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Articles from 1998 In April

What's Driving Today's Collection and Recycling Marketplace?

Today's intensely competitive solid waste marketplace is forcing solid waste collection and recycling operations to undergo dramatic changes.

Experience has shown that both private and public operations can succeed if they understand the market in which they operate and if they use the full range of tools available.

Recycling and collection system managers are learning to retain control of their destiny by building flexibility into their systems, not by becoming captive to any particular operational mode, and by using competition as a tool to improve operations.

In a number of recent competitions for residential solid waste collection and recycling services, local governments have learned that they can get lower bids by allowing municipal employees to engage in managed competition with private service companies.

While local governments can contract out some or all of their solid waste operations, they never can contract out their accountability to protect public health and the environment and to achieve waste reduction, recycling and diversion objectives. Privatization and municipalization are only the bookends in a range of options that include constructive and mutually beneficial public-private partnerships.

Competition works as well in the public sector as in the private sector, and municipal employees are beginning to show that they will compete for business and that they can win publicly-tendered service contracts. This broadens the competitive field and in the end, the customers will be the winners.

To hear about these and other collection innovations, mark your calendars for May 11-15 for a double-barrel program in Tempe, Ariz., at SWANA's 9th Annual Waste Reduction, Recycling and Composting Symposium and at SWANA's 2nd Annual Collection Symposium.

For the price of one admission, you can attend your choice of technical sessions from either symposium. The symposia are co-sponsored by SWANA's Arizona Chapter and World Wastes magazine. In addition, there is a workshop for local governments on making source reduction and reuse work in your community which is sponsored by the National Recycling Coalition's (NRC) Source Reduction Forum and the Southwest Recycling Association.

Featured speakers include: Will Ferretti, NRC's Executive Director, Chaz Miller, NSWMA's Manager of Recycling Services, and Bill Wolpin, World Wastes' Editor and Publisher.

Team up with SWANA in Tempe and stay on the cutting edge of developments in the solid waste reduction, recycling and collection field.

collection: Who Handles the Trash in the 100 Largest U.S. Cities?

How do your rates, services and market shares stack up against other U.S. cities' public and private solid waste programs? To help you answer these and other questions, 100 of the largest U.S. cities were surveyed during the first half of 1997 by Hilton Farnkopf & Hobson, a Newport Beach, Calf.-based solid waste consulting firm.

Combined, these top 100 cities represent a population of 22 million residents. New York, the largest city surveyed, recorded 7.3 million residents while Newport News, Va., was at the other end of the spectrum with only 171,000 residents.

Exclusive municipal service is still king of the residential refuse collection market; it is provided in 62 percent of the cities, according to the survey. A total of 18 percent use exclusive private service under a contract or franchise agreement. In addition, 6 percent employ open competition where several haulers vie for residential customers, and 14 percent have combinations of arrangements.

The largest cities are more likely to have publicly-operated residential collection programs. Based on the population served, 70 percent of the residents in these 100 cities are served by municipal collection operations.

The high percentage of municipally-operated residential collection programs, combined with privatization trends, provides limited potential growth for private solid waste companies. Based on an average $13 monthly rate reported by the municipal operators and assuming three people per household, the residential market served by the municipal operators has a $1.9 billion average annual value.

Compare this to the 1996 reported total revenues of Waste Management Inc. (approximately $9.2 billion) and Browning-Ferris Industries (approximately $5.8 billion).

Unlike the residential market where municipal service providers dominate, only 12 percent of the cities reported exclusive municipal service for commercial collection. The vast majority of the cities, 60 percent, allow open competition among private haulers for commercial collection.

A small number, 13 percent of the surveyed cities reported that their municipal collection operation competes with private haulers for commercial customers, and 15 percent of the cities have an exclusive private contract or franchise agreement.

A 95 percent majority of the cities collect either curbside or in alleys, while the remaining 5 percent provide backyard service as standard or optional.

In addition to refuse collection service, 87 percent reported operating curbside recycling programs, 74 percent collected yard waste and 69 percent offer a household hazardous waste collection day.

Nearly two-thirds of the surveyed cities provide once-per-week residential refuse collection. Approximately 30 percent provide twice-per-week service, and 4 percent use other pickup schedules. New York and Boston offer collection up to three times per week.

Manual refuse collection is still the predominant collection method, used by 45 percent of the cities. Twenty-eight percent provide fully-automated service, and 13 percent provide semi-automated service. Another 13 percent use a combination of methods.

While 81 percent still charge all residential customers a flat monthly rate for solid waste collection, some 19 percent of the jurisdictions have implemented variable rates which require residential customers to pay for solid waste collection services based on the amount of waste generated.

This is done in a variety of ways, including volume-based rates charging by the number of containers and/ or container size and pay-by-weight systems.

Thirty-eight percent of the cities owned their own landfills, while 62 percent used third-party landfills owned by either the counties or private companies.

The private sector share of the disposal market will probably increase in future years as smaller, municipally-owned landfills are closed and waste quantities are transported to larger, regional landfills that often are owned by private solid waste companies.

Landfill tip fees ranged from $7.50 to $97 per ton. Interestingly, the two lowest reported tip fees were in Colorado (Aurora at $7.50 per ton and Denver at $9.15 per ton) and the two highest were in Washington (Tacoma at $80 per ton and Spokane at $97 per ton).

For more information about this survey, contact Hilton Farnkopf & Hobson at (714) 251-8628.

