Competition Works in Both Insurance AND Trash Collection

I just re-learned a lesson about free-market competition yesterday that every member of the Las Vegas City Council should bear in mind before it rubber-stamps a 15-year, no bid monopoly franchise agreement extension for trash pickup by Republic Services at next week’s meeting.

We’ve been in our Las Vegas home for eight years now.  Travelers Insurance been our homeowner’s insurance carrier all that time, while our auto insurance has been covered by Geico.  And with renewal time coming up, Geico sent us an invitation to consider adding our homeowner’s insurance to our auto policy.

I’ve received similar invitations in the past, but it’s always been easier to just keep doing what we’ve always been doing.

This year I decided to go ahead and ask for a competitive bid.  What could it hurt, right?  And if Geico couldn’t make me an offer I couldn’t refuse, I could just continue with my current provider.

I think you can guess what happened…

Our current annual homeowner’s insurance premium with Travelers is $3,528 per year.  But because we requested a competitive bid from another company, we learned we could get the same coverage from Geico for just $977 per year…a savings of $2,551!

Guess what we’re doing at renewal time next month?

Now…

I understand the Las Vegas City Council is quite comfortable with Republic Services and would prefer to take the easy road and just keep doing what they’ve been doing…

And I understand that if they open the trash-hauling contract to competitive bidding it’ll be a little extra work for city staff (which, by the way, is what they get paid for)…

And I understand that Republic would just as soon have the contract extension handed to it on a silver platter (again)…

But you’ll never know what else better/faster/cheaper might be out there unless you look.  Which brings us to a second example of competition in action, this time within the waste-hauling industry itself…

There are generally three types of trash pickup in Las Vegas: Residential, commercial and construction.  And in residential and commercial, there are two categories: Regular trash and recyclables.

Republic Services enjoys a government-imposed monopoly franchise on residential pickup service for both regular trash and recyclables.

It also has the monopoly franchise on commercial for regular trash, but competes with other companies for commercial recyclables.

For construction trash it’s wide open competition – as it should be.  Now get this…

I’ve obtained an invoice from a contractor who gets a 40-yard dumpster from Republic for construction waste-hauling in this competitive market.  And the cost is $280 for a week – although I understand the price is actually good for 30 days.

Got it?

Now let’s look at the proposed cost for a similarly-sized 35-yard dumpster in the pricing schedule (Section 9.08.160 Table B) for regular commercial waste-hauling in the monopoly-controlled franchise market if Republic’s contract extension is approved…

The base cost would be $352.45 – which is $72.45 HIGHER than Republic’s cost for a smaller-sized dumpster in the construction market in which they actually have to compete.

But wait, as they say on late night TV, there’s more…

According to the proposed new franchise agreement, that base price of $352.45 is only for THREE DAYS.  After that 72 hours you’re going to be hit with an additional rental fee of $22.50 per day.

So your actual price for a weeklong rental of a trash dumpster in the proposed closed, monopoly market for regular commercial trash would be…$442.45.  Which is $162.45 HIGHER than what Republic charges for the same service in the competitive construction market.

That ain’t chump change!

Members of the Las Vegas City Council should break out of their comfort zone, stop doing what they’ve always done, and issue an RFP (request for proposals) for the entire trash collection market – residential, commercial, recyclables, and construction.

Competition is good.  Competitive bidding is good government.