March/April 1992
How can a scrap processing firm take advantage of the opportunities presented by municipal recycling programs? Those that have made the move offer recommendations on securing contracts with the public sector.
BY KENT KISER
Kent Kiser is associate editor of Scrap Processing and Recycling.
A few years ago, most scrap processors happily resided exclusively on the commercial/industrial side of the recycling fence, with little interest in the municipal programs on the other side. Now, thanks to the environmental age, municipal recycling has become a pervasive issue—as well as a growing market—and more and more scrap companies are crossing the fence to establish new business with their municipal neighbor.
The bottom-line reason for taking the leap to establish contracts with municipalities can be summed up in one word—"opportunity"—says Evan Koplin, vice president of marketing and finance for Macon Iron & Paper Stock Co. Inc. (Macon, Ga.) and secretary of the Southeastern Chapter of the Institute of Scrap Recycling Industries (Washington, D.C.). Household recyclables—which usually encompass aluminum and steel cans, glass and plastic containers, and newspapers—can be profitable materials, particularly in the long term, so "there's no reason to let them go right past us," another processor says. Municipal recycling is a horizontal market for scrap processors, not a totally different business, which means it can be a natural extension of a firm's existing operations. After all, Koplin points out, scrap processors already know how to collect, process, and market recyclable materials, and they probably have the necessary equipment—scales, roll-offs, loaders, conveyors, balers—to handle postconsumer scrap.
Last year, Koplin's firm joined forces with a waste-hauling company to found Industrial Recovered Materials Inc., a material recovery facility (MRF) in Macon that handles industrial and commercial scrap as well as postconsumer materials collected from municipal programs. Industrial and commercial scrap currently comprises most of the MRF's input, but household materials could eventually account for up to 50 percent of its revenues, says Koplin, who serves as the MRF's president. Currently, the MRF's industrial accounts are serving as "anchor clients," Koplin notes, giving the facility stability as it adds more municipal accounts.
Obtaining municipal contracts also can help head off competition and protect market share, say others who have entered the MRF business. Waste-hauling firms have used postconsumer material collection as an entre into the recycling industry, and other entrepreneurs seem likely to do the same. "By the year 2000, there'll be twice as much material recycled as there is now," predicts Bruce Brenner, president of Cycle Systems Inc. (Roanoke, Va.), "and you have to decide if you want to be part of the picture. If you do, you must go after each municipality as if it's a major industrial account." This doesn't mean processors have to go to war against waste haulers, however, notes Brenner, who's firm handles household recyclables from communities in Virginia , West Virginia , and North Carolina . "Some of your best opportunities may come from working with existing waste haulers," he says. "Major haulers, in particular, will be looking for partners like scrap processors in smaller geographical areas."
Fortunately, scrap companies are well-positioned to capture municipal recycling markets, notes David H. Weitzman, vice president of the material marketing group of Resource Recycling Technologies Inc. (RRT) (Vestal, N.Y.), which operates 6 MRFs. By being local and having a recycling infrastructure already in place, he says, scrap firms "can have an economic advantage over someone coming in from out of town and attempting to do it."
One other reason to work with municipalities: "It's a good public relations vehicle in your community," Brenner notes. "Your profile and role is appreciated more by the community."
In Search of Contracts
If you've decided to seek out municipal contracts, your firm must also determine how involved it will get, municipal recycling veterans advise. For the sake of simplicity and efficiency, most municipalities require their recycling contractor to handle all their recyclables, Weitzman notes. Is your company ready to make that kind of commitment? If so, will it only accept segregated materials, or will it operate its own MRF to separate commingled recyclables? Is it able to site collection bins throughout the community and pick up and process the materials? Is your firm willing to charge for its services in order to make a profit?
After selecting your niche, your firm can improve its chances of landing contracts by following several steps:
Promote your company. Learn who the municipal officials and/or departments in charge of making recycling decisions in your area are and let them know who you are and what your company does. "Municipalities, just like anybody, tend to work with people they know," says Colleen M. Halpine, recycling coordinator for American Iron & Supply Co. (Minneapolis), which, along with another Minneapolis scrap firm, Recycling Services Inc., operates a local MRF.