1. Air Force One uses retread tires.

a. True b. False

2. PET bottles cannot be recycled back into food and beverage containers.

a. True b. False

3. All recycled products must be labeled as recycled products.

a. True b. False

4. The easiest way to determine the difference between a virgin and a recycled product is:

a. chemical testing

b. physical testing

c. none of the above

5. When you are buying a product, recycled content should be your only consideration.

a. True b. False

Answers to QuickQuiz: 1 - A. Not only does Air Force One use retreads, so do all other domestic airlines, about 80 percent of truck fleets, the U.S. Postal Service, Federal Express and United Parcel Service.

2 - B. PET bottles can be recycled into food and beverage containers using technologies reviewed and found safe by the Food and Drug Administration. In 1996, 24 million pounds of recycled PET were used to manufacture new food and beverage containers.

3 - B. Many of the products that we use, such as auto parts, steel, plastic products, tissue and towel products and many others use recycled materials and provide good quality products at a competitive price.

4 - C. There is no chemical or physical test to determine the difference.

5 - B. Price and quality should also be important considerations; if you buy a recycled product that is significantly overpriced or does not suit your needs, you have not made a good purchase. In addition, you should look for other environmental features of the product, such as waste prevention, lower energy use and less toxicity.

Questions courtesy of Maryland Environmental Services. For more information, contact: Richard Keller, 2011 Commerce Dr., Annapolis, Md. 21401. (410) 974-7281. Fax: (410) 974-7267.

The Transfer Tune-Up

The "integrated" in integrated solid waste management takes on new meaning as competition between providers becomes more intense. For example, in order for a transfer station to be a viable part of an efficient, integrated system, owners and operators must understand the variables that will make their business successful - or not.

Haulers know that collection costs are usually twice as much as disposal costs and that disposal costs are often beyond their control. As a result, they must find ways to collect and transfer waste as efficiently as possible to gain a competitive advantage.

For example, Sacramento County, Calif., is focusing on increasing its collection efficiency by rerouting and implementing a four-day-per-week collection system and by routing more material through low-cost transfer operations.

That's only the beginning. The costs of transfer must be understood. They include:

* the station's annual operating expenses, including: debt on the capital cost to site and build the station(s), debt on the rolling stock and equipment, labor; maintenance/repair and utilities;

* longhauling materials transferred to disposal or market destinations;

* collecting and hauling materials to the station(s); and

* disposal less net revenues from recycling materials recovered.

More to Consider But wait, there's more. Other areas that affect overall transfer cost include basic design and planning. For example, it is important that a transfer facility is properly sized when it is designed.

The basic elements - the scale facility, circulation roadways and queuing areas, the tipping floor and the transfer load-out areas - should be sized based on accurate existing and realistic future traffic and tonnages. Excessively conservative and unrealistic future projections can make the venture appear uncompetitive.

Two simple strategies for keeping capital costs under control are:

* Plan the design based on a 10- to 15-year period instead of guesstimating the tonnage and traffic volumes for 25 to 30 years in the future. Plan for additional growth through easy expansions, such as adding another bay on the tipping floor or adding a second scale). Alternatively, tonnage and traffic growth can be managed by increasing the operating hours.

* Use existing facilities and infrastructure such as industrial warehouses or other large structures. For example, the city of Portland, Ore., converted an old steel mill into a material recovery facility (MRF) and Montgomery County, Ohio, expanded a facility originally designed for incineration into a transfer station (see "Montgomery County Shapes up, Ships out" on page 44).

What's Your Operating Cost? Labor, operation and maintenance costs can represent up to 50 percent of total annual costs. To keep labor and operating costs as low as possible, planners in Sacramento County, Calif., are considering the following options at their two existing 300 to 400 ton-per-day (tpd) stations and one planned 300 tpd station:

* Centralizing different functional operations when making material recovery improvements. For example, one person manages both sets of containers when they are set side-by-side - the roll-off containers used by the public for recyclables and the containers for loading recovered materials from the tipping floor.

* Because the new transfer station will eliminate all self-haul traffic at the landfill, the county will defray system-wide cost increases by transferring unneeded landfill equipment and staff to the proposed transfer operations.

* Instead of implementing costly mixed waste processing and sorting operations, the county plans to incorporate material recovery improvements at its transfer stations that provide incentives for the public to separate recyclable materials.

These include constructing a free tip area for recycling certain materials. A waste exchange also will be established to encourage customer recycling. Another improvement will be a new, reduced-rate tipping area so that customers can dispose of materials such as clean loads of inerts, wood, white goods and yard waste.

Longhaul Costs Typically, longhauling materials from the transfer station to the landfill is the most expensive element. Factors that contribute to high longhaul costs include low payloads, inefficient loading/unloading and inefficient round-trip travel times.

The most effective step toward minimizing longhaul costs is to reduce the amount of time and the number of longhaul miles traveled annually. Tactics to maximize payloads include:

* breaking up and running over the waste on the tipping floor to increase density prior to loading transfer vehicles;

* using tamping equipment to increase the material density in open-top transfer trailers; and

* using mechanical compactors.

Preload compactors and lightweight trailers also can minimize longhaul's costs. However, for preload compactors to be cost-effective, haul-cost savings must offset the additional capital and the compactors' operating costs. A comparison between open-top and preload technologies must include the following to determine the lowest per-ton cost:

* Annual debt service on capital costs. At about $1 million for a large, high-capacity preload compactor and associated infrastructure, pre-load compaction costs are considerable. Conversely, the cost of tamping equipment must be considered for open-top stations.

* Station labor costs. Labor costs for tamping equipment operation is higher than that for preload compactors, which can be operated either by loader operators or truck drivers.

* Maintenance, repairs and consumables costs for both the compactors and tamping equipment.

