Taking back the trash
Although a popular option for decades, privatizing public sector services has not worked as well as expected, causing some local governments to rethink their contracts. Reverse privatization — also known as contracting back in — is occurring in the heavily contracted area of solid waste services.
Governments re-establish their solid waste service operations for several reasons. In some cases, the change is caused by unhappiness with private service quality, a new competitive bidding opportunity, improved internal processes or a combination of those factors.
A careful approach
After many years of working with private solid waste contractors, Washington has joined a number of cities and counties that recently have brought solid waste services back in house. Since 1990, private haulers have been picking up or processing Washington’s recyclables. However, because of budget cuts, the city temporarily cancelled the curbside program twice, first in 1995 and again in 1997. In addition to drawing sharp criticism from residents and environmentalists in both instances, the 1997 cancellation embroiled the city in a major dispute with the local private hauler.
As the city struggled to pay off the company’s backlogged invoices, government officials accused the company of inflating its projected revenues from the sale of recyclables, which were counted on to help fund the program. Even after a new private contractor began picking up the city’s recycling in 1998, local officials noted numerous service complaints. Washington’s recycling rate subsequently lagged in the teens, topping out at approximately 17 percent, only about half the rate of nearby large suburban counties.
In January 2005, however, the city’s government hoped to make up for its spotty recycling history by taking over recycling services from Houston-based Waste Management. After Washington’s previous problems, government officials were understandably cautious about that move. In 2002, the city’s Department of Public Works (DPW) began working with the locally based American Federation of State, County and Municipal Employees (AFSCME) to study various ways to manage a city-run program. Based on AFSCME’s recommendations, the city began a pilot recycling program with only 582 households in June 2003 in which residents were provided with new blue rolling carts, which were easier to move than the standard recycling bins. In addition, all recyclables — such as paper, cans and containers — could be placed into the cart without separating them.
Shortly after the pilot program began, city officials reported a sharp increase in participation, from a 17 percent recycling rate and 1.5 pounds per household per week to a 46 percent recycling rate and 6 pounds per household per week. As a result, the city has begun rolling out the new carts to other wards with full coverage expected by May. DPW Director William Howland predicts that “this is going to improve service to our residents and increase recycling across the city.”
The decision to take recycling collection back in house also is a victory for the labor union. “We are pleased to have this opportunity to show that public employees can deliver comparable or better service at a cost competitive with the private sector,” says James Ivey, president of the local AFSCME chapter.
City officials in Lubbock, Texas, have taken a slow-and-steady approach to contracting solid waste services. In May 1995, after a competitive bidding process, Lubbock hired a private contractor to provide one-third of its residential trash collection services. Like many cities, Lubbock had approached privatization cautiously, choosing to bid out only a portion of its waste routes. According to AFSCME, the city viewed that as a hedge against the possibility that a private hauler would not provide an adequate level of service. The private waste collection contract saved the city about $150,000, which may be why it opened another bidding process when the first contract ended in 1998. This time, however, Lubbock was extending the contract to five years instead of three and increasing the collection area to 40 percent of the city’s households instead of one-third.
In addition, the contract was going to be altered so that the service provider would set the collection rate based on the amount of “tipped” waste rather than the number of households served. (The first contractor had unsuccessfully tried to renegotiate its contract at a higher rate based on unexpectedly high waste volumes and tipping fees.) The bidding process yielded responses from three private haulers and the city, with its sanitation department bidding $3.6 million over five years — about half of the cost proposed by the private haulers.
According to AFSCME, Lubbock was able to lower its costs by reducing the number of pick-ups to once a week during the winter months, keeping its twice-weekly collection during warmer periods. In addition, the work week was extended from 40 hours to 53 hours. Even with overtime pay, the city said that the new system cost less than hiring additional full-time employees. City officials also say they are committed to keeping a significant fraction of the city’s waste routes in house in the future.
Proven track record
Municipalities that take back contracts for waste services often realize efficiencies and cost savings, debunking the widespread belief that local governments are less efficient and effective than the private sector. In Warwick, R.I., for example, the city’s public works department has provided sanitation and recycling services since 1997, after a five-year experiment with privatization.
In 1992, despite union opposition, Warwick’s city council approved a request for proposals for waste collection and recycling, which was awarded to a local hauler. When the contract came up for renewal in 1997, the city’s public works department submitted a bid alongside five private firms. The city won the five-year contract with a bid that was more than $1 million lower than the closest private company offer.
The secret to the city’s success, according to AFSCME, was a team approach to waste collection. Under the new plan, drivers collect trash along with a second worker. When a truck is full, the driver heads to the landfill, while the other worker is taken to a different route to help the two workers on that truck collect more trash. The city also stipulated that it could terminate the agreement at any time — which was also a part of the previous private contract — as a way to keep city workers on their toes. In 2002, AFSCME helped city officials rework the contract and keep the city’s sanitation workers employed through 2006.
