Destined to be Different

Cheryl L. Dunson

Although it's not flattering to be compared to Mark Furhman from the O.J. Simpson trial while you're representing local governments' interests at a congressional flow control hearing, it's testimony, nonetheless, that you're not like the rest of the flock.

Since its inception in 1986, being a "black sheep" has been the blueprint of success for Cleveland, Tenn.-based Santek Environmental Inc. Located 20 miles northeast of Chattanooga, this full-service landfill management company has capitalized on a niche that most companies in the solid waste industry have avoided: Privatizing small- to mid-sized, publicly owned solid waste landfills.

Often characterized as time consuming, politically tedious and less than lucrative, public-private partnerships are Santek's core business. This is because company officials' key to success is protecting their public partners' best interests.

"Having our interests vested on the same side of the fence as local governments has proven again and again to make winning arrangements for our public partners," says Santek Chief Executive Officer Ken Higgins. "As the industry has evolved so have we. But paramount [is that] we do what [our] government customers want to do, and we don't influence them in ways that aren't in their best interests."

From High School to Highways While most of his peers were graduating high school and joining college fraternities, Higgins sacrificed a collegian football career in 1979 to revive his father's ailing heavy construction business.

Capitalizing on Chattanooga's revitalization efforts and sudden growth surge, Higgins turned the family enterprise into one of the largest contracting companies in southeast Tennessee. Without a formal business education, the 19-year-old entrepreneur soon learned the meaning of forsaking business for busyness.

"When my debts outnumbered my assets two-to-one, I decided to educate myself in accounting, estimating, business law and bonding," Higgins recalls. "I got a Ph.D. in business from the school of hard knocks by the time I reached 23."

By 1985, Higgins was growing tired of the daily grind of contractor bidding wars and began searching for a more prosperous venture where he could apply his heavy equipment knowledge. In the meantime, his childhood friend and eventual chief operations officer, Edward Caylor, kept the business running.

At the same time, the local county commission also was contemplating divesting its landfill operations because of regulatory violations and public pressure.

"That's when I knew I could do a better job than local governments - purely from an equipment standpoint - of managing municipal solid waste landfills," Higgins says. Within two years, he converted his construction business into Santek Environmental - a business that manages publicly owned landfills.

By 1988, Santek secured its second landfill management contract in a small community south of Knoxville. By this time, Higgins had discovered his niche: using a sophisticated computerized equipment maintenance program with a cost-accounting system to reduce local government's landfill operating expenses while keeping local officials in control.

"Then, Subtitle D came along, and that's when I definitely knew I had something," Higgins says. Because of the increase in heavy equipment needed to construct natural clay and synthetic liners, Higgins' opportunities to save local governments more money grew.

"But, I didn't realize the difficulty in privatizing a government-run facility," Higgins acknowledges. "I never imagined the political impediments posed by local officials or the job insecurities of municipal employees. One of local government's greatest fears is being taken advantage of."

Higgins' corporate development efforts were stymied, finding it difficult to differentiate Santek from its competitors. Although contracts with Santek's two existing public partners were renewed and extended, his two-man marketing department hit a brick wall.

"We kind of washed up in the tide with all the large waste companies that talked the privatization lingo," Higgins recalls. He soon realized, however, that this small size was his advantage.

Higgins decided to roll the dice and created Santek's engineering company, restructured his corporate headquarters and relinquished control of his company's direction to a team of professionals.

"For so many years, I shot from the hip," Higgins says. "I was the keeper of all the knowledge - from operations to corporate development. It was a heavy weight to bear, and it was painful to think about yielding control to others. But I finally realized I'd surrounded myself with competent people, and it was time to let them take Santek to the next level."

By 1995, Santek was "on the map," securing the largest privatization contract in the history of Wake County, N.C., Higgins says. By 1998, Santek became the manager of the largest, publicly owned landfill in the Tarheel state.

Design and Build for the Future Today, the privately held company manages a total of eight landfills across the Southeast and currently is venturing into new waters by managing industrial landfills and supporting its management contracts with collection efforts.

Last year, Santek was ranked 56th in Waste Age magazine's Top 100 listing of the nation's largest solid waste companies, and 43rd amongst privately held companies.