* Longhaul costs, consisting of debt service on transfer vehicles, driver labor, fuel and lubricants, tires, vehicle repairs and maintenance, taxes, insurance and licensing.

Payloads depend on the size and type of the transfer trailers used and the over-the-road weight limits. Payload optimization must be evaluated by project to identify the most cost-effective operation.

For example, in Montgomery County, the transfer stations primarily are handling packer truck waste using tamping cranes with open-top trailers. Even with a 50-mile, one-way haul, this system provides the lowest-cost operation.

In contrast, at Sacramento County's North Area transfer station, which primarily handles self-haul and low-density waste materials, pre-load compaction is the lowest-cost operation with a 25-mile, one-way haul.

In congested metropolitan areas, longhaul costs can be reduced by scheduling the transfer outside of heavy traffic hours.

While no cookie-cutter plan exists, your transfer station can remain competitive if it is properly designed, built and operated.

UPDATE: Super Bowl Scores One for Recycling

SAN DIEGO - A series of environmental projects integrated into Super Bowl XXXII events resulted in cost savings of $18,876 and provided a variety of benefits to San Diego, this year's Super Bowl host community.

"Over the last six years, many of the environmental initiatives we've set up at NFL-sponsored Super Bowl events have become permanent programs in host cities," says Jim Steeg, NFL Vice President of Special Events.

In San Diego, the three major projects included solid waste management at NFL-sponsored events, a community-wide prepared food recovery and distribution program and a unique "litter-free" campaign at the NFL Experience Football Theme Park, the largest single public event run in conjunction with the Super Bowl.

"Thanks to all the local individuals and agencies who participated, our recycling effort was the best it has ever been," says Ed Augustine, director of the NFL's Environmental Program. "By aggressively recycling and donating excess food, we were able to cut the waste stream dramatically, diverting nearly half of the material that would have ended up in local landfills."

The cost savings are based on the waste hauling and tipping fees that were avoided by recycling as well as on the rebates offered by local recyclers in return for the plastic, cardboard and aluminum that was collected.

The litter-free campaign was staffed by volunteers from the San Diego Zoo who greeted attendees at the NFL Experience. Each attendee was reminded that the event was litter-free and then offered a souvenir NFL sticker as a reminder.

Based on the number of stickers distributed, there were approximately 100,000 one-on-one, face-to-face contacts between volunteers and attendees. Such personal contact has been shown to reduce the amount of litter substantially at public events and, thus, saves in clean-up costs.

For more information on the NFL Environmental Program, which is in its sixth year, contact Jack Groh at (401) 732-1551.

waste-to-energy: Chicago-Area Facility Recycles, Energizes Waste Bill Siuru

With its landfills rapidly filling to capacity, one community in Chicago has devised an important alternative to landfilling that will not only process waste, but also recycle and convert it to energy.

A combination recycling and waste-to-energy (WTE) facility in the Village of Robbins, Ill., a suburb of Chicago, can accept, separate and process the 1,600 tons of residential and commercial waste it receives daily.

Of that solid waste, 25 percent by weight is recycled, while the other 75 percent is converted to refuse-derived-fuel (RDF). At an 85 percent capacity rate, the facility can handle about 1.5 million tons of solid waste annually.

The RDF fuels twin circulating fluid bed (CFB) boilers that provide steam for a turbine generator system producing more than 50,000 kilowatts, leaving boiler ash residue as the only by-product to be landfilled.

Upon delivery, unacceptable and unprocessable wastes are removed from the solid waste. Two processing lines then separate the recyclable and combustible material. On each, a primary trommel opens trash bags, breaks glass and separates any material less than six inches in size.

Using a horizontal hammermill, the material not removed by the primary trommel is shredded to pieces no larger 3.5 inches.

That material is sent to a two-stage trommel screen, where it's separated into three waste streams. The first handles glass and organic materials, including yard and food wastes that are then conveyed to the glass recovery system, yielding organic-free glass that can be used as building material and road aggregate. Organic materials are sent off-site to be processed into compost, which in turn can be used as soil conditioner.

Several overhead belt magnets located in the processing system recover 92 percent of the ferrous metals (about 5 percent of total solid waste). Eddy current separators remove about 65 percent of aluminum in the solid waste (mainly cans).

Shredders provide uniform-sized fuel with an estimated value of 6,170 British thermal units per pound. The RDF is placed in storage, where an estimated three-day fuel supply is stored before being sent to the CFB boiler feed system.

Two high-tech CFB boilers, supplied by Foster Wheeler Power Systems, Clinton, N.J., a partner in developing the facility, burn up to 600 tons of RDF to produce 229,000 pounds of superheated steam per hour. Currently, this is the world's largest circulating, fluidized bed WTE unit in operation.

Unlike conventional combustors, CFB combustors burn waste in a hot, fluid suspension of material that is trained in an upward flow of air rather than on a grate or hearth. This fluid bed consists of RDF mixed with intensely hot particles of a screen bed ash and sand mixture.

CFB technology yields a combustion efficiency of 99 percent, high boiler efficiency (81 percent versus 70 to 75 percent for other types of boilers), low combustion temperatures, reduced nitrogen oxide (NOx) emissions, more stable combustion and cleaner stack emissions than other technologies.

In addition, there are twin state-of-the-art air pollution control systems: selective, non-catalytic reduction and dry blue-gas scrubber/baghouse. The result: low carbon monoxide and NOx emissions.

The system is environmental friendly, having eliminated the need of addition MSW transportation to landfills, and the plant produces cleaner electricity than coal-fired power plants typically used in this region.

