Former contractor takes issue with state’s new e-waste contract with Casella

Discarded electronics, called e-waste. Creative Commons photo by JohnJMatlock via Flickr

Discarded electronics, called e-waste. Creative Commons photo by JohnJMatlock via Flickr

When 11th hour negotiations over the state’s e-waste recycling program fell apart in August, the contractor chalked it up to a fair business loss.

Good Point Recycling, working as a subcontractor of the New Hampshire-based Northeast Resource Recovery Association, had built Vermont’s successful e-waste recycling program from scratch in the preceding two years. Their contracts with the state’s Agency of Natural Resources were public records, so they assumed a competitor, armed with the knowledge of the incumbent contractor’s price point, intentionally had bid to run the program for less.

“We played nice,” said Mike Durfor, executive director of NRRA.

But Durfor, along with Good Point president Robin Ingenthron, reconsidered when they saw the contract the agency signed with Casella Waste Management.

The Agency of Natural Resources had conditionally renewed its agreement with NRRA and Good Point, pending successful negotiations. But the contractors wanted to keep negotiating, according to Cathy Jamieson, solid waste program manager for ANR. A final contract couldn’t be signed in time, she said.

Casella’s bid had been rated as second to theirs, so when things fell apart with NRRA and Good Point, the ANR picked Casella.

The agreement Casella and ANR reached, just days before the NRRA contract expired, included a flat rate that exceeds the per-pound payments from NRRA and Good Point’s previous contracts, and a new conditional $720,000 guarantee: In the event that a so-called “independent” plan were approved to compete with the state program, Casella would collect at least $720,000, regardless of how much e-waste the company sent for recycling.

Durfor: “When we saw this, we said, ‘Wait a minute!'”

No such guarantee surfaced in NRRA’s initial negotiations with the state in 2011, nor for the 15-month extension agreement signed in 2012.

And Good Point’s own application to run an independent plan had been denied on Sept. 23 — three days after Casella chairman and CEO John Casella signed the state contract, and one day before the Department of Environmental Conservation finished the deal.

In addition to the financial arrangements that raised Durfor and Ingenthron’s hackles, Casella’s primary recycling subcontractor gave them pause. Despite official procedures that expressly forbid land disposal of e-waste, the Finland-based firm Kuusakoski — with U.S. facilities in Plainfield, Ill., and Philadelphia — will send at least some e-waste to a landfill to use instead of soil as an “alternative daily cover.”

Representatives from Casella did not return phone calls seeking comment for this story.

The day before the Casella contract took effect on Oct. 1, Durfor and Ingenthron filed civil suit in Vermont Superior Court in Barre, charging that ANR had violated procurement standards and contradicted the agency’s own bidding standards. They wanted the agency “to rebid the project and properly apply the mandated procedures,” according to court documents.

The state argued the case should be dismissed entirely because it belongs in the court’s environmental, not civil, division.

The Agency of Natural Resources ultimately won on that point, but not before Judge Helen M. Toor took testimony and characterized some of the agency’s communications as “puzzling” in her final ruling.

Meanwhile, the lawsuit ball is back in NRRA and Good Point’s court. They’ll have to file a new suit in the environmental division if they want to pursue it.

And the Casella contract is on. With the lawsuit out of civil court, the temporary injunction Toor had ordered on Sept. 30, to maintain the “status quo” of NRRA and Good Point running the state program, also is gone. On Oct. 10, Casella technically took over operations.

But NRRA and Good Point remain hopeful the agency will reverse its denial of their application to run an e-waste recycling program independent of the state.

If not, as a nonprofit organization doing business throughout the region, NRRA would be disappointed but able to absorb the lost business. Good Point, on the other hand, already has weathered financial struggles, since tenants in the company’s newly acquired warehouse in Middlebury went out of business after the 2008 recession hit. In Toor’s ruling, she documented Ingenthron’s worry that, without the e-waste program, Good Point may fold.

But with about 30 employees counting on him for their paychecks and other clients across the Northeast, Ingenthron is not giving up.

He said Tuesday afternoon that ANR had asked to meet Oct. 18 to discuss Good Point’s “request for reconsideration” regarding the independent plan rejection.

“But if the independent plan is quashed, if we do have to go to court, we’ll appeal the entire process,” Ingenthron said. The negotiation process, the $720,000, the landfilling of e-waste, the independent plan rejection, all of it.

