Friday, February 26, 1999

Trash hauler
in dumps over
losing Navy pact

Isle's Browning Ferris says
allegations of fraud against
its rival should have
been considered

By Peter Wagner


The federal government is standing behind a $10.8 million contract awarded by the U.S. Navy to commercial trash hauler Honolulu Disposal Services Inc. despite past allegations of fraud against the company in other military contracts on Oahu.

The General Services Administration last month denied a protest by refuse rival Browning Ferris Industries of Hawaii, saying Honolulu Disposal fit the government's low-bid contract criteria.

"We are disappointed," said BFI spokeswoman Linda Lee. "We offer the best service and we have the best people."

BFI, which bid about $11.8 million on the contract, argued the Navy downplayed allegations of fraud against Honolulu Disposal in a contract at Hickam Air Force Base between 1987 and 1992.

The allegations were raised by Red River Service Corp., an Oklahoma-based trash hauler that took over the contract from Honolulu Disposal at Hickam.

In a 1994 lawsuit, Red River charged that Honolulu Disposal padded its collection figures, overcharging the Army, Navy and Coast Guard $411,993 over the five-year contract. Red River said its monthly collections were about half the 677 tons billed by Honolulu Disposal.

HDS denied any wrongdoing but agreed to pay $823,000 -- $164,000 to Red River and the rest to the federal government -- in a 1997 settlement after the U.S. Attorney's Office took over the case.

Investigated for a year by the military, the case allegedly involved the co-mingling of civilian and military trash to inflate collections at Hickam by about 318 tons a month.

According to a document released by the GAO last month, the Navy properly awarded the contract based on three standard criteria: past performance ratings, price, and compliance with federal small business subcontracting goals.

The GAO said Honolulu Disposal had the low bid and the most experience with large-scale military contracts. BFI, in its references, cited contracts below $500,000. As for the alleged fraud, the GAO said it is not the agency's responsibility to evaluate proposals beyond the established criteria. Moreover, the agency noted, the matter was resolved by the settlement.

Navy spokesman Lt. Cmdr. Rod Gibbons said Honolulu Disposal was picked as a best value for tax dollars.

"We carefully and thoroughly scrutinize all proposed bids for Navy contracts in accordance with all appropriate federal contracting regulations and policies," he said. "We also meticulously review the past performance of all potential contractors to ensure they qualify for the contract and are able to meet the terms of the contract."

Meanwhile, the military is currently reviewing new bids from Honolulu Disposal for hauling contracts at Air Force and Army installations on Oahu.

Honolulu Disposal has had other troubles in recent years. In 1997 the company reached a settlement with the National Labor Relations Board over charges it abused its union contract. Honolulu Disposal and sister company Alii Refuse Corp. were named in a lawsuit brought by Laborers' International Union Local 368 over the alleged abuses.

Alii, in 1991, pleaded guilty to federal anti-trust charges and agreed to a $100,000 fine.

Officials at Honolulu Disposal declined comment on the new contract, or on the company's past conflicts.

BFI, the nation's second-largest trash hauler, has about 51 percent of commercial contracts on Oahu, according to city refuse officials. The company, which last year took over Waste Management of Hawaii contracts, has more than 400 affiliates or subsidiaries and 37,000 employees nationwide.

Honolulu Disposal Services is second largest in Hawaii, with about 26 percent of contracts.

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