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How to Make Your MRF Contract a Public-Private Win-Win

The turning of a calendar to a new year means a slew of new contracts and renewal agreements.

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If your city is like many communities, the turning of a calendar to a new year means a slew of new contracts and renewal agreements.

The contract between a community-run recycling program and privately owned materials recovery facility (MRF) is one of the most impactful legal documents in the U.S. public recycling system. These contracts serve a critical purpose, ensuring that recycling programs remain sustainable over the long haul. Yet too often these contracts result in unintended problems – or, in the worst case, canceled recycling programs – because of practices that fail to accommodate both sides’ needs.

This is why The Recycling Partnership created the Guide to Community Material Recovery Facility Contracts. The comprehensive guide features best-management practices, including an overview of the MRF contracting process, case studies from communities, essential contract elements, and sample contract language to implement during your next contract negotiation.

The best MRF contracts recognize the individual needs of each party while also grounding the agreement in their common goals, creating a true win-win outcome. Each party benefits from stability – the MRF to guarantee a return on expensive capital, and the community to keep services going. Each side also gains from a sense of trust, a shared vision, strong communication, and a coordinated commitment to material quality.

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This guide is designed to help public recycling programs and MRFs develop transparent, balanced recycling processing contracts that allow each party to navigate volatile market conditions and the ever-changing landscape of consumer packaging. With four out of every five MRFs operating under private ownership, and most curbside recycling programs run by public agencies, the success of these public-private contracts is foundational to the success of U.S. recycling.

Starting with RFPs: A “Best Value” Approach

While local governments have many options for procuring MRF processing services, a Request for Proposals (RFP) process allows the most flexibility and transparency to both proposers and the community. Also known as a “best value” approach, an RFP is versatile in allowing a wide exploration of varying service parameters from different companies and is not just based on price alone.

RFPs also allow communities to take time to reflect on local goals and objectives, while involving critical internal stakeholders, including budget, purchasing, legal, and elected officials.

Among the critical decisions in the RFP process is determining what role the community should play – such as owning the land, building, and/or equipment related to a facility – and determining the length of the contract. Local purchasing offices often prefer shorter contracts (three years or less), in part to regularly test the market. But this approach runs counter to the realities of MRF companies, which will make large investments in expensive equipment that must show a return. Longer MRF contracts (seven to 10 years) better align with the amortization schedules that support best-in-class sorting capital. Renewal clauses also allow communities to sustain a good working relationship with their MRF in lieu of another RFP process.

11 Essential Elements of the Best MRF Contracts

These 11 essential elements of MRF contracts can help all communities address the most critical details of the business relationship:

  1. Processing Charges – Commodity pricing reflected in the “blended value” of sold materials no longer financially supports the full cost of MRF operations, making processing charges a necessity that should be called out directly and specifically in an RFP.
     
  2. Revenue Sharing – Many contracts have processing charges cover MRF costs, including, in many cases, a base level of profit. All MRF RFPs and contracts should address if and to what degree revenue is shared, separate from processing charges.
     
  3. Material Value Determination – If revenue sharing is included, contracts should explicitly identify mutually acceptable and transparent sources for determining market value.
     
  4. Acceptable Material Mix – Every MRF should have clarity around acceptable materials, while also detailing procedures and conditions under which the material mix might change.
  5. Material Audits – Contracts should determine the frequency, focus, and protocols for assessing inbound and outbound material.
     
  6. Contamination and Material Quality – Contracts should include mutually agreed-upon contamination standards, which set the stage for community action on inbound material quality.
     
  7. MRF Performance – Contracts should convey clear and specific standards around the processing and marketing of delivered commodities.
     
  8. Rejected Loads and Residue Disposal – Contracts should include explicit parameters on what constitutes unacceptable loads, how they are handled, and how MRF residues are managed.
     
  9. Education and Outreach Support – As an increasingly important funding source for community education that drives high material tonnage and quality, contracts should define education-focused responsibilities and identify resources to support these efforts.
     
  10. Contingencies – Contracts should spell out plans for managing materials during a weather event or other service disruption.
     
  11. Reporting and Communications – The processing business relationship works best with regular information sharing between the contracting parties. Contracts should detail specific mechanisms for consistent and robust communication.
While MRF processing-services contracts have been in play for years, market conditions since 2018 have created an apparent “new normal” in these partnerships, with implications for both the ability of MRFs to remain viable and for community programs to be sustained. This underscores the urgency of applying best practices in MRF contracts now, so that they may continue to operate in synergy and success for years to come.

Download the full guide for more information.


About The Recycling Partnership

The Recycling Partnership is a national nonprofit organization that leverages corporate partner funding to transform recycling for good in states, cities, and communities nationwide. As the leading organization in the country that engages the full recycling supply chain from the corporations that manufacture products and packaging to local governments charged with recycling to industry end markets, haulers, material recovery facilities, and converters, The Recycling Partnership positively impacts recycling at every step in the process. Since 2014, the nonprofit change agent diverted 230 million pounds of new recyclables from landfills, saved 465 million gallons of water, avoided more than 250,000 metric tons of greenhouse gases, and drove significant reductions in targeted contamination rates. Learn more at www.recyclingpartnership.org