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Maximizing Efficiency and Quality: The Importance of Periodically Bidding Out Service Contracts

If you’ve been using the same vendor for years without bidding out the service contract, you could be doing yourself a disservice. As a property management company, bidding out service contracts for our clients is a valuable tool that creates a balance between maintaining quality service and optimizing costs. In this blog post, we delve into the benefits of bidding out service contracts, including which services to start with and the frequency.

Reasons for Periodically Bidding Out Service Contracts

Cost Savings

Regularly bidding out service contracts ensures you receive the most competitive pricing from vendors, often resulting in lower costs and better terms. Commercial Property Manager Mary Brown says when soliciting bids, it’s important to use companies that have been vetted, meaning you are familiar with the quality of their service and have already established that their pricing is fair. Unfamiliar companies that have not been vetted may not have the appropriate scope for the property and may submit the lowest bid to earn the business but may not be able to offer comparable quality,

Ensuring Quality Service

Periodic bidding, even if you are happy with the service you have, offers a chance to assess quality and offerings from both your current vendor and potential vendors. This process ensures you have thoroughly considered your vendor’s performance and allows you to seek references and evaluate proposals to compare services. This can result in enhanced tenant satisfaction and in some instances, increased property value.

Technology and Innovation

As properties evolve, so can the requirements of the service, explained Brown. Periodic bidding lets you stay current on technological advancements and innovative service offerings. Vendors often introduce new solutions that enhance efficiency and property performance, which can make your commercial property more attractive to tenants and increase value.

Flexibility and Adaptability

Over time, needs change, and having the ability to negotiate new terms that allow you to adjust service levels or establish more flexibility to suit your changing needs is important. “The pandemic was a prime example of this,” said Brown. “As occupancy decreased, so did the demand for services like janitorial. Now, as people have returned, those services should be evaluated again,” she added. Periodically, soliciting bids offers the opportunity to tailor solutions to your current requirements.

Risk Mitigation and Compliance

Diversification of vendor reliance through periodic bidding mitigates operational risks. Having alternative options in place minimizes disruptions to property operations. Furthermore, adherence to changing regulations and industry standards is ensured, safeguarding against legal and regulatory risks.

How Often Should You Bid Out Service Contracts?

The frequency of bidding out service contracts varies based on factors such as property size, service requirements, and market dynamics. As a rule, reviewing and bidding out contracts every 3-5 years is recommended. This timeframe allows for thoroughly evaluating vendor performance, market trends, and technological advancements, ensuring properties remain competitive and cost-effective.

Best Practice for Soliciting Bids

Define Scope of Work: Clearly define service requirements and provide vendors with a comprehensive understanding of expectations.

Identify Potential Vendors: Conduct thorough research to identify potential vendors through referrals, industry associations, and online platforms. An advantage to working with a property management provider is that they have a network of vetted vendors that are trusted, and often can negotiate the best rates.

Request for Proposals (RFPs): Depending on the service, it may be necessary to develop a detailed RFP outlining project specifications, evaluation criteria, and submission guidelines.

Evaluation Process: Rigorously evaluate vendor proposals based on pricing, experience, qualifications, references, and compatibility with property needs.

Negotiation and Contract Award: Negotiate terms with selected vendors and award contracts to the vendor who best meets your property requirements, and offers competitive pricing and quality services. 

Determining Which Services to Evaluate

To determine which services to assess, start with those that are the largest expense. Many property managers start with Janitorial services, landscaping and grounds maintenance, and snow removal since they tend to be the largest service-related expenses for a property and can result in significant savings. Other services include HVAC maintenance and repair, security services, and elevator maintenance.

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