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[greenyes] Route Efficiencies



Bob Krasowski asks:

"I live in a large County (Collier, Florida) that is developing a strategy
for
residential/comercial solid waste, and residential recycling collection
franchise bids. The County has 91,000 curbside residential pickups. Data
on the number of multifamily and business accounts is still being
processed.

"My question is. How can I determine how many separate "Zones" can be
created
in a given system to allows for competition and comparison yet not cause
an
increase in the cost of the programs due to inefficiency of scale?"
Gary wrote back that:
"Let the market decide how many is efficient, by opening the system up to
competition (see http://www.crra.com/irc/guide.html). If there are
concerns about having too many collectors involved in any one location,
consider multiple semi-exclusive franchises, like we did in Hawthorne, CA
(see http://www.cityofhawthorne.com/pwks_cref-index.htm)"


Let me add to Gary's response to zero in on the question you ask about scale
efficiencies for trash collection. As CRRA notes, recycle collection has
other considerations.

The minimum size that you may want to consider is the number of stops that
one truck can collect from in a week. That will vary with the topography,
density, household size, waste generation, traffic, time to offload, and
fleet types, but one rule of thumb might be a district with in the order of
10,000 people.

Then, one needs to recognize that a new operator entering the market, for
example, cannot run just a single truck because it can break down. A back
up truck is needed, typically one for every five trucks operating. The
optimal size fleet to gain the first threshold for scale efficiencies, then,
would be five minimum sized district.

What needs to be borne in mind is that there are cross currents here that
need to be factored into your analysis.

In one sense, it is certainly true that the more hauling firms that can be
brought into the market, the more competition will tend to be engendered.

On the other hand, breaking up the exclusive districts into too small pieces
can make it very difficult for anyone but the largest firms to compete. As
noted in the foregoing explanation, if the district is too small to fully
utilize one truck, then the new entrant would find it difficult to bid for
that exclusve district contact competitively with the large firms that have
commensurately large fleets within which to move trucks back and forth and
can assume that their truck is fully utilized, which the new guy might not
be able to do.

Similarly, unless the contract term is at least 5 years and even better 8
years, in order to amortize the capital cost over the life of the equipment,
that new guy may not even be able to get a bank loan to finance purchase of
the truck.


Peter




_____________________________
Peter Anderson, Executive Director
CENTER FOR A COMPETITIVE
WASTE INDUSTRY
4513 Vernon Blvd. Suite 15
Madison, WI 53705-4964
Ph: (608) 231-1100
Fax: (608) 233-0011
Cell: (608) 698-1314
eMail: anderson@no.address
web: www.competitivewaste.org







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