"Up until the past year or so, we'd prided ourselves on being a neutral company," says Caylor, who was promoted to president and chief operations officer in 1995. "Not having Santek trucks use our customers' landfills distinguished us from other solid waste companies. But as markets have become more competitive, we've been forced to enter the collection arena to protect our customers' best interests without losing sight of what made us successful."

In 1998, Santek inherited a collection company when it assumed ownership of a landfill management contract in the Mississippi Delta. It was a bittersweet pill for company officials to swallow. The collection company had been so mismanaged, Santek inherited customers that hadn't been billed for services in more than three years.

"It definitely was an eye opener," Caylor concedes. "But we hired employees who had years of collection experience, and we've turned the company around."

Collection efforts have become so successful that last fall Santek created Waste Services of Tennessee to feed several of its homestate landfills.

"We made the decision to enter the collection market to protect and secure waste streams in our market place," Caylor says. "We're not planning on being in the collection business just for the sake of having a hauling company. It must directly benefit our customers' landfills or else we're not interested."

Providing Service In the meantime, Santek's partnerships with local government are as diverse as the communities they represent. Mandated by local officials, some are singlecounty facilities handling a daily volume of 200 tons to 300 tons. At the request of local governments, others are regional in scope and are managing upwards of 2,000 tons per day.

"Again, it's a matter of listening to our customers and providing a level of service they want and have come to expect," Higgins says.

Services provided by Santek vary. For a predetermined price per ton, some local governments prefer a turnkey approach in which Santek provides all engineering and design, environmental monitoring, project financing, operations, construction and closure. Others contracts are broader with Santek personnel providing basic landfill operations. In all scenarios, Santek provides equipment and personnel.

"A turnkey approach gives local governments the ability to better control their costs because we're their single source of responsibility," Caylor says. "When Santek combines design and construction services with an operations agreement, we're able to significantly reduce local governments' cost because there's no longer a host of other contractors and consultants billing the municipality for services rendered."

When local governments don't want the turnkey option, Santek Engineering's designers and construction personnel continue to assist landfill managers and their staff. "We're internal helpmates to our managers," says Santek Engineering President Rob Burnette. "Providing continual support to our landfill personnel helps them to be more efficient as well as keeps Santek's regulatory compliance record strong."

This design-build concept worked in the general contracting industry and can be applied successfully to the solid waste industry, Burnette says. In fact, several studies from the heavy construction industry indicate that the design-build approach provides up to a 28 percent quicker project completion time and up to a 15 percent cost savings.

"Private developers have used the design-build concept consistently because it provides them with the lowest cost per square foot for an office, shopping center or industrial building," he says. "By hiring one company with a defined scope of work, the job gets done faster, better and on a more cost-efficient schedule. We're proving the same concept works in the solid waste industry."

Public-Private Partnerships In the meantime, Higgins says keeping Santek under his ownership and promoting true public-private privatization are philosophies of the heart. During the past 12 years, Caylor admits Santek's had the opportunity to grow larger and faster through mergers and acquisitions, but the company's mission statement to "foremost, work under the authority of local government" dictates a more strategic approach to corporate development, he says.

"Sure, we could have experienced faster growth just as we could have branched out into different areas of the solid waste industry, but that's not our mission," the 38-year-old businessman says. "Structuring a privatization contract with local governments doesn't materialize overnight. Local politics alone requires a lot of hand-holding and trust-building. That's why our larger counterparts typically turn away from privatization. It's definitely time consuming."

In and of itself, privatization also isn't a new concept, Caylor adds. What remains innovative is Santek's approach to its public partners.

"Allowing local governments to retain ownership of their facilities while dictating their waste origins and, to some degree, pricing, empowers them," Caylor says. "Many times in our industry we hear from our municipal counterparts complaining about the private sector and the inability to co-exist. If a public-private partnership takes into account the best interests of the public entity, privatization can work and is more than merely lip service."

"By staying [privately owned], I've been able to keep the values of my company where I want them while being able to have a heart for local governments and their constituents," Higgins adds.

He says standing up to these values can be challenging. Recalling threats made to him and his staff concerning Santek's pro flow control testimony before the U.S. House of Representatives Small Business Committee in 1995, he says: "Supporting local governments hasn't always been a popular decision, but we're standing tall now, and we're going to be a lot taller before it's all said and done. We remain staunch constituents of local governments and increasing their powers to control their solid waste destiny. I guess that's what makes us different."