Negotiation breakdown

Cathy Jamieson at ANR said the sticking point in negotiating a renewal with NRRA and Good Point was the amount they were willing to pay the solid waste management districts and other entities that collect e-waste.

“State law says that (the state’s e-waste program) requires fair compensation be paid to collectors,” Jamieson said. “So the state does have an obligation to make sure that at least fair compensation is made.”

ANR wanted contractors to pay collectors at least 5 cents per pound of e-waste they collect, she said. NRRA and Good Point collectively had earned 28 cents per pound in the two years before, out of which they compensated collectors.

The first year of operation, Good Point paid collectors 5 cents per pound of e-waste. The second year, Good Point paid them based on the amount of work they put in: If collectors handled some of the legwork, such as sorting materials, Good Point may have paid up to 5 cents per pound. They’d add another 5 cents per pound for collectors who transported their own e-waste straight to Good Point. But if Good Point did all the work, the collectors didn’t earn a dime, and that was OK with them, Durfor said.

Teri Kuczynski, district manager of the Addison County Solid Waste District and the Vermont Solid Waste District Managers Association, concurred. She said her organization was very involved in development of the first year’s contract.

“We had someone on the committee to review bids,” Kuczynski said. “I don’t know why this one was different. It was kind of strange.”

In negotiations during summer of 2013, NRRA and Good Point initially asked for 34 cents per pound, with continued leeway to negotiate payment to collectors. They later offered to take 30 cents per pound, with the promise that collectors would get two cents even without extra handling responsibilities. But if the price were a deal-breaker, Durfor said they offered, they’d do the job for 28 cents per pound and re-establish the 5 cent guarantee.

“Our view of that discussion is different than theirs,” Jamieson said. She emphasized that the payment to collectors was “the focus” of the first part of their negotiations. “We thought we had an agreement, and they went back on that and wanted to continue to negotiate,” she said.

ANR needed more traction than they were getting from NRRA and Good Point, and faster.

Under the state’s new plan with Casella, the company will be paid 30.1 cents per pound for electronic waste the company gathers for recycling, with 5 cents going to e-waste collectors, Jamieson said.

Kuczynski said in an interview that she was not aware of any collectors who felt they had not been fairly compensated by Good Point. In a letter to Jamieson dated Aug. 29, she expressed the collective wish of her organization that collectors be left to negotiate their own contracts.

“While we appreciate the State’s concern for the program collectors,” she wrote, “we do not feel that the RFP/negotiator process and the independent plan approval process has been fair or is in the best interest of the program or the collectors.”

State vs. independent recycling plans

Casella and ANR reached a flat rate agreement. But according to their final contract, the pricing structure could have turned out much different if the state had approved Good Point’s application to run an independent e-waste recycling program.

And it still could, if the agency agrees to reverse its denial of that application.

Campaign contributions

In the 2011-2012 election cycle, Casella Waste Systems and associated employees contributed at least $11,500 to both Democratic and Republican candidates for public office, political parties and political action committees in Vermont.

Searches in VTDigger’s forthcoming campaign finance database did not return results for Good Point Recycling, its parent company American Retroworks Inc., or Robin Ingenthron.

An approved independent plan would replace the flat per-pound rate with a tiered compensation structure, and trigger the $720,000 guaranteed payment clause in Casella’s contract with ANR.

To understand the implications of this clause, it’s important to know how e-waste recycling is paid for and what the difference is between a state-run versus an independent plan.

All aspects of e-waste recycling in Vermont — down to ANR’s administration and oversight of it — are paid for by electronics manufacturers, who in turn pass the cost along to customers in the price of the goods they sell.

When the state runs its own exclusive program, as it has through NRRA and Good Point since 2011, the manufacturers are bound to its terms. They pay for the cost of recycling electronic waste in proportion to the market share they hold.

If an independent plan were to enter the ring, however, the manufacturers would get to choose whether to sign up for the state’s program or the independent option.

And essentially, the independent plan is that of the manufacturers themselves, submitted to the state for approval by the company they would contract to handle the recycling for them. That’s why the independent plan often is called an “opt-out” plan: It lets manufacturers opt out of the state’s plan in favor of their own.

Good Point, in addition to bidding with NRRA to continue running the state program into 2014, applied to run an independent program on the manufacturers’ behalf. In case the first didn’t pan out, Ingenthron reasoned, he could leverage his experience to compete with the state contractor for business.

