Is There a Better Way to Hire a Management Company?

Hiring a new management company is a delicate dance for any co-op or condo board, and there's no textbook that lays out the best moves. But a growing number of co-op boards are taking their cues from the corporate world.

Three and a half years ago, when Kimberly Danzi Overs became president at her Manhattan co-op, the board was in the market for a new managing agent. Overs, a general commercial lawyer, knew exactly how to do it – send out requests for proposals, or RFPs, to a list of firms so they could all jockey for the job. “In my work I support clients in running RFP processes and regularly see vendors vie and bid for the opportunity to provide services,” Overs says. “Why shouldn’t our co-op do the same and enjoy the best vendors for the best price, as large corporations do?”

These days, a growing number of co-op and condo boards are thinking the same thing and turning to RFPs to screen the competition. “An RFP tends to be more formal than a simple questionnaire,” says Patricia Kantor, a partner at Mintz Levin. “It typically requires in-depth responses to both specific and open-ended questions about the company, its experience, and how it would handle certain scenarios or concerns posed by a board.”

In other words, RFPs are a gauntlet that prospective management firms must pass through before they can meet with board members and hopefully seal the deal. Since they demand a significant time investment for boards and managing agents with no guaranteed payoff, it’s not surprising there are differing opinions as to whether RFPs are, in fact, an effective tool.

“Boards can learn a lot from them, like whether a company knows your neighborhood, handles a building your size, or [has the proper] ratio of managing agents to buildings,” says Timothy Fine, managing director at Rudd Realty. “But finding the perfect agent has a lot to do with chemistry, and you can’t find that out through an RFP.”

At Overs’ co-op, the RFP process yielded big rewards. Overs came up with 30 companies, and collaborated with board members to narrow the list to 10, making sure to include large and smaller firms. The board drafted the five-page request, which had nuts-and-bolts questions, such as the number of buildings represented and the backgrounds of the management teams. It also included broader queries, stemming from the co-op’s particular circumstances.

“The proposals immediately allowed us to separate the wheat from the chaff,” Overs says. “It was clear who sent us standard marketing material and who gave us thoughtful, carefully considered answers. After we received the responses, one board member put together a chart comparing all ten companies and their answers to the RFP,” she says. “There was a tremendous amount of board participation, and a very robust discussion of the proposals when they came in. One proposal stood out dramatically above the others, and it surprised us because it was not one of the biggest companies.”

The board narrowed the list to a handful of firms. After a panel of two to three board members met with each of the finalists, the board chose a medium-sized firm. “It was a big investment of time and effort, but using the process was well worth it,” Overs says. “Some board members had been skeptical of the value the process would have, but it was eye-opening to see the range of proposals we received and to experience vendors really competing for our business.”