I previously authored an article on the advantages of issuing a parking operator Request for Proposal (RFP) to ensure that the incumbent management company provides the desired level of service and value, instead of simply executing renewals on the same terms and conditions. The playing field may have changed over the past year, and it is a good time to take a fresh look!
Access to detailed revenue and expense reporting educates the client as to the property’s performance and potential.
This topic additionally considers an article that I wrote titled “What distinguishes Parking Management Agreements (PMAs) from Parking Lease Agreements (PLAs)”, which explains that the PMA provides the owner with more flexibility and visibility to revenue and expenses than often applies with a PLA. Access to detailed revenue and expense reporting educates the client as to the property’s performance and potential. The operator in a PMA recommends, but the informed client has the final say.
Lease agreements typically shift more risk to the operator, which is often assumed to offer greater decision-making control. The property owner’s visibility to the facility’s performance is generally limited, an exception being revenue reporting for percent rent calculation. However, it is a trade-off, as the rent payment received every month likely exceeds the net operating income (operating revenues minus operating expenses) generated in a management agreement.
There are advantages to each popular parking deal structure. As a parking operator for many years, prior to my joining Walker Consultants four years ago, I have firsthand experience with PMAs and leases. At Walker, I have administered PMA RFPs and parking operator procurement processes, including those for airports, municipalities, event venues, and office buildings, and have consulted with property owners on PLAs. I often advise that the best way for a property owner to know that a rent offer is a good deal (ideally, a win-win) is to learn the ropes first by executing a PMA until the facility reaches peak performance levels (where feasible, of course). Later, when issuing an RFP for the operation as a lease, the property owner already knows how the facility can best generate revenue and can thus make informed decisions as to which offer to accept or reject.
As a representative example, the property owner has decided to hire a parking management company. An RFP has been issued and responded to by qualified operators. The response from each proponent includes a proposal emailed in PDF format (limited to 100 pages in length!) and forms into which financial components are entered. Now, how does the property owner know which operator to choose? Here is a “to do list” for the selection of a parking management company, with key tasks and questions to help in the evaluation process:
1- Identify Proposal Evaluation Team – The proposal evaluation team should include an array of key client stakeholders. If a consultant is handling the RFP, the consultant can be a non-voting member of the team and a resource to the decision-makers.
2- Prepare a Proposal Comparison and Evaluation Workbook – This will include financial responses from each proposer and a comparison of key evaluation factors. Evaluation categories and weighted scores (assigning more value to certain categories than others) should have been provided in the RFP when issued and should include at minimum the following components:
Proposer Experience – Does the operator have the necessary experience to manage the project as a first-class operation? Is the company on sound financial footing? Does the proposer bring qualities to the operation that the client may be able to take advantage of at other projects or in different cities?
Project Manager – Does the proposed project manager have the experience to meet or exceed client expectations? Equally important, is the proposed project manager over-qualified for the position? What regional support is provided to ensure that employees receive the requisite support to provide excellent customer service?
Personnel and Training – Does the operator have robust hiring, background checking, drug testing (if applicable), and training programs in place that would be deployed at this new operation?
Compliance to RFP – Does proposal identify items operator listed as exceptions to the RFP (i.e., operator wants to deposit revenue into its own bank account while the RFP specifies an owner-depository bank account, etc.)? Are there areas in which the response is not compliant, but the proposer did not call it out as an exception?
Operating Plan – Is the proposed operating plan indicative of the operator’s experience at managing similar projects? Does it incorporate innovative solutions and effective use of technology?
Management Fees – Did the operator propose base and/or incentive management fees that reflect good economic value to the client, but include adequate consideration of effort that will be required in the operation?
Budgets and Financial Offers – Did the operator submit a thoughtfully (and accurately) prepared revenue and/or expense budget that reflects not only good value, but a clear understanding of the project particulars and client expectations for customer service?
Sample Management Agreement – If an agreement draft was provided, did the operator review it and provide feedback on any items requiring further discussion?
Marketing Plan – Does the proposal address industry-leading revenue growth strategies, such as hyperlinks to venue web sites, parking phone apps, and the effective use of advertising and branding?
Operator References – How do the references provided by the operator check out? Do their current clients endorse them wholeheartedly or do you sense dissatisfaction in what they do not say?
1- Short-List Respondents and Interview Finalists – Consider narrowing down the list of respondents to a manageable number of about three finalists. Ask them to present their proposals virtually or in person.
2- Select an Operator – Each voting member of the evaluation team should independently assess the finalists’ proposals and presentations based on the points totals shown in the proposal comparisons and evaluation workbook. Some municipal and other governmental agencies may require the operator with the highest score to be named the winner. If not, the team should discuss the results and their perspectives before collectively agreeing on an operator with whom to negotiate a PMA or PLA.
Will Rhodin is a Senior Parking Consultant at Walker Consultant. You may contact him at wrhodin@walkerconsultants.com
