GREAT WESTERN RECLAMATION, INC.1978

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REQUEST FOR COUNCIL ACTION Refuse Collection Contract considered at a later date and that the City' s attention should be focused upon the request for the three year extension described above. ANALYSIS The contractor in his letter states that they need the extension to amortize new equipment. They say they have purchased six new rubbish trucks at an approximate cost of $300 ,000 within the past few months and have issued purchase orders for an additional $800 ,000 of equipment, much of which will be delivered this year . It would seem that this argument is not as strong a one as it once was. Great Western Reclamation, Inc. is a company wholly owned by SCA Services, Inc, a huge corporation in the refuse collection and resource recovery business, with annual revenues of $166 million in 1974. As any equipment purchased locally by the company could be used by any number of sister companies within the corporation, it would seem that the argument for amortization of equipment purchased for use in Santa Ana would be somewhat diminished . Great Western Reclamation, Inc. was low bidder and was awarded the City of Santa Ana contract beginning November 1 , 1963 and running for a period of seven years. Subsequent extensions of the contract by the City Council provide now for an expiration date of October 31, 1978 , or a total contract. period of 15 years. There are three issues of primary importance which should be dealt with during consideration of the extension of the contract. These are 1) a fair pricing policy for the citizens of Santa Ana, 2) quality of service performed by the contractor in the past, and 3 ) the principle of competition in the marketplace. DETERMINATION OF FAIR PRICE Three methods of determining a fair price to be paid to contractor by the City are as follows: a. Rebid the contract allowing competition in the market place to establish an equitable price. b. Contractor opens his financial records to the City so that determinations can be made through the auditing process of reasonable rates of return on investment and reasonable profit levels. This is the public utility approach where firms enjoying a monopoly such as suppliers of gas, electricity, telephone or other utility service must disclose all fiscal information to justify pricing. c. Compare the contractors price with those of other contractors serving municipalties in this vicinity. This is probably the least desirable method because the operations vary considerably from city to city. Such factors as population density, general design of the street system, traffic congestion, distance from transfer stations, distance from disposal sites, etc. all are variables which have an impact upon the cost of refuse collec- tion and disposal . The following is a result of a recent survey showing present monthly prices being paid to contractors in larger cities within Orange County who use the contract method of collection: Anaheim $1 .55 Huntington Beach $2.07 Buena Park 1 .85 Orange 1 .50 Costa Mesa 2 . 35 Santa Ana 1 .98 Fullerton 1 .60 1 Garden Grove 1 .50 AVERAGE, above 8 cities 1 .74 Note: Buena Park , Orange and Santa Ana use the water meter as the basic unit of payment. All others use the dwelling unit. QUALITY OF SERVICE For quality of service, we would have to give a high mark to Great Western Reclamation. The number of service requests received from citizens during the 1975-76 fiscal year amounted to 724 . This averages out to 60 per month or 14 per week. Considering that over 50 ,000 refuse collection stops are serviced each week , we feel that this is an extraordinary record. Many of these requests -2- 5