The Charlotte Way

Michael Fickes

WAYMAN PEARSON joined Charlotte, N.C.'s Solid Waste Services Department (SWSD) in the early 1990s, assuming the unusual title of key business executive. At the time, the city had 120,000 households, and the department employed more than 400 people. Today, SWSD services 200,000 households, employs about 250 people and consistently outperforms other North Carolina municipalities when the cost and efficiency of solid waste services are measured.

According to a 2004 report issued by the University of North Carolina at Chapel Hill's Institute of Government and the North Carolina Local Government Budget Association, Charlotte's collection costs per ton of garbage are 45 percent lower than the statewide average. The city also spends 41 percent less per household to collect garbage than the statewide average while collecting 27 percent more tons of recyclables per employee and 46 percent more tons of yard waste per employee.

Observers attribute much of Charlotte's performance to innovations introduced by Pearson, who wasted little time replacing outdated systems when he took over SWSD.

Manual routing was one of his first targets. Pearson believes that Charlotte was one of the first municipalities to bring Route Smart routing technology on line. “Right away, we saw a savings in the time we had to spend routing trucks,” he says. “The system also enabled us to adjust routes based on what was actually happening. We no longer had to wait until the routes were totally out of balance before justifying the time it would take to re-route manually.”

Today's fleet consists of 50 automated residential collection trucks, 48 two-compartment side-loading recycling vehicles and 40 rear loaders for green waste collections. Pearson also runs eight trucks for bulk item collections, including rear loaders and dump trucks, which are used for white goods.

The trucks combine cabs, chasses and bodies from the major makers, including Tulsa, Okla.-based Crane Carrier Co., Heil Environmental in Milwaukee and Dodge Center, Minn.-based McNeilus Companies Inc.

Onboard technologies include automated vehicle locating (AVL) systems, which employ global positioning system (GPS) technology. “We use AVL to track the activity of our trucks,” Pearson says. “We've tied it to the arm, so we can tell where the truck is, how many lifts it makes and the travel time in between lifts. We've factored this data into performance standards for drivers.”

Pearson has not installed on-board computers yet, but says the department is moving in that direction.

Managed Competition

Perhaps Pearson's greatest innovation has been enabling SWSD to thrive in the city's managed competition program. Since the mid-1990s, SWSD has had to bid against private waste haulers on service contracts for the north, south, east and west quadrants of the city.

Out of the 12 competitive bids made since 1995, Pearson's team has only lost one. “That was very close,” Pearson says. “That contractor is Inland Service Corp. from Laguna Vista, Texas. They are in the third year of their five-year contract.”

The department provides garbage, recycling, yard waste and bulky item collection services for single-family homes and apartment complexes with less than 30 units. SWSD also collects solid waste from small businesses. Charlotte pays for solid waste services with an annual budget of about $41 million funded by property taxes.

According to Jeremy O'Brien, director of applied research for the Solid Waste Association of North America (SWANA), Silver Spring, Md., managed competition is a procurement process that enables the private and public sector to compete fairly to deliver services. “The process is designed to level the playing field between the public and private sides as much as possible — even though each side always complains that the other side has an advantage,” he says.

The public sector, for example, doesn't have to pay taxes, O'Brien says. Nor does it have to provide bonding for insurance purposes. On the other hand, private sector companies, such as Houston-based Waste Management Inc., often have the advantage of great size and resources compared to a city department with a couple hundred employees and a handful of managers.

In 1995, Charlotte decided to privatize its residential collection operations and bid out a test section of the city to see how it would work. The city itself was not invited to submit a bid.

At the time, O'Brien was working as a project manager with HDR Engineering of Omaha, Neb. Coincidentally, he was working on a project in Charlotte. When he heard about the city's privatization initiative, he got in touch with Pearson to talk about the program. One thought lead to another, and Pearson decided that the city ought to put in a bid the next time around. He asked O'Brien and HDR to help with the presentation.

When trash services for another section of the city came up for bid, four companies plus the city submitted bids. Charlotte's bid came in 25 percent lower than the lowest private bid. Everyone but Pearson and O'Brien was stunned.

O'Brien's experience with managed competition taught him that an intelligent bid would give the city a good chance to win. “When a private contractor bids to the terms of a contract, it inserts exclusionary clauses designed to manage risks,” he says.

“Suppose, for example, that a bad ice storm puts crews out on the street for extended overtime,” O'Brien adds. “A contractor would say that this is a change in the scope of the contract and point to a clause that describes the process for negotiating charges outside of what the contract covers.

