Suburbs throughout the Chicago area routinely issue no-bid contracts or skirt formal bidding procedures in bestowing the lucrative privilege of hauling away their residents` garbage, a Tribune survey has found.
Although state law mandates that the City of Chicago seek bids on municipal contracts, there is no such requirement for smaller Illinois communities, even when they issue multimillion-dollar contracts.
Law or no law, bids for large contracts such as trash hauling are considered good policy by good-government advocates, and some Chicago suburbs have saved hundreds of thousands of dollars by seeking competitive bidding on their trash business.
But two of every three trash contracts found in a Tribune survey of 201 municipalities in Cook, Du Page, Kane, Lake, McHenry and Will Counties were not awarded through bids or were routinely extended without bidding.
In many cases, the trash contracts represent the most money awarded on a regular basis by the municipalities to any private firm.
The no-bid arrangements are worth about $31 million annually, the survey found, representing 61 percent of the value of all the contracts. Sixty-seven of 103 municipal contracts issued were no-bid. Ninety-eight of the 201 municipalities have no contracts with private haulers-they either employ their own crews or leave it to their residents to make arrangements.
At the same time, the survey found, the local garbage-hauling industry has come to be dominated by the world`s two largest waste-services companies: Waste Management Inc., based in suburban Oak Brook, and Browning-Ferris Industries Inc. of Houston.
No-bid methods of awarding contracts to these and other trash haulers are employed everywhere from affluent Du Page County and the North Shore to blue- collar towns in the south suburbs.
State law generally permits such arrangements for municipal contracts in towns with populations under 500,000 if two-thirds of the aldermen or trustees approve the deal. But the experience of suburbs using bidding suggests that those who do not may be throwing away residents` money along with the tons of garbage they generate each year.
In Franklin Park, officials switched to bidding in 1984 after growing disillusioned with 28 years of an informal, negotiated arrangement with Van Der Molen Disposal, which was bought by Browning-Ferris in the 1970s.
Village Clerk Garry Rossino estimates the village saved $900,000 over the life of the contract by awarding its three-year deal to the low bidder, Best Way Disposal, rather than sticking with Van Der Molen.
”The drop was dramatic for basically the same service,” Rossino said. Van Der Molen was charging $8 per home per month, but Best Way bid $5.25. The village`s current hauler, Arc Disposal, charges $6 a home.
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Peter Block, a spokesman for Browning-Ferris, said of the Franklin Park contract: ”They underbid us and won the bid. That`s a fact of life with bidding.” He declined to speculate about what caused the substantial price difference.
No-bid contracts would appear to be especially susceptible to cronyism, particularly in light of the 1986 convictions of two men for payoffs made while they were employees of Waste Management subsidiaries. The payoffs were in connection with the municipal garbage business.
Competitive, sealed bidding is ”the preferred method of procurement”
for supplies and services, according to the Model Procurement Code for State and Local Governments drafted by the American Bar Association in 1979. Lawyers who developed the code said that residential trash-hauling contracts can easily be offered for bid.
Even in a small town such as St. Charles, the hauling contract is worth $350,000 a year. In larger communities-Chicago Heights, Oak Lawn and Waukegan, for example-the no-bid contracts are worth $1 million or more a year.
In Arlington Heights, the annual trash-hauling contract, renegotiated after being awarded through bidding several years ago, is worth more than $2 million.
With the cost of hauling garbage increasing rapidly as a result of the lack of landfill space in the area, the amount of money spent by
municipalities or individual residents can only multiply, according to suburban and industry officials. Area residents currently are paying anywhere from a few dollars a month to $180 a year, or $15 a month.
A little more than half the towns surveyed, 103 of 201, awarded contracts to an outside hauler-either through bidding or some form of negotiation. Residents pay the price for hauling through direct billing or taxes.
In 26 of the 201 towns, municipalities have their own garbage trucks and crews. In the other 72, officials license multiple scavengers or leave it up to residents to arrange for pickup.
Though dozens of waste haulers still operate in the Chicago area, their numbers are shrinking, leaving Waste Management, Browning-Ferris and, to some extent, Laidlaw Waste Systems Inc., of Burlington, Ontario, alone at the upper echelon of the industry locally.
Some suburban officials defended their no-bid contracts, arguing that there is little competition for hauling and that bidding can sometimes be futile.
That sentiment echoes views expressed in a 1977 study on waste-disposal costs for the Northeastern Illinois Planning Commission. Local officials, the report said, ”point to the growing market power of a few companies and bemoan the creation of subregional monopolies and oligopolies.”
Among the 21 largest municipal contracts issued in the Chicago area, companies owned by the two international giants hold 14, and they have held the contracts for 10 to 20 years or more.
In some cases, the two haulers have opted not to bid against each other.
Browning-Ferris, for example, holds the $1.6 million contract for Aurora. But Rot`s Disposal, a Browning-Ferris firm, declined an offer in 1986 to bid for the residential service in nearby Naperville, according to Kristina Kaar of the city`s Department of Transportation.
The only bidder in Naperville was Fox Valley Disposal, a Waste Management firm. At $2.3 million this year, the Naperville contract was the largest contract found in the survey.
Block of Browning-Ferris said the reasons for not bidding on a particular contract include the distance to a disposal site and the amount of available equipment and manpower. The company might not go through the time and expense of bidding, Block said, if it believes it cannot offer a low enough price to win.
Waste Management officials said that company`s policy is to try to bid for every municipal contract. ”We want to grow,” said Donald Price, vice president of Waste Management of Illinois Inc. ”We look at everything.
”As far as I know, the company has always been responsive to bidding. If there wasn`t one bid, all I can say is, it fell through the cracks.”