The state and independent contractors wouldn’t just just compete to sign up manufacturers for their programs, though. They also would compete for collection sites, which are not automatically bound to participate in the state-administered collection program.

Ingenthron, as the initial subcontractor running the state’s plan and as a former environmental regulator in Massachusetts, thought he’d have an edge. He had the infrastructure established, plus existing relationships with both manufacturers and collectors.

Good Point’s independent plan application, which he maintains was virtually identical to the state’s own plan — whose success ANR had celebrated in prior reports to the Legislature — was sent back for several modifications. Given just days to secure memoranda of understanding with manufacturers and collectors who agreed to sign up for his independent plan, Ingenthron landed 73 out of the 102 existing collectors, plus 13 manufacturers.

The MOUs were not binding, but Durfor thinks their responsiveness speaks well for NRRA and Good Point.

In a letter dated Sept. 23, ANR finally denied the application, citing several technical and substantive “deficiencies.”

Kuczynski, upon learning Tuesday of Good Point’s appeal of the independent plan rejection, was hopeful ANR’s decision would be reversed.

“Options are always better,” she said. “I think that’s a fair way to proceed.”

The Vermont e-cycles Team was selected and recognized at the 2012 Vermont Public Service Recognition ceremony held on May 7, 2012. Pictured here: Karen Knaebel, Kim Lutchko, Barb Schwendtner, Cathy Stacy, Cathy Jamieson, Matt Chapman. Photo courtesy Good Point Recycling.

The Vermont e-cycles Team was selected and recognized at the 2012 Vermont Public Service Recognition ceremony held on May 7, 2012. Photo courtesy Vermont Agency of Natural Resources.

The $720,000

But the prospect of granting Good Point approval to compete independently carries $720,000 worth of complications. That’s because the mere existence of an independent plan triggers the $720,000 guaranteed payment clause for Casella.

“It only would get triggered had there been an opt-out plan. … And everything for the e-waste program is paid for by the manufacturer,” Jamieson said. The contract specifies it would cover Casella for the first two million pounds of e-waste collected.

If Casella were only to collect one million pounds, Durfor figured, they would get 72 cents per pound. If they were to pick up one pound — an extreme but compelling potentiality — they would collect $720,000 for it.

“That’s a very cost-effective pound on their side,” Durfor said. “They would make more money under this contract if they didn’t pick up anything! Because they would have no cost.”

Jamieson confirmed that technically, the contract was written in a way that guaranteed $720,000 be paid to Casella regardless of how much e-waste the company does — or does not — collect between Oct. 1, 2013, and Sept. 30, 2014.

“But we felt that would not be much of an issue, considering the contract required 85 locations,” Jamieson said. With so many collection sites established, plus the opportunity to hold special collection events, she said, the risk of Casella not being able to collect two million pounds was very low.

Good Point, after all, had collected more than 4.8 million pounds in the first program year. More than 100 collection sites ultimately came on line, and more than 80 manufacturers signed up. The state’s average collection of 7.7 pounds of e-waste per resident in the second program year surpassed the record of any other state with a similar program, according to ANR’s report in early 2013.

But whether Casella realistically could compete with the company that had made such strides is an open question.

Jamieson did not return a phone call Tuesday afternoon seeking follow-up comments on the matter.

Doug Smith, who coordinates environmental programs around the country for Sony, was surprised by the $720,000 price guarantee and expressed indirect reservations about Casella’s ability to deliver.

“If you don’t have a customer, you better not incur costs,” he said.

But that isn’t Smith’s only worry with Casella’s contract.

Where e-waste ends up

“We absolutely are opposed to putting glass in landfills,” Smith said, referring to Casella’s subcontractor’s business model and the likely destination for recyclable cathode ray tubes from Vermont.

CRT glass, as the tubes are known, is found in old television and computer monitors, among other products. It’s highly toxic and becoming harder to recycle, which has stirred up concern over stockpiling of e-waste, as well as overseas shipments to developing nations where e-waste is recycled under conditions dangerous for both the environment and the workers who handle the materials.

In a separate business challenge, Good Point may be caught in the crosshairs of the latter concern. The Burlington Free Press reported in late September that a proposed ban on exporting used electronics to be refurbished could pull the rug out from under about 8 percent of Ingenthron’s business.

But to help American markets deal with the “glass tsunami,” as e-waste stockpiles have been called, the company Casella named as its primary recycler is waiting on a patent for a new technique: chemically stabilizing crushed, lead-laced cathode ray tubes, then using the treated toxic waste, instead of soil, as an “alternative daily cover” for landfills.

