Your Hidden Waste Hauler Contract Problems: What they are and what you can do about them - Part 1
Most waste hauler contracts have hidden problems. Why? Because your haulers don’t have incentive to help you save.
And unfortunately, many vendors in the waste industry are out to make more and more profits. So they’re willing to have you sign contracts that help them do exact that. And many of you have unwittingly signed them.
A typical contract will include the following expensive specifications:
Allow for unlimited price spikes
Has inaccurate service levels
Charges you for additional fees
Makes it nearly impossible to cancel
Has no provision for bad service
Most people simply don’t know that they can ask for additional contract language. They don’t know that they can ask that certain clauses be removed. They don’t know they can edit existing language. So they don’t.
And as a result, they overspend by 10-30% on their waste every month.
This article will help you start saving on your waste expenses by identifying some of the most common contract problems. We’ll go over 1-3 today, and 4 and 5 later in the week.
(Psst! Want to quickly know how good your contract really is? Download our free Waste Hauler Scorecard!)
Price Spikes Allowed On Contract
This is a good example of a contract problem that requires additional language in order to fix. If your contract does not include language that prohibits or limits price hikes, you will almost certainly get them.
Price spikes can occur 1-4 times a year, at rates of 10-15% each time. Most haulers will only increase prices once a year, but some will chose to do so more. And if your contract doesn’t expressly prohibit this there’s nothing to stop them from taking advantage of the opportunity.
If price spikes compound over time, you will pay more than you should. If this happens at multiple properties in a portfolio, you can overpay by thousands of dollars. Don’t let that happen to you.
Take a look in the notes section in one of your contracts. Does it have notes that limit or completely eliminate price hikes? If not, scan the rest of your contract for any similar denotations.
You can read more about these waste issues and others right here.
Inaccurate Service Levels
Service levels tend to be “off” for two main reasons.
First, 70% of companies in the US are paying for too many pick-ups. Why? Because haulers err on the side of too many pickups since more pickups mean more revenue. The more trips to your property that they make, the more they get paid.
So when they’re first evaluating for your needed service levels, they have financial incentive to over-estimate your real needs. Some haulers do this intentionally. Others err on the side of too many pick-ups because too few pick-ups are going to cause major problems quickly.
Second, most haulers don’t tend to re-evaluate your real needs over time. When was the last time your hauler said they should drop service down to twice a week? Or that if you switch out equipment, you could have fewer pickups?
You may have had the correct service levels when your contract began, but your needs may have changed. There may be unnoticed savings opportunities at one or more of your properties because your services have not been thoroughly evaluated in a long, long time - or ever. (This is one of the major reasons why 90% of companies are paying too much for their waste services.)
Haulers simply don’t have the financial motivation to proactively find the solutions that are right for you. They’re there to pick up trash, and they know that more pickups means more revenue.
To make sure you have the right services, find an independent waste consultant who will objectively evaluate every waste stream and find where you’re currently overspending.
Contract Includes Additional Fees
Most haulers will pass on the cost any number of administrative and overage charges to you. A lot companies pay these outright because they think they have to. You don’t.
But unless your contract specifically caps or eliminates these fees, you will need to pay them.
Look for these on your current hauler contract:
Fuel/environment fees: This fee supposedly helps recoup the cost of gas, but is actually a huge profit center.
Recycling recovery fee: Covers the fees incurred by hauler to transfer recyclable, but again, is typically a profit center.
Minimum tonnage fees: Fee charged by the hauler (typically on roll-off or open-top accounts) when a container’s weight upon pickup is below a specific threshold.
Administrative fees: typically charged if a client elects to receive paper invoices instead of electronic delivery of invoices.
Regulatory Cost recovery fee: Some haulers, (like Waste Management) will charge this fee to cover costs in other regions - not necessarily yours. They explain it like this:
“This charge is not specifically tied to such costs to service your account, but instead helps us cover Waste Management’s enterprise-wide costs for host community fees, waste disposal taxes and similar charges to service all WM operating company customers in the United States and Canada, and to achieve an acceptable operating margin.” (From Waste Management, retrieved July 23, 2019.)
The regulatory cost recovery fee is not “tied to . . . your account.” In other words, you’re helping cover their costs to service other companies. Why should you pay for what you don’t benefit from?
You can reduce or eliminate all of these fees; you don’t have to pay them. But you have to do it prior to renewing a contract, or getting a new one. It’s extremely difficult to negotiate these fees in the middle of a contract.
Your Hidden Waste Problems are Costing You
Too many companies don’t realize how prices hikes, inaccurate service levels, and ancillary fees are costing them.
Price hikes are built into the fabric of the vast majority of waste contracts. Inaccurate service levels go unnoticed in most contracts. Ancillary fees are paid without question.
Take the time you need to take to carefully review your contract or contracts. You are likely sitting on significant savings.
Have you ever thoroughly reviewed your contract? Ever heard of any of these waste issues? Let me know in the comments below!