Lubbock, Texas
Keywords: Residential Trash Collection, Competitive Bidding, Failed Contract
Residential Trash Collection
The City of Lubbock (population 195,000) is located in the Southern Plains of the Texas Panhandle.
In May 1995 the City of Lubbock, Texas began its first experiment with private service delivery when it hired Browning-Ferris Industries (BFI) to provide one third of its residential trash collection services. BFI won the three year contract with the city following a competitive bidding process that included two other private firms.
The BFI contract was the citys first experiment with private service delivery, and as such the city approached privatization cautiously. Rather than contract out the entire service, city officials instead chose to put just one third of city routes out to bid. Keeping a majority of the service in-house gave the city the option to return trash collection to public hands if the private contractor failed to deliver high quality service.
Cost savings with the private contractor averaged about $150,000 annually, according to City Manager Bob Cass. However, service quality was lower with the private contractor. The city maintains detailed records on the number of complaints received for both publicly- and privately-provided services, and the number of complaints per 100 households was significantly higher with the private firm.
About two years into the contract BFI attempted to renegotiate its agreement with the city, citing unexpected costs. The original contract was negotiated such that BFI would be paid on a per-household basis. Yet the weight of trash collected per household was higher than the company expected, which meant that the company had to pay more than it had anticipated to dispose of the trash at the local landfill. The city refused to renegotiate its contract, however, and the contractor finished out its three year term at the agreed-upon price.
BFIs contract ended in May 1998, and the service was again put out to competitive bid early that year. This time the service contract was for a period of five years rather than three, and the contract was for the right to serve forty percent of the citys households instead of thirty-three percent. In addition, the contract was rewritten so that the service provider would be charged based on the number of cubic yards tipped rather than the number of households served. By charging for service according to the number of cubic yards tipped the city hoped to avoid the unanticipated costs faced by the private provider during the previous contract.
The Spring 1998 Request for Proposals attracted bids from three private providers as well as the city. Public employees won the contract with a bid of $3.6 million over five years, compared to private bids of $7.3 million (BFI), $6.6 million (El Paso Disposal), and $6 million from Duncan Disposal.
The citys bid of $3.6 million represented savings of forty percent compared to the lowest private bidder. The city was able to lower its costs by restructuring the way the service was provided. Rather than pick up trash twice weekly year-round, the city changed its service to once a week during the winter (November to February) and twice weekly during warmer periods (March to October). Equally important, the work week for city employees was extended from forty to fifty-three hours per week. While overtime pay was significantly higher under the new system, total costs were still lower than if the city were to hire additional full-time employees to deliver the service.
The citys bid was carefully assembled by an interdepartmental team. Members of the team included staff persons from the citys fleet department, budget office, and public works, as well as solid waste employees. In addition, the citys internal auditor and an independent certified public accountant reviewed all bids received, including the citys cost estimates. The auditor and accountants thorough evaluation of all cost items ensured that the total costs of providing the service were included in each proposal, and added credibility to the citys plan in the eyes of City Council.
The city had no problems taking back the service. Because city officials knew that they may take back trash collection services at any time, the city kept its seven best trucks that were scheduled for retirement in storage during the three years of private service provision. Consequently the city did not need to purchase any expensive new equipment when it took over trash collection in 1998.
Between seven and nine new drivers were hired to provide the service. The citys fully-automated system uses large (3 cubic yard) containers to collect residential trash. As a result laborers in addition to the driver are not required to provide the service. These dumpsters are located in alleys and are shared by three to four families, on average.
The citys five-year contract for trash collection will be put out to competitive bid again in 2003. Like the two previous rounds of competitive bidding, only one third of city routes will be considered for privatization. According to the Director of Public Works, Mildred Cox, the city would never consider wholesale privatization of the service. We would always keep at least one third of the service in house, says Cox. This way we would never lose the ability to keep the private firms on their toes. Just as important, having competitive bids provides the city with important information about what constitutes efficient service.
Additional Notes on Contracting Out in Lubbock (for reference only)
Commercial trash collection privatized
The City of Lubbock, Texas, recently got out of providing commercial trash collection services. The city abandoned the service for two reasons:
(1) Unlike private contractors who can cut deals with individual businesses, the city must charge a uniform price for trash collection. As a result the city was never able to be price-competitive with private firms.
(2) The city cannot send out marketing materials to promote its commercial trash collection services. Any efforts at marketing would be met by opposition from private sector interests, who argue that a public provider should not be trying to compete for the business of private firms.
Managers attitudes towards contracting out in Lubbock
When it comes to privatization, says City Manager Bob Cass, our policy is to pluck the low hanging fruit first. In general, the city targets services where the quality of service is easy to monitor and the risks associated with privatization are low. Examples of successfully privatized services include the public golf course and buildings and grounds maintenance.
Services that are highly regulated and with high liability are not targets of privatization efforts. Facilities such as the water treatment plant and the city landfill are kept off the bargaining table because of concerns with governmental accountability. Should a problem occur, the city realizes that it is ultimately responsible for service delivery and is therefore unwilling to privatize these high-risk, high-liability services.