An Arizona waste hauling company on the verge of beating scandal-tainted Recology out of a contract worth up to $119 million for collecting and disposing of waste from San Francisco city facilities has abruptly withdrawn from consideration following questions about its bid, according to city officials.
City staff had named Phoenix-based Allied Waste Services of North America the top scorer after a competitive bidding process in January 2023 and then brought a contract to the Board of Supervisors’ Budget and Finance Committee for approval on Feb. 28.
At the hearing, however, a Recology representative raised environmental concerns focused on newly disclosed details about Allied’s plans to run trucks from Half Moon Bay and to Santa Clara County, issues around union representation, and questions about newly available pricing data that Allied used to make a bid that was millions of dollars cheaper than Recology’s.
The committee referred the matter back to staff for further inquiry, and on Friday, Republic Services, of which Allied is a part, withdrew its proposal, pointing in an email to The City’s unwillingness to change its rates.
“With the city’s advisement (sic) that no changes to the rates can be accepted, yes, we confirm that we are withdrawing our proposal,” stated the email, signed by Kathryn Tekulve, general manager of Republic Services for the San Francisco Peninsula and San Mateo County. A Republic representative declined to comment.
In the wake of Allied’s move, the City Administrator’s Office issued a statement underscoring that bidders in a competitive solicitation process certify that the information in their proposals is accurate, and they are bound to the rates they propose and on which their bids are evaluated.
“We trust that the responder has presented a thoughtful price proposal that will enable them to faithfully perform the contract,” the statement read.
It was not until last Friday that Allied informed The City it was withdrawing because it could not proceed with its proposed rates, the City Administrator’s office said.
”We are deeply disappointed by this outcome,” it said. “Significant staff resources were spent getting to this stage in the process with Allied so that we could present a contract to the Board of Supervisors for approval.”
Recology — San Francisco’s homegrown giant of West Coast waste processing, which serves more than 100 communities — now remains the sole bidder for the contract to continue servicing about 380 city facilities, a job it already does along with being the designated hauler of residential and commercial waste in The City.
Angela Yip, senior communications and legislative analyst with the City Administrator’s Office, said city officials believed they could proceed to the next bidder without putting the contract out to bid again.
Recology officials welcomed news of Allied’s withdrawal.
“We applaud City leadership for taking the time to give this contract careful consideration. Recology’s proposal is better for the environment and will keep unionized jobs in the City, both of which align with San Francisco’s values,” read a company statement.
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The contract that city staff recommended for approval was to begin April 1, with Recology’s contract ending June 30. Allied was to collect garbage, recycling and compostables from city facilities, such as office buildings, libraries and parks.
The San Francisco Department of the Environment estimated that Allied would have collected about 7% of all trash, 4% of all compostables and 10% of all recyclables generated in The City.
City officials emphasized that Allied got a perfect score on pricing and estimated Allied’s proposal would save about $13.3 million over Recology’s bid during the first seven years of a contract worth up to $79.4 million with an option to extend for three additional years.
But in a letter and testimony before the Budget and Finance Committee, Evan Boyd, Recology vice president and region manager, raised questions about environmental and labor issues and a possible “pricing error” in Allied’s bid, noting that the prices did not change according to certain trash-compactor sizes.
Among other things, Boyd said the city had not adequately considered potential harms from Allied sending additional trucks to and from their base in Half Moon Bay and to Santa Clara County, and that The City could lose union jobs in San Francisco because Allied was planning to move recycling operations to a South Bay facility that would use nonunion sorters. Two representatives of the Teamsters Union also told of labor conflicts involving Republic in the Bay Area and elsewhere.
Supervisor Connie Chan, chair of the Budget and Finance committee, started the proceedings by congratulating City Administrator Carmen Chu and her staff for their work preparing the proposed contract with Allied, which she called “quite historic.” A short time later, the committee continued the matter to get more information.
Chan said via text that it was “disappointing that the vendor now has determined that it can no longer meet the proposed pricing and rate.” She defended Chu and her staff, saying they did “a fine job” and “there are lessons learned through the process, including labor and pricing issues.”
Allied’s surprising exit apparently put Recology in much the same position it was in back in 2020 when the Board of Supervisors recommended giving the company, already serving municipal buildings, a six-year deal worth up to $62.5 million. The City hit the brakes after a Recology employee was federally charged for allegedly bribing then-Director of Public Works Mohammed Nuru to benefit the company. Recology has continued providing service under shorter-term agreements since then.
Two former Recology employees pleaded guilty to bribing Nuru, who was convicted and sentenced to seven years in prison. Recology subsidiaries agreed to pay $36 million in criminal penalties as part of a deferred prosecution settlement with federal officials.
Longtime Recology CEO Michael Sangiacomo retired at the end of 2020 and was replaced by Sal Coniglio, former executive vice president and chief operating officer, who has condemned the illegal behavior and promised Recology would do better.
In 2021, the company also signed an agreement with the San Francisco City Attorney requiring, among other things, that Recology reimburse ratepayers $94.5 million in overcharges unearthed as part of a wide-ranging investigation into public corruption tied to Nuru and others.
Voters in last week’s election overwhelmingly approved Proposition D, a measure to overhaul The City’s ethics laws designed to address issues that arose from the Nuru scandal.
