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March 23, 2005 Governmentwide Relocation Advisory Board Meeting ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

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Presentation on theme: "March 23, 2005 Governmentwide Relocation Advisory Board Meeting ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C."— Presentation transcript:

1 March 23, 2005 Governmentwide Relocation Advisory Board Meeting ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

2 Introductions Residence Transaction Subcommittee Members Relocation Management Company Participants Independent Auditor Worldwide ERC® General Counsel Worldwide ERC® Staff ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

3 Purpose Scope Data review Suggestions to consider as a result of data analysis Lessons learned BREAK Service fee discussion Questions Report Organization ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

4 Provide comprehensive data on homesale transactions managed by Relocation Management Companies to federal oversight entities. Provide a benchmark to compare federal spending to the private sector. Establish range of suggestions to improve effectiveness and reduce cost to the government. Purpose ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

5 Moves completed in fiscal year ,712 transactions Represents 98% of all transactions managed by Relocation Management Companies Scope of Public Sector Data ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

6 Number of Transactions State/U.S. territory Transaction type Authorization date Acquisition price Sales price Days on market Acquisition costs Carrying costs Cost of funds Selling costs (Gain)/Loss on sale Total cost Data Review Component Definitions ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

7 Data Review Definitions of: 1. Amended Value Programs 2. Appraised Value Programs 3. Buyer Value Option Programs ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

8 National Profile Report ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Amended % $246,060$246,010$5015$2,573$660$17,934$374$21,5919% Appraised % $191,812$178,788$13,024105$2,832$3,943$22,550$2,274$44,62323% BVO 349 6% $213,730$213,784$(53)8$1,008$314$16,150$230$17,6488% No. of Transactions Transaction Type Sales Price Avg. Acquisition Price Avg. Days On Mkt. Avg. Loss (Gain) on Sale Avg. Acquisition Cost Avg. Carrying Cost Avg. Selling Cost Avg. Cost of Funds Avg.Total Costs Avg.% of Costs to Acq. Price

9 ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Acquisition Price Range Number of Transactions Acquisition Price Average Total Costs Average Total Costs % of Acquisition Price $0 - $39,9994$21,125$5,75027% $40,000 - $54,9995$48,190$6,71614% $55,000 - $74,99952$67,197$8,51213% $75,000 - $99,999148$87,991$9,73611% $100,000 - $149,999625$127,373$12,88210% $150, $295,543$25,2389% Amended Transaction Price Range Report

10 Appraised Transaction Price Range Report ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Acquisition Price Range Number of Transactions Acquisition Price Average Total Costs Average Total Costs % of Acquisition Price $0 - $39,99919$29,267$18,83364% $40,000 - $54,99930$46,977$21,52646% $55,000 - $74,99991$65,846$24,27637% $75,000 - $99,999218$87,883$26,32830% $100,000 - $149,999637$126,646$29,55923% $150, $253,985$57,06222%

11 ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. BVO Transaction Price Range Report ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Acquisition Price Range Number of Transactions Acquisition Price Average Total Costs Average Total Costs % of Acquisition Price $0 - $39,9993$25,167$6,05624% $40,000 - $54,9992$45,350$5,01711% $55,000 - $74,99915$65,203$6,0909% $75,000 - $99,99928$87,206$8,43110% $100,000 - $149,99981$128,637$11,5259% $150, $275,392$22,1378%

12 Ten Lowest Acquisition Price States StateAverage Acquisition Price North Dakota$110,539 Arkansas$130,539 Oklahoma$136,381 South Dakota$143,192 Idaho$148,405 Mississippi$150,095 Iowa$154,232 Texas$156,184 Nebraska$157,769 Alabama$161,381 (Guam has been omitted since it only has one transaction.) ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

13 TEXAS Amended 218 (38%) $155,187$155,114$7312$1,715$545$11,809$192$14,3349% Appraised 341 (59%) $156,511$146,501$10,01098$2,168$4,863$18,562$1,677$37,28024% BVO 18 (3%) $162,061 $06$774$225$12,404$89$13,4938% Days On Mkt. Avg.No. of Transactions Trans. TypeSales Price Avg.Acquisition Price Avg. Loss (Gain) on Sale Avg. (A-B) Acquisition Cost Avg. Carrying Cost Avg. Selling Cost Avg. Cost of Funds Avg. Total Costs Avg. (C + E + F + G + H) % of Costs to Acq. Price (J/A)% A B C D E F G H J K ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

14 Ten Highest Acquisition Price States StateAverage Acquisition Price Alaska$256,131 New Jersey$284,055 Connecticut$312,956 Rhode Island$334,273 Virginia$356,644 Maryland$360,866 Massachusetts$365,122 California$386,763 District of Columbia$414,983 Hawaii$425,021 ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

