Current Trends in RFP’s

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 Division Office of the State Comptroller

Preparing the RFP Thomas C. Woodruff, Ph.D. Director, Retirement & Benefit Services Division Office of the State Comptroller

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? Before You Begin Writing:

Multi-vendor Retail Model Multi-vendor Semi-retail Model One Company Bundled Model TPA : Multi-company investments Internal Administration What Plan Model Do You Want?

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 RFP Content

Purpose is to Determine Capability to Provide Services Look For Comparability to Your Plan Organization and History

Companies Need to Comply with State/Local Laws & Regulations Issues May Include Diversity Outsourcing & Unions or Public Policy Corporate Governance/Responsibility

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

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 Recordkeeping/ Administration/ Systems

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 Reporting

Services: Transactions? Asset Allocation? Rebalancing? Contribution changes? Beneficiary changes? Retirement Planning Tools? Security Disaster Recovery Hours of Operation VRS, Call Center, Internet Services

Communication Content Staffing and Other Resources Retirement Counseling Commitment to Individual & Group Sessions Use of Third-party Resources Communication and Education

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

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 Investments

Overall Goal: Transparency Breakout All Fees By fund: 12b-1 Asset Management Administration M & E Create an Annual Plan Budget by Service Provided Cost Proposal and Fees

Evaluating Proposals Andrew Ness Mercer Investment Consulting

Interest Generation Advertisements Calls to providers Distribution list Experienced companies Companies expressing interest Procurement Website RFP is Issued

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 RFP is Issued (cont.)

Minimum Criteria Pass or fail Evaluation Committee Ground rules Timeline Deliverables Technical proposal and Cost proposal Separate or together? Proposals Received

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! Evaluation Methodology

Evaluation Categories

Evaluation Categories (cont.) Common fee methodology:

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? Selecting Finalists

Current Trends in RFP’s Jayson Davidson, CFA Arnerich Massena & Associates, Inc.

Negotiations and ImplementationThe Interview Process and Beyond…

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? For Consideration:

Focus on preparation How do you want it communicated? Room configuration PowerPoint presentation Question & answer Who do you want in attendance? The Interview

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 The Interview (cont.)

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? Post Interview

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

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 The Contract (cont.)

Committee vs. Task Force Conference Calls Checklist Timeline – Be conservative Communications Multiple versions Don’t be too complicated Transition

Presentations Cover many locations Offer accessible times Keep it simple Generally helps to have committee involvement Transition (cont.)

Current Trends in RFP’s