Three and a half years ago, when Kimberly Danzi Overs became president at her Manhattan co-op, the board was in the market for a new managing agent.
Overs, a general commercial lawyer, knew exactly how to do it – send out requests for proposals, or RFPs, to a list of firms so they could all jockey for the job. “In my work I support clients in running RFP processes and regularly see vendors vie and bid for the opportunity to provide services,” Overs says. “Why shouldn’t our co-op do the same and enjoy the best vendors for the best price, as large corporations do?”
These days, a growing number of co-op and condo boards are thinking the same thing and turning to RFPs to screen the competition. “An RFP tends to be more formal than a simple questionnaire,” says Patricia Kantor, a partner at Mintz Levin. “It typically requires in-depth responses to both specific and open-ended questions about the company, its experience, and how it would handle certain scenarios or concerns posed by a board.”
In other words, RFPs are a gauntlet that prospective management firms must pass through before they can meet with board members and hopefully seal the deal. Since they demand a significant time investment for boards and managing agents with no guaranteed payoff, it’s not surprising there are differing opinions as to whether RFPs are, in fact, an effective tool. “Boards can learn a lot from them, like whether a company knows your neighborhood, handles a building your size, or [has the proper] ratio of managing agents to buildings,” says Timothy Fine, managing director at Rudd Realty. “But finding the perfect agent has a lot to do with chemistry, and you can’t find that out through an RFP.”
Are RFPs Right for Us?
At Overs’ co-op, the RFP process yielded big rewards. Overs came up with 30 companies, and collaborated with board members to narrow the list to 10, making sure to include large and smaller firms. The board drafted the five-page request, which had nuts-and-bolts questions, such as the number of buildings represented and the backgrounds of the management teams. It also included broader queries, stemming from the co-op’s particular circumstances.
“The proposals immediately allowed us to separate the wheat from the chaff,” Overs says. “It was clear who sent us standard marketing material and who gave us thoughtful, carefully considered answers. After we received the responses, one board member put together a chart comparing all ten companies and their answers to the RFP,” she says. “There was a tremendous amount of board participation, and a very robust discussion of the proposals when they came in. One proposal stood out dramatically above the others, and it surprised us because it was not one of the biggest companies.”
The board narrowed the list to a handful of firms. After a panel of two to three board members met with each of the finalists, the board chose a medium-sized firm. “It was a big investment of time and effort, but using the process was well worth it,” Overs says. “Some board members had been skeptical of the value the process would have, but it was eye-opening to see the range of proposals we received and to experience vendors really competing for our business.”
RSVP on RFPs
Managing agents know that merely filling in the blanks is tantamount to throwing away their shot. “RFPs take a lot of work on the front end,” says Fine of Rudd Realty. “To do the job right, an agency needs to put together a committee to provide boilerplate answers and documentation requested by most RFPs. But for more complex, customized questions, we use a team of people from our management, operations, and financial departments.”
At AKAM Associates, president Michael Berenson, along with a member of the marketing team, personally responds to all RFPs, sometimes spending up to 12 hours on a single one. “Cookie-cutter answers won’t do,” Berenson says. “We do our homework on each building and look up as much information as we can, online and through industry resources, so we can tailor our responses.” But Berenson says there are times when it’s smarter to be circumspect. “If a board wants to know how we’d handle, say, a dispute that’s smoking- or noise-related, we won’t necessarily offer a solution,” he says. “We’ll explain that the answer depends on the building’s bylaws and that we’d need to get all the facts and documentation.”
Keeping responses sharp and succinct can be a challenge, especially when faced with RFPs that have 50 questions or more. “We’ve gotten those, along with requests on top of that to attach examples of monthly statements and budgets,” says Fine. “Sometimes it feels like you’re being judged by how long your response is, but there’s nothing to be gained by putting people to sleep with too much information.”
Crafting a compelling response can also require reading between the lines and, even when questions aren’t specific, parsing a board’s questions carefully. “After all, when things are going well there’s no need for an RFP,” says Fine. “If we can figure out what’s the trouble, we can offer the expertise and solutions the board is looking for.” The bottom line, says Berenson, is that RFPs work for boards and managing agents alike. “Boards can do an apples-to-apples comparison of companies, and companies are all responding to the same questions,” he notes. “It puts everybody on the same playing field.”
RIP for RFPs?
But the playing field may not always be a level one, says Dennis DePaola, executive vice president at Orsid Realty. “We’re by no means a small firm, but we don’t have a marketing department that’s available to answer RFPs,” he says. “And the attention that’s required to answer them means we’re taking time away from providing services to our clients.”
While DePaola sees the value of RFPs, he asserts that “things have gotten too extreme. While we can be evaluated on criteria like our fee structure, compliance packages, or the number of people in our alterations department, there’s too much focus on this kind of information. I mean, we’ve gotten RFPs that are 30 pages long. I can’t believe boards are actually reading all this without their eyes glazing over.”
Even worse, the barrage of questions often comes with impossible deadlines. DePaola says he has to ask for extensions for up to a third of all proposal requests, and that boards only grant them about half the time. “They may be ruling out managing agents who would be perfectly appropriate just because a company, which is busy effectively overseeing their buildings, didn’t have the time to answer an RFP,” he says. “It doesn’t make sense.”
In some cases, boards can find a good match without getting buried in paperwork. Case in point: Queensview Homes, a 726-unit co-op in Astoria that made the switch from self-management last June. “We have 14 buildings spread out across 10 acres, so we initially looked for companies that had extensive experience with large properties with large grounds,” says board member Mark Adelson. “Then we narrowed the list to four firms before conducting interviews and selecting one. Instead of using RFPs, we chose to put our energies into the actual management agreement, which specifically defines our agent’s responsibilities given our particular situation.”
The takeaway for co-op and condo boards? Proceed with caution, be prepared to work hard, and know that there are no shortcuts. “If board members are organized enough to put together an RFP to send it to multiple management companies, it is a way to gather information on who you want to work with – but only as a preliminary look-see,” says C. Jaye Berger, an attorney who specializes in co-op and condo law. “It can be hard for boards to articulate what they’re really looking for,” she adds, “and more questions don’t necessarily get you answers you need to make the right decision. A managing agent might write a terrific response, but you could still end up with someone who won’t do the job well.”