Ohio Association Public Treasurers

Banking Services – Comparing Apples to

Apples

October 4, 2007

Overview

Issuing and evaluating a proposal and its pricing can be enhanced and simplified by:

Providing the bidders with:

Time to prepare quality response -3 wks

Statistical transaction information

Your used and “wish list” of desired services

Transferring the responsibility for bottom lining the pricing - by service - to the bidders

The 7 Step RFP Program

1. Set Objectives – Service, Price, Location… Establish Review Team if Possible

2. Create Scoring template3. Schedule Vendor Meetings/Presentations4. Create & Issue RFP5. Allow for Q&A – email or in person6. Simplified Evaluation, Score, Award7. Manage Implementation Process

Set Objectives High Level Objectives

Save time Save money Prevent fraud Meet requirements of ORC Political pressures to electronify Audit functionality Sound financial partner

Specific Level Objectives Simplify returned check management Satisfy governing body bid demands

Identify Your Challenges

Security Fraud Need to do more with less Inefficiency Investment return Reconciliation Lack of dual controls for audit

Evaluation Tools

Account Statements Monthly statements and other various reports

provided by the financial institution allow public funds managers to review activity and compare information for other services. Reconcile it!

Account Analysis A monthly summary of activity, average balances,

and charges for services. Allows you to monitor the cost of bank services

utilizing comparative AFP/ANSI standards.

Basic Banking Assessment Tools

Bank Balances Ledger Balance

The book balance of all funds on deposit -reflects all accounting entries that affect a bank account.

Float The amount of uncollected funds assigned to each

check as deposited. (Money the Bank has not been given availability to yet.)

Collected Balance The difference between the ledger balances and the

deposit float.

Negative Collected Balance When the ledger balance minus any uncollected funds is

negative (How is it charged and at what price?)

What is Collection Float? It is the time between production of an invoice to the time when the funds are “collected” in your bank account.

Processing Float – The time it takes to prepare an invoice through getting it in the mail. Occurs on both the issuer and receivers side.

Mail Float – Time between mailing an invoice and the customer’s receipt and/or the time between customer mailing payment back to you and your receipt.

Clearing Float – The time it takes from deposit of a check to receipt of available funds.

Float?

Account Analysis

Adobe Acrobat Document

Alternatives to an Analysis

No reports – use bank statement only No fees at all Fixed monthly / annual fee Cluster Pricing By Product Type Being Used Compensating Balance Fee Offset

… …These Usually Mean Trade OffsThese Usually Mean Trade Offs

Microsoft Excel Worksheet

Simplify the Process

Determine Types of Services Needed Develop a Request for Proposal (RFP)

Necessary elements versus the “Wish List” Understanding pricing comparisons

Price Is Not the Only Determining FactorThe lowest price proposal may come from

an institution in need of deposits or that could be a poor service provider

Define Your Process

Define your current processes and procedures with sample volumes

Average account balances Checks written Deposits and Items Deposited ACH transactions Treasury Management tools currently used Electronic transmissions

Microsoft Excel Worksheet

Additional Evaluation

Understand Calculations and Basis for Change

Bidder totals all service fees Bidder applies ECR calculation to illustrate

account balance offset Bidder provides proposed interest rate Bidder provides sample analysis

statement using your volumes and requirements (preferably in their format)

“All In” Evaluation “All In” Cost evaluation looks at more than just

the per unit pricing: Compare “unique” offers – fixed rate, fixed

compensating balance, high ECR, free months of service

Bidder provides proposed interest rate Bidder determines compensating balance Bidder applies interest rate to remaining

balances Bidder nets fees against interest for total

return

Sample ECR Calculation & Account Type Comparisons

Microsoft Excel Worksheet

Scoring Since you have already:

Provided bidders with a detailed bid form including summary of products with transaction volumes and services

Set the parameters for level of importance and

Let the bidders bottom line the bid for you Don’t try to perform a line by line price

comparison, use categories only Use line by line to ensure monthly billing is what was

bid

Award the bid a score based on price – lowest to highest

Sample Scoring Sheet

Bank A Bank B Bank C Bank DPricing Max Value

Interest Rate 20Total Fees 20

Experience of vendor 10Ability to meet current needs 15Ability to provide additional needsImplementation process 15Completeness of Proposal 10

TOTAL 100

Based upon the objectives you initially set, give a value to each objective

10

Vendor Meetings The primary function of vendor meetings is to:

Gather latest information about bank services and processes, matching relevant services with your needs and objectives prior to issuing RFP

Provide information about your processes, challenges and objectives so vendors can create proposals that are easier to evaluate with more creative solutions.

Vendor presentation and/or demo of products and new technology prior to and/or after RFP

After the Selection

Multiple relationships? Reality of demands?

Public Fund’s Staff Bank’s Staff

What is a contract? Length of contract? Exit strategy?

How to get out of your contract should the services become unacceptable

RFP Tips

Share your objectives to invite creativity Ask for an evaluation of current practices

and suggestions for improvement Ask for what you really want – see what

happens, but realistic in expectation Ask for references of others using same

systems/software Ask questions that comparatively make a

difference between products or vendors and that really make a difference to you

Ask to review contracts required up front

RFP Tips

Be sure to get electronic copy of bid sheet and contracts – check the math!

Don’t bid when it is not convenient for you to bid, review and make potential bank or product/process changes

Do product demos before awarding business to ensure ease of use and to confirm technical details meet needs

Be sure not to lock yourself into having to make a change when there is not an overwhelming reason to do so

The End Result????

Questions…

Contact:Karen Bigelow, CTP

Vice President & Regional Manager175 south Third Street

12th FloorColumbus, Ohio 43215

karen.bigelow@usbank.comPhone: 614-232-8078

Fax: 614-849-3444