Sludge Watch ==> San Francisco sludge hauling contract in front of judge

[Maureen Reilly]

Sludge pact fight spotlights S.F.'s contracting practices
Robert Selna, Chronicle Staff Writer

Thursday, December 13, 2007

A San Francisco Superior Court judge will decide Thursday whether the Board 
of Supervisors overstepped its authority when it sided with the city's 
garbage monopoly, Norcal Waste Systems, and canceled a new contract with a 
competitor that would have saved taxpayers millions of dollars.

But a more fundamental issue is whether city officials should turn their 
backs to competitive bidding practices - which help ensure the best deal for 
the public and are considered a bulwark against patronage and corruption - 
in the face of political pressure.

The case - which revolves around a comparatively small city contract to haul 
sludge from sewage plants to landfills - also puts on display the political 
influence of Norcal, and how it has successfully resisted the introduction 
of competition to San Francisco's approximately $200 million-a-year waste 
collection business.

This summer, the San Francisco Public Utilities Commission attempted to 
award the multiyear contract for daily hauling of 240 tons of treated sludge 
to S&S Trucking, after the Oakland company bid $5.5 million less than the 
highest bidder, a subsidiary of Norcal called Sunset Scavenger, which held 
the contract for 50 years running.

"The cost advantage to going with S&S was clear," said Ben Kawamura, who 
manages the public utilities commission's contracts for the city Office of 
Contract Administration. "If the PUC doesn't use S&S they will have to pay 
more and the costs will be picked up by the public in the form of higher 
water bills."

The decision by the public utilities commission to put the contract out to 
bid also was in line with a 2004 call by Mayor Gavin Newsom for an overhaul 
of the city's contracting program to inject more competition into the system 
by eliminating sole-source contracts - ones that are agreed to without 
competitive bids on the grounds that only one qualified provider of a good 
or service is available to do the work.

But on Nov. 13, the Board of Supervisors - without debate - disapproved the 
agreement between the city utilities agency and S&S, giving Norcal an 
extension of its current sludge-hauling pact.

Supervisor Bevan Dufty, who called for the vote to cancel the contract, 
later said he wasn't confident that S&S had "the financial wherewithal or 
the track record to ensure truck safety," even though the company had 
performed the same work for the East Bay Municipal Utility District for the 
past two years and the Board of Supervisors' budget analyst recommended the 
S&S contract.

In a petition filed last month, S&S asked the court to order the city to 
finalize the contract with S&S immediately and to not extend the existing 
deal with Norcal.

While the legal decision before Judge Patrick Mahoney today appears to be 
limited to the narrow question of whether the supervisors had the legal 
power to block the contract, the decision by Dufty and other board members 
to side with Norcal - only Supervisor Chris Daly voted with the public 
utilities commission and S&S Trucking - reflects the staying power and 
political influence of the bigger company.

That stature stems not only from the quality of service provided by the firm 
- which some city officials say has been exemplary - but also is rooted in 
city law that uniquely benefits Norcal and the business and political 
relationships that the company has built with unions and local elected 
officials.

"Norcal does a fantastic job," said Jared Blumenfeld, executive director of 
the city's Department of the Environment, which serves as the city's policy 
adviser on garbage and recycling. "When you look at what we are getting and 
how it's getting delivered, it's a good service for a fair price."

San Francisco-based Norcal provides waste hauling and recycling for 63 
cities and counties in California. It essentially consists of two companies 
- Golden Gate Disposal and Sunset Scavenger - that have dominated garbage 
collection in the city since the 1920s.

In 1932, city voters passed a law that effectively cemented the existing 
garbage routes and the two companies into place. The law states that the 
other companies can apply for garbage permits, but the city Department of 
Public Health can grant them only if a proposed route was not adequately 
served by the existing collector. It takes 20 percent of residents or 
merchants on a given route to sign a petition for service to be found 
inadequate.

There is no record of anyone filing such a petition since 1932, and no new 
company has applied to take over a garbage route.

