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Table 2 Revised (8/23/08) Revised r Total Annual Costs (~OQ8 dOllars) (3/16/09) Avg all Item Reference proDosers Hudson Baylor South Bay South Bay A. Total Operating Costs (year 1) Table 2. $15,748,011 $14,987,464 $13,229,178 $12,725,221 B. Annual Interest Expense (year 1) Form 3 ~ K $278,265 $238,052 $165,040 $165,040 Subtotal $16,026,275 $15,225,516 $13,394,218 $12,890,261 C. Recycling Revenue Guarantee Form 3 - E $7,728,571 $10,100,000 $7,250,000 $7,250,000 D. Buyback Customer Payments Table 12 $729,182 $1,111,500 $906,000 $906,000 88 age 4 Consistent with the negotiations process that was contemplated after SBR and HBC were short-listed, both firms were directed by the Evaluation Committee to submit changes to their respective proposafs. After the initial changes were submitted by the proposers and reviewed by the Evaluation Committee, SBR was directed to submit further changes by the Evaluation Committee. Again these changes are consistent with the process envisioned when SBR and HBC were short-listed. As a point of comparison, SBWMA staff estimates that overall and on average throughout the SBWMA service area each $1 million of additional cost will add roughly $5.00 per year to each residential ratepayer's bill. ISSUES PRESENTED AND INVESTIGATED DURING THE SELECTION PROCESS Labor Agreements Communications between the Teamsters and the proposers took place independent of the RFP process managed by the SBWMA. Accordingly, the Evaluation Committee and the Selection Committee are uncertain as to what was communicated and agreed to by the various parties. The Evaluation Committee and the Selection Committee were unaware until March 2009 that HBC had signed an MOU with the Teamsters. The original MOU, which the Teamsters requested SBR sign, would have required SBR to treat the MRF sorters as union employees even though they are not currently covered by a collective bargaining agreement (CBA). From the SBWMA's analysis, this represents upre-negotiation" of the terms of the future agreement with labor and would have potentially significant cost implications for the contractor and lor the SBWMA. By signing the MOU, SBR would be implying their willingness to accept additional labor costs of $800,000 to $1,000,000 per year without the prior consultation or approval of the SBWMA. To avoid this awkward situation, SBR created and signed a modified MOU that was consistent with their proposal to the SBWMA and which acknowledged that SBR would accept all employees covered by a CBA at the time of contract. The selection committee found that SBR made an appropriate business decision when they refused to sign the original MOU provided by the Teamsters. Environmental Compliance The Selection Committee reviewed the Notices of Violation issued by the local enforcement agency (in this case the City of Los Angeles Health Department) that came to light during the evaluation process. The bulk of violations were related to the permit conditions surrounding the operation of Community Recycling's (one of the two SBR partners) facility in Sun Valley, California. This facility has been operated for over twenty years and predates many of the current regulations pertaining to solid waste facilities. While the Selection Committee recognizes that Community Recycling has