DATE: November 3, 2015
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Russell Truell, Assistant City Administrator / CFO
Mark Hilty, Water Management Director
Michelle Hatcher, Water Management Assistant Director
Juan Davis, Water Reclamation Superintendent
Brian Wilcox, Purchasing Manager
SUBJECT:
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Consideration Of Bid Award To Waste Management, Inc. Of Tennessee / Cedar Ridge Landfill Of Lewisburg, Tennessee In The Unit Price Amount Of $31.11 Per Ton For Sanitary Landfill Disposal Of Biosolid Sludge Produced At The Water Reclamation Facility For A Specified Term Of Award, With Options To Extend, For The Water Management Department (Purchasing Office Procurement Solicitation No. 2016-010; $330,750 Budgeted In 431-82270-52213 For Fiscal Year 2016; Contract No. 2015-0353) (11/10/15 WS)
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Purpose
The purpose of this procurement solicitation was to obtain competitive pricing for the sanitary landfill disposal of biosolid sludge produced by the sewerage treatment process at the City Water Reclamation Facility (wastewater treatment plant) and delivered by the City to that landfill for the Water Management Department. This service is necessary as long as the City chooses to landfill the biosolid sludge produced at the Water Reclamation Facility. The current arrangement, which commenced April 1, 2011, is due to expire at the end of December, 2015 and has no more options to extend the term of award. For the new arrangement, the initial term of award is three (3) years, effective January 1, 2016 and through December 31, 2018, with up to two (2) options to extend, each time for up to one (1) additional year. It is worth noting that the 2015 specifications include the following provision:
During the course of either the initial term of award or an optional extension to the initial term of award, if any such optional extension is exercised pursuant to the provision … for doing so, the City shall have the option to terminate the award immediately upon notifying the vendor that the City no longer has biosolid sludge it wishes to dispose of pursuant to this procurement solicitation.
Background
The City published on September 17, 2015 a Notice to Bidders in the Williamson Herald for sanitary landfill disposal of biosolid sludge produced at the City of Franklin Water Reclamation Facility, for a specified term of award and, if exercised, optional extensions thereto. In addition, bid documents were sent on or about the same date directly to three (3) potential bidders known or thought to be interested in this solicitation. A single bid was publicly opened at the bid opening held on October 15, 2015. A tabulation of the bid received for this solicitation is attached.
In order to anticipate the possibility that the type of sludge produced at the City’s Water Reclamation Facility may change before the term of award expires, from waste-activated sludge to digested sludge and/or class A sludge, the City specified that bidders were to quote unit pricing for disposal of each of these three (3) types of biosolid sludge. The apparent lowest, most responsive and responsible bid, from Waste Management, Inc. of Tennessee / Cedar Ridge Landfill of Lewisburg, Tennessee is in the unit price amounts of $31.11 per ton for each of these three (3) types of biosolid sludge. This bid was identified because it is the bid that most closely meets or exceeds the City’s intention as expressed and implied by the City’s specifications as well as the instructions, terms and conditions pertaining to this procurement solicitation. Note that the bid takes exception (1) to how the City specified pricing is to be established beyond the initial term of award (see discussion below) and (2) to the City’s specified landfill hours of availability for delivery of biosolid sludge (between the hours of 6:00 a.m. and 2:00 p.m. Monday through Friday instead of between the hours of 6:00 a.m. and 6:00 p.m. Monday through Friday). As to the landfill hours of availability for delivery of biosolid sludge, staff of the Water Reclamation Facility anticipate that the narrower window of opportunity to make a delivery is acceptable from an operational standpoint.
Financial Impact
The Water Management Department estimates the production of 1,250 tons per month of biosolid sludge to be disposed of at a sanitary landfill during the term of award. The total value of the purchase is therefore estimated to be $466,650 per year for the three-year initial term of the award.
By comparison with the unit pricing being paid currently for this service ($26.29 per ton), to Waste Management, Inc. of Tennessee / West Camden Sanitary Landfill of Camden, Tennessee, which unit pricing was established by competitive process conducted in 2011 and subsequently adjusted periodically according to the City’s specifications, the 2016-2018 unit pricing bid by Waste Management, Inc. of Tennessee / Cedar Ridge Landfill is $4.82 per ton (18.3%) higher than what the City is paying in 2015.
By comparison with the unit pricing currently budgeted by the Water Management Department for this service effective January 1, 2016 ($28.90 per ton), the Waste Management, Inc. of Tennessee / Cedar Ridge Landfill bid amount is $2.21 per ton (7.6%) over budget.
Two items of note regarding the Waste Management, Inc. of Tennessee / Cedar Ridge Landfill bid, each of which pertain to the financial impact of that bid:
• In terms of proximity to the City’s Water Reclamation Facility, the location of the landfill (Lewisburg, Tennessee, an estimated 45 miles away) for the 2016-2018 bid is much more favorable to the City than the location of the landfill the City uses currently (Camden, Tennessee, an estimated 96 miles away) for the disposal of biosolid sludge.
• The bid takes exception to the City’s specifications with respect to how the unit pricing is calculated if the parties choose to exercise either the first or both of the options to extend the term of award. The City’s specifications state, “If the term of award is extended beyond the initial term of award …, then the quoted unit pricing for sanitary landfill disposal of biosolid sludge shall be adjusted exactly once for each such extension and exactly by the percentage change [indicated by the change in] the … [specified] Consumer Price Index ….” The exception declares a minimum and maximum increase, expressed in percentage terms, to the unit pricing. Specifically, the exception establishes a minimum rate increase of 2.5% per year and a maximum rate increase of 5.0% per year, and explains the impact of this exception by stating, “What this means is that the price increase from the base for year 4 will be at least 7.5% and no more than 15%. The price increase from the base year for year 5 will be at least 10% and no more than 20%.” The decision by the City of whether to accept this exception may be postponed for now and instead made at the time of making the decision as to whether to exercise either the first or both of the options to extend the term of award.
Options
In accordance with the bid documents, the City reserves the right to reject any and all bids.
Recommendation
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Staff recommends that the City accept, contingent upon Law Department and City Administrator approval of City Contract No. 2015-0353, the apparent lowest best bid, from Waste Management, Inc. of Tennessee / Cedar Ridge Landfill of Lewisburg, Tennessee, in the unit price amount of $31.11 per ton for the sanitary landfill disposal of biosolid sludge produced at the Water Reclamation Facility for the specified three-year initial term of award, with up to two (2) options to extend, each time for up to one (1) additional year. Purchasing Manager Brian Wilcox is of the opinion that the prepared specifications as distributed allowed for competition among multiple vendors, and that the staff recommendation appears to be made in a fair and impartial manner based upon the bids received.