Winning the Refuse Game

All is not fair in love and competition. At least that's what private and public sector operators are discovering as shrinking profits and dwindling budgets come into play.

The nature of the game has changed, so it becomes critical that today's players understand the objectives, rules, penalties, the other team's strengths/weaknesses and the exact prize that the winner gets to take home.

If you're lucky, the competition will be similar to responding to a municipality's request for qualifications or a request for proposal. Here, the who, what, when, where and how will be spelled out.

In other cases, these factors may not be that cut-and-dry.

During the last five years, the definition of "competition" has evolved, and buzz words like "managed competition" and "privatization" have come into vogue to either clarify or confuse.

Depending on whether your desk is in City Hall, in a corporate office of one of the 10 largest refuse companies or in the back corner of one of the thousands of mom-and-pop operations, your definition and perception of "competing" is bound to vary.

"My definition of 'competition' is when qualified companies that have services to offer and that meet the requirements of a business or community submit a combination of prices and services and whoever has the best combination is awarded the contract," says Christi Clark, Corporate Director of Marketing and Sales for the Public Sector for Browning-Ferris Industries (BFI), Houston.

The end result of competition should be quality services for residents, adds John Skinner, CEO of the Solid Waste Association of North America, Silver Spring, Md. "Competition is activities between service providers that result in the most favorable terms for the ratepayer."

Robert Epler, assistant director of the Environmental Services Department in the city of San Diego is more blunt: "As I see it now, [competition] seems to be a code word for the private sector attempting to take municipal services and convert them over to private systems."

No matter what your definition is, one thing is true: To brace for the future of competition, you must understand how competition has changed over the past few years. For example, "managed competition" has given the public sector both opportunities and challenges.

"There is a big change that most of the folks in the industry really have not caught onto yet," reports John Williams, senior vice president with HDR Engineering Inc., Omaha, Neb.

"The term 'managed competition' originated in Phoenix more than a decade ago, where they started bidding out public services and allowing public employees to bid against private entities," he continues.

"Originally, the private companies grasped managed competition with enthusiasm because it represented an opportunity for them to enter what was formerly a pure public market. They may not like it anymore, because lately, there have been a number of [situations where] public employees won.

"I don't think that many of the private companies expected that to happen, and there's a growing number of them that are saying they will no longer participate in managed competitions where they feel the competition isn't on an even playing field."

For municipalities, the idea of competing is both frightening and invigorating. "Before Carbone [decision], we in the public waste industry were monopoly operators," says John Hadfield, deputy executive director for the Southeastern Public Service Authority in Chesapeake, Va.

"We operated waste management facilities for which there was little competition in most communities," he says. "With the advent of Carbone, a lot of us found that we were no longer monopolies, and we had to fight for our survival."

For most municipalities, this paradigm shift was the result of altered public perception.

"The prevailing [general public] belief is that public employees are not efficient, that government is wasteful and the only good government is a smaller or non-existent government," Williams says. "However, the public works sector suddenly has been introduced to the pressures of competition, and the belief that only the private sector can deal productively with that is absolutely false."

The private sector has not been left unscathed by this changing paradigm either. The recent spate of acquisitions, divestitures and realignments - with their accompanying management shake-ups - has affected how the private sector is responding as well.

"When I started in the late '70s, the complexity of what was required [to compete] was not as sophisticated," Clark, a 20-year BFI veteran, says. "The customer had a different expectation level than what they have today. I think that's why there's really been an increasing level of competition above and beyond just the price."

Epler sees the private sector vertically integrating to ensure market share, while simultaneously vying for the remaining municipal collection and disposal operations. "They are fighting to maintain their status quo on the contracts and on the franchises they have," he says.

Level Playing Fields? One of the most critical changes has been the concept of leveling the playing field so that both sectors are competing on the same footing and with the same costs.

"When folks start talking about an even playing field, almost invariably they're saying that they're searching for some advantage that they can realize from the process," Williams says. "In the real world, there is no such thing as an even playing field. Every team has its own advantages and disadvantages."

Until recently, the playing field was filled with traps that obstructed anything except token competition.

"Great efforts have gone into [defining] service requirements and bidding procedures," Epler says. "The public sector services have been beating out private bids on a fairly regular basis with Phoenix, Charlotte [N.C.] and Florida having some very notable examples.

"Competition has spurred [municipal services] to improve their operations and get rid of program costs that were assigned when collection or landfill service was a cash cow. All of a sudden, prices are compared equally," he adds.

Today's biggest competitive battlefield consists of maximizing existing system tonnage into the private landfill systems. A decade ago, it was feared that the nation would run out of landfill capacity, which ultimately pushed recycling and waste diversion to the forefront.

Instead, small, local landfills closed, and mega-landfills, which were operated primarily by private companies, developed. Increasing waste diversion, coupled with expanding capacity, has put a downward pressure on landfill costs, resulting in fierce competition for tonnage.

"There are a number of areas in the country where capacity is significant and where the volumes are less than what the capacity would be able to handle," Clark says. "[In some places], disposal prices have really plummeted - in some cases to levels of 10 and 15 years ago."

This pressure to feed capacity critically affects the public sector as well, especially where large investments in infrastructure were made assuming flow control would ensure the revenues necessary to pay off the bonds.

With legalized flow control considered dead by many, public agencies have had to come up with aggressive pricing to prevent revenue losses. "We looked at other ways to compete rather than trying to grab the waste and control it," Hadfield says.

