Current Trends in RFP’s

Moderator:Keith Overly, State of Ohio

Panelists:Thomas C. Woodruff, Ph.D., State of

Connecticut

Andrew Ness, Mercer Investment Consulting

Jayson Davidson, CFA,Arnerich Massena & Associates, Inc.

Current Trends in RFP’s

Thomas C. Woodruff, Ph.D.Director, Retirement & Benefit Services

DivisionOffice of the State Comptroller

Preparing the RFP

Thomas C. Woodruff, Ph.D.Director, Retirement & Benefit

Services DivisionOffice of the State Comptroller

Before You Begin Writing:• Do a Thorough Audit of Your Plan(s)• What Plan Model Do You Want ?• Gather Key information on Your Plan• Gather Key information From Others• Determine Whether You Have

Authority for Changes• Do You Need to Take Legislative or

Other Steps First?

What Plan Model Do You Want?

• Multi-vendor Retail Model• Multi-vendor Semi-retail Model• One Company Bundled Model• TPA : Multi-company investments• Internal Administration

RFP Content

• Organization and History• Corporate Governance/Corporate

Responsibility• Client Service• Recordkeeping/Administration/Systems • Reporting• Communication and Education• Conversion Plan• Regulatory Services• Investments• Cost Proposal and Fees• References

Organization and History• Purpose is to Determine Capability to

Provide Services• Look For Comparability to Your Plan

Corporate Governance/Responsibility

• Companies Need to Comply with State/Local Laws & Regulations

• Issues May Include Diversity• Outsourcing & Unions or Public Policy

Client Service

• Team Members• Description of Previous/Current Clients• Experience with Similar Plans• Integrity of Member Data• Performance Guarantees

Recordkeeping/ Administration/ Systems

• Ability to Comply with Data Submission Methods and Timing

• Processing of Withdrawals, distributions, Loans, QDROs, etc.

• Checks & Balances and Error Responsibility

• Plan Sponsor Administrative Support

Reporting

• Standard Reporting Packages for Sponsors

• Ability to Provide Customized Reports• Types of Media Available for Reports• Availability of Internet-based Reports

for Sponsor and Members• Ability to Customize Quarterly

Members Statements

VRS, Call Center, Internet Services

• Services:– Transactions?– Asset Allocation?– Rebalancing?– Contribution changes?– Beneficiary changes?– Retirement Planning Tools?

• Security• Disaster Recovery• Hours of Operation

Communication and Education

• Communication Content• Staffing and Other Resources• Retirement Counseling• Commitment to Individual & Group

Sessions• Use of Third-party Resources

Conversion Plan

• Timeline and Responsibilities• “Black-out” Period• Handling of Cash-flow• Ability to Handle Record Formats• Experience of Team

Investments• Funds/Fund Families Offered• Mutual Fund vs Annuities• Fixed Account vs Stable Value• Co-Mingled Separate Account• Performance of Funds• Fee Structure• Use of Third-Party Services for Fund

Selection

Cost Proposal and Fees

• Overall Goal: Transparency• Breakout All Fees By fund:

– 12b-1– Asset Management– Administration– M & E

• Create an Annual Plan Budget by Service Provided

Evaluating Proposals

Andrew Ness

Mercer Investment Consulting

RFP is Issued

• Interest Generation– Advertisements– Calls to providers

• Distribution list– Experienced companies– Companies expressing interest– Procurement– Website

RFP is Issued (cont.)

• Q&A– Pre-proposal meeting– Written questions and responses– Distribute any new information

• Send to distribution list• Post on website

– Provide answers that will help companies submit quality proposals

Proposals Received• Minimum Criteria

– Pass or fail

• Evaluation Committee– Ground rules– Timeline– Deliverables

• Technical proposal and Cost proposal– Separate or together?

Evaluation Methodology• To score or not to score?• Evaluation criteria weighting

– In RFP, or set by committee?

• Ranking responses– 1, 3, 5 or A, B, C…– Take notes!

Total Maximum Points: 1,000

Evaluation Category WeightingWeighting in

SectionMax

Points

Company Qualifications 10%Organizational Structure 20% 20 5 20 3 12 5 20Experience 40% 40 3 24 3 24 5 40Litigation 10% 10 3 6 3 6 1 2Contractual Issues 30% 30 5 30 5 30 5 30

100 80 72 92

Firm A Firm B Firm C

Evaluation Categories

•Recordkeeping system – look for down time?

•Adequate support?

•Processing standards

Recordkeeping

•Adequate testing, training, and communications?

•Blackout periodTransition

•Litigation – specific to DC services?

•Number of similar clients

Firm Qualifications

More ComplicatedSimpler

Evaluation Categories (cont.)

•Revenue sharing disclosed?

•Administrative fees

Fees

•Manager philosophy?•Strategy consistent?

•Performance vs. benchmark

Investments

•Communication materials easy to understand? Include enrollment, accumulation, and retirement?

•Customer service hours

Participant Services

More ComplicatedSimpler

fees of proposing vendor= score of proposing vendor

lowest fees proposedMaximum points available x

Common fee methodology:

Selecting Finalists• Goal – further consider companies

that have a legitimate chance of winning– Based on the evaluation– Committee discussion– Work backwards?

• Checking references– During initial evaluation or only check

finalists?

Current Trends in RFP’s

Jayson Davidson, CFAArnerich Massena & Associates, Inc.

Negotiations and ImplementationThe Interview Process

and Beyond…

For Consideration:• Purchasing requirements

– Liberal vs. restrictive– Numerical scoring– Can providers change the offer?– How much negotiation can you do?

• Final approval– Committee recommendation– Council or Board vote

• Consultant involved?

The Interview

• Focus on preparation– How do you want it communicated?

• Room configuration• PowerPoint presentation• Question & answer

– Who do you want in attendance?

The Interview (cont.)• Focus on preparation (cont.)

– What are you expecting?• On-site services• Plan sponsor support• Investment flexibility• Technology• Fees• Transition

– Send instructions to providers in writing– May consider distributing questions in

advance

The Interview (cont.)

• Interview conduct– Participate– Stay on course with time– Be direct with questions– Focus on narrowing down candidates

The Interview (cont.)

• Interview goals– Remember…you will be working with one

of these providers for a long time– What do you want to accomplish?

• On-site services• Plan sponsor support• Investment flexibility• Technology• Fees• Transition

– Try to make a decision• No time like the present

Post Interview

• Negotiations• Final points and tying up loose ends

– May need interview follow-up for clarifications

• Ask again for enhancements• Get it in writing…Get it in writing…Get

it in writing!• Site visit?

The Contract• Read everything!!!

– Service Agreement– Annuity Contract– Separate Trust Agreement– Advice Agreement– SDBA Agreement

• Agreement should be customized and specific

• Incorporate RFP responses, finals, and written correspondence

The Contract (cont.)

• Spell out service requirements– Days, hours on-site, etc.

• Specify fee agreement• Identify investment flexibility

expectations– Fund change timing– Additions to platform– Revenue requirements

The Contract (cont.)

• Data security• Performance guarantees

– Penalties for failure to perform– Termination clauses

• Legal review– Indemnification, arbitration, etc.– Insurance, state law issues

Transition• Committee vs. Task Force

– Conference Calls– Checklist

• Timeline – Be conservative• Communications

– Multiple versions– Don’t be too complicated

Transition (cont.)• Presentations

– Cover many locations– Offer accessible times– Keep it simple– Generally helps to have committee

involvement