Item 14 Staff Report Informational Report Regarding Green Valley Performance AuditCouncil Agenda
Date: 11/21 /8,8
Item No. '
TOWN OF LOS GATOS
Council Agenda Report
DATE: NOVEMBER 15, 1988
TO: MAYOR AND TOWN COUNCIL
FROM: DEBORAH SWARTFAGER, TOWN MANAGE
SUBJECT: INFORMATIONAL REPORT REGARDING GREEN VALLEY PERFORMANCE AUDIT
RECOMMENDATION
For information only
DISCUSSION
Attached please find a memo from the four West Valley Managers regarding the recent
performance audit of Green Valley Disposal Company completed by the firms of Arthur
Young & Associates. The memo provides a summary of the audit, its background, and a
summary of the audit findings.
Over the next several months, Staff will be discussing implementation of the
performance audit recommendations with Green Valley representatives.
At the request of the four cities Arthur Young also reviewed Green Valley's
recycling proposal. In accordance with their recommendations, Staff is preparing a
request for proposals which will be presented to the respective Councils in January.
PREPARED BY: Regina A. Falkner, Manager
Community Services Division
RAF:cr
CSD: TC 11/21-6
Attachment
cc: Regular Distribution
Dennis Varni - Green Valley Disposal Company - PO Box 1227, LG 95031
Reviewed by: Attorney Clerk Treasurer
TOWN COUNCIL ACTION DIRECTED TO:
ACTION OF COUNCIL:
COMMENTS:
MEMORANDUM
TO: Campbell City Council
Los Gatos Town Council
Monte Sereno City Council
Saratoga City Council
FROM: Kevin C. Duggan, City Manager
Deborah Swartfager, Town Manager
Rosemary Pierce, City Administrator
Harold Peacock, City Manager
SUBJECT: Performance Audit - Green Valley Disposal
SUMMARY
November 4, 1988
A performance audit of Green Valley Disposal Company was recently
completed by the firm of Arthur Young. Presented here is a summary of
that report and the firm's findings and recommendations. In general,
Arthur Young found that Green Valley's performance compared favorably to
industry standards for comparable sized firms. Recommendations were made,
however, where Arthur Young found opportunities for increased productivity
or improved performance. The next step for the Cities and Town is to
begin discussions with Green Valley regarding implementation of
performance audit recommendations. Green Valley's response to the
performance audit indicates that implementation of several recommendations
is either in progress or planned at this time.
BACKGROUND
The Cities of Campbell, Los Gatos, Monte Sereno and Saratoga entered into
franchise agreements with Green Valley Disposal in 1983. Included in the
terms of each agreement is the requirement of a performance audit during
the fifth, tenth and fifteenth years. Pursuant to the terms of the
agreement, the four cities selected the firm to conduct the audit which
was paid for by Green Valley.
The scope of the performance audit included: organization, management and
personnel practices; financial and administrative practices; collection
and fleet maintenance operation; and customer service operations.
Additionally, based on early discussions with the four cities, Arthur
Young included a review of Green Valley's curbside recycling proposal at
no additional cost.
PERFORMANCE AUDIT FINDINGS
Organization, Management and Personnel Practices
Arthur Young found Green Valley's organization structure similar to other
refuse companies and organized along functional service areas.
Recommendations in the management area concern productivity improvement.
Page 2
The report found the Company interested in productivity improvement and
programs are in progress aimed at improving cost effectiveness. The
report recommends that one officer be given formal responsibility for
productivity improvement. Secondly, regarding personnel management, the
report recommended that a safety training program be designed for all
Collection Drivers and Mechanics.
