Questions, Conflict of Interest Surround Norwalk Trash Contract Bid Process

By Brian Hews

Hews Media Group-Community News has obtained a Nov 15, 2016 letter sent to Norwalk City Attorney Roxanne Diaz from the California Fair Political Practices Commission (FPPC) that definitively stated Norwalk Mayor Mike Mendez was in a conflict of interest position with respect to the trash contract being negotiated with the City and could not, at the time, participate in any decisions related to the agreement.

Norwalk Mayor Mike Mendez.

Since 2011, Mendez has been working as an “independent consultant” for governmental affairs and is “on call” for Universal Waste Systems (Universal), receiving $1,800 per month.

The request for proposal for Norwalk’s waste hauler contract was sent out in Oct. 2015.

Universal was part of CR&R Environmental Services’ overall proposal, CR&R was utilizing Universal’s transfer station in Santa Fe Springs.

When CR&R found out about the conflict, they immediately amended their contract, removed Universal, and moved to their own facility.

The revelation comes on top of new accusations that the award process of the lucrative $9 million residential and commercial contract has taken some questionable turns.

Diaz, an attorney with Richards, Watson, and Gershon in Los Angeles, requested the advice regarding the conflict of interest provisions contained in the Political Reform Act (Act).

The advice letter has been forwarded by the FPPC to the Attorney General and the Los Angeles County District Attorney’s Office for possible further action.

Last page of advice letter prohibiting Mendez from making any decisions on trash contract. Click on image to view entire letter.

Diaz asked four questions:

1. Does the Act prohibit the Mayor from taking part in any decisions related to the contract?
2. Does Section 1090 prohibit the Mayor from taking part in any decisions related to the contract? (Section 1090 generally prohibits public officers from making contracts in which they are financially interested.)
3. If the Mayor resigns from Universal, can he participate under the Act or under Section 1090?
4. If CR&R removes Universal from their proposal and submits an amended proposal, can the Mayor participate?

The FPPC answered “yes” for questions 1 and 2, stating that Mendez could not participate in the decision.

For question 3, if Mendez resigned his position with Universal, the Act would prohibit him from making any decisions on the contract for 12 months.

In regards to question 4, the FPPC stated that if CR&R amended its proposal and removed Universal, then Mendez could participate in the decision making process.

CR&R subsequently amended its proposal.

“We did not know Mike currently worked for Universal, I knew about the consulting arrangement with Universal years ago, but I don’t follow what Mike does,” said John Telesio Government Affairs Advisor for CR&R, “once we found out we immediately amended the proposal and moved to another facility. Universal was building a new facility that was only three miles away so we were going to use that, now we will use our own facility that is eight miles away.”

The bidding process then moved into the analysis stage, with City staff creating a report from the City’s consulting company, HF&H, who was paid $160,000 for their services.

Through its process, HF&H first ranked the 12 companies by “first year rate revenue,” meaning the lowest bidder was ranked first with the remaining company’s position based on the next lowest bid.

An unusual step as other consulting companies have used a point system that takes into account the revenue bid as well as other aspects of the companies such as experience, financial strength, equipment, and philanthropy.

The top five companies ranked by HF&H were Commercial Waste Services, Ware Disposal, Serv-Wel Disposal, CR&R, and Republic Services. The next four companies were United Pacific Waste, CalMet, NASA, and Athens.

All the company’s bids were less than what the City is currently paying; Commercial Waste was an eye-opening 44% less; 16% less for Ware; 14% less for Serv-Wel; 10% less for CR&R; and 9% less for Republic.

United Pacific Waste was 6% less with the others averaging 2% less.

CR&R was the only company to offer a $1 million upfront for the City’s educational fund.

Other factors were taken into account but surprisingly did not ultimately affect the top five companies.

HF&H subsequently performed interviews with the five companies, which, according to sources, was not attended by all Norwalk councilmembers.

The overall evaluation after interviews gave a varied analysis of the five companies.

After learning of the rankings by HF&H, one waste company official who wanted to remain anonymous told HMG-CN, “Commercial Waste and Serv-Wel should never have been included in the selections whatsoever, they have very little experience and they are not financially able to handle the contract.”

HF&H’s own words described Commercial Waste’s proposal as “far below all other companies while proposing the highest diversion rate at 75%.” With that combination HF&H said Commercial Waste “would have significant financial risk.”

Commercial Waste also has “very limited residential collection service experience.” Also, the Norwalk contract would represent a massive 70% of the total revenue of the company.

A significant fact left out of the interview process and the subsequent City staff reports was that Commercial’s Montebello facility had been inspected several times by the state of California and found to be non-compliant.

Researching the CalRecycle website shows, beginning in March 2015, several inspector photos of Commercial Waste’s facility with sub-standard storage of trash and e-waste.

This went on into the first half of 2016, with each month having different violations.

Finally in July 2016, Commercial was hit with a “Notice of Intent to Include the Commercial Waste Services Inc., Facility No. 19-AA-1131, on the Inventory of Solid Waste Facilities Which Violate State Minimum Standards.”

Photos of Commercial Waste’s Montebello facility from CalRecycle website.

Click on images to larger picture.

Lower right: “Unsecured pallet with 20 lead acid batteries.”

Questions also surrounded the inclusion of Serve-Wel, which, as HF&H stated, “is the smallest in terms of company overall revenue.”

The Norwalk contract would represent a staggering 164% increase in revenue and Serv-Wel, like Commercial Waste, has very limited residential collection service experience.

Ware Disposal, “a mid-size firm,” was the second lowest bidder, saving the City 16%. Norwalk’s contract would represent a modest 28% of the company’s revenue and Ware’s diversion rate was more in line with industry standards.

“Yeah, Ware might be able to handle it, but Commercial and Serv-Wel? No way,” the waster hauler official told HMG-CN. “I don’t know why HF&H recommended them, maybe Commercial was included because (former Assemblyman) Rudy Bermudez works for them. The clear leaders are CR&R and then Republic, forget the other two.”

If Commercial and Serv-Wel were not included, then United Pacific Waste and CalMet would have made the initial top five.

Editor’s note: We incorrectly identified Rudy Bermudez working for Serv-Wel, Bermudez works for Commercial Waste. We apologize for the error.

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