News & Research Archive

Competitive Bidding on a Utility is a Bad Idea

Jun 23, 2011

 

Supervisor Avalos wants to put a measure on the ballot to allow a competitive bidding process to occur regarding our waste management services for San Francisco. Our current provider, Recology, has been serving San Francisco for over 60 years. On the surface competitive bidding makes sense. It allows firms to compete freely to see who can give our city the best service for the best price. However, our garbage service is a regulated utility with a tremendous infrastructure overhead that requires long-term agreements to pay for this necessary service.

At the heart of the debate involves a new ten-year contract where Recology will gather San Francisco garbage and dump it at its own landfill instead of landfills owned by its competitors, which is how it is currently handled. In 2009 Recology offered the greenest and cheapest bid for landfill. Since then the city has been working out the details to implement the plan. Competitor landfills are crying foul and stating that they should have a fair opportunity to compete. However, the city could save $130 million over 10 years through an exclusive agreement with Recology. This agreement gives Recology the necessary time to invest in new green renovations that could not occur without an exclusive, reliable contract that isn't subject to open bidding.

Waste management is like any other public utility company; it is highly regulated and requires constant large investments of capital to continue to properly service our city. Recology has met the challenge to make San Francisco one of the greenest cities in terms of its waste management through a heavy investment that could only have been made through an exclusive contract guaranteeing them time to recoup that investment. Recology is also an employee owned company where everyone in the company benefits from its success.

An open competitive bid may get San Francisco a cheaper contract but at the cost of an unknown risk of what kind of actual service would be provided. It would also derail the current contract that would save San Francisco millions over the course of its ten-year arrangement with Recology. When it comes to our waste management we cannot afford to take that chance.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 26 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.

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