Reverse privatization also has proven successful for several rural counties in Alabama. Although the state’s cities tend to privatize waste collection, its more rural areas have struggled in recent years to keep up with the increasing costs of contracting. Rural Colbert County, for example, had contracted its solid waste collection for nearly 30 years when it decided to bring the service in house in September 2002.
“When you’re dealing with a 4- or 5-percent increase [in private collection rates] over that long a period of time, it gets unreal,” says Howard Keeton, Colbert County commissioner. “The economics become unfeasible — between the fuel, the insurance, workman’s comp, and so on — with private companies.” Keeton adds that the program is going well and that residents feel that they have better access to county sanitation workers with concerns or questions.
Keeton also has consulted with commissioners in other counties, helping spark a trend in the state’s most economically challenged areas. Winston County, Ala., for example, took back its waste services about four years ago. “We have realized a cost savings,” says Jerry Mobley, chairman of the county commission. “We have no plans on returning to the private sector for residential waste collection.”
Kim A. O’Connell is a freelance writer based in Arlington, Va.
Sioux City, Iowa, switches up contract
Sioux City, Iowa, is no stranger to privatization. For more than 20 years, the city contracted its solid waste collection, with as many as seven waste haulers collecting trash for various neighborhoods at the same time. When the solid waste service was opened for bid in 1996, however, the Sioux City Utilities Department approached the Washington-based American Federation of State, County and Municipal Employees (AFSCME), about developing a plan to take back the service. Public employees ultimately won the contract that year with the lowest of three bids.
“We can make these [city] workers part of the community,” AFSCME member Garland Treloar told the Sioux City Council during the bidding process. “We can offer them a decent wage to support their families. And we can be sure that the money the city spends stays here in Sioux City. Or, we can continue with business as usual and send half of what we spend on trash collection off to some corporate headquarters [in another state].”
The transition to city-run waste services, which began in 1998, reportedly was smooth, largely because private contractors already had been using city-owned trucks and maintenance facilities. In addition, private waste workers always had worn uniforms with the Sioux City logo, so the switch back to the city was fairly transparent to residents.
Over nearly a decade, city employees had built up a track record with few public complaints, no lawsuits and good service, says local AFSCME representative, Dan Homan. The union pointed to Sioux City as a positive example of reverse contracting of city services.
In late 2004, however, the city opted to privatize its solid waste services once again, citing concerns over a $2 million deficit in the city’s solid waste fund, as well as its failure to comply with state waste reduction regulations. Last summer, a citizens committee concluded that the city could save nearly $1 million over five years if its solid waste services were contracted. Although union representatives questioned that number’s validity and offered a counter-proposal, ultimately a private hauler won the bid.
The question of privatizing was never about the quality of the city service, says City Manager Paul Eckert, but about saving money and reducing the solid waste deficit. In fact, city workers were considered so effective that the contractor hired as many city employees as possible when it took over the service. In addition, the hauler expressed interest in renting municipal facilities to store trucks and equipment, providing additional revenue to the city.
— Kim A. O’Connell
The good, the bad, the misunderstood
For the last couple of decades, privatization has been widely hailed as the most efficient way to deliver government services. However, according to two Department of City Planning researchers at Cornell University, that view may be based on limited information. “Local government contracting has been treated as a one-way process — toward markets — and most studies have only looked at contracting out,” say Amir Hefetz and Mildred Warner in a report published last year in The Journal of Public Administration Research and Theory. “Those studies that have acknowledged the possibility of reverse privatization … have not given it detailed attention.”
Hefetz and Warner point to recent studies that have proven that privatized contracts are not always stable over time. For example, they say that from 1992 to 1997, 96 percent of all governments privatized some services, but during the same period, 88 percent of governments brought some previously privatized work back in.
Research also has shown that many local governments understand that contracting does not have to be an either-or proposition. “Pragmatic local government managers use markets in a dynamic approach; they contract out and bring unsuccessful contracts back in house for direct public provision,” say Hefetz and Warner. “They also mix public provision and private contracts for the same service.”
Hefetz and Warner say that in the past, the contracting process was viewed simplistically as a choice between either failure of the market-driven private sector or of government. Instead, the authors say that cities and counties should view both privatization and de-privatization as just two possible options in governing.
Clearly, privatization is not the universal remedy for government problems as some communities have discovered. “The same concerns with efficiency, quality and innovation that motivate privatization,” say Warner and Hefetz, “may also promote contracting back in.”
— Kim A. O’Connell