Property Management Waste Service

How to Determine if You Are Paying Too Much for Waste Services

In Recycling, Reduce Waste Costs, Waste Management by David FahrionLeave a Comment

Organizations typically outsource their waste services to third parties or waste management service providers offering specialized waste management services. Oftentimes, senior management cannot be bothered to take a detailed look at the contracts or the services provided by these specialized vendors, with the excuse of being “too busy” dealing with “more important” matters. These contracts are frequently out of date and companies could potentially be continuing on with tie-ups and agreements that may have been signed years ago, with organizations neglecting to consider re-negotiating such contracts.

As a matter of fact, if these contracts are not regularly updated or re-negotiated, an organization might very likely be paying too much for its waste management services since most waste service agreements include price escalation clauses, which automatically increase service costs over the years. By neglecting to look over their contract with their waste management service provider, companies may essentially be paying double, triple, or more than when the contract was first signed – even when the amount of waste produced or the services provided have remained the same.

Apart from this one aspect of waste service agreements that organizations subconsciously condone, there are other areas that an organization can look into to determine if its paying too much for its waste services.

Digging Deeper into Whether Your Business is Paying Too Much for Trash Service

The cost-benefit analysis of waste disposal services is generally not a top priority for organizations, and it’s highly probable that businesses, churches, schools, and other entities have fallen victim to the fraudulent billing schemes adopted by some unscrupulous waste management service providers out there.

As mentioned above, such entities would, sometimes unknowingly, be paying substantially more than what they should be. An organization should consider determining whether it’s being overcharged for services rendered as a top cost-saving priority, and this can be done by following these simple steps:

Understanding the Contract - The first step is to thoroughly read and understand the waste service contract. Organizations must ensure that each and every clause, along with the full terms and conditions, is properly read and understood.

Properly Identify Frequency and Volume - The size of the waste containers should be made clear in the agreement. The size may vary from company to company and jurisdiction to jurisdiction, however, the first page of the contract should typically include details regarding the volume, amount, and service frequency listed. The contract should also identify whether your business has the opportunity to purchase a trash compactor for the business.

Look for Invoice Discrepancies – Prices listed in the most recent invoice should be compared with the prices set forth in the waste service agreement to identify any discrepancies. Any discrepancy could potentially be a sign of over billing by the waste management service provider.

A surprising amount of vendors assume that an organization’s employees may not necessarily be aware of the agreed prices, and thus any over billing would go unnoticed – and in some cases, such assumptions are correct. Oftentimes, employees won’t, in fact, be aware of the contracted prices, assuming that everything in the invoices is in order and will refrain from digging deeper into the correct pricing and other details.

Regularly Invite Quotes from Existing Providers – It would be prudent to keep an eye out for small, local and regional players operating in the field of waste management services and explore all options. Quotes should be sought on a regular basis and should be based on requirements such as container size, waste volume, disposal frequency, and any other supplementary services needed.

Just because a comparison of the latest invoice and the contract pricing checks out, it doesn’t mean that the work is done and the investigation can end. Third-party vendors or contractors follow a general practice of incessantly increasing prices in small increments to the point their customers are able to notice the rate increase.

Once confronted, the service provider may offer new, discounted prices which may be higher than the originally agreed upon price, but insist that they’re still lower than current market rates. By taking a provider’s word for it, an organization might still be paying too much; since a bit of due diligence could reveal that even the original contract price for the service being rendered is even higher than current market prices, thus highlighting importance of familiarization and keeping up to date with current pricing.

By constantly seeking new quotations from other waste management service providers, companies are able to determine a benchmark rate, to which they can compare the prices they are paying.

If a company finds out that it’s shelling out too much for waste services, it should consider switching to another waste management service provider, ideally one that offers better and more transparent pricing.

Even though it may sound simple and straightforward, the process of changing waste management providers may not be a smooth one, and the original contract must be carefully studied to determine the consequences, if any, of early termination.

