Chicago awards $ 79.6 million residential recycling contract to LRS and maintains municipal service in 2 zones

UPDATE: April 5, 2021: The Chicago Department of Streets and Sanitation has announced that it will award LRS a three-year residential recycling collection and treatment contract for four of the six areas. The municipal teams will continue the collection service in their two current zones. The contract, worth $ 79.6 million according to the Chicago Sun Times, will go into effect in June and include new penalties for missed collections as well as an agreement to collect carts with contamination rates of up to ‘at 50%. Longer-term decisions regarding the city’s waste policy, including high-density commercial and residential recycling, will be informed by an upcoming report from the Delta Institute.

January 20: Chicago is set to award one or more new contracts for the bi-weekly collection and processing of recyclables in its residential Blue Cart program for the first time in many years, with the potential for noticeable changes depending on the outcome.

The city’s Blue Cart program covers more than 620,000 households in buildings up to four units, as well as some municipal facilities, and is among Chicago’s most visible recycling efforts. The program collected nearly 73,000 tonnes of material in 2019 and over 65,000 tonnes until September 2020, with recent above-average volumes due to the pandemic. The city’s Department of Streets and Sanitation (DSS), which manages collection in two of the six areas, has solicited city-wide bids, a sign that full privatization may be possible.

Following two rounds of calls for tenders on an identical call for tenders (RFP), because the offers were either non-responsive “or the bid far exceeded the City’s estimate for these services ”, Chicago now faces a choice of up to three different companies. Lakeshore Recycling Systems offered $ 117.2 million for the six zones, Waste Management offered $ 85.7 million for three, and Independent Recycling Services offered $ 35.7 million for one.

Service area Service locations WM auctions LRS Offers IRS Submission Current service
1 78 726 $ 33,575,328 $ 25,433,856 MW
2 44,273 $ 19,081,584 SSD
3 60 112 $ 28,202,076 $ 20,516,616 MW
4 79 629 $ 18,469,692 $ 35,727,939.72 SSD
5 69,197 $ 16,739,172 Sims, via LRS
6 87 223 $ 23,955,300 $ 16,965,900 MW

Specific details of the offer have not been made public. The RFP indicates that the city’s purchasing manager will award one or more contracts to the “Lowest responsive and responsible bidder as determined by the bid price for each service area”, while taking into account potential price adjustments. Entrepreneurs can request an annual price increase of up to 3% after the first year.

The DSS declined to comment on the contract, including whether it could exit recycling collection altogether, citing an open procurement process. Once awarded, the initial term of the new contract would run for three years, with the potential for an extension of up to three more years.

System in trouble

Chicago’s efforts have been under intense scrutiny for years, with debate ongoing over recycling rates below 9%, based on data available for 2020, and basket rejection practices varying among entrepreneurs. Many elected officials and local activists have expressed their optimism about this new Blue Cart contract which could give better results.

The much higher rejection rate of carts containing contaminants in areas served by Waste Management has come under special scrutiny, including a 2018 Better Government Association survey, which led some elected officials to call for a change. Higher residual rates from materials collected by Waste Management also emerged as a frequent point of contention, due to the company’s ownership of a regional landfill. Waste Management has long maintained that it is following proper procedures and has also highlighted that an MRF fire in 2018 was one of the factors in the performance of the treatment.

Chicago’s new RFP includes specific guidance on differentiating between contamination levels and detailed customer education recommendations that draw on materials from The Recycling Partnership. The city will allow the rejection of carts with “severe contamination,” defined as greater than 50%, but will require carts with “moderate contamination” to be collected and flagged to the resident with an education tag. It comes as the DSS reports improvements in cart rejection rates, with around 9,000 cases in 2020 (according to a budget hearing in November) compared to more than 23,000 in 2019.

The city also includes provisions for damages of up to $ 250 for repeated missed collections, citing more than 8,100 complaints through August of last year. Missed collections were another frequent complaint among aldermen during this budget hearing.

Waste Management declined to comment on this new contract, including why it chose not to bid for additional areas.

Lakeshore also declined to comment on the open procurement process, but could be ready for significant expansion. The only area it currently serves as a subcontractor for Sims Metal Management was among the smallest, in terms of 2019 tonnage. The large Midwestern firm’s recent acquisition of regional carrier Roy Strom also gives it an advantage. with additional infrastructure and a more central location for Chicago operations.

Independent Recycling Services, a Chicago-based family business, did not respond to a request for comment on its auction strategy.

Republic Services registered with the city to collect information on tenders, but did not submit an offer. While DSS previously said it expected Sims to make an offer, the international recycler ultimately pulled out.

“[A]As a recycling company with a long history in Chicago, we have been pleased to help provide Chicago residents with recycling services for the past several years. However, the first prospects of increasing the tonnages that we have managed into a large and long-term flow of materials that would justify investing in processing capacities have never materialized. As a result, for this offering, we were unable to compete with other companies that have existing local facilities to receive, process and market the city’s recyclables, ”said Tom Outerbridge, Managing Director of Sims Municipal Recycling, by email.

Evolving program

The city’s modern residential recycling efforts can be traced back to a “blue bag” recycling program started in 1995, which a recent Inspector General report called low turnout and persistent bag breakage problems. Chicago began piloting the Blue Cart program system in 2008, before expanding it to the entire city in 2013 under the leadership of former Mayor Rahm Emanuel. As DSS continues to collect all residential waste from low-density buildings, sources say the plan has long predicted it will eventually move away from recycling service in favor of a “managed competition” system.

The city never fully committed to this approach – instead it continued to execute contract extensions to the point that even the closest observers were not entirely clear on the duration of the agreements. current. Last summer, DSS executed a final extension until July 1 of this year before issuing another amendment shortly after setting that expiration date on January 18. DSS did not respond to a request for clarification on this timeline.

During a lengthy budget hearing in November, several aldermen asked DSS leaders to potentially bring all recycling collection back in-house, and the concept was quickly rejected.

“The costs for the city to resume the program are higher, and there would be a huge capital investment that would be required to purchase additional trucks. So there would be a significant increase if we were to take it back in-house, ”said MP Policy and Sustainability Commissioner Chris Sauve, citing the need for an additional 75 to 90 teams beyond the 27 DSS currently in service in its two recycling areas.

At the time, Sauve said the city hoped for cost savings with the new contract, but recognized market conditions had changed as well. Like Boston and other major cities that have negotiated contracts in recent years, Chicago could find the next one more expensive than expected.

While it is not clear when and how the DSS will award contracts, the current level of privatization is expected to continue or even expand.

“The biggest benefit they see from the managed competition program is that it’s just one more headache in terms of people management and budget management,” said Carter O’Brien, vice -Chairman of the Chicago Recycling Coalition, citing a litany of other issues the agency faces on a daily basis.

As to what the coalition wanted, O’Brien was waiting for more details but was optimistic about Lakeshore’s city-wide offer, calling it a “net gain for all of us in the sense that you have a business. which is dedicated to recycling “.

Other issues on the DSS agenda include the response to the IG December report on the limited enforcement of the 2017 recycling regulations for multi-family and commercial buildings. It is estimated that 40% of residential households in Chicago fall into this category and are not part of the Blue Cart program. Mayor Lori Lightfoot has commissioned a study on Chicago’s larger recycling system from the nonprofit Delta Institute, which will examine opportunities to improve the system and is expected to be released soon.