Financial and Administrative Practices
Arthur Young reviewed all major financial and administrative practices
including accounting systems, billing and collection, cash management,
capital investments and data processing systems. To allocate costs among
jurisdictions, Green Valley uses a cost allocation methodology based on
time -and -motion data. Time -and -motion studies were conducted in 1984 and
1986. Arthur Young recommends a standard three-year interval be
established for these studies to correspond with the three-year rate
review cycle referenced in the franchise agreement. With respect to
capital assets, the report recommends that the rate review committee and
Green Valley discuss guidelines for capital expenditure decisions, that
all equipment leases include buy-out provisions, that automobiles
purchased by the Company for use by the officers not be included as assets
of the Company but treated as officer bonuses, and that Green Valley
examine the cost effectiveness of a mileage reimbursement program in lieu
of providing vehicles. The report also recommends that the rate review
committee review the methodology used to estimate Green Valley's projected
revenues, expenditures and profit level, consider asking for more detail
in financial statements and explore ideas to refine projections.
Collection and Fleet Maintenance Operations
Green Valley's collection operations are divided into three sectors:
residential; commercial; and drop -off -box accounts. Arthur Young reviewed
the Company's collection productivity and found its performance to compare
favorably with other refuse operations. The report noted that franchise
requirements have a significant effect on collection efficiency and that
other collection systems suggest savings of 25 to 40 percent per household
if backyard and sideyard service options were eliminated in favor of
curbside collections. The report stated that Green Valley should explore
the use of side loading vehicles in "hard to serve" areas (currently
served by rear loaders) as the side loaders offer more maneuverability and
capacity. Arthur Young also recommended that for certain flat land
routes, the Company explore the use of front end loading vehicles and
one -person crews and that the Company continue to monitor its
semi -automated pilot program (large trash containers).
With respect to the fleet maintenance operation, Arthur Young found Green
Valley's performance to be consistent with industry standards. The report
recommended that vehicle maintenance costs be tracked by actual labor
rates, plus fringe benefits of the mechanics rather than an
approximation. A more comprehensive maintenance checklist was also
recommended for vehicle servicing.
Page 3
Customer Service Operation
Arthur Young reviewed Green Valley's customer service operations and
surveyed a sample of customers who had registered complaints to determine
customer satisfaction with the Company's complaint resolution process.
The overall observation was that Company management has a direct interest
and commitment to provide quality customer service, evidenced by
investment in an on-line computer system with immediate access to customer
records and the Assistant Manager's direct follow-up with various cases.
A majority of respondents to the customer survey gave the complaint
resolution process an overall evaluation of "good to excellent". The
survey also showed a perception by some customers that multiple contacts
were required to resolve complaints. In the customer service area, Arthur
Young recommends that the Customer Service Supervisor implement a program
to identify and correct the cause of multiple customer contacts to resolve
a complaint, that the Dispatcher implement a program to check that
corrective actions have been properly carried out by Collector Drivers,
and that the Company enhance communication of its service policies.
Citing a high turnover in Customer Service employees, a salary survey of
those positions was suggested. The final observation in the Customer
Service area notes that the Company's office closes at 4:30 p.m. rather
than 5:00 p.m. as discussed in the franchise agreement.
Proposed Curbside Recycling Program
Arthur Young also commented on Green Valley Disposal's proposed curbside
recycling program. The report finds possible advantages with a Green
Valley operation in that the service could be integrated with current
refuse collection services. A potential disadvantage is Green Valley's
lack of experience in operating a curbside recycling program. In summary,
Arthur Young recommended that the Cities and Town drive the proposal
process by clearly defining program specifications, develop a request for
proposal and receive proposals from Green Valley as well as other
operators.
Green Valley Disposal Response
Green Valley Disposal was given an opportunity to provide comments
regarding the performance audit, and the Company's response is included as
an addendum to the report. The Company's response indicates that some of
the report's recommendations are either currently being addressed or plans
are being made to address them. Included here are reinstatement of a
safety training program, addition of buy-out provisions to equipment lease
agreements, additional data processing security measures, evaluation of
side loader vehicles for hard -to -serve areas, expansion of the use of
front end loading vehicles, expansion of the pilot semi -automated
collection program, and implementation of a program to identify and
correct the causes of multiple customer contacts for complaint resolution.
Page 4
The balance of Green Valley's comments consisted of additional information
regarding several recommendations. Additional information was provided
regarding productivity enhancement and the Company official responsible
for that function, industrial injury statistics, purposes of company
vehicles, level of detail of preventive maintenance records and revised
billing statements that provide additional information about service
policies.
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