traffic study

RFPs test parking operators’ competitiveness

Transparency trumps complacency
Thursday, March 28, 2013
By Phill Schragal

Issuing a request for proposal (RFP) can be a way to assess the competency and competitive value offered by an incumbent parking operator. This can support property managers in selecting a parking operator based on a number of criteria in addition to cost such as audit control, facility maintenance, marketing policies and pricing (daily and monthly rates), staffing requirements and technological advancements.

Of course, because the property manager is choosing a parking operator that may not be offering the best economic package, it’s imperative competing operators and the general public (in the case of public facilities) are satisfied the selection process is fair and impartial, and no favouritism is shown toward the winning operator.

RFPs can be a way to guard against complacency – an example that came to light when a new company policy requiring competitive bids prompted one property manager to call for bids for parking management services for the first time in more than 20 years.

An RFP with staffing schedules and historical revenue data clearly defined the scope and magnitude of the parking operation, drawing responses from several qualified operators. Bids were then analyzed using a side by side comparison matrix of proposed operating expenses, and also against the annual budget submitted by the incumbent operator three months earlier.

Lower costs and marketing innovations
Surprisingly, in a competitive scenario, the incumbent parking services operator submitted a bid with costs pegged 12 per cent lower than in its own earlier budget. When questioned about this variance, the operator stated, “We assumed some economies of scale that had gone unnoticed during the annual budget preparation cycle.”

Unhappy with this response, the property manager requested a best and final budget from the operator. Ultimately, the operator that had held the services contract for two decades did not survive the final review process and was replaced by a third party firm.

As a spinoff, bidders offered an array of marketing opportunities that the longtime incumbent operator had failed to explore. Meanwhile, the winning proponent also noted under-market pricing and proposed to manage the parking facility with the same level of staffing at considerably less cost. The end result was additional bottom line profit for the property manager.

In another example, an owner issued an RFP two years after purchasing a property. In the interim, the incumbent parking operator had been retained under the terms and conditions of an existing agreement with the previous owner.

The RFP was an exercise to assess operating costs and the fees charged to manage the asset. The proposal review process and subsequent shortlisted operator interviews resulted in several bidders offering new marketing initiatives and technological enhancement opportunities. Meanwhile, the longtime operator promised “business as usual.”

A comparison matrix of proposed operating expenses revealed the incumbent operator proposed annual operating costs that were 11.5 per cent greater than the nearest bidder and 47 per cent higher than the least expensive, even though a base staffing schedule was included with the RFP to ensure “apples to apples” responses. When the owner subsequently requested a best and final budget and a revised marketing plan, it came in 5.5 per cent above the nearest bidder and 26 per cent higher than the least expensive.

The property owner rejected the operator’s contention that “some operators are just better and, in fact, command greater fees,” and awarded the contract to another firm.

Vigilance required
In the past, property owners conventionally paid only the direct costs incurred for their operations, which included a fair profit for the parking services operator. Today, many operators up-sell, charging additional fees for insurance, uniforms, payroll taxes and equipment fees.

Property owners and managers may be unaware of this method of marking up expenses. To ensure only those direct costs associated with managing a parking facility are being paid, property managers should implement a policy that requires a thorough review of all monthly operating expenses.

An RFP can provide a further assessment of whether a property manager is paying too much, a parking operator is using the latest technologies that can save money or if a high volume parking structure is being operated as efficiently as possible. It can be an eye-opening experience and a tool for managing parking assets to the fullest potential and bottom line profitability.

Phill Schragal is the director of the parking operations consultant group at Walker Parking Consultants.

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