Foundations of Real Estate Management BOMA International ® Module 1: Real Estate Administration Contracting for Goods and Services ®

Foundations of Real Estate Management Module 1: Real Estate Administration 2 ® Objectives  Identify components of competitive bid process from Request for Information through Bid Award  Describe at least five criteria a property manager uses to evaluate bids from multiple vendors  Describe at least ten considerations a property manager must keep in mind when crafting and signing a service agreement  Define OFAC compliance and discuss steps a firm must take to comply with regulations  Identify main components of process to terminate a vendor

Foundations of Real Estate Management Module 1: Real Estate Administration 3 ® Contracting for Goods and Services Contracting for goods and services is one of your most important jobs

Foundations of Real Estate Management Module 1: Real Estate Administration 4 ® Contracting for Goods and Services There is potential liability for:  Your company  The owner of your building  YOU!

Foundations of Real Estate Management Module 1: Real Estate Administration 5 ® Contracting for Goods and Services Your contracting tactics depend on owner’s strategy for the property:  Less expensive vendor  High levels of service

Foundations of Real Estate Management Module 1: Real Estate Administration 6 ® Contracting for Goods and Services Generally, companies compete either on price or service. Rarely will the low cost vendor provide the highest level of service. Less Expensive Higher Quality

Foundations of Real Estate Management Module 1: Real Estate Administration 7 ® Contracting for Goods and Services Your goal: The best service for the price you are willing to pay or The best price for the service you require.

Foundations of Real Estate Management Module 1: Real Estate Administration 8 ® The Bid Process  Management agreement may require an annual bid  Regular bidding is part of your fiduciary responsibility  Keep accurate records of all bids  Stagger bids throughout year

Foundations of Real Estate Management Module 1: Real Estate Administration 9 ® The Bid Process  Bid list  Pre-qualify vendors before allowing them to bid (Request for Information)  Economies of scale  Automated v. electronic v. paper

Foundations of Real Estate Management Module 1: Real Estate Administration 10 ® The Bid Process  Request for Information (RFI)  Request for Proposals (RFP)  Pre-bid Meetings  Evaluation of the Bids  Bid Award Now Let’s Break it Apart!

Foundations of Real Estate Management Module 1: Real Estate Administration 11 ® The Bid Process Request for Information (RFI)  Reduces # of bidders to a reasonable number  Removes bidders who do not meet contracting requirements  Occurs prior to Request for Proposals

Foundations of Real Estate Management Module 1: Real Estate Administration 12 ® The Bid Process Request for Proposals (RFP )  Bid package – details of the bid  Provide sufficient detail so bidders can propose exactly the same scope of work (“apples to apples”)  Typically sent to at least 3 vendors  Follow your management agreement

Foundations of Real Estate Management Module 1: Real Estate Administration 13 ® The Bid Process Pre-Bid Meetings  All bidders hear same information at same time  Bidders ask questions, get answers  Bidders inspect premises and make sure they understand scope of work  PM provides written answers to all bidders

Foundations of Real Estate Management Module 1: Real Estate Administration 14 ® The Bid Process Evaluation of Bids  Compare cost  Ascertain ability to do job  Ensure bid compliance  Conduct interviews  Review bids with owner  Complete paperwork  Document bid

Foundations of Real Estate Management Module 1: Real Estate Administration 15 ® Service Agreements  Use your company’s agreement (or your owner’s agreement)  Never sign vendor’s service agreement

Foundations of Real Estate Management Module 1: Real Estate Administration 16 ® Signature Block  Precision is required  Typical signature block looks like this: Property Management Company, Inc. As Independent Contractor for Property Owner, Inc. _________________________________ By: Emily Johnson, Property Manager

Foundations of Real Estate Management Module 1: Real Estate Administration 17 ® Signature Block  Never sign a service contract with just your name:

Foundations of Real Estate Management Module 1: Real Estate Administration 18 ® Signature Block  Use correct legal name for your owner and property management company  Never enter into contract as the property management company – always as a representative of the owner

Foundations of Real Estate Management Module 1: Real Estate Administration 19 ® Signature Block  Agent v. Independent Contractor v. Authorized Property Manager  Use a rubber stamp with correct signature block to make signing agreements easy

Foundations of Real Estate Management Module 1: Real Estate Administration 20 ® Service Contracts  By law, must be written  Changes require approval of senior manager or legal counsel  When possible, sign contract “as is”  That’s why you provide the contract as part of the RFI/RFP process  Make sure insurance provisions met

Foundations of Real Estate Management Module 1: Real Estate Administration 21 ® Signing Thresholds  Most companies have a signature policy  Signature authority often granted based upon value of contract and team member’s position  Make sure vendor’s representative has right to execute contracts  Vendor must pay all taxes – be careful when using vendors across state lines

Foundations of Real Estate Management Module 1: Real Estate Administration 22 ® OFAC Compliance USA PATRIOT Act and Executive Order  Passed after September 11, 2001  Eliminate money laundering by terrorists, narcotics smugglers and Cuban entities  Prohibit doing business with companies on list of countries under embargo

Foundations of Real Estate Management Module 1: Real Estate Administration 23 ® OFAC Compliance  Vetting against Specially Designated Nationals and Blocked Persons List (SDN List)  Money laundering occurs through legitimate businesses – every business needs to be vetted  Every company needs a compliance program

Foundations of Real Estate Management Module 1: Real Estate Administration 24 ® OFAC Compliance  You are prohibited from doing business with an entity on SDN List  Fines of up to $10 million for company  Fines of up to $5 million for you  Up to 30 years in jail  Impossible to vet every vendor – use third party firm

Foundations of Real Estate Management Module 1: Real Estate Administration 25 ® OFAC Compliance Who has to be vetted?  Anyone to whom a payment is made  Vendors  Employees  Tenants  Owners

Foundations of Real Estate Management Module 1: Real Estate Administration 26 ® Termination  Sometimes termination is necessary  Follow service and management agreements  Talk with vendor first  Generally, 30 days written notice unless agreement states otherwise  You and vendor can negotiate

Foundations of Real Estate Management Module 1: Real Estate Administration 27 ® Termination  Term usually 1 year with 30-day cancellation  Service agreements should comply with terms of management agreement  Written permission from owner for deviations

Foundations of Real Estate Management Module 1: Real Estate Administration 28 ® Termination Termination for cause  Cure period  Always in writing  Follow management agreement  Report to senior manager as appropriate

Foundations of Real Estate Management Module 1: Real Estate Administration 29 ® Kickbacks and Gifts  Bid process should be 100% open, fair, and transparent  No vendor gets a “second look”  Know the limit for receiving gifts – when in doubt, disclose to your manager  If your gut tells you it’s wrong, it probably is  If you are not comfortable telling your boss about a gift, it’s probably inappropriate

Foundations of Real Estate Management Module 1: Real Estate Administration 30 ® Your reputation is one of your most important assets Even the appearance of impropriety can damage your reputation Make certain vendor relationships are appropriate and in the open Kickbacks and Gifts