Building a relationship with government officials "takes a lot of effort," Koplin says, but the work can offer scrap companies an edge over competing firms, making the effort well worth the time and money invested. Among the municipal relations strategies processing companies recommend are giving plant tours to municipal officials, hiring a recycling education specialist to give the firm a higher local profile, and sending holiday greetings, company literature, and calendars to government decision makers.
Cycle Systems also promotes its services to municipal trade groups such as the Virginia Municipal League, which represents cities in the state, and the Virginia Association of Counties. The firm exhibits at the groups' trade shows and keeps up with their executive rosters. "Each municipality is unique," Brenner says, "and each one has to be approached individually, just like industrial accounts."
Get involved early. Keeping in touch with municipal officials will enable you to be part of the decision-making process as early as possible, which can give you the chance to offer municipal program recommendations. For example, if a municipality is considering issuing a request for proposals (RFP) that would require all bidders to combine waste hauling and recycling services, you could point out the negative impact of that stipulation on operation costs. If you discover that your municipality is considering building and operating its own MRF, you could show how the facility might duplicate existing recycling capacity in the private sector. "If municipalities start doing it, they're going to be reinventing the wheel," Koplin explains. "Why learn through trial and error, when they could deal with someone who already knows what they're doing?"
Be informed. "The main thing is being aware of what's going on in your area," Koplin says. "Take the time to stay involved in the community and the area you're going to be bidding." Weitzman notes that your best opportunities may be right in front of your face: Most municipalities, by law, must advertise RFPs in local newspapers, trade publications, and/or government publications.
Many municipalities also have a master bid list of companies that automatically receive RFP notices. Call your municipality's purchasing or public works department and ask how you can get on the list. "It takes phone work, just like finding scrap markets," Halpine notes.
In addition, read industry publications and attend recycling and waste management trade shows to scope out the competition and learn what type of low-tech and high-tech equipment and technology is being applied in the field.
Gain experience. There's no substitute for experience when it comes to knowing what's involved in handling, processing, and marketing postconsumer materials, Weitzman asserts. Begin by handling small quantities of household recyclables to show you can be successful at it, increasing the volume only as you can efficiently and profitably process and market the materials, he advises.
Sell your services. Show the municipality what your firm can do for it. Perhaps most important is that scrap firms can usually process and market materials more profitably than municipalities. "We're set up to do it day in and day out," Koplin notes.
Another selling point is that scrap processors relieve municipalities of the risk of marketing their recyclables. "Marketing recyclables is a full-time job," Koplin says, "and if you don't know what you're doing, you can get burned." Many municipalities think they can make money from their recyclables, he says, but they don't always figure in the related costs of labor, equipment, storage, transportation, and energy. Scrap companies can work with municipal officials to help them implement the most cost-effective recycling program, which ideally would include the scrap industry.
"Governments aren't necessarily out there trying to do any harm," observes Daryl R. Parks, vice president and general manager of American Iron and Supply. "In many cases, they just don't know what they need, and you can give them input before you have legislation forced on you. You can create the system for them."
For Koplin, another plus his company promotes is that "we're locally owned, and all our profits stay right here in Macon—they don't get sent to a corporate headquarters in Houston, or elsewhere."
Deciding Factors
The RFP process can be both a boon and a curse for scrap processors. It gives them an equal chance to secure municipal recycling contracts, but scrap companies may lack experience in writing and presenting government RFPs in the first place, Weitzman says. RFPs can be extremely intricate documents that require bonding, insurance, and other assurances, and professional consulting may, therefore, be necessary to ensure that the firm responds correctly. "Be 100-percent aware of what's being planned, what the bid is all about, and make sure you can respond to the bid and provide the services that are called for," Weitzman recommends.
When reviewing bids, municipalities consider the efficiency, stability, and level of service offered, as well as cost, he says. Location and flexibility can also be critical. Nevertheless, if all bidders meet basic criteria, the contract must usually go to the lowest bidder. Therefore, bidders should make their offers as financially attractive as possible.
Essentially, governments are looking for stability—not necessarily in price but in knowing that they can count on reliable service, which will enable them to provide long-term recycling programs to their citizens, Weitzman says. Brenner agrees, pointing out that Cycle System's strongest selling point to municipalities is its ability to secure markets for their recyclables regardless of volumes generated.