“My point is that if a private contractor can bid this way, a city department competing with private contractors should be able to use the same techniques. When a public department bids that way, it can lower its costs and compete very effectively.”

SWSD earned the business with a hard-nosed business plan that upgraded departmental capabilities. For example, the bid included costs to spec and purchase new trucks, which probably wouldn't have been possible without the managed competition contract. The contract also provided the department with the right to alter the workday, from eight to 10 hours, while providing for the cross-training of employees.

“The model we created here for managed competition is the same model being used by SWANA when members ask for advice on setting up a program,” Pearson says.

“Our model works well because it requires a detailed description of the scope of service,” he adds. “In addition, the materials are written in a way that allows the text of the bidding documents to flow easily into a contract.”

Freeing Up Creativity

Under a managed competition system, successful bidders are those that are deemed to provide the best service for the lowest cost. That leads contractors to stay alert for new, more efficient methods to carry out tasks.

Given the high cost of tires, for example, Pearson figured that finding a better way to control tire costs would help him control the costs of services provided to Charlotte. Searching for tire management ideas, he came across a program offered by Michelin, in which tire mechanics monitor wear on vehicles and change the tires before they go flat from old age.

Pearson contracted for the service. “It's a comprehensive tire management program,” he says. “They are probably in our yard once a week.”

By and large, the program pays for itself out of the savings it produces. Pearson pays Michelin out of the money ordinarily budgeted for tires. “I don't have a figure, but we have had a substantial drop in the cost of tires,” Pearson says.

Charlotte has also earned praise for its comprehensive approach to recycling collection. “They have done a good job of promoting recycling and a wide array of special waste management services,” O'Brien says.

Four years ago, Pearson got out of the recycling cart business. He made a deal for 200,000 recycling carts with Charlotte-based Otto Environmental Systems LLC that avoided the need for a large capital expenditure.

Under the terms of the deal, Charlotte does not purchase any carts. Instead, Otto owns the carts and provides them to residents for a small fee. “The city doesn't have to pay for millions of carts over the years or to provide any maintenance services,” Pearson says. “Otto does that.”

Pearson, however, isn't on the cutting edge with every system. For example, Charlotte's recycling program currently uses 16-gallon bins, which residents can put bagged fiber in. At the curb, the driver gets out of the truck and separates the fiber before throwing it into a dual compartment truck.

Many municipalities have been switching to single-source recycling. “And they're right,” Pearson says. “It is more efficient, and it increases the amount of participation and set outs. We're considering the possibility of converting to automated single-stream recycling collection as well.”

Pearson also is pondering the best way to organize a collection program for electronics, and he is thinking about building a transfer station. The region has never needed one, but Charlotte's rapid population growth may change that.

In a system of managed competition, managers must always be on their toes by constantly reviewing and updating programs, policies and procedures. If they don't, they could lose their next competitive bid. “I like it that way,” Pearson says.

“Charlotte is one of the few cities in the country that has embraced managed competition,” O'Brien adds. “They should be proud of what they have accomplished.”

Michael Fickes is a contributing writer based in Westminster, Md.

CHARLOTTE'S SOLID WASTE STATS

Population: Charlotte is one of the nation's fastest growing cities. Its population today stands at 648,139, up from 579,684 in 2002.

Households: Roughly 260,000.

Residential trash collection volume: 374,445 tons in 2005.

Commercial trash collection: The city collects solid waste from small businesses only. Tonnage for this work totaled 10,293 in 2005.

Recycling collection: 30,764 tons in 2005.

Bulk Waste: 11,575 tons in 2005.

Sources: Charlotte Chamber of Commerce, Charlotte SWSD

SOLID WASTE IN MECKLENBURG COUNTY

Charlotte lies inside the boundaries of Mecklenburg County and accounts for about 80 percent of the county's 796,000 residents. As in many jurisdictions across the country, Mecklenburg County does not provide collection services for residents and businesses. County residents that do not live in Charlotte or another jurisdiction within the county contract for waste disposal with private firms.

County facilities include a landfill that accepts construction and demolition materials, a material recycling facility (MRF) that accepts recycling materials and Compost Central, which accepts green waste. The county also maintains several drop-off sites where residents can bring household hazardous wastes.

A second landfill, owned by Allied Waste Industries of Scottsdale, Ariz., accepts solid waste from trucks that collect waste in the county and its cities. According to Wayman J. Pearson, key business executive of Charlotte's Solid Waste Services Department, tipping fees at the site have held steady for years, rising only two dollars a ton, from $23 to $25, over the past five years.