Council Memo

Approval of Amendment No. 4 to City Contract No. 2017-064A4 with Fann Contracting for Solid Waste Hauling Services for an additional $100,000.00 for the remainder of FY18, and increasing the annual amount for the remaining 3-years of the contract to $835,000.00. Funding is available in the Solid Waste Fund.


Department:Public WorksSponsors:


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Document Comments

Recommended Action: MOVE to approve Amendment 4 to City Contract No. 2017-064A4


Item Summary


The Solid Waste Division is seeking approval to award an Amendment to the existing contract with Fann Contracting for hauling trash and recyclables to designated facilities, which currently are the Gray Wolf Landfill, Dewey, Arizona, and the North Gateway Transfer Station, Phoenix, Arizona. The Division has experienced higher hauling costs due to increased tonnage, and is requesting an increase in the original contract amount to cover the cost. 




The City of Prescott is under contract with Waste Management of Arizona for the disposal of trash at the Gray Wolf Landfill.  Recyclables are processed at a Material Recovery Facility (MRF) at North Gateway Transfer Station, through an Intergovernmental Agreement with the City of Phoenix for single stream recycling.  In order to transport the trash and recyclables, City crews push trash and recyclables into large transfer trailers for hauling to designated facilities. 


In December of 2016, a contract for hauling services was awarded to Fann Contracting following an RFP process. The initial term of the contract was for five (5) years beginning in FY17 and includes a provision for five (5) additional one (1) year periods up to a total of ten (10) years, with the mutual consent of the City and the Contractor, which is done administratively without additional City Council approval. The contract is based on a per ton price that is adjusted annually in accordance with the Western Region Consumer Price Index for Statistics, and a fuel price adjusted semi-annually in accordance with the Consumer Price Index (CPI) Data for Automotive Diesel Fuel.


The contract amount was set at $735,000.00 annually based on 45,000 tons of trash and 4,500 tons of recyclables, at per ton pricing. Due to the CPI, fuel adjustments, an increase in haul tonnage from expanded residential trash service and the increased use of the transfer station dumping, hauling costs have exceeded this amount. Based on hauling tonnage estimates so far this year, Solid Waste is expecting to pay $817,125.00 in FY18, with these increased costs expected to continue. Amendment No. 4 will add $100,000.00 in FY18 to cover these higher costs, and will adjust the future annual contract amount from $735,000.00 to $835,000.00 for the remaining term of the contract. This increased hauling cost is offset by increased revenue in residential trash service fees and transfer station fees. 


Financial Impact


Funding of $835,000.00 is available in the FY18 Solid Waste Fund.


Meeting History

Jun 12, 2018 3:00 PM Video City Council Voting Meeting
draft Draft

City Traffic Engineer Ian Mattingly presented the request for approval of Amendment No. 4 to City Contract No. 2017-064A4 with Fann Contracting for Solid Waste Hauling Services for an additional $100,000.00 for remainder of FY18 and increasing the annual amount for the remaining 3-years of the contract to $835,000.00 due to the Consumer Price Index CPI, fuel adjustments and increase in haul tonnage. This is a total of a ten year contract.

Councilman Goode exhibited concerns with finishing the first year of a five year agreement and the expected payments are 11% higher than originally anticipated. Now a request to go higher to increase over the course of the remaining contraact by 13.5%. We either did a poor job of anticipated the cost at the beginning of the contract or there has been unanticipated expenses that have been generated. He pulled the CPI because the example of calculations in the amendment were taking a worse case scenario and using those to justify a higher reimbursement for diesel fuel by using CPI less energy rather than using actual petroleum CPI which is running pretty consistently at 3% which indicates we may be paying too much for reimbursement rather than using government generated CPI

Mr. Mattingly said the contract was in anticipation of 45,000 tons of hauling per year. The city is experiencing more than that. The increase is budget neutral. Money is generated at the transfer station when people dump are experiencing more than that. When the revenue is coming in, we pay more for hauling and fees for the landfill. There is a hauling cost and fees for dumping at the landfill.

Mr. Mattingly said we are experience growth. It is revenue neutral.

Fleet and Facilities Manager Mike Carr said this contract doesn't utilize the same price indexing as the citywide fuel contract. If it goes above a certain amount, there is a surcharge. If it goes lower than a certain amount $3.69 a gallon, then a credit is received. Essentially the idea is to make the contract better and more equitable for both parties. The language was taken from the city of Phoenix from their hauling contract. The increased volume has cost more money in the contract.

Councilman Goode said wouldn't it be more appropriate to tie the CPI to petroleum cost rather than energy in general. Councilman Goode said it doesn't look like it is going to have a cost impact this fiscal year but may want to look at it in the future.

Mr. Mattingly said it changes to the contract can occur. This is the fourth one. If it becomes an issue, we can come back and address. The increase of payment is to help offset the volume. They have a projection that they will spend close to $835,000 this year. If business drops, the money will not be spent.

Councilman Lamerson suggested to look at on an annual basis rather than every ten years. Mr. Woodfill said we need to keep in mind that this is a big capital investment with the contractor. By doing the ten year time frame, we get the cost down. If it was done one year at a time the cost would be lump sum cost which would cost higher if fuel prices changes.

Mayor Pro Tem Orr said the original contract was based on 45,000 tons of hauling and inquired to its current status. Mr. Mattingly said we are over 50,000 which is about 12% over of increase use. The dumping occurs at Gray Wolf in Dewey and in Phoenix.

Councilman Sischka inquired how long is the contract with Gray Wolf? Mr. Dotseth said it is around a thirty year contract.


MOVER:Alexa Scholl, Councilwoman
SECONDER:Steve Sischka, Councilman
AYES:Greg Mengarelli, Billie Orr, Steve Blair, Phil Goode, Jim Lamerson, Alexa Scholl, Steve Sischka