"We attacked the competition issue by telling our communities that if we lose all the private sector waste, their disposal fees are going to go up into the $80- or $90-a-ton range," he says. "If that is taken as the floor, then anything we can do to reduce cost below that is good. We made tipping fees for the private sector competitive with hauling waste out of the area. Over the first six months, we stabilized and started recovering waste flow."

Another major battlefield continues to be collection. "It's in both commercial and residential collection," Skinner says. "In the area of commercial collection, it's the private sector firms predominately competing with each other. [There is] some public sector interest in commercial collection as well to capture waste flows for various purposes."

Collection competition continues to remain a hotbed of controversy. "Municipally-provided services are a prime target for private companies that need to increase their market share and feed the facilities that they've developed," Epler says. "It seemed like the private sector simultaneously has closed down competition in areas that have exclusive franchises."

California state law requires that a municipality must give a five-year notice before terminating collection services with a private hauler.

"You've got all of these companies that have negotiated evergreen contracts in their franchise agreements," Epler says. "We've got examples of cities that've gone 43 years without any rebidding, and so you've got the private sector guarding its nest and trying to stake out new territories. That's the area where there isn't competition."

What's Your Strategy? The basic differences between the public and private sectors often make it difficult to ensure fair and equitable competition.

Whereas the private sector has the flexibility to set pricing based on market demands, the public sector often is limited to a one-size-fits-all pricing scheme to ensure equitable service.

"If you're in the private sector, you have an unfettered opportunity to do business with whomever you want to and under whatever conditions," Hadfield says.

"As a public agency, we've got a couple of restrictions," he continues. "First, in order to move outside of our normal business, we need political support. Also, because of our public nature, we're unable to cut special deals with certain customers to improve our position. Whatever we do has to be offered to everybody. So, we find ourselves trying to be creative in establishing what appears to be equal terms, but that really are terms that are geared to one or two businesses."

If you're in the public sector, it's easy to assume that the private waste companies have got competition wired since they've been doing it for much longer.

Not necessarily. Private companies often wrestle with understanding their competition and the changing nature of the waste industry as well.

"You might be thinking we have some strategy that's oriented to our competition," Clark says. "You watch the competition to see if there is innovation that is meeting the needs of the customers in a way that you should adopt.

"Simultaneously, you're working to develop your own innovation, doing your research with your customers to make sure that you're doing what you need to do internally to meet their needs," she says. "It's nearly impossible to figure out what our competition's strategies are from the pricing standpoint, because it is so variable from one area of the country to the other."

Since profit is the motivating factor with private companies, the competitive engine runs much hotter than it does in the public sector. While staying competitive in the public sector means controlling costs to satisfy the community's ratepayers, in the private sector, this often means ensuring a maximum return to stockholders.

"In the private sector, the competition has heated up far more than anyone anticipated because of the glut in cheap landfill space," Williams reports. "Many of the large, private companies are facing stockholders who are demanding significant profit.

"Over the past few years, a couple of the major companies have reported disappointing profits or major losses. They're desperate to improve their bottom line, and therefore, they're trying to compete even harder.

"In the meantime, the public sector emerges as a portion of the marketplace that's not interested in profits, so they're more service- and regulatory-driven," he continues. "Instead of chasing a profit target, they simply want to provide a comparable service with the private provider and fulfill their regulatory requirements. It's going to come down to who can satisfy the requirements and nothing more."

The winners will be those who can thrive in a changing environment, acting entrepreneurially while responding to customer needs and regulatory requirements in a manner that satisfies everyone.

"Those that have the best chance of winning recognize the market has changed and that they need to change with it," Hadfield says. "Folks who stick their heads in the sand and hope for flow control or expect customer loyalty when prices are still high are going to lose.

"[Private companies] don't have to be viewed as the enemy," he continues. "We can all learn a lot about this business if we rise to the challenge."

And this challenge is likely to continue, Clark adds. "It's a very dynamic industry," she says. "The only way to survive is to renew yourself continually.

"You need to do the best you can to understand your customers and what their needs are, then look internally and improve upon the internal efficiencies and capabilities of your organization," she says.

"Sometimes you're going to win and sometimes you're not, but if you do the best you can, you're going to win your share."

AN ANALYSIS: A Strong Current of Change

The language you could use to describe the event is simple: the pooling of capital and resources, trucks, landfills, transfer stations and talent.

But if the merger is completed between these two industry titans - Oak Brook-Ill.-based Waste Management and USA Waste, Houston - its effect will be anything but simple.

Consider the combined company's size: 650 collection operations, 319 landfills, 339 transfer stations and 76,500 employees. All this adds up to a 1997 revenue of $11.8 billion ($9.2 billion for Waste Management and $2.6 billion for USA Waste).

At first glance, the reasons for the merger appear simple, as well. For example, pooling the resources of both companies will save money - "at least $800 million through operating synergies and enhanced efficiencies," notes the mid-March announcement issued from both companies.

USA Waste's strong leadership provides another important reason: The one element the floundering Waste Management needs, ironically, is management.

And, at least one other possible reason for the merger surfaces when you dive deeper into the numbers: The companies' operations complement each other.

Compared to USA Waste, for example, Waste Management had far more collection operations (400 versus 250), but fewer company-owned transfer options (164 transfer stations versus 175 owned by USA Waste) and still fewer landfills (137 versus 182).

Clearly, the new Waste Management is being led primarily by top USA Waste personnel (see "At the Helm" on page 18), although, according to the announcement, the members of its new senior management team will be chosen "from the best of both companies."

However, both companies most likely will be releasing some future competitors. "I won't be surprised if several former employees of Waste or USA start their own company," says N.C. Vasuki, head of the Delaware Solid Waste Authority in Dover.