Observers believe that is explained in part by the friendly relations Norcal 
has built with the Teamsters Union and the city's union-friendly Democratic 
establishment.

The company, which serves 150,000 residents and 21,000 business customers in 
San Francisco and derives 45 percent of its $400 million in annual revenue 
from the city, pays those drivers well. They gross $61 an hour - and 67 
percent of them live in San Francisco.

Norcal also has been an active and generous donor to the campaigns and 
political causes of the city's elected leaders.

In recent years, it donated thousands of dollars to help elect Newsom and 
has contributed to several supervisor campaigns.

Perhaps no politician had closer ties to the firm than Willie Brown, the 
former state Assembly speaker and San Francisco mayor. Norcal paid him at 
least $60,000 as a legal adviser while Brown served in the Legislature and 
donated thousands to his first mayoral campaign, inaugural and a 1996 city 
economic summit.

Over the years, residents and some elected officials have tried to open city 
garbage collection and recycling to competition.

But in the 1990s, voters shot down two ballot initiatives intended to 
dislodge Norcal's monopoly power, and a 2001 legal claim that Norcal's rate 
increases were excessive lost in court.

Quentin Kopp, a former San Francisco supervisor and state senator, was a 
backer of the ballot measures and the lawsuit. He said he opposed Norcal's 
monopoly because it was outdated and not healthy for the city.

"They controlled City Hall and they were no longer 250 guys from North Beach 
who were part of the companies in the 1920s," Kopp said. "The (city laws) 
became obsolete by the 1960s because garbage collection became a big 
business."

Norcal outspent the proponents of the San Francisco ballot measures, and the 
company has a history of contributing to local and state officials and 
weighing in on legislation.

Down the years, the company's reputation for influence buying has drawn law 
enforcement scrutiny.

In 2000, then-San Jose Mayor Ron Gonzales was accused of secretly agreeing 
to give Norcal an additional $11.25 million in public money in exchange for 
the company having its recycling subcontractor become a Teamsters Union 
shop. The Teamsters had contributed to Gonzales' campaigns. That case was 
later dismissed.

Today's hearing will once again bring Norcal's political maneuvering into 
public view.

Although the court's decision will turn on a narrow legal question, lawyers 
who will represent S&S have said that political pressure caused the Board of 
Supervisors to cancel the contract with S&S.

S&S's legal argument is that as the sludge contract is written - five years 
of service for $8.5 million with options to renew for four years - it should 
never have gone to the Board of Supervisors for approval because the board 
is only authorized to review contracts that are worth $10 million or more.

The city Office of Contract Administration sent the contract to the board 
for approval believing that the contract could surpass $10 million during 
the initial five-year period because S&S would be paid based on the amount 
of sewage it hauled - an amount that is variable and could increase over 
time.

To compete for the contract, all of the haulers that applied had to agree to 
pay the union-scale wages received by Norcal employees, even if their 
workers weren't represented by the Teamsters. S&S said it has and would pay 
prevailing wages. Yet, its bid still came in considerably lower and would 
save the city approximately $600,000 a year.

At a board committee hearing on the contract before the supervisors voted to 
block it, Norcal employees and Teamsters representatives argued that S&S 
would not pay the union wages - despite the company's assurances and the 
contract requirement - and that service would suffer.

"We think we provide the best service ... 67 percent of our drivers live in 
San Francisco and we are available 24-7," Robert Reed, a spokesman for 
Norcal, said in an interview. "We are totally committed to customer service, 
knowing that we succeed or fail at the curb."

S&S owner Steve Navarro said the board's decision to cancel his company's 
contract boiled down to politics. "It's pretty obvious what happened here," 
Navarro said. "Norcal is the big boy and we're the little guy."

E-mail Robert Selna at rselna at sfchronicle.com.

This article appeared on page B - 1 of the San Francisco Chronicle

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/13/BA9GTSI5P.DTL