1. Elements of Best Practices Solid Waste Franchise Agreements
PRESENTATION TO:
California Resource Recovery Association (CRRA)
August 10, 2016

2. What is a “Best Practices” Franchise Agreement?
Goals:
Specify services to be provided by hauler, outline key hauler performance requirements and expectations
Allow for easy monitoring of hauler performance, and effective management of contract
Balance hauler cost of service issues while protecting rate payers
Facilitate compliance with current and future State requirements (AB 341, AB 1826, AB 1594, etc.)
Provide procedures for adjusting to any changes in law, or any changes in services
Support clear communication between the jurisdiction and hauler

3. Best Practices Definitions Term Length and Extensions
Scope of Services / Collection Programs
Diversion Requirements
Customer Rates and Rate Adjustments
Franchise Fees and Other Fees
Vehicle and Container Requirements
Contractor Staff and Office
Customer Service
Public Education

4. Best Practices (continued)
Processing and Disposal Facilities
Recordkeeping and Reporting
Periodic Performance Reviews
Liquidated Damages
Insurance and Performance Bond
Indemnity
Default and Termination
Transition to Next Contractor

5. Definitions
The franchise agreement should define key terms, examples include:
Organics / Food Waste – Define exactly what types of food and green waste material are accepted.
Recyclable Materials – Define exactly what material types are included in the program.
Franchise Fees – Define how the fee is calculated (e.g., as % of gross revenues incl. franchise fees)
Diversion Rate – Define how the rate is calculated (e.g., total recyclable and organic material processed, less any disposed residue from processing, divided by total tons of material collected under scope of the franchise agreement)

6. Term Length and Extensions
Specify start date and end date of “base term”
Extensions
Specify length and quantity of possible term extensions
At jurisdiction’s sole option
Require positive contractor performance review prior to granting extension
Recommendation: Avoid “evergreen” agreements (i.e., agreements that automatically renew their term length every year)

7. Scope of Services / Programs
Single Family Residential
Garbage, Recyclables, and Organics (Cans)
Commercial and Multi Family Residential
Garbage, Recyclables, and Organics (Cans and Bins)
Separate food waste collection, if necessary
Construction & Demolition (C&D)
Roll-off boxes / debris boxes
“Temporary” vs. “permanent” accounts
Public Facilities
No charge collection from schools, parks, city offices, public receptacles, etc.
Street Sweeping

8. Scope of Services / Programs
Additional Services:
Curbside bulky items, E- and U-Waste, HHW, sharps and pharms, oil and oil filter
Christmas trees
Special events
Public education
Lay out procedures for implementing new programs
How customer rates will be adjusted
How the program will be rolled out

9. Diversion Requirements
Diversion Rate – Common to require the hauler to calculate their diversion specific to the franchise (separate from CalRecycle reporting)
Typically 50% minimum requirement or greater (overall, by weight)
Agreement should define specifics of calculation
Reporting – Diversion rate calculation should be submitted each year (or more frequently), with a detailed breakdown of diverted and disposed tonnages by sector, as part of an annual report to the jurisdiction

10. Customer Rates and Adjustments
Attach complete customer rate schedule to the franchise agreement as an exhibit
Include all contractor charges and fees
Breakdown by rate “components,” if any
Rate adjustments
Annual – Consumer Price Index (CPI) or Refuse Rate Index (RRI) adjustment
Be very specific with calculation method, give an example
Periodic – Detailed rate reviews
Define allowable, non-allowable, pass through costs, and allowable profit / operating ratio
Adjustments due to change in law, or new programs

11. Franchise Fees and Other Fees
Franchise Fee – Commonly calculated as % of gross revenue
Vehicle Impact Fee – Amount designed to offset cost of road maintenance attributed to refuse vehicles
AB 939 Fees / Administrative Fees
One-Time Procurement Reimbursement Fee
Performance Review Fee – Cost of periodic performance reviews to be covered by the hauler, as they occur

12. Vehicle Requirements Maximum vehicle lifetime (~7 or 10 years)
Monitor and report overweight vehicles
Use of alternative fuel
Vehicle signage and markings
Pre- and post-trip inspections
On-board GPS and link to customer service / dispatch systems
Cleaning / washing schedule
Preventative maintenance schedule and recordkeeping
Vehicle replacement schedule

13. Container Requirements
Maximum container lifetime
Cart and bin standard sizes and colors
Markings, labels, instructions to customers
Labels, hot-stamping, in-molding
Contractor name and phone number
Graffiti removal
Cleaning/washing schedule
Exchanges/replacements to occur on next scheduled service day
Container replacement schedule

14. Contractor Staff and Office
Office hours and availability
Dedicated route supervisors, public education coordinator
Driver uniforms
New-hire training and refresher training requirements for drivers and customer service representatives
Contractor emergency contact info
Customer service
Hours, phone system capabilities, service response times, customer billing timing

15. Public Education AB 341 and AB 1826 outreach
Require the hauler to keep an ongoing list of commercial customers with notes on service levels and status of outreach efforts
Full time dedicated recycling / public education coordinator
School presentations, special events
Bill inserts, recycling newsletters, etc.

16. Processing and Disposal Facilities
Hauler to ensure facilities continue to be fully licensed and permitted throughout term
Hauler to notify jurisdiction in event of need for any backup facilities
Typically contractor proposes facilities to be used, with approval by jurisdiction

17. Recordkeeping and Reporting
Common to require submission of quarterly and annual reports, which may include:
Detailed breakdown of tons of material diverted and disposed by sector
Diversion rate calculation
Gross revenue and fees paid
Summary of public education activities and special events
Customer service statistics
Instances of overweight vehicles
Proactive reporting of other performance issues

18. Periodic Performance Reviews
Schedule performance reviews every ~5 years
At a minimum, have reviews prior to approving any term extensions
Hauler pays the cost of reviews
Reviews cover objective performance requirements set forth in the agreement

19. Liquidated Damages
The most effective liquidated damages are ones that can be proactively self-reported by the hauler
Examples include:
Failure to meet minimum diversion rate
Instances of overweight vehicles
Failure to respond to customer service requests in required timeframe
Property damage

20. Other Provisions Insurance and Performance Bond Indemnity
Default and Termination
Transition to Next Contractor

21. Notes Regarding Procurement / RFP
Developing an effective agreement often begins with a competitive procurement process
Include draft agreement in RFP package
Recommendation: Require haulers to lay out the following during the proposal / negotiation process, and then append these documents to the final franchise agreement as exhibits:
Complete customer rate schedule
Transition Plan, Diversion Plan, and Public Education Plan
Vehicle and Container Replacement Schedule
List of facilities, and list of subcontractors, if any

22. Recap – Goals
Goals:
Specify services to be provided by hauler, outline key hauler performance requirements and expectations
Allow for easy monitoring of hauler performance, and effective management of contract
Balance hauler cost of service issues while protecting rate payers
Facilitate compliance with current and future State requirements (AB 341, AB 1826, AB 1594, etc.)
Provide procedures for adjusting to any changes in law, or any changes in services
Support clear communication between the jurisdiction and hauler

23. David Pinter | Senior Project Analyst
Thank you!
For additional information, contact:
David Pinter | Senior Project Analyst
R3 Consulting Group, Inc.
(916)