The length of municipal recycling contracts varies but, in general, the larger your investment in specialized equipment or dedicated facilities, the more contract stability you want. "A municipality can and is willing to give you a long-term contract," Brenner says. "That is one of the more appealing benefits of working with municipalities." Financial arrangements vary depending on the extent of services provided by the scrap firm. It will receive more, for instance, if it collects and processes recyclables than if it just processes them. Furthermore, in some cases the processor may have to pay the municipality—or its contracted waste hauler—for materials delivered to its plant.
Bureaucratic Bugaboos
Municipal recycling may be a prime opportunity, but it's an opportunity that comes with a few flaws. The biggest problem? "It's difficult to make a profit," Brenner says, but he adds, "The key thing we have to learn is the ability to charge to receive material. Between what we charge and what we receive [from marketing the scrap], we can create an adequate gross profit."
There's also no such thing as a handshake deal with municipalities, as there is with some commercial and industrial clients. "With anything to do with government, it has to be done in the open according to public bidding laws," Weitzman says. "It's a very expensive and time-consuming process." To illustrate his point, Weitzman recounts an episode in which RRT bid on a MRF job in Rochester , N.Y. The firm turned in the lowest bid and was about to receive the contract when all the bids were suddenly recalled. The RFP was reissued and RRT was once again the lowest bidder. This time it won the contract and, after six months of contract negotiations, it opened its Rochester MRF in December 1991—three years after submitting the initial bid. Weitzman estimates that RRT spent approximately $200,000 in legal fees, time, and bidding costs, not counting the construction and development costs of the facility. When dealing with municipalities, Parks observes, be prepared to deal with "a lot of politics."
Another difference between municipal and industrial accounts is how you interact with the principals. With industrial accounts, Koplin notes, you usually deal with only one or two people and always know who to talk with, whereas with municipal accounts you can work with many people at many levels of the hierarchy. "There's confusion sometimes on whom you have to deal with," he says. "You have a lot of people who need to be informed, and it takes a lot of time and patience to let people learn on their own what they need to know."
Reporting requirements can also be extensive. RRT, for example, has to document operating costs, revenue, and electrical consumption at its MRFs, as well as undergo periodic audits. At minimum, most municipalities require tonnage figures of each commodity to show state officials how much they are reducing their waste stream. This can be difficult, or at least tedious, requiring processors to weigh trucks several times for different commodities or process municipal loads separately from nonmunicipal material.
Parks says his firm has had to be flexible and "make adjustments" in its recycling arrangements with Minneapolis . For instance, both the city and the MRF initially weighed the city's recycling loads, which slowed the delivery time and created undue duplication of effort. Now, Parks says, his firm accepts the city's weights and has designated a separate gate at the facility to allow the city's trucks to get in and out quickly. "All of that takes very good communication," Halpine points out.
In many cases, however, the reporting requirements may not be any more elaborate than what's required by industrial clients. "When you look at the overall picture, it may just be done in a different format," Koplin says.
One other problem: Municipal collection programs don't always yield clean, usable scrap, which can cause processing and marketing hassles and sometimes prompt processors to reject loads entirely or charge a disposal fee. "The cleanliness factor is sometimes a point of difficulty with municipalities," notes one processor. Such problems can be worked out with municipal officials, however. "They're receptive to listen," Koplin says. "You just have to approach them in the right way."
Making the Leap
Municipal recycling is still in its infancy, but indications are that it will see major growth in coming years. More and more states are setting recycling goals, which is forcing them to implement or contract out recycling services. In addition, many expect that upcoming regulations tied to the Resource Conservation and Recovery Act will close nearly half of all existing landfills, and many areas will not want or be able to establish new ones. This means government officials will have to seek other waste management solutions, with recycling ranking high on the list.
Thus, scrap processing companies have an opportunity to enter new territory: municipal recycling. Will the grass be greener on the other side? According to those who have successfully crossed the fence, the move is not hurdle-free, but many of the same common-sense strategies used to secure industrial and commercial accounts can translate to a healthy new market hold. •
How can a scrap processing firm take advantage of the opportunities presented by municipal recycling programs? Those that have made the move offer recommendations on securing contracts with the public sector.