Federal and state prosecutors are investigating allegations of price-fixing and agreements not to compete with each other by garbage firms in various locations around the U.S., though there is no known inquiry in the Chicago area.
In Ohio, subsidiaries of Waste Management and Browning-Ferris pleaded guilty last month to federal antitrust charges that they engaged in
”collusive” behavior and ”rigged bids” in the Toledo area. In September, the U.S. Justice Department filed a one-count felony information alleging that a Waste Management subsidiary conspired with unnamed competitors to allocate customers and fix prices in south Florida. And similarly, the Los Angeles County district attorney`s office has charged Waste Management of California and other haulers with ”dividing up customers among themselves, eliminating true competition and raising prices to artificially high levels.” Overall, Waste Management and Browning-Ferris hold about half the 103 contracts found in the local survey, representing 58 percent of the total spent for residential trash collection. Browning-Ferris hauled garbage from 25 of those towns and had about $15 million in municipal business; Waste Management held 24 contracts, worth a total of $13 million.
Suburban officials and smaller haulers cite two reasons why the two firms have such a foothold: their sheer size, which allows them to handle larger jobs, and their landfill ownership, a potential selling point and cost saver. The two companies have a tight grip on the now-precious landfill space in the six-county Chicago area. Waste Management owns or operates seven of the area`s 26 landfills for municipal trash; Browning-Ferris has three.
Those 10 landfills account for 77 percent of the remaining capacity in the area, according to state Environmental Protection Agency figures.
”Those who have the landfills wear the crown,” said Burbank Mayor John Fitzgerald. ”The further away they have to haul it, the higher the bid will be.”
Higher tipping fees-which landfill operators charge haulers to dump garbage-also are not as big a concern to a hauler who owns a landfill. Those fees have been rising quickly as landfill space diminishes.
There are some instances where Waste Management and Browning-Ferris have faced off over contracts. In Hinsdale, Browning-Ferris bid 13 percent less than Waste Management to win a $920,000 contract. In Addison, Browning-Ferris won a contract from among six bidders, including Waste Management.
The two also bid for the relatively tiny $35,000 contract at the College of Du Page in Glen Ellyn, with Browning-Ferris winning. But Mark Olson, director of campus services, said that`s a rarity.
”Although there are many vendors who can supply this service, we found a reluctance for companies to bid due to unofficial `territorial rights,`
” according to a college memo.
Other suburban officials also say they suspect that there is a territorial understanding among some haulers, making it difficult for public bodies to do anything but stick with the same hauler.
”We had no choice,” said Don DeBiase, director of the physical plant for Harper College in Palatine, where Browning-Ferris hauls the trash in a no- bid arrangement. ”This is their territory.” He said he bases that conclusion on 26 years of experience at various schools.
Waste Management and Browning-Ferris dispute the contention that such territories exist.
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Waste Management spokesman William Plunkett said the company believes
”the climate in Chicago is extremely competitive. It`s a microcosm of the industry nationally.”
Even in cases where bids are sought and bidders are found in the Chicago area, officials can ignore the lowest price.
Meyer Brothers has hauled trash in Bridgeview for more than 20 years, said Mayor John Oremus, and in at least one instance the company was underbid by a competitor but retained the contract.
Though the village has not been served by any other hauler, Oremus is confident that Meyer Brothers provides the ”best service.” The current contract is worth about $350,000.
”We don`t have to give it to the low bidder,” Oremus said. ”We go for the service. You judge the future by the past, and we`ve been satisfied up to this date.”
The south suburb of Chicago Heights has negotiated one of the more interesting municipal garbage-hauling contracts in the Chicago area. That contract, signed in March, 1984, was with a firm whose president is reputed south suburban mob boss Albert Caesar Tocco.
Under that contract, residents of Chicago Heights pay a basic fee of $9 per household per month, plus any increases in labor costs-one of the most costly contracts found in the south suburbs by the newspaper`s survey.
The company, Fitzpatrick Brothers Disposal Services Inc., had previously hauled refuse in Chicago Heights under other management. After Tocco took over as president in 1983, the city rejected a lower bid from another firm and negotiated a contract with Tocco`s company at a rate initially equal to the other firm`s bid, according to city records and Streets Supt. Ernest Molyneaux.
But by 1984, Chicago Heights went from one to two weekly pickups and doubled the payments to the Tocco-run company. City records show that payments to the company went from $515,000 in 1983-83 to $1.23 million by 1986-87.
Yet the survey by The Tribune found that in other towns giving residents a choice of once- or twice-weekly pickups, the rate for twice-a-week service isn`t double the other, but ranges from 24 to 55 percent higher. Doubling the pickups doesn`t double a hauler`s costs, according to other executives in the hauling business, because such costs as the amount paid by haulers to landfill operators shouldn`t change when the number of pickups changes.
Molyneaux said ”we just negotiated with Fitzpatrick” and didn`t seek competitive bids after rejecting earlier bids because ”we felt we were getting a good price.” Tocco didn`t respond to phone inquiries.
By contrast, a rate that may be the lowest in the suburbs, $4.90 a home per month, can be found in Crestwood, according to Mayor Chester Stranczek.
”We`re paying less today than we were paying 10 years ago,” he said.
”That`s strictly because of competition.”
HOW THE REPORT WAS COMPILED
The statistics upon which this report are based were gathered by a team of Tribune reporters who studied municipal garbage contracts and bidding histories throughout the Chicago area.
Reporters who participated in the survey were Steve Johnson, Terry Wilson, Karen M. Thomas, Robert Enstad, Andrew Fegelman, Katherine
Seigenthaler, Neil H. Mehler, John Schmeltzer, Tasia Kavvadias, Andrew Bagnato, Robert Blau, Barbara Mahany, George Papajohn and Thomas M. Burton.