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DOC ID: 4196 B
CITY OF SAN BERNARDINO — REQUEST FOR COUNCIL ACTION
Agreement/Contract
From: Fred Shorett M/CC Meeting Date: 12/07/2015
Prepared by: Georgeann "Gigi" Hanna,
Dept: Council Office Ward(s): All
Subject:
Reconsideration of Contracting Of Refuse and Recycling, Street Sweeping and Right-Of
Way Clean-Up Services to the City (#4196)
Current Business Registration Certificate: Not Applicable
Financial Impact:
Motion: Discuss and take possible action.
Synopsis of Previous Council Action:
<<Insert synopsis here>>
Background:
<<Insert background here>>
Supporting Documents:
Letter from Bruce D. Varner, Varner & Brandt LLP (PDF)
Franchise Bid Irregularities Might Justify Second Vote (DOCX)
Updated: 12/1/2015 by Nita McKay B Packet Pg. 617
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-annc W.Brandt VA RN E R&B RAN D TuP
azanne M.Bryant
Rabic P.Chaudhry
Linda J.Gladson
Scott R.Heil
Nathan W.Heyde November 25,2015
Stephen C,Jones
Andrew R.Morand
'timothy R.Owen
David J.Porras V
Leslie E.Riley
Andrew Ross Email:hruce.varner(cilvamerbrandt.com =
Patricia D.Short 0
Bruce D.Varner U
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Kristin C.Vamer Via: First Class Mail rn
Scan S.Varner 3
Michelle M.Wolre Gary D. Saenz, Esq.
Kristen R.Olscn City Attorney o
In memoriam 1968.7015 City of San Bernardino c
James W.Dilworth
300 North"D"Street, Sixth FIoor
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Of Counsel San Bernardino, CA 92418 a�
Vahc 1-1.Sarralian 'a
Of Counsel C
RE:November 16, 2015 Council MeetingMthens'Protest 0
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Dear Mr. Saenz,
Varner & Brandt represents Athens Services ("Athens"). Previously we sent a
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letter to the Council dated November 13,2015 prior to the Council's meeting and decision J
on November 16, 2015 advising the City of our multiple concerns regarding the City's
Request for Proposals for Solid Waste and Recycling Services,Street Sweeping Services, 0
and Right-of-Way Clean-Up("RFP")process.As you know,Athens submitted a Proposal m`
to the City of San Bernardino in response to the City's RFP. C2
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Athens is objecting to the blatant violation of the terns of the RFP by Burrtec,and >
protesting the City's award of the contract to Burrtec. Burrtec clearly violated page 3 of
the RFP which states "During the RFP process, proposers and their agents are strictly
prohibited from any contact with City staff, City's consultants and/or elected >
officials. If this condition is violated, the City may render the proposal non-responsive CS
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(emphasis added)." At the November 16, 2015 Council Meeting, City employee Chuck
Greenwood acknowledged that Burrtecrepresentatives had met with City employees while m`
registering disappointment they had not been contacted by Athens. As soon as that o
admission was made,it was clear to Athens and the citizens of San Bernardino thaf Burrtec
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Riverside 0 ce had tainted the process. Q
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3750 University Ave. �
6th Floor J Not only d meeting ith the City employees violate the terms of the RFP it also
Riverside,CA 92501 3r g ty C
Tel 951274 7777 prompted the City employees to advocate for Burrtec at the Council meeting. The City E
Fax 951 274 7770 employees urged the Council to make a decision that night and to choose Burrtec. U
Burrtec's meetings with the employees clearly led the employees to urge the Council to w
onrariv Qfice choose Burrtec. Council members acknowledged that they were making a decision that a
3237 E.Guasti Road
Suite 220 night based on the employees' opinion. By violating the terms of the RFP, Burrtec
Ontario,CA 91761 managed to convince the Council through the City employees to choose Burrtec. This
T o0?931 9219 disregard for the terms of the RFP cannot be allowed to stand.
