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88 Page 115 price is to be determined by the SBWMA on a quarterly basis through a local market survey (specifically, the SBWMA will contact five (5) buyers of recycled materials and obtain quoted for the materials market by the Contractor. The average of these prices will be the price which the Contractor must sell the SBWMA's materials at lor above. If it is found that the Contractor has sold materials for less-than the "market average" then the Contractor is to pay the SBWMA liquidated damages equal to two-times the difference between the actual sale price and the "market average" price). While this method of market price "testing" can be performed by the SBWMA reliably, the SBWMA believes it is important to have a separate objective method of "benchmarking" the Contractor's commodity sales. For this reason, the Evaluation Committee requested that HBC and SBR provide an alternate method. Each proposer was asked to propose a "fail-safe" mechanism whereby the SBWMA can be assured that it always receives the highest prices that are offered in the local market area. The methods proposed by both companies can create transparent fiber sales transactions and render price security to SBWMA for the targeted fiber grades. Both HBC 'and SBR propose to tie the sales price of fiber commodities (DCC, ONP, and mixed paper) to a benchmark pricing guide called the Official Board Market (OBM) - Yellow Sheet. The OBM is commonly used by recyclers and municipalities to gauge the sales price (domestic and export price) of recycled fiber. The OaM is issued monthly and provides the high and low sale prices for most common recycled fiber grades by major regional market center. For the West Coast, the OaM provides pricing index for San Francisco and Los Angeles market areas. HBC and sac have tied their minimum fiber sale pricing to this index. Hudson Bavlor Corporation - In their original proposal to the SBWMA, HBC offered a methodology to "benchmark" their fiber sales to the OBM index. HBC has offered to pay the SBWMA for ONP and OCC paper grades based the OBM price index - "San Francisco pricing + $10.00 per ton". Their proposal is to pay the SSvVMA the higher of either the "market price" or OBM + $10. Because the OBM only provides pricing for domestic ONP and DCC in the San Francisco market, the detailed workings of HBC's pricing methodology will require adjustment to reflect local conditions. The intent of HBC's methodology is understood and its principle can be applied to create the results sought by SBWMA (see HBC methodology in Appendix G). South Bav Recvclina - SBR has also proposed to use the OBM - Yellow Sheet Index as the benchmark for confirming the fair-market price for the fiber grades recovered at Shorway. However, SBR states that because the OBM exoort price index more accurately reflects actual market conditions than the domestic guide, they have based their metric on the OBM - Yellow Sheet - Los Angeles export price (The OBM does not list an export price for the San Francisco market area.) The actual price will be adjusted by the difference in the Los Angeles and San Francisco costs of transporting the commodities to the port. SBR's proposed methodology is understood and it can be applied to create the results that are sought by SBWMA. Please see SaR's methodology - Appendix H. 5. Cost Chanaes from Oriainallv Submitted Proposals Hudson Bavlor Corooration. In response to the SBWMA's stated concern regarding the ability of the company's proposed transfer station management sub-contractor, HBC proposed various sub-contractor options and substantial changes to their original cost Facility Operations Evaluation Committee Report: 3/18/2009 Page6