Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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40 May | June | 2014 Commercial Investment Real Estate has changed dramatically in recent years. Today, parking operators should be viewed as providers, and owners must regularly gauge what services are being provided at what cost. For example, previously owners would pay only the actual direct costs incurred for their operation, which included a fair prof t for the operator. Now many operators assess additional fees for the cost of insurance, uniforms, payroll taxes, equipment, and credit card fees. T is is a way of marking up expenses and an approach that many property owners and managers are not aware of. To ensure that only those direct costs associated with managing your asset are being paid, property owners and managers should imple- ment a policy that requires regular and thorough reviews of all monthly oper- ating expenses. If an owner or manager feels they are leaving money on the table each month, it may be time to issue a request for proposal for a parking operator. T e RFP process lets the owner and prop- erty manager know if they are paying too much, whether their parking oper- ator is using the latest technologies that can save money, or if a high-volume parking structure is being operated as ef ciently as possible. Two Case Studies T e RFP process provides an opportunity to evaluate a parking operation on a number of criteria in addition to cost, and if neces- sary, select a new operator. Of course, because the property manager may choose an operator who may not be of ering the best economic package or price point, it's imperative that the selection process is fair and impartial, and that, in the case of public facilities, no favoritism is shown toward the winning operator. In addition, the RFP process of ers support and validation for the chosen opera- tor, based on an "apples to apples" comparison among competing service providers. T e experiences of two parking owners illustrate the value of issu- ing an RFP to assess the competence and competitive value of ered by an incumbent parking operator. In the f rst case, the incumbent oper- ator had handled the day-to-day management of a parking facility for more than 20 years, and the property manager frequently expressed satisfaction with the operator. However, because of continuing economic challenges and a new company-wide policy of obtaining competitive bids for all third-party services, an RFP for parking man- agement services was issued. T rough this process, the property manager discovered that his company was not receiving the best possible value for the management services being provided. T e RFP contained staf ng sched- ules and historical revenue data that clearly def ned the scope and magni- tude of the operation. Af er receiving responses from several qualif ed opera- tors, a side-by-side comparison matrix of proposed operating expenses was developed. T e matrix compared the operating expenses proposed by the longtime operator with other proposals. Additionally, all the proposed expense budgets were compared to the annual budget submitted by the operator, three months prior to issuing the RFP, which the property manager felt was represen- tative of the actual operating expenses required to manage the facility. Much to the chagrin of the property manager, the expenses contained in an outside operator's submittal were 12 percent less than those contained in incumbent's budget submitted months earlier. When questioned about this variance, the competing 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 f nal budget proposal from the incumbent operator. Ultimately, the operator with whom the park- ing manager had done business for two decades did not survive the f nal review process and was replaced by a respected third-party f rm. Additionally, other bidders of ered an array of marketing oppor- tunities the incumbent operator had failed to explore. T e successful bidder also noted under-market pricing and proposed to manage the parking facility with the same level of staf ng at considerably less cost. T e end result was additional bottom-line prof t for the owner. T is situation isn't unusual. It's easy for long-time vendors to become so comfortable in their relationships with owners that they fail to look for new opportunities to improve the operation and f nd ef ciencies. T at's why it's important for owners and managers not to become complacent with their operator, no matter how well they seem to be operating the facility — or how close a personal relation- ship they may enjoy with the operator. In another case, an operator had managed a parking facility since its opening 15 years earlier. During this period, the property was sold and the operator was retained by the new owner under the terms and conditions of an existing agreement with the previous owner. Two RFP CONTENTS Here's a list of items asked for in the parking operations request for proposal. Cover Letter Table of Contents Signature Page and Legal Status Experience Form Affi davit of Non-Collusion State Labor Law Form Proposal Bond Certifi cate of Insurance Management Procedures Transition Plan Qualifi cations/Experience SkiData Experience GM Resume and Qualifi cations (40 hrs/wk) Mgr. Resume and Qualifi cations (40 hrs/wk) Form A - Proposed Compensation Form B - Operating Budget (Excel File) Form C - Start-Up Budget Form D - Hourly Rate (as-needed Personnel) Form E - Hourly Rate (Valet Services) Form F - Proposal Form Staffi ng Plan Customer Service Training Past Failure Contract Comments/Exceptions Source: Walker Parking Consultants 3 9 - 4 1 F - R o o m I m p r o v e m e n t - S c h r a g a l . i n d d 4 0 39-41 F-Room Improvement-Schragal.indd 40 4 / 2 9 / 1 4 3 : 0 9 P M 4/29/14 3:09 PM