiting the vote it made last week in favor of providing Burrtec Waste Systems with the city franchise for trash hauling in light of irregularities and incomplete information surrounding the matter.
The move toward dissolving the city’s municipal sanitation division started more than three years ago when the city filed for Chapter 9 bankruptcy protection. At that time, discussion of privatizing or outsourcing several city divisions, including the police, fire and sanitation departments, began. The city’s trash workers, however, proved highly resistant to the proposal relating to their function, and the concept languished until earlier this year. In the meantime, city management and the council pushed forward with a plan to outsource the fire department, concluding a deal this summer in which the provision of fire protection service is to be taken over by the San Bernardino County Fire Department. As part of that arrangement, the entirety of the city of San Bernardino is being transformed into a county fire district, which is now assessing against every parcel of property within the city a $139 district fee, generating an additional $7.8 million of revenue that the county is passing back to the city as a pass-thru to the municipal general fund.
In structuring the bidding competition between the refuse haulers willing to take on San Bernardino’s trash handling franchise, the city layered in minimal requirements, which included eliminating entirely the city’s expenses in operating the division and providing the city with a minimum of $5 million in revenue. The city entertained four serious proposals, one from Waste Management, Inc., another from Republic Industries, and from Athens Services and Burrtec. Penultimately, the competition came down to competing proposals between Athens and Burrtec. Staff, working in conjunction with a consultant, Management Partners, evaluated those proposals. According to internal city documentation, Athens, over the first ten years of the franchise guaranteed the city $29,278,968, while Burrtec committed to paying the city $24,876,468 over that same ten year period. Both companies provided two decade proposals as well, with Athens saying it would return to the city $54,348,968 over 20 years. Burrtec offered $35,126,468 guaranteed to the city over the same two decades. City staff took into consideration only the ten year bid from both companies. It also factored into the equation $10 million in non-guaranteed revenue from Burrtec that was to consist of the possible construction of a new biofueling station. This, on paper, inflated the value of Burrtec’s offer to $34 million, which was higher than the $29 million Athens guaranteed. In addition, the staff/consultant report, which did not reach the council until just four days before the council vote took place, omitted mention of Athens’ $6.5 million offer to purchase the city yard where sanitation division-related activities take place while promoting Burrtec’s identical $6.5 million city yard purchase offer as a selling point to encourage the council to embrace the deal with Burrtec. The city’s consultant on the matter, Management Partners, led by principal Andrew Belknap, tendered a recommendation, which, prior to the meeting was seconded by city manager Allen Parker, that Burrtec be given the nod. Athens representatives, forewarned of that recommendation, came armed to the November 16 meeting with documentation and penetrating references to how the request for proposal process had been undermined by conclusions drawn from incomplete or faulty data. This prompted both Belknap and Parker to shift their position from what was in the staff/consultant report and recommendation, and they indicated the emerging information merited further study. The council, however, primed as it was in favor of Burrtec by the recommendation, was subject to further pressure to vote in favor of Burrtec when droves of city sanitation workers came forward at the meeting, telling the council they were in favor of having the franchise go to Burrtec. Those employees indicated their recommendation in this regard was based upon their interaction with Burrtec, the owner and corporate officers of which had troubled themselves to meet with them to offer them job security by hiring them to continue to work in San Bernardino as trash men employed by the company. Several remarked that Athens had made no contact or offered no such assurances.
With councilman Fred Shorett dissenting, the council voted 6-1 to confer the franchise upon Burrtec.
In the aftermath of the vote, it became apparent that the request for proposal process had been dogged by irregularities, in that the information provided to the council was incomplete and the comparisons contained therein were not straight across or expressed in the same terms. Moreover, the protocol of the process had been violated. The request for proposals that went out to the various companies that competed for the franchise specifically forbade contact by the applicant with city employees. Page 3 of the official request for offers states, “During the request for proposals process, proposers and their agents are strictly prohibited from any contact with city staff, city consultants and/or elected officials.” Based upon the sanitation workers’ statements, Burrtec clearly violated that provision.
Councilman Henry Nickel, one of the six who voted in favor of Burrtec, this week told the Sentinel that it may be propitious for the city council to revisit the issue and perhaps even rescind the November 16 vote and reconsider it from scratch based upon a thorough analysis of a more complete numbers comparison between Burrtec and Athens.
“Our objective was to meet the obligations we have with regard to the city’s bankruptcy recovery program,” Nickel said. “We wanted five million [dollars] in revenue and 2.5 in franchise fees, which two of the four companies met. The decision then came down to ancillary cost benefits. The two had very much equivalent proposal. Some things Burrtec does better than Athens could do. Some other things Athens does better. It became a trade off from a cost and revenues standpoint.”
