Five Tips For Comparing Reserve Study Bids

BY ROBERT W. BROWNING, PCAM, RS

The Browning Reserve Group (BRG) understands there are many options when considering which reserve study firm should be selected. Lots of choices can make it difficult to discern the differences between various reserve study companies.

The best approach to bidding the reserve study is to distribute a Request for Proposal (RFP) to each reserve study firm. This ensures an “apples to apples” approach to comparing reserve study bids. The Community Associations Institute, (CAI) has excellent information on this topic in their bookstore.

Absent an RFP process, the reserve study bids received by the client, from the reserve study firms, will be in various formats and it may be difficult to match them up side by side.

The five major causes of discrepancies between reserve study bids are the following:

Mix and matching levels of service among reserve study bids
Qualification and experience of the reserve analyst
Subsequent annual update fees
Add-on fees
Not utilizing sealed bids when there is the appearance of a conflict

1. Mixing and Matching Levels of Service Among Reserve Study Bids

What type of study is needed? Under the National Standards developed by CAI, there are three levels of service: Full, Update with Site Visit, and Update with No Site Visit. All three levels of service include the analyst developing a funding plan, fund status, and life and valuation estimates.

The Full study also includes a component inventory with a condition assessment, based on an actual, on-site visual observation of each component.

The Update With Site Visit study includes the above tasks, but only verifies the component inventory, it does not quantify the inventory. This means on the Update With Site Visit study, the Analyst will not quantify (measure) each component. Be careful here. If the reserve study bid says “Full Study” the analyst must quantify, from scratch, each component, not simply verify previous work.

When bidding a reserve study, it is important that the association obtain bids from each competitor, for the same level of service reserve study. Mix and matching differing levels of service will create a difference in pricing.

At BRG, the level of service for each reserve study bid is in the first paragraph of the proposal and displayed as a header on each page.

2. Qualification and Experience of the Reserve Analyst

In California, there is no requirement for a reserve analyst to hold any license, certification or designation. There are many different types of firms holding themselves out to be in the reserve study business. There are companies who only do reserve studies such as BRG and there are other ancillary entities providing reserve studies. It is up to each potential client to decide if the firm they are asking to bid, has the appropriate skill set to perform a reserve study. Many of the ancillary companies who also do reserve studies have the appropriate education and experience to compliment and augment the skills related to performing competent reserve studies. Unfortunately many do not.

Some of the designations a potential client should look for include, but are not limited to: Reserve Specialist (RS) from CAI; the Professional Reserve Analyst (PRA) from the Association of Professional Reserve Analysts (APRA), general contracting license, architectural and engineering degrees, building inspector experience and other construction related fields.

At BRG, we have five RS designees and one PRA designee. BRG is a licensed general contractor. In addition, the site inspectors for BRG have many years of building trade experience. BRG also holds two Reserve Study Specialist permits in the state of NV where a permit is required by law to perform reserve studies.

3. Subsequent Annual Update Fees

Generally when bidding a reserve study, the level of service is one of the two requiring a site visit review. In California there is a civil code requirement to do a site visit study every three years. (In Nevada the term is five years.) The difference in reserve study bids sometimes comes down to the total cost over the three years, five years in Nevada. At BRG, it is easy to calculate because BRG only charges $200 per association (cost center) per year on the two off-years when no site visit is needed. For our larger clients, the fee may be slightly higher. So to understand the BRG fee for the three year period in California, just add $400 to the current year site visit proposal and you are probably close to your three year proposed fee.

4. Add-On Fees

One of the other major causes for a difference in reserve study fees can be in the add-on fees. Read the fine print! Again, in BRG proposals it is easy, there is no fine print. BRG does not charge for many of the extra fees that go along with developing a reserve study collaboratively with our clients. These can include:

More than one draft
Meeting attendance
Telephone call support
Rush fees
Having a licensed or designated representative contribute to the study

At BRG, we have never charged our clients for the above add-on fees. BRG has never charged more for a “rushed” reserve study. Our proposal is all inclusive and we will work with the association to ensure the reserve study meets the goals and objectives of the community. Be careful out there. Sometimes the low bidder is not actually the low bidder when taking into account the fees for the three year California cycle (five years in Nevada.) The low bidder may be lower at first glance only to make up for the low bid with additional hourly fees.

5. Not Utilizing Sealed Bids When There is the Appearance of a Conflict

As mentioned above, there are a multitude of different types of companies selling themselves as Reserve Study providers. For example there are management companies who do reserve studies. In these cases the manager should always obtain reserve study bids through a sealed bid process. Furthermore, the California Association of Community Managers (CACM) mandates a sealed bid process when the management company provides the same service or product that is being bid and the provision is in the CACM Manager Code of Ethics ¹:

“Where a contract for goods or services is to be competitively bid and the member (manager) or an allied, related and/or affiliated company of the Member (manager) is a bidder such bid shall be based on precise written specifications provided to each bidder. The Member (manager) shall employ a sealed bid process wherein all bids are received sealed and are opened in the presence of the client board or its designated representative other than the Member (manager).”

The board of directors should ensure that any bid received for work on behalf of the association is done in a transparent fashion, and with the best long term interest of the members in mind. Some questions to ponder when selecting a reserve study provider:

If the board switched management companies, would they still utilize the same reserve analyst? Is the reserve analyst credentialed in the reserve study field? Does the reserve analyst contribute to the industry as a whole? Does the reserve analyst attend continuing education or teach in the field?

If the answer is not yes to most of these questions, the association may be considering an analyst who is doing reserve studies as a side job in addition to their main workload and may not have the long term commitment to the field.

Of course unqualified reserve analysts may be less expensive in the short term, but is the association saving money in the long term? Experienced and qualified reserve analysts will take less of the client’s valuable time in the long run and bring leadership to the process. The members will feel confident that the board of directors has peeled back the layers of the reserve study process to create a useful tool that will turn the study into meaningful action.

Reserve studies need not be difficult to understand. Don’t confuse a bulked up study that simply regurgitates the same data over and over in different formats, with a study that adds value to the association’s long term financial goals.

A fancy spreadsheet alone is not a sophisticated system for assessing and analyzing the complexities of a community. At BRG we are continually evolving better systems that are informed by our experience in the industry. Making sense of the information within a reserve study is critical to turning the study into meaningful action.

BRG brings clarity from complexity to the reserve study process and we would be honored to show you what we can do.

¹ California Association of Community Managers- Code of Professional Ethics and Standards of Practice Amended September 9, 2009.