News earlier this fall that Rizzo Environmental Services, recently rebranded as GFL Environmental after an October sale to an Ontario, Canada waste hauling company, was the subject of a public corruption probe by the FBI in Macomb County, caught numerous Oakland municipalities by surprise, as 20 of the 62 county communities have contracts with the Sterling Heights-based waste hauling company for hauling trash and recycling. The FBI said they wouldn't be able to confirm or deny if they were looking into Rizzo in Oakland County, or if there was any possibility of corruption in Oakland County.
Many of the 20 Oakland communities are new Rizzo customers, having signed contracts with Rizzo only in the last couple of years. Research revealed that Rizzo came into those cities and townships with a reputation for providing their customers with very good service at a very good price, often underbidding their competition. On the surface, that sounds like a strong business model. After all, Rizzo has grown from a small snow removal company in 1965 to become the dominant waste hauler in southeastern Michigan, with contracts for hauling trash and recycling for 55 municipalities. The company has grown exponentially since 2012, when it was acquired by the private equity firm Kinderhook, skyrocketing from 16 contracts to 55. The question is – at what cost?
Several of the communities which have contracts for service with Rizzo have chosen the waste hauling company without bidding out the contracts, basing their choice on Rizzo's reputation as one that provides an excellent level of service for a good price to the locales for which it provides service. Most of the communities, however, are renewing contracts with them without rebidding them out, a practice we think needs to change.
Even when municipal consortiums play the middleman for municipalities, and review numerous contracts, it is in every single community's best interest to have several companies bidding for their work. Southeastern Oakland County Resource Recovery Authority (SOCCRA), which negotiates contracts for 12 member communities in southern and central Oakland County, general manager Jeff McKean said, “We did a market survey of all the prices being charged in southeastern Michigan, and our prices are very competitive, so we thought there was no need to do a bid process.”
Bloomfield Township Supervisor Leo Savoie stated Rizzo told the township that the company would keep prices at a certain low level for the length of the contract – an eight-year renewal – as long as they didn't bid the contract out. By a vote of 6-1, trustees voted to renew the contract without rebidding it, because as Savoie said, no one has been dissatisfied with the service.
With some Rizzo employees under criminal suspicion and a change in ownership, Bloomfield Township is now considering reviewing the contract.
The other significant issue we question is the length of the contracts communities have signed with Rizzo and other waste haulers. Many of the municipalities have five-, eight-, even 10-year contracts with Rizzo, or competitors Waste Management, Republic, Tringali or others. That's great for the waste company, allowing them to go out and purchase new trucks, equipment, and lock in rates for gas, based on their size and long-term contracts, but how does that benefit taxpayers?
The length of any service contract – whether for a waste hauler, law enforcement services from the sheriff's department, or any other service provider, should be for no longer than five years, with an open bidding process. A five-year process is not onerous upon a municipality, but allows for changes in the marketplace.
It's the essence of a free market system, with residents the beneficiaries.
Moving forward, local municipalities must change how they handle contracts for waste hauling services.