Kuusakoski is “working in partnership with Peoria Disposal Company (PDC) … (to) offer an environmentally sound option for CRT glass processing in the U.S.,” according to the firm’s website. A call to Kuusakoski Tuesday afternoon to confirm whether Vermont e-waste would be applied in this manner was not returned.

Jamieson said that where the state’s e-waste ends up is out of her hands. She said ANR’s obligations start and end, with limited nuance, in making sure that the subcontracted recyclers are certified by either R2 or e-Stewards. Both certifications come from national programs whose seals of approval demonstrate environmental practices acceptable under state statutes.

“Whatever Kuusakoski does with the materials needs to conform to either R2 or e-Stewards,” Jamieson said. “We will continue to make sure that the material is being managed in accordance with those standards.” She said it’s not clear yet whether Kuusakoski’s landfill technology would earn that approval, or whether it’s being implemented yet.

“It’s Sony’s position that we don’t want that lead going into a landfill, especially a municipal landfill,” Smith said.

He added that with lead going for a dollar per pound, there remains ample opportunity to recycle it. “Why not explore those till the midnight hour, before it goes into a landfill?”

As a solid waste district manager, Kuczynski looks to state statute and the state’s e-waste procedures for guidance. She thinks whether Kuusakoski’s application of CRT glass qualifies as “recycling” as intended by the state statutes and procedures — written before the technology existed — is up for debate.

“I think the goal was to recycle the materials, not to landfill them,” Kuczynski said. Even if the treated  CRT glass were approved by R2 and e-Stewards as landfill cover, she feels ANR would have to define whether that use meets the Vermont program’s intended definitions.

Logistical challenges

The transition between Good Point and Casella has been rocky, not just legally for the parties involved, but logistically for collectors, too.

Casella is still working out memoranda of understanding with collectors and manufacturers. The company will have to set up its own processes and infrastructure, such as collection trailers, at sites around the state. Meanwhile, e-waste is piling up between collections at some sites, Kuczynski said.

She had been waiting since early- to mid-September to learn whether collectors would still be permitted to self-haul. She received word from Casella Friday that they would. Collectors will be paid 5 cents per pound for loads they transported to the company “during the transition,” she said. But payment beyond that timeframe will have to be negotiated, and it’s unclear whether collectors will be able to hire a third-party trucking company — a service Good Point also offers — to get the job done.

Jamieson said that decision will be up to Casella alone, whose contract establishes responsibility for transporting the waste. Casella has subcontracted with North Coast Services, headquartered in Portsmouth, N.H., to handle the e-waste trucking. Transporters must be registered with the state of Vermont, Jamieson said.

“If they (collectors) want to make other arrangements, they can,” Jamieson said. “The state would not be involved,” she said, adding that ANR didn’t dictate hauling options for NRRA and Good Point, either.

She said if collection sites are interested in trucking their own waste, “I would encourage them to contact the contractor.”

For the time being, the only approved contractor is Casella.

Update Nov. 7, 2013: Representatives from Kuusakoski confirmed after this article’s publication that the company intends to prioritize eStewards certification for its facility in Peoria, and ultimately pursue R2 certification, as well.

Hilary Niles

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4 Comments on "Former contractor takes issue with state’s new e-waste contract with Casella"

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2 years 10 months ago

well written article – a good example of anything unnecessary cause of the higher cost of living here in the beautiful Green Mountain state

Jay Davis
2 years 10 months ago

Can you say no fair bid, sweet heart deal.

Barry Kade
2 years 10 months ago

What ever happened to “If it works, don’t fix it”?
The State rejected a contractor with a proven track record that had created the E-cycle program, to sign a put or pay contract with the 800 pound gorilla. Doesn’t make sense.

2 years 10 months ago

Oddly, the Superior Court injunction the state fought to dismiss (moving it to Environmental Court) had continued recycling at 28 cents, 5 cent payment to Collectors, no $720k “signing bonus”. The state fought to immediately initiate paying 30.1 cents, 5 cent payment to Collectors, and $720k obligation.

Had the State waited for the bid appeal to be heard, they’d have saved taxpayers money, avoided landfilling, provided a transition period, and kept Vermonters employed. And perhaps have negotiated an even better deal. Strange to see the state fighting tooth and nail to lose money.

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