Ted Oberg Investigates

Council members: "Lets start over" on recycling contract

Wednesday, July 19, 2017

HOUSTON, Texas (KTRK) -- Questions about a proposed $48 million recycling plan, set to be approved Wednesday morning by the Houston City Council, remain unanswered after an hours-long committee hearing Tuesday.

The proposal, that's been bogged down in questions from its initial release in June, now has more confusion surrounding how the city selected Fomento De Construcciones Y Contratas for the deal.

"I think we need to throw this out and start over," councilman Greg Travis said.

Travis and other council members expressed concern over the city's process, bid scoring and responses from bidders on the terms of the deal - a deal that is being kept secret from taxpayers because it was "still in process," the city's chief procurement officer Jerry Adams said.

The public could see the finalized recycling contract after it was approved by the city council, Adams said.

When asked if the taxpayers should have a chance to review the contract it's paying for before it was voted on, Adams simply said "no comment."

Council members heard about a selection committee made up of members of solid waste, legal, finance and a "subject matter expert" from Texas Southern University that ultimately came up with the bid selection. Many council members said they'd never heard of the group.

The lack of transparency was a problem, councilman Dave Martin said.

"What are we trying to hide?" Martin asked. "This just doesn't smell right. This just doesn't sound right."

Just two days ago, this deal was worth $56 million. Today, it's worth $48 million.

When the deal was first proposed just three weeks ago, the city was borrowing $2.5 million dollars at 11.15 percent interest to buy more garbage trucks.

That was a tough sell and in the new, revised deal, that part is gone. The city was able to obtain its own financing for 1.15 percent.

As for the rest of the money no longer in the deal, the city cited a change in what city's return based on the consumer price index.

But that's the start of the confusion.

"I think the whole analysis is flawed," Martin said.

Some council members can't figure out how the city graded the bidders. The scores are secret.

"This doesn't smell right," added councilman David Robinson.

Two of the losing bidders say the costs the solid waste director presented Tuesday aren't the numbers they submitted in their bid paperwork.

"It's the first I've seen it," Independent Texas Recyclers president Dean Gorby said.

Gorby's company currently recycles 27 million pounds of waste a year for Houston, Gorby said.

City staffers can take the original bid, do an analysis and submit different information to that selection committee, who may never see the original data, a spokesman for the mayor's office said.

And this contract is longer than the city asked for. The original request was for a contract of 10 years with two five-year options for extension.

FCC bid for a 15-year deal when no one asked for that, said councilman Mike Knox.

"They took a big risk and took an exception when everyone was told no," Knox said.

In written questions to the city, potential bidders were told that any terms other than what was in the request (a 10-year deal) were not something the city was looking for, Knox said. He points to a question in the request documentation asking if the city would consider a longer term in the contract.

"10 years is not sufficient to secure private financing on a project of this size and complexity," the question reads.

The response is simply "no."

Companies could bid anything they wanted to, solid waste director Harry Hayes said, adding the response dealt directly with the lease of city lands.

Waste Management and ITR both said if they knew that the city would've accepted different terms, they would've submitted a different proposal as well.

In a letter to the procurement division presented Wednesday to the city council, a Waste Management executive says the company's proposal beats FCC's by $8.5 million in rebates to the city over the 15-year deal.

"When I look at this contract, it looks like this request for proposal, things were looked at to direct this to this company," Travis said.

Hanging over the discussion was the city's failed effort at the "One Bin" idea, a plan to collect and recycle all your trash in one can. Today, the city's solid waste director gave his first explanation of why that plan never happened.

"After a year, year and a half of negotiating, cost neutrality could not be obtained," Hayes said.

That's not what the mayor said two weeks ago. It was a new explanation to us after months of asking. It was apparently new to the EcoHub CEO too.

"That was a shock," EcoHub CEO George Gitschel said. "It was never brought up."

Hayes and Adams stand by the winning bidder and still support the process, they both said at Tuesday's meeting.

Many of the questions from city council members went unanswered, with the promise that Hayes would get the information to those council members sometime before Wednesday's vote.

ABC13 Investigates also asked for answers and have not yet received them.

The vote on the deal - with or without answers - is scheduled during Wednesday's 9:30 a.m. city council meeting.

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