varnerbrandt_com 3750 University Avenue 1 6th Floor I Riverside,CA 92501-3323 1 Tel 951 274 7777 1 Fax 951 274 7770
Packet Pg.618
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City Attorney Gary D. Saen
November 25,2015
Page 2
At the urging of the City employees,the Council chose to make a decision that night despite
the City Manager's and the City's consultants' recommendation to further evaluate the financial
packages. Going against management's recommendation,the Council failed to take the necessary c
time to consider which Proposal offered the best overall package for the City, its citizens, and its U
creditors. By not following the recommendations to take more time to evaluate the Proposals, the
Council chose to follow the urging of some employees who had clearly been communicating with
Burrtec, and chose the Proposal that did not offer the best financial future for the City and its —
citizens. Apparently the Council based its decision on employees chantingin the Council Chambers. r_
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Because Burrtec violated the terms of the RFP and ur ed the em to ees to speak in favor of
Burrtec resultin in the Council's decision to choose Burrtec their decision does not achieve the :2 best financial outcome for the City its citizens or its debt holders o
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The City's successful emergence from bankruptcy depends in large part on maximizing
revenues including revenue generated by franchising the solid waste services. The revenue is an
integral part of the Plan for Adjustment of Debts. The guaranteed revenue of 129.3 million offered �
by Athens clearly exceeds the $24.9 million offered bv Burrtec. If the twenty year analysis was a.
considered, Athens' offer was $54.3 million while Burrtec was only offering $35.1 million. The J
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Council members owe a duty to its citizens and its debt holders to maximize the financial benefits
of this decision because of the long-ranging impacts CO
Now Athens and the citizens know that Burrtec violated the terms of the RFP and made
direct contact with City employees. Furthermore, the citizens and the creditors know that the a
Council did not choose the Proposal which offered the most guaranteed revenue for the City. >
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Therefore, this letter shall serve as official notification of Athens' protest of the Council
action in awarding the contract to Burrtec. Athens further requests that an item be placed on the o
Council agenda for December 7,2015 to have the Burrtec Proposal declared non-responsive. Given
the implications of the violation,the violation cannot be waived as an irregularity and the Proposal i3
must be deemed non-responsive. Athens will remain committed to its Proposal and urges the m
Council to fully analyze its Proposal. c
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Athens' Proposal guaranteed $10,000 to each employee that transitions to Athens. This is J
more than what Burrtec offered but,again,Athens did not make contact with the employees in order
to persuade them.
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The analysis presented to the Council was also disingenuous and misleading because on page w
6 ofthe"Review of Financial Proposals"it included an additional$10 million to Burrtec's proposal. Q
That figure is not guaranteed revenue and no other Proposal had non-guaranteed revenue included
in the presentation to the Council.
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Packet Pg. 619
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City Attorney Gary D. Saen�Z
November 25,2015
Page 3
Time is of the essence in this matter because of the December 23, 2015 Hearing in the
Bankruptcy Court. We are confident that Judge Jury would not look.with favor on the Council's
decision to leave over$4.4 million dollars on the table and are also confident that the City's creditors c
would object to the City not maximizing possible revenues. Again, the creditors will be looking at v
Athens'guaranteed revenue to the City of$29.3 million compared to Burrtec's guaranteed revenue y
of$24.9 million. The analysis considered over a twenty year period indicates that Athens'Proposal
guaranteed$54.3 million and Burrtec only guaranteed$35.1 million. By not considering Athens'
Proposal,the Council passed up at least$4.4 million and a possible$19.2 million over 20 years. r_
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Athens protests the Council's November 16,2015 action because of 1)Burrtec's violation
of the terms of the RFP which renders its proposal non-responsive;and,2)the failure to adequately N
consider the financial benefits for the City, its citizens, and its creditors. o
Accordingly,Athens requests this matter be placed on the agenda for December 7,2015 or
in the alternative at a Special Meeting convened to hear this matter and award the contract to Athens. o
Sincerely, a.
J
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JZ5r4ucTeVarner 00
of VARNER&BRANDT LLP
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cc: City Clerk Georgeann Hanna
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Packet Pg. 620
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Franchise Bid Irregularities Might Justify Second Vote. Nickel Says
Posted on November 26, 2015 by Venturi
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San Bernardino City Councilman Henry Nickel this week said the council should entertain revisiting the m
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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.