Peter Ruud, vice president - administration at Madison, Wis.-based Superior Services, agrees. "It's happened before, and it's reasonable to assume that will happen again, based on the way our business has developed historically."

Ruud also sees opportunities for his company, and those like Superior, to purchase some of the assets likely being sold by Waste Management.

In addition, he says, "there will be some management talent available," all the way down to the local level.

Who Will Be Affected? How this merger will affect the industry depends on who you talk to. For example, Ruud views the merger as a positive sign. "For the past couple of years, the industry has been operating under a cloud because its largest company has had some very serious questions raised about its ability to manage its operations."

He says WMI's problems were viewed as "a reflection of problems in the industry as a whole," particularly in the investment community.

"Putting the USA management to work over the Waste Management assets will remove a great deal of those concerns." As a result, he says, the publicly-held companies will benefit because investors will view environmental stocks more favorably.

Ruud also predicts that the merger will add stability to the nature of competition. He says in some cases, "local [Waste Management] operation's activities were somewhat unpredictable." He expects "more rational pricing and a more disciplined approach to producing earning" under the new leadership.

Bruce Parker, president and CEO of the Environmental Industry Associations (EIA), Washington, D.C., sees the merger positively. "There are clearly opportunities with this change," he says. "It depends on how you manage it."

In a unique position to feel the affects of this merger, the EIA will lose at least one large dues-paying member as a result of the consolidation. Parker maintains that the association's value can increase with a company's size, however.

Although he knows that USA is a "lean and mean" company, Parker sees opportunities for the association in providing services to large companies, such as the new Waste Management, that they don't want to invest in themselves.

In fact, he sees the development of the larger integrated waste management companies as a necessary part of the industry's and EIA's growth.

"To some degree, the future stability of the industry is in the larger companies, both publicly-traded and independents, that have the financial means, resources and needs to use a trade association to its fullest."

Parker sees opportunities for the smaller operator, especially in the niche area. "What difference does it make if you have a 100-pound or an 80-pound gorilla to compete against?" he says. "Garbage truly is a local service, and the ability to act quickly and make changes has been the element that enables small haulers to persevere."

Dave Gobin, vice-president and chief development officer at Casella Waste Systems, Rutland, Vt., agrees that the consolidation presents an opportunity for small haulers "because they respond quicker to customers." He also believes that Waste Management's sophistication and resources will balance the equation.

"It's waking a sleeping giant," he says. He thinks that in some cases, independents may have become complacent because "Waste Management wasn't as competitive as they were capable of being," he says.

"The level of competition will be raised," he predicts, because USA's marketing savvy is more advanced than that of the old Waste Management.

Ultimately, Gobin sees independents finding their niches, as well. "They have to reinvent themselves - an introspection to find out how they will compete against a larger entity with better tactics and management," he says.

Municipal Vibrations "This is not a consolidation of two companies," says John Skinner, Executive Director of the Solid Waste Association of North America, Silver Spring, Md. "It's probably a consolidation of seven or eight."

As a result, Skinner sees "one company dominating in some regional markets." The twin goals of consolidation and vertical integration shared by larger private contractors "will lead to a significant reduction of competition in the industry," he says.

This consolidation serves as a reminder to municipalities of the importance of writing a good contract, Skinner says, especially when that company may be bought during the contract period.

"It becomes extremely important with respect to post-closure landfill care. If you're not careful, you may start out contracting with a company with a significant asset base being replaced by a new owner without those assets," he continues. "How you avoid that is a serious issue."

For municipalities with existing contracts specifically with USA Waste, "now is a good time to examine those agreements for clauses that allow reopening of negotiations as a result of change of ownership or lowered operating costs," advises Lynn Merrill, solid waste manager for the city of San Bernardino, Calif.

"Cities should bargain hard to reap the benefits of savings resulting from both streamlining and vertical integration in the merged company."

Merrill also sees a larger, more aggressive company. "There is a renewed danger for municipal collection operations and regional private haulers from this merger," he warns.

"Once Waste Management digests the merger savings, the only way they can ensure future corporate growth and satisfy stockholders will be through even more aggressive competition strategies and acquisitions," he says. "This means that they'll target cities for privatization and small haulers for acquisitions."

"The real question is 'How will this merger benefit the customer?'" Vasuki says. "Since customer satisfaction is the key issue in collection, if the consumer ultimately doesn't benefit, then opportunities will open up for other private contractors."

And, if this consolidation ultimately means at least one fewer company bidding for a contract, then those public sector operators tuning up to compete for collection contracts could benefit, too, he adds.

Although holding down costs while providing the same or better service is a primary tenet of consolidation, does this always hold true?

Vasuki, whose own landfills have not increased tipping fees in six years, feels that, in some cases, the consolidation will result in certain inefficiencies, "because all costs cannot be accurately predicted."

"This was the logical next step," Ruud says. "I don't think it's anywhere near the end of the consolidation trend."

Parker also sees more consolidation, asset swaps and mergers, "and maybe a few surprises." For example, he says, there are a dozen publicly-traded companies, "and it'll be interesting to see how many will still be picking up garbage in the next year or two."

Consolidation is part of the evolution of the industry, Gobin says - an evolution with several phases. "The late '80s early '90s consolidation was a continuation of consolidations from a decade earlier," he explains. "The current phase, which includes an upgraded executive corps, is the result of the investment community taking a serious interest in our industry."

Gobin sees the next phase emphasizing efficiency. "This is one of the most inefficient industries I've ever seen," he says and predicts that "we will start thinking like a Federal Express, applying those kinds of efficiencies and logistics to this industry."

