Contract Compliance Review City of Barstow Contract Compliance Review Barstow City Council August 18, 2014

Presentation Outline Overview Objectives Methodology Summary of Findings Safety and Customer Service Contract Compliance and Performance Review Billing and Financial Review Diversion Review Questions and Answers

Overview Exclusive franchise agreement with Burrtec Waste Industries, Inc. Solid waste Recycling Street sweeping Contract term through 2033 Review Covered 3-Year Period (January 1, 2011 through December 31, 2013)

Objectives Determine Burrtec’s compliance with the performance and operational provisions of the agreement; Verify that Burrtec is fulfilling the financial terms and conditions of the agreement; and Evaluate Burrtec’s diversion rates and determine if Burrtec’s reported diversion and tonnage figures are accurate.

General Methodology The methodologies used to meet the project objectives included: Reviewing and analyzing documents and data provide by the City and Burrtec; Reviewing Burrtec’s management systems; Interviewing Burrtec’s management and administrative staff; and Conducting field audits and observing operations.

Summary of Findings Safety and Customer Service Safety - Reviewed safety record Satisfactory ratings from CA Highway Patrol Biennial Inspection of Terminals Reported no vehicle hydraulic or fluid spills in last three years Injury rate significantly less than industry standard Customer Service - Reviewed Customer Complaint Logs 100 complaints over 3 year period (~2.6 complaints/month) Mostly billing issues; only a few related to customer service quality or employee conduct

Methodology Contract Compliance and Performance Review Documented more than 100 specific contractual requirements: Obtained documentation in support of compliance with each requirement; Reviewed operations with respect to specific requirements; and Assessed compliance with respect to each requirement.

Summary of Findings Contract Compliance and Performance Review Burrtec is in compliance with the vast majority of contractual requirements. Areas of Non-Compliance: Red-Tagged Containers; Labeling of Residential Containers; Cleaning of Bins; and Reporting of DOT Testing.

Methodology Billing and Financial Review The methodologies included: Route Audit; Review of Approved Rates; and Review Accuracy of Monthly Invoices.

Summary of Findings Billing and Financial Review Route audits confirmed services levels are consistent with billings with minor exceptions. Exceptions included: Extra pick-up rate Temporary bin rate Shared containers Monthly invoices to the City are accurate with minor exceptions. Franchise Fee and Administrative Fee calculations are hard coded, resulting in slightly lower payments No AB 939 fee for roll-off disposal and locking bin categories Note: The billing and payment process established by Burrtec and the City does not utilize industry best practices.

Methodology Diversion Review The methodologies included: Reviewing the mathematical accuracy of the calculations used in the reports submitted by Burrtec; Documenting all components of reported tonnages and determining if tonnages from recyclable materials and all other material types are accurately reported; Reviewing Burrtec’s internal controls to ensure that all residuals and tonnages are properly recorded; and Recalculating the diversion rate as appropriate.

Summary of Findings Diversion Review Data supports the “franchise diversion rate” of 13.4%; Data supports the City’s “State reported” diversion rate of 71.9%; and City must divert approximately 2,300 additional tons of material to meet the State’s goal of 75% diversion by 2020.

Questions and Answers