Waste & Recycling Services
Waste & Recycling Industry Alert: How a Waste Route Driver Can Impact Your P&L
You, the Category Manager responsible for your organization’s waste & recycling spend, are revisiting the program because contract expiration is approaching and it’s time to negotiate a new deal.
Your analysis shows an 18% increase from three years prior.
“That can’t be right,” you mutter aloud. You pull up the contract again and scan until you find the price increase language.
You confirm there is a 3% annual price increase cap.
How can spend be up 18% when pricing is capped at a 3% annual increase?
Tapping your pen on your desk, you think, Do I need to go back over my calculations? You reach for your calculator. Perhaps I added somewhere instead of subtracting…
The good news: You can put your calculator down. The problem isn’t your calculation. A genuinely good deal was negotiated, and your organization stood to only increase waste & recycling spend by 3% annually—that is, IF all factors remained statice over the course of the three years since signature.
The bad news: Inevitably, all factors did not remain static within the waste & recycling program. And because the category went largely unmanaged over the three years since signature, spend went unchecked and thus, the “Good Contract, Bad Deal” phenomenon—exacerbated by creative tactics deployed by your waste route drivers (which will be examined throughout this article)—turned what was a good deal on paper into a bad deal in reality.
The hopeful news: Now is your chance to learn where things went wrong and implement strategies to better manage the waste & recycling category moving forward.
Where did things go wrong?
How did waste & recycling category spend increase 18% over three years despite a 3% cap on annual price increases?
The answer is complicated, but as you dig further into each site’s waste & recycling spend, you uncover a handful of pervasive waste route driver-generated events which led to spend increases across sites. All of these spend increases were not contemplated in the contract—and were thus left out of spend projections calculated three years ago:
Container overfill is left to the waste route driver’s discretion
Your first finding is that at most of your sites, container overfill spend is significant.
This isn’t uncommon, and here’s why:
If an 8-yard container is contracted to be serviced one time per week, this means weekly waste volume must fit inside that 8-yard container with the lid completely closed.
Most waste route driver’s trucks are equipped with a camera so that if there is waste material protruding out of the open container—in any form or fashion—they can take a photo and impose a penalty charge.
This means that a penalty charge can be imposed even if there is significant space remaining in the container but something such as the way the container is loaded causes the lid not to completely close. Or one side of the container is empty while the other is stacked beyond the top and causing the lid not to close. Or any other of the other numerous ways that can cause a container’s lid to remain propped ajar—which, if you think about it, are impossible to avoid given the likely multiple people who add to your containers in any given week, and the fact that the average human being lacks the time, knowledge, skill, etc. to load a container in the most efficient way possible.
And the call as to whether an overfill charge is imposed is up to the waste route driver.
The price for extra yardage is often 10-50 times the yardage rate for regular service, resulting in a huge revenue incentive for the hauler and a huge cost to the customer.
In fact, in some market areas, management has put an incentive program in place for waste route drivers to earn bonuses by taking pictures of overfill—so don’t count on the waste route driver letting it go if you have a raised lid but only partially-filled container.
Unwarranted service increases
For the sites without significant overfill spend, you find that, in many cases, they’ve had service increases.
The two are likely related. Here’s why:
If a particular site experiences multiple container overfills, besides generating extra revenue it raises a flag to the waste route driver that current service levels may not be adequate. The customer is then contacted and advised to increase service frequency.
Oftentimes, a waste route driver will notify a customer of one or more overfill charges before an upcoming bill to give them the opportunity to avoid the charges if they’ll simply increase their service level right away.
Unfortunately, without vigilant management of the category, the service increases go unchecked. But if questioned at the time, increased service frequencies would have been found as not truly warranted; in many cases, the overfill charges were dubious to begin with—either avoidable or rare.
Maybe employees simply needed to be taught to load the container correctly so that both sides are filled, or so waste materials aren’t sticking up and over the top of the container.
Or perhaps there was a series of weeks during which illegal dumping was an issue because remodeling was taking place next door. Or there was a need for deep cleaning by janitorial one day a week over a month, resulting in more waste than usual.
The result is a customer paying a higher rate for all 52 weeks of the year—in the end, amounting to much greater spend than if they paid the few overfill charges and then, if necessary, took actions to avoid further overfill charges.
Warranted service changes with unpermitted price increases
Continuing your investigation into the organization-wide waste & recycling category spend increase, you note that some sites experienced service decreases. But their spend with the waste hauler for those services didn’t decrease in proportion.
How does that make any sense? You scratch your head with the tip of your pen.
Here’s what’s going on:
Any time service changes are made, waste haulers will attempt to increase their margins. This is true when decreasing and increasing service, but is especially prevalent with decreases, because the hauler wants to mitigate the resulting hit to their revenue.
For example, you find that one of the sites halved their service. The site was originally paying $100 and after halving the service they paid $65. Really, according to the agreement, they should have paid $50, but the hauler took the opportunity to charge $65 in hopes the site wouldn’t catch it or wouldn’t have the resources to argue it—and they didn’t.
Recycling contamination billed vs. addressed
Your attention moves back to where you began investigating your waste & recycling spend—added fees—and you notice another one frequently billed: Recycling Contamination Fee.
The recycling route driver inspects the container’s contents when they begin dumping the container into the truck. If there is even the slightest contamination in your recycling container (i.e., anything non-recyclable, a recyclable item that is wet or has any amount of oil stain, etc.), they can categorize the load to be contaminated and charge the customer the corresponding charge.
“Surely the sites can’t be that bad at ensuring the recycling bins are the only ones dumped in the recycling container,” you think, drumming your fingers on your chin.
You’re probably correct. However, there are so many other variables that play into the success of moving recycling from point A (the individual consumer) to point B (the recycling bin) to point C (the recycling container) to point D (the recycling hauler’s truck) with no contamination—and no added contamination fee. For example:
- Your municipality accepts only some types of plastic, not including number 6. Unaware of the plastic types accepted, an employee at your site tosses their number 6 plastic bag into the recycling bin.
- An employee uses a paper towel in the break room of your site and, thinking paper towels are recyclable (they are not), throws it in the recycling bin.
- Someone walking by your site is carrying an oil-stained McDonald’s bag. They mistake the recycling container for a waste container (or just don’t care, or are simply unaware the paper bag is no longer recyclable with oil stains, etc.) and toss the bag in.
There are so many other examples, and then multiply them by all the different people interacting along that “recycling chain” from point A to point B. Then add in the subjectivity of the recycling route driver and what they choose to do about the contamination. Reasonability would say that in cases of one or two contaminating items on top, they can easily exit the truck and pick them out of the container. But oftentimes they don’t, and a contamination fee is slapped on your bill.
The (impact to your) bottom line
By the end of your analysis of the waste & recycling category spend increase, you found several more “creative” spend-increasing tactics employed by your waste route drivers and the hauler organization. But the four detailed above were the most pervasive and, alone, fully eroded the efforts put into the contract at its start.
The takeaway? Though leaned out procurement departments have led to a strain on resources, you must find a way to engage in the ongoing joust with your waste & recycling haulers.
Unless you are engaging in the joust, you are capitulating—and your organization’s bottom line suffers while your suppliers’ pockets grow fatter.