"When the dust finally settles, you're going to have a stronger industry," but possibly fewer players, Parker says. "You're going to have players who can respond to situations, that have more financial capability, capital access and are more innovative. And you're still going to have a lot of mom and pops."

The "wild card" in the industry's future, Ruud says, "is whether technology will change and whether we will use alternative forms of disposal. That will affect the way our business develops long term. There may be substantial changes, but they will reflect changes in our culture."

Whether this merger fuels more consolidation, increased privatization or more independents selling is still to be seen. Merrill's advice to solid waste managers, however, may be the most fitting: "Sharpen your pencils, tighten your costs and hang on."

Although the new company will be named "Waste Management" and will be based in Houston, its key managers, particularly John Drury, are straight off USA Waste's roster.

Drury, board chairman since 1995 and CEO since 1994, will serve as CEO and chairman of the new company's executive committee board.

Drury also was president/COO of Houston-based Browning-Ferris Industries from 1982 to 1991.

To help him run the new company, Drury will bring in two top USA Waste execs: Rodney R. Proto (president and COO) and Earl E. DeFrates (executive vice president and CFO). Both will retain their former titles in the new company.

The two most visible members of Waste Management to serve in the new company are acting chairman and CEO Robert S. Miller, named as non-executive chairman of the new company's board of directors, and Roderick M. Hills, a current member of the board, who will chair the new board's audit committee.

The board of directors of both companies will designate equal numbers of members to serve on the new board.

Feds Denied Questioning Carte Blanche

Federal prosecutors and investigators must get permission from a company's lawyer before questioning its employees, according to a ruling by a federal appeals court [U.S. ex rel. Daniel G. O'Keefe v. McDonnell Douglas Corp., No. 97-2261, 8th Cir., Jan. 6,1998].

The decision could seriously affect government investigations of all kinds of corporate wrongdoing, including environmental law violations.

The case arose in 1993 when Daniel G. O'Keefe, a former McDonnell Douglas employee, filed suit in federal district court in St. Louis under the False Claims Act (FCA).

The suit alleges that McDonnell Douglas overstated labor costs on a Navy contract. The FCA encourages employees who know about fraudulent goings-on to sue their employers on behalf of the government. After such cases are filed, the Justice Department (DOJ) can assume responsibility for pressing the matter, and the whistleblowers can share in the recovery.

Indeed, DOJ intervened in 1995, and soon afterward, Defense Department investigators began making contacts with current and former company employees who may have participated in the illegal activities.

Government agents questioned employees who were suspected of participating in the alleged billing scam. Investigators visited current and former workers at their homes. Sometimes the agents simply sent out questionnaires.

McDonnell Douglas promptly asked U.S. District Judge George F. Gunn, Jr. for a protective order preventing such contacts. As the company's lawyer saw it, the investigators simply were acting on behalf of DOJ lawyers and, thus, were bound by Missouri's legal ethics requirements.

Under the rules of professional conduct for lawyers who practice in Missouri and in virtually every other state, a lawyer for one side in a dispute cannot talk with individuals who are linked with the opposing side, unless either the lawyer for the opposing side approves or the inquiring lawyer is authorized by law to do so.

Such private conversations are known as ex parte contacts. The purpose of the rule is to protect unsophisticated laymen from ensnarement by wily lawyers. Almost without exception, the federal courts adopt the legal ethics rules of the states where they are located. Missouri rules hold sway in the federal courthouse where Judge Gunn sits.

The government, for its part, argued that a protective order was not warranted because the ex parte contacts were "authorized" under the Attorney General's own rules, which permit contacts with individuals who are not (or were not) key high-level employees.

Judge Gunn granted the protective order, concluding that the Attorney General's permissive rules exceeded her legal authority.

He ordered the government to stop all contacts and to turn over to the defendant all information obtained from ex parte contacts already made. "The suggestion that [federal prosecutors] should be exempted from a longstanding and applied ethical norm is alarming," Judge Gunn said.

On appeal, the U.S. Court of Appeals for the Eighth Circuit in St. Louis upheld the lower court decision. In effect, government attorneys now must abide by the ethical standards imposed by local rules of United States courts - even if such rules hamper a federal investigation.

Defense lawyers applauded the decision, which puts a crimp in gung-ho government probes of corporate activities. According to Fordham University law professor Daniel C. Richman, a former federal prosecutor, "This really strikes at the heart of what the government thinks is important."

Historically, DOJ has taken the position that its lawyers are not subject to ethical standards in local federal courts. In 1989, DOJ lawyers began relying on a controversial memo written by then-Attorney General Richard Thornburgh to justify their disregard of local ethics rules.

In 1994, Attorney General Janet Reno formally issued a regulation that purported to authorize federal prosecutors and agents to interview anyone connected with a targeted entity except for so-called "controlling individuals" - i.e., current top-level employees who participate as decision-makers in formulating the organization's legal position or in investigating the subject matter.

Although the Eighth Circuit ruling directly affects federal investigations in Arkansas, Missouri, Iowa, Minnesota, North Dakota and South Dakota, prosecutors throughout the country are now obliged to reexamine their tactics in corporate investigations.

Such a disruption of DOJ operating procedures almost guarantees that the government will appeal.

Questions, Comments, Ideas? The Legal Column invites your questions and comments on legal developments and welcomes suggestions for topics. Contact the Legal Editor via e-mail: [email protected] Net

Baling out Small Landfills

When seeking to extend a landfill's life, managers of small sites are discovering that baling waste can be a viable alternative to traditional loose waste disposal.

