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6A Page 1 0 ATTACHMENT 3 Brian - Sloan Vasquez and I have gone back to the Agreement to verify our position on how a labor cost increase would be treated by the S BWMA before the initiation of services and after the initiation of services by the new Facility Operations Contractor. This analysis is presented below. Also, below are the excerpted sections of the Draft Agreement and Attachments 12&13 that are sal ient to the discussion. The issues regarding the Teamsters' proposed MOU is that the Teamsters have solicited the proposer's to make a commitment to Labor in advance of the Agreement being signed. OUf interpretation is that in signing the Teamster's MOU, a company has done the following: 1. Agree to pay MRF sorters a potential cost increase that may not be reimbursed by the SBWMA (discussion of this circumstance below). This would mean that the proposer's originally submitted prices as presented in their Cost Forms would be "superseded" by the commitment made by signing the MOU. The Selection Committee concluded that SBR made an appropriate business decision in not signing the MOU. 2. Pose a risk to the SBWMA in so much as the Company may have committed themselves to pay a higher wage than the contractor will be reimbursed, thus exposing the SBWMA to cost and political pressure to reimburse the Contractor after the Agreement has been signed. 3. If the signing the MOU, the company included the higher "union wage" cost for MRF sorters (that would follow from the MOU), then they disregard the clear instructions of the RFP. The RFP instructed proposers to use a wage for Temporary Employees for MRF sorters in responding to the RFP. This is so the proposals could be compared apples-to~apples. With that said, the answers to your questions about cost reimbursement are as follows: Labor costs adjustments are provided for with a one-time rate adjustment prior to the initiation of services and on an a nnual basis thereafter as described in the Agreement Section 7 and in Attachment 12A and 13A. The initial one-time rate adjustment, among other costs, allows for changes in costs for represented em ployees based on the CBA labor rates in effect when the proposals were submitted and the CBA labor rates in effect in October 2010. It also allows for an adjustment for non-represented employees using a different procedure. However, once the CBA that was in effect in 2010 expires, wages and benefits for all direct labor employees represented or not, may be adjusted based onlv on the Consumer Price Index (CPI). There is no specific language 0 n how to handle employees reclassified from non-represented to represented. Question #1: What happens if the CBA is renegotiated by Allied before its expiration in 12/31/09 and costs increase becau se MRF Sorters are included in the CBA? Answer #1: If the CBA is renegotiated by Allied prior to the new contractor initiating services, then the MRF Sorter labor adjustment resulting from the reclassification would be appropriate because the procedure provides for changes in costs for represented employees. In this case, instead of using the procedure for non-represented employees