The key element of the analysis, Nickel said, was “Attachment Three to the report that went into an in-depth discussion of the recommendation. It turned out that staff was going back and forth at the last hour. There were some claims Athens made after it was known the recommendation was going to Burrtec that questioned if in fact what they [Burrtec] were guaranteeing was guaranteed. That happens every time you have a competitive bid process. One side comes in and says ‘Our offer includes this that could have some benefit to the city the other side did not.” In terms of ancillary benefits to the city, the number of employees who were in favor of Burrtec was persuasive at the time the council made the vote. Certainly, if we were looking just at dollars and cents, there might have been agreement that Athens had the better proposal. But in terms of local facility capacity and good will, Burrtec went the extra mile and sealed the deal. It was not just dollars and cents. They cemented it with good will. Both met our basic requirements. Then came facility capacity and good will. What they [Burtec] were offering in terms of buying out some of the city’s equipment, and capacity, since they have a local track record and dealing with other cities in this area, their customer service, that pushed them over the top. You have to look at what they are offering and what Athens was offering. At the end of the day you have to make a decision to move forward, understanding Burrtec and Athens had met the minimal requirements.”
At this point, however, Nickel said, “In light of what we know now, we should consider that.”
Nickel acknowledged that the entire process was marred by “failure on the parts of both the city manager and city attorney to get out information. At the eleventh hour he [City Manager Allen Parker] backed off of his recommendation or appeared to back off of his recommendation. The guy had six months to make his determination. It is completely unacceptable that someone in his position paid what he is paid who has his responsibility over six months could not come up with a recommendation he was comfortable in supporting.”
Nickel pointed out that the delivery of the recommendation four days before the vote was taken gave the council little time to evaluate it and that the half-hearted withdrawal of Parker’s endorsement of Burrtec complicated the matter even further. He contrasted the four day window with the longer length of time to evaluate the fire department outsourcing proposal. He said that the decision to release Parker from his position as city manager, which also was made on November 16, was an outgrowth of the difficulty the council had in negotiating the thicket of issues which he said Parker was inadequately managing.
“We had ten days to look at the fire department changeover,” Nickel said. “No wonder he [Parker] is on his way out. There was failure after failure on this. What happened last week was the final nail in his coffin. He was either incompetent or incapable or creating turmoil. We could no longer tolerate that as a city. Unfortunately, our council still struggles to get information within a reasonable amount of time so we can be comfortable with our decisions. We have to make a decision. He failed to do the job, in my view. He failed to meet our request that he prepare a recommendation and get it to us in time so we can look at the recommendation and support Burrtec. We went on his preliminary recommendation.”
At first blush, the statements by the city’s sanitation workers in support of Burrtec were taken as an indication, Nickel said, that Burrtec “had developed good will that would lead to a more appropriate transition. Previously outsourcing was opposed by the employees. We wanted to make sure if we had a [franchise] contract, we could make that transition smoothly.”
He was not aware, Nickel indicated, that Burrtec and the other applicants were prohibited from lobbying city employees. “If that is the case, then that needs to be discussed,” Nickel said. “If they engaged employees in a manner that is inappropriate I am pretty sure Athens will make that point.”
When that violation of protocol was in evidence during the meeting, Nickel said, “It was not brought up by the city manager or the city attorney that the letter of the proposal was not met. If something inappropriate occurred, it was up to the city manager and city attorney to investigate and address that. We were given a recommendation. We have trust in city staff. If we are micromanaging and inserting ourselves in every decision and not relying on the decisions by our staff, we will get into a situation, frankly, that put the city into the position we are now trying very hard to recover from. Micromanagement from the council will lead to dysfunction.”
With the violations of the protocol now a public issue, the city needs to resolve the circumstance, he said. “If there were improprieties, we don’t want that cloud hanging over the city and if someone dropped the ball, then I would not be against seeing what can be done to fix it,” Nickel said.
Indeed, also on November 16, precedent for doing just that – reversing a vote – was set. On the issue of whether the city should extend its contract with the firm of Urban Futures in carrying out work related to the winding down of the city’s former redevelopment agency and the accounting of its assets for the bankruptcy court, the item failed on a 3-4 vote. Immediately thereafter, however, Councilwoman Virginia Marquez reversed her vote, and the motion to authorize a $53,000 purchase order to extend the consulting work by Urban Futures carried.

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