The Problem: Reducing Operating Costs

When it comes to building repairs and upgrades, cost reductions sound good, but many boards don’t get around to looking into them because they’ve already got too much on their plate. 

That is true. But it is well worth the effort. We worked with a co-op that needed to replace its elevators. The property manager recommended that the board hire an elevator consultant, and the consultant solicited three bids. Our company then brought in our own elevator expert, who slightly changed the scope of the work, since one of the motors had been recently replaced. We then asked the lowest bidder to remove that motor from the project and come down in price, which it did. The revised price was $245,000 below the original bid. The board was very pleased.

How does your business model work? What fees do you charge?

We work on contingency. We offer different cost-reduction services, and in the case of projects, it’s a one-time split, 50/50, of the savings. In other cases, we split our clients’ savings for ongoing operating costs for the first two years. So in reality it doesn’t cost boards anything to hire us. We basically provide a free second opinion, and if we don’t find any savings — which has never happened — our fee would be zero. 

So with new clients, what are you looking at to determine where you can cut costs? 

We get the building’ monthly financial report from the property manager, whom we also ask for any renewable quotes, like laundry-service contracts or insurance. We have a large database, literally thousands of line items, of how much things should cost in any given building. Then we make suggestions and actually do the implementation. For instance, we would get on the phone with an insurance broker to get our client a better policy bid. In the corporate world, most large firms bring in a consultant every year to improve their bottom line. We are basically taking that and bringing it to the world of co-ops and condos.

How is your approach different from a management company or a consultant a board hires for a particular project?

Management companies manage the day-to-day operations for multiple buildings. They typically do not get paid more when they do more for their clients, and they also do not get compensated more when they save their clients money. When it comes to industry-specific consultants, they might sell one product, while we take a holistic approach and have a much larger list of solutions to cut costs. 

The takeaway here for boards is not to accept the status quo. Whether it’s ongoing operations or a specific project, there is no reason not to have a second opinion on how much you are spending and how much you should actually be spending.