What to Do Moving Forward

A company that has determined its paying too much for waste management services has multiple options when it comes to reducing overall costs. Before moving forward with its action plan, it’s important for a company to understand the contract’s finer details with regard to its effective term, renewal, cancellation, and, if any, potential breach of contract liabilities.

Determining the Current Agreement’s Expiration Date - Waste management service agreements typically have an effective term of three to six years. Most also include an automatic renewal clause, by which such agreements are automatically renewed for an additional term unless one of the parties involved decides to cancel the agreement upon its expiry. Typically, conditions surrounding an agreement’s renewal and cancellation are presented as separate sections in the agreement.

Determining the Communication Requirements for Cancellation - Like most other service agreements, in order to cancel the agreement, most waste management service agreements require the party that wishes to cancel the agreement to issue a formal, written notice of cancellation to the other involved party. This notification must be issued within a period of time agreed upon in the contract. Such written notice typically has to be sent via mail 90 to 180 days prior to the expiry date specified in the agreement.

Determining Whether the Contract has been Renewed at Any Stage - If an agreement has been automatically renewed without any amendments by the vendor and the customer, then it is considered to be in a renewal period. The penalties or fees for an agreement’s cancellation may vary depending on whether it’s in its first term or in a renewal period.

Calculating Stipulated Damages - Charges required to be paid by a party in breach of contract, such as by terminating the agreement prior to its expiry, are known as “Stipulated Damages”. When considering backing out of its agreement with its current waste management service provider, an organization should go over the applicable sections in the service agreement and determine the actual amount it would be liable to pay.

Speculating Estimated Annual Gains - A detailed analysis of the quotations received from various vendors provides a company with a clear picture of what it could potentially be paying if it decides to switch its waste management service provider. Based on such information and current invoice amounts, a fair value of the projected savings a company could potentially gain can be calculated.

Once it has concluded that the gains from changing waste management service provider are substantial, a company can proceed further, keeping the service agreement’s terms and conditions in mind.

Making an Informed Decision on Whether to Wait Out an Agreement - After carefully and diligently looking over the current service agreement, current market prices, and market conditions, the company may make an informed decision on whether it would be more beneficial to wait out the agreement until it expires or terminate it early and switch to another vendor.

If the company decides to wait, the beginning of the notice period provided in the agreement should be noted. Once the notice period begins, a company may then send a written notice of cancellation to its vendor clearly communicating its desire to end the agreement.

Immediately Terminating the Agreement and Paying the Stipulated Damages - This option should only be considered after a thorough cost-benefit analysis of the stipulated damages and projected gains. A company should only consider the immediate termination of the existing service agreement if a considerable gain stands to be attained, even after paying the stipulated damages, and should send an immediate notification to the vendor clearly outlining the details of the exit clause and the stipulated damages to be paid.

Seeking Legal Counseling to Terminate the Agreement Without Penalty - If it is determined that the waste management service provider is charging exorbitantly high prices and not following ethical practices, a company may seek legal advice to determine whether it can legally exit the contract early without incurring any penalties.

An example of such a case would be one in which the agreement itself is biased towards the vendor, with clauses related to pricing and termination being in their favor. In such cases, it is recommended that companies seek legal counseling and advice on their next course of action.

Taking a thorough look at your waste services is beneficial for you as a company because there is money to be saved. Be sure to look frequently and ask yourself, "Is my business paying too much for trash service?"

The answer, more often than not, is yes! If you are unsure, contact Waste Control for a FREE BUSINESS WASTE AUDIT ANALYSIS.

About the Author

David Fahrion

David Fahrion serves as the President of Waste Control after a 40-year career in the waste and recycling industry. Prior to joining Waste Control, he worked exclusively for CR&R and its affiliates since 1986 serving as the President of the Solid Waste Management Division. During his career, he worked on all facets of the solid waste management business from dispatching and routing to contract negotiations and state facility permitting.