The solid waste cost consulting industry was largely started in the mid 1990’s by professionals who once worked for solid waste hauling companies like Waste Management and Republic Services (2 largest). They saw that their employers were overcharging businesses and over-prescribing services, so entrepreneurs began helping people save money by becoming Waste Consultants (aka Brokers).
Eye Opening Stats
75% of Waste Expense Audits/Reviews are successful in reducing costs or finding billing errors. That leaves about 25% with clean billing and good market pricing (zero savings potential). There are hourly solid waste consultants who will charge $100 to $300 per hour or you can opt for the contingent based consultants, who get paid nothing if they don’t procure any refunds or savings. Contingent based consultants generally split the savings procured with the client. Waste Consulting service agreements are generally 36 to 60 months and most waste consultants continue to audit for savings and billing errors, during their service terms. Its very common to find more billing errors and monthly savings after the initial review. Additionally, solid waste and recycling hauling agreements are generally 36 or 60 months so the consulting agreement time frame, compliments the hauling agreement.
Why do you need a consultant? The same reason you hire a tax accountant or cleaning company. Professionals simply do not have the time to audit these accounts each month, nor do they have the time to learn how to audit things like the fluctuating monthly fuel indexes and recycling indexes. You simply can’t be an expert at everything, but why not hire a contingent consultant who only gets paid if they reduce your disposal costs or secure a billing error refund. No risk, no additional overhead and you will save money long beyond your consulting agreement term.
Basic Waste Expense Audit Outline
- Forensic audit—a line by line examination looking for billing errors and overcharges. A spreadsheet analysis is needed for things like fluctuating fuel fees, because they are attached to the DOT’s monthly fuel index, https://www.eia.gov/petroleum/gasdiesel/ . Same goes for state and local taxes and changing pricing schedules.
- Review service levels and equipment in play. – What kind of equipment does your waste hauler use? Better equipment and new recycling programs will reduce refuse service levels, securing long term savings.
- Renegotiate rates with hauler— Most brokers are familiar with regional pricing across the United States. They have other local clients and are able to negotiate terms and pricing at or below the market. Waste Consultants will also clean up your hauling contract terms and protect your pricing for many years to come.
Forensic Audit (Trash Expense Audit) – The foundation of Waste Expense Auditing/Consulting is the actual line by line audit. The current hauling contract is then dissected to find billing errors and overcharges on the client’s invoices. You would be shocked at how many “unintentional” errors are found in billing. Finding these errors secures a refund for the client but can also help restructure a much better hauling contract as well. Remember the hauler has breached the agreement at this point and is looking to make amends.
Waste Industry Fee Trends- since fuel has been down for several years there has been a surge in rates for environmental fees. A fuel surcharge was justified when fuel was at it’s highest point and companies used it as a profit engine, now with fuel costs at their lowest point in a decade those same companies must find a way to increase profits. Environmental fees are the new fuel surcharge. It is not uncommon for this new charge to be 15-20% of the bill. For some haulers the fuel+environmental fee can exceed 40% of the bill.
Some newer fees are; the Container Use Fee (they now charge to swap out clean containers annually) and the Regulatory Cost Recover (RCR) fee. Other common fees are the franchise fees, admin, state tax, city tax, county tax, transfer station fees, rental, tonnage, overage charges, lock fees, dry run fees, etc. Billing errors are pretty common, but over billing outside the agreed upon pricing schedule is the most common. Most people don’t know this but many contracts have limits attached to the CPI or some other variable but companies still make the same “mistake” over and over again. These fees/overcharges are very easy to miss to the untrained eye.
Review services and equipment in play: this is pretty self explanatory. Examples:
- By adding the recycling of Old Corrugated Cardboard (OCC) a client can reduce municipal waste disposal costs.
- By reviewing compactor compaction ratios and other data, a smaller sized compactor could be utilized, saving the client significant costs.
- Onsite volume survey (trash audit) reveals the dumpsters are only 60% full on haul days, client can now reduce service levels.
Renegotiate Contracts. – Based on your contract history (new vs old) and if any billing errors were found a broker can leverage their knowledge and database of information by presenting a fact based report to the hauler to get them to drop their fees and rates. Obviously the older the hauling contract the better chance there is of locating a billing mistake which could add up to significant savings or 5-6 figure refund.
If you’re looking to lower your fixed costs look deep. Expertise in the industry is getting thin because there is quite a bit of competition. There are plenty of people who do gas and electric auditing with bigger bills and lower hanging fruit. Some consultants only provide an initial review and are done in 30-60 days often times only finding the low hanging fruit. Secure a consultant who will located savings for you today and 18 months from now.
Most Waste Audit Consultants Will Perform The Following:
- Forensic Audit every line item, invoice or SKU for hauler compliance. Audit includes verification of rate increases; surcharges; CPI adherence; DOE monthly regional fuel indexes; recycling indexes; state/local taxes, environmental fees; admin charges; recovery fees; excess disposal; container use fees and others.
- Review your current operations. If the client wishes, we will assess equipment/services to develop an in-depth understanding of your unique service needs. These are on-site surveys and include spreadsheet analysis for clients who have volume and efficiency concerns.
- Identify opportunities to reduce costs by applying knowledge of the latest technologies, transportation systems, container alternatives, frequency control, disposal alternatives, commodity pricing for any recycling materials and negotiating more feasible profit levels for the hauling companies.
- Present recommendations and an estimate of savings/refunds for approval.
- Implement the plan and secure refund/s and savings. Consultants will fully implement the recommendations once approved.
- Monitor the plan. For the length of the agreement, we monitor/audit the operations of the implemented waste management plan, insuring that standards are maintained, errors and overcharges are identified and corrected, and that the expected savings are being achieved.
- Provide monthly reports showing continuing results. Each month a detailed report is provided showing the actual savings being achieved as a result of the above referenced services.
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