· Whether to retain ownership of golf course maintenance assets or require the Management Company to purchase them
· The type of contract we should have with the Management Company
· The selection process used to determine which Management Companies would be invited to bid
In the Request for Proposal (RFP) which we have sent to the prospective bidders, we have stated that the Community Association (CA) will retain ownership of the golf course maintenance assets. The reasons for retaining ownership of the maintenance assets are:
· We own the equipment at Legacy Hills, but the equipment at White Wing is leased. The leases cannot be assigned to a third party, so to require the management company to purchase our equipment assets would wind up with them owning some and us owning some.
· If for some reason, we decide in year two or three that we are dissatisfied with the management company, and decide to replace them for non performance, we could be in an awkward position if they owned all of our maintenance equipment.
· Down the road, as our leased equipment comes up for renewal, and our purchased equipment needs replaced (we have a reserve of over $700,000 for equipment replacement), we may well look to the management company to take control of all equipment, although we would still be financially responsible for the cost.
Regarding the issue as to the type of contract we want, our RFP states the following:
"The Association will be financially responsible for all operating expenses, whether under the operational control of the provider (management company) or the Association.For those operating expenses for which they have operational control, the Provider will be expected to hold those expenses within agreed upon budgeted levels, or provide acceptable justification in the event that budgeted levels are exceeded."
For all expenses the Management Company has operational control over, including their management fee and any agreed upon incentives, the management company will be required to submit line item detail in their initial proposal, their annual plan which they will submit to the CA Finance committee, and monthly and yearly operating expense statements. Representatives of the Management Company, The CA, the Finance Committee, and the Golf Committee will meet monthly to review these expenses and ensure that they are being properly controlled.
The types of contract we considered were a "Management Control" contract (as described above), which provides information on each expense element, and a "Fixed fee contract, whereby the management company would commit to perform agreed upon services for a fixed amount, but would not be required to report any expense detail.
We chose to ask for a "Management Control" contract for the following reasons:
· We asked the CA Controller, Ann Dodson, to contact other Sun City Communities she has relations with to determine their experience with these two types of contracts. All contacted indicated that A "Management Control" contract was the method they used. None used a "Fixed Fee" contract.
· We had a conference call with a CA Executive in the Palm Springs area (a position identical to Rob McDaniel's). She has oversight responsibility for three Sun City Communities, and she strongly recommended a "Management Control" contract.
· The main advantage we see in a "Management Control" type of contract is that it provides us with the opportunity to challenge the Management Company to find savings in the expense areas they control (without compromising course quality or service), and for us to share those savings with the Management Company. This gives them incentive to do the most cost effective job they can, and the more money they save us, the more they make. With a "Fixed Fee" contract, the Management Company would still have the opportunity to reduce costs, but we would not be aware of it and would not share in it.
The selection process used to determine which Management Companies we wanted to invite to bid was as follows:
· Members of the Task force researched various Management Companies looking for Companies that we knew by reputation, had experience managing private and semi-private courses, had courses in Texas.
· The Task Force met with Henry DeLozier, Pulte's corporate VP of golf, on January 25. At that time, Mr. DeLozier provided sample contracts for six Management Companies which he said he felt were all capable of meeting our business needs. He provided background on each company, but made no recommendation as to which one he favored. The majority of the companies the Task Force had researched were included in the six Mr. DeLozier provided. Those companies the Task Force had researched that were not included in the six were discussed, and Mr. DeLozier explained that the business models of these companies would not be consistent with our needs, as most of these companies wish to purchase the golf course and run it themselves.
· During the course of the Task Force's preparation of the RFP, two additional Management Companies (one local and one national) were reviewed and added to the original list of six.
Our RFP asking for bids to operate our golf facilities was then sent to eight Management Companies on Wednesday, April 5.
All residents who have questions, concerns, or comments about the Golf Bid Process are encouraged to contact a member of the Golf Bid Task Force, whose E-mail addresses appear on our web site.