Other pluses of baling at small sites include: reduced operational costs, increased efficiency and improved site aesthetics.

Could baling be the solution for your landfill? Read on.

If you have a loose-waste landfill, your site's waste density is determined by the thickness of the lift being compacted, the number of passes the equipment makes, and the weight and configuration of the compaction equipment (plus environmental factors and waste characteristics).

The typical equipment used at landfills to compact the waste are:

* track-type tractors and track loaders which can achieve compaction densities of 800 to 1,000 pounds per cubic yard and

* steel-wheeled landfill compactors (those with operating weights over 45,000 pounds can achieve compaction densities of 1,200 to 1,400 pounds per cubic yard).

While a landfill compactor provides the greater compaction, this equipment's use often would not be feasible at a small site since it only would be needed for a few minutes at a time.

A more practical choice would be to use a track-type tractor or track loader, which also could be used to excavate, haul, and place cover soil, and repair ditches and roads.

The in-place density of baled waste depends on the baler's configuration and waste characteristics. Balers which provide a greater working pressure in the bale chamber generally can produce a bale with a greater density.

However, as this working pressure increases, the baler's size and cost increases as well. Therefore, when selecting a baler, consider the following:

* waste received daily;

* compaction density desired;

* whether or not recyclables will also be baled;

* future waste volumes predictions; and

* budget.

Small balers are made which can manage small landfill waste volumes and also provide a bale density similar to those found at a loose-waste site.

Such balers' densities are reported by the manufacturers to range from 1,025 to 1,620 pounds per cubic yard. However, these densities are based on the weight and dimensions of the bale in the chamber. Once outside of the chamber, bales tend to expand. There is also an air space between the bales when they are placed in the landfill.

These factors add an average of six inches to the bale's width and length. (Bale height actually decreases almost immediately when placed in the landfill due to the weight of overhead bales.)

With the actual field dimensions, smaller balers' densities can range from 875 to 1,270 pounds per cubic yard.

Let's compare the differences between loose and baled waste disposal. Using the example of six-inch cover soil on a three-foot compacted lift, loose waste disposal produces a 3.5:1 waste-to-soil ratio. Here, only 78 percent of the total cell volume is waste.

However, four to five waste bales can be stacked in a column with only six inches of soil needed to cover the top bale. This soil covers baled waste every 12 to 15 feet. Thus, the waste-to-soil ratio is about 9:1, which means that 90 percent of the total cell volume is waste.

The Cost of Baling Waste Your site's waste densities and waste-to-soil ratios will help you determine if baling waste is feasible for your operation.

The design life affects the construction financing terms and the annual dollar amount needed for closure and post-closure.

In order to determine a particular method's feasibility, first specify the cell's design life (i.e. 15 years). Then, calculate the cell volume, taking into consideration the primary disposal method, the percent of soil in a cell, waste in-place density and waste volume or tonnage received.

Next, select a disposal method (loose or baled waste) to calculate the required cell volume. Finally, determine the cell life for the other disposal type for comparison purposes.

Using this calculation method, a 15-year loose waste cell should last about 1711/42 years in a baled waste operation. The additional cell life gained with baled waste is due to the reduced volume of soil used in this operation.

With the exception of equipment building design, construction and closure will be the same with loose or baled waste. Loose waste demands only a simple on-grade slab and overhead doors large enough for landfill equipment. On the other hand, baled waste requires an on-grade slab with a pit for the conveyor or a two-level design with the tipping floor on the upper level and the baler and bale discharge on the lower level.

The baler building doors should allow extra height for packer trucks to pull out with the tail gate up or roll-offs (and other boxes that dump by tipping) to exit raised.

The baler building will cost about 211/42 times more than a simple equipment building. Other landfill costs should include construction of the cell, roads, drainages, buildings and utility preparation.

The cell's construction costs for both disposal methods is based on its life expectancy. (In this example, loose-waste cells are 15 years, and baled waste cells average 17 and 18 years.)

The buildings' and utilities' financing is uniformly set at 20 years. A sinking fund, which parallels the cell construction schedule, also is established to close the cells. Since a baled waste cell includes an extra two to three years of life, the construction costs can be financed over an a longer period, reducing annual payments.

The sinking fund also has an additional two to three years of interest to accrue, allowing the annual payments to be reduced.

Equipment Costs Equipment expenses - including capital, operating and maintenance (O&M) costs - can vary greatly, depending on the type and number of pieces needed.

The O&M costs depend on how often the equipment is used and how well it is handled and maintained. Replacement costs also will depend on these factors.

Costs associated with a baling operation includes a conveyor, the baler and the cost of the baler's overhaul about every 10 years (in our site, approximately $20,000). The baler's cost will depend on the desired bale density and its manufacturer.

When developing costs for a loose-waste operation, don't overlook the cost associated with the time spent collecting blowing trash, which can be as high as six to eight hours a day.

Additional benefits to a baler operation include improved aesthetics and the ability to dump inside a building. Since baler buildings have concrete floors, vehicles won't get stuck as they could in a landfill cell, and loads are more easily inspected.

Also, since virtually all waste brought to the landfill would be processed through the baler, materials can be separated prior to baling, and the unit can be used to bale recyclable materials.

Landfilling baled waste should be considered by communities with lower generation rates. A baler can be incorporated into the disposal operation at any time. It can become part of a transfer station, be placed into an existing landfill or be added into a proposed new landfill.

Compared to traditional loose waste landfills, baling waste could result in reduced disposal costs and should improve operation efficiency. Regardless of any other benefits, baling waste will greatly improve site aesthetics.