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The move toward dissolving the city's municipal sanitation division started more than three years ago 0
when the city filed for Chapter 9 bankruptcy protection.At that time, discussion of privatizing or
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outsourcing several city divisions, including the police,fire and sanitation departments, began.The city's
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trash workers, however, proved highly resistant to the proposal relating to their function,and the 0
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concept languished until earlier this year. In the meantime,city management and the council pushed 0
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forward with a plan to outsource the fire department, concluding a deal this summer in which the
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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
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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. 0
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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 n
revenue.The city entertained four serious proposals,one from Waste Management, Inc., another from rn
Republic Industries, and from Athens Services and Burrtec. Penultimately,the competition came down U)
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to competing proposals between Athens and Burrtec.Staff, working in conjunction with a consultant,
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Management Partners,evaluated those proposals.According to internal city documentation,Athens,
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over the first ten years of the franchise guaranteed the city$29,278,968,while Burrtec committed to m
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 m
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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 0
in non-guaranteed revenue from Burrtec that was to consist of the possible construction of a new LL
biofueling station.This,on paper, inflated the value of Burrtec's offer to$34 million, which was higher
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than the$29 million Athens guaranteed. In addition,the staff/consultant report,which did not reach the E
council until just four days before the council vote took place, omitted mention of Athens'$6.5 million U
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offer to purchase the city yard where sanitation division-related activities take place while promoting Q
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
Packet Pg.621
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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 v
sanitation workers came forward at the meeting,telling the council they were in favor of having the
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franchise go to Burrtec.Those employees indicated their recommendation in this regard was based Q
upon their interaction with Burrtec,the owner and corporate officers of which had troubled themselves o
to meet with them to offer them job security by hiring them to continue to work in San Bernardino as r-
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trash men employed by the company.Several remarked that Athens had made no contact or offered no
such assurances.
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With councilman Fred Shorett dissenting,the council voted 6-1 to confer the franchise upon Burrtec. v
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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 o
competed for the franchise specifically forbade contact by the applicant with city employees. Page 3 of M
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the official request for offers states, "During the request for proposals process, proposers and their 0
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agents are strictly prohibited from any contact with city staff, city consultants and/or elected officials." v)
Based upon the sanitation workers'statements, Burrtec clearly violated that provision. Y
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 P
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vote and reconsider it from scratch based upon a thorough analysis of a more complete numbers v,
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comparison between Burrtec and Athens. L
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"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
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of the four companies met.The decision then came down to ancillary cost benefits.The two had very m
much equivalent proposal.Some things Burrtec does better than Athens could do. Some other things v°',
Athens does better. It became a trade off from a cost and revenues standpoint."
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The key element of the analysis, Nickel said,was "Attachment Three to the report that went into an in- U-
depth discussion of the recommendation. It turned out that staff was going back and forth at the last CD
hour.There were some claims Athens made after it was known the recommendation was going to s
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 Q
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
Packet Pg. 622
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 U
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 v
make a decision to move forward, understanding Burrtec and Athens had met the minimal N
requirements." m
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At this point, however, Nickel said, "In light of what we know now,we should consider that." r_
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Nickel acknowledged that the entire process was marred by"failure on the parts of both the city
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manager and city attorney to get out information.At the eleventh hour he [City Manager Allen Parker]
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backed off of his recommendation or appeared to back off of his recommendation.The guy had six o
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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 o
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 0
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of time to evaluate the fire department outsourcing proposal. He said that the decision to release Parker m
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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 y
managing.
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"We had ten days to look at the fire department changeover," Nickel said. "No wonder he [Parker] is on
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his way out.There was failure after failure on this.What happened last week was the final nail in his m
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 o'p
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
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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 (D
[franchise] contract,we could make that transition smoothly." E
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He was not aware, Nickel indicated,that Burrtec and the other applicants were prohibited from lobbying Q
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."
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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." v
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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.
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Indeed, also on November 16, precedent for doing just that—reversing a vote—was set. On the issue of f°
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whether the city should extend its contract with the firm of Urban Futures in carrying out work related
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to the winding down of the city's former redevelopment agency and the accounting of its assets for the 0
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 co
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the consulting work by Urban Futures carried.
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