15 VIRGINIA Amended 303 (81%) $373,616 $373,605 $11 17$2,526$403$24,214$633$27,7887% Appraised 51 (14%) $284,396 $268,808 $15, $3,236$4,036$29,553$3,004$55,41719% BVO 21 (6%) $287,221 $287,269 $(48) 10$1,250$593$19,837$392$22,0258% Days On Mkt. Avg.No. of Transactions Trans. TypeSales Price Avg.Acquisition Price Avg. Loss (Gain) on Sale Avg. (A-B) Acquisition Cost Avg. Carrying Cost Avg. Selling Cost Avg. Cost of Funds Avg. Total Costs Avg. (C + E + F + G + H) % of Costs to Acq. Price (J/A)% A B C D E F G H J K ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

16 MARYLAND Amended 98 (79%) $359,831 $359,613 $218 17$7,506$784$26,955$627$36,08910% Appraised 17 (14%) $395,679 $368,888 $26,791 70$8,696$2,755$35,581$4,202$78,02520% BVO 9 (7%) $306,378 $0 6$993$119$20,715$279$22,1067% Days On Mkt. Avg.No. of Transactions Trans. TypeSales Price Avg.Acquisition Price Avg. Loss (Gain) on Sale Avg. (A-B) Acquisition Cost Avg. Carrying Cost Avg. Selling Cost Avg. Cost of Funds Avg. Total Costs Avg. (C + E + F + G + H) % of Costs to Acq. Price (J/A)% A B C D E F G H J K ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

17 Data Review Industry Groups Categorized moves into industry groups in order to compare to private sector jobs in the future. ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

18 Industry Report: Law Enforcement ( 1820 transactions) ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Amended$273,812$273,775$3717$2,857$785$19,680$431$23,7909% Appraised$201,285$187,624$13,66198$3,006$4,076$23,569$2,128$46,44023% BVO$303,357 $05$721$24$22,689$370$23,8048% ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Transaction TypeSales Price Avg.Acquisition Price Avg. Days On Mkt. Avg. Loss (Gain) on Sale Avg. Acquisition Cost Avg. Carrying Cost Avg. Selling Cost Avg. Cost of Funds Avg. Total Costs Avg. % of Costs to Acq. Price

19 Moves completed in calendar year ,501 transactions 54 private sector organizations using services of Relocation Management Companies Scope of Private Sector Data ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

20 Homesale Program Data Private Sector ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Type of Transaction No. of Transactions % of Total Transactions Average Purchase Price Cost as % of Purchase Price Total Avg. Cost Total Cost Amended Value Transactions 4,52553%$281,9059.5%$26,781$121,184,025 Appraised Value Transactions 1,54318%$304, %$53,833$83,064,319 BVO Transactions 2,43329%$282,4788.6%$24,293$59,104,869 Total8,501100%N/A $263,353,213

21 Homesale Program Data Public Sector ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Type of Transaction No. of Transactions % of Total Transactions Average Purchase Price Cost as % of Purchase Price Total Avg. Cost Total Cost Amended Value Transactions % $246,0609%$21,591$65,463,912 Appraised Value Transactions % $191,81223%$44,623 $104,016,213 BVO Transactions 3496%$213,7308%$17,648$6,159,152 Total %N/A $175,639,277

22 Comparison of Homesale Programs % Government Amended/BVO 41% Government Appraised Value 81% Corporate Amended/BVO 18% Corporate Appraised Value ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

23 Homesale Program Data Hypothetical ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Type of Transaction No. of Transactions % of Total Transactions Average Purchase Price Cost as % of Purchase Price Total Avg. Cost Total Cost Amended Value Transactions %$246,0609%$21,591$65,463,912 Appraised Value Transactions %$191,81223%$44,623$45,872,444 BVO Transactions %$213,7308%$17,648$29,154,496 Total %N/A $140,490,852

24 Suggestions to consider based on data analysis Savings if Public sector emulates Private sector on homesale mix $175,639,277 - $140,490,853 = $35,148,425 (20% savings) For every percentage point increase in BVO transactions, there is a $1,528,192 (or.9%) savings to the government. ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

25 Suggestions to consider based on data analysis Ways to drive Amended, BVO transactions Mandatory marketing time Mandatory listing with certain brokers Cash incentives Delayed guaranteed offer program ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

26 Suggestions to consider based on data analysis Other considerations on ways to drive Amended, BVO transactions Give transferee more lead time Accelerate travel order process ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

27 Suggestions to consider based on data analysis Direct Reimbursement Programs If there are about 6,000 moves managed by RMCs, we estimate there are at least twice as many homesale transactions which fall into the Direct Reimbursement category ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

28 Assumptions 2 times as many direct reimbursement programs 12,000 Average Home Value Buyer Value Option$213,730 Family SizeTransferee Spouse 1 child over 12 1 child under 12

29 Comparison of Direct Reimbursement Programs to Home Purchase Programs ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Type of Transaction No. of Trans. % of Total Trans. Average Home Price RITATotal Avg. Cost Cost as % of Home Price Total Cost Amended Value Transactions %$246,060N/A$21,5919%$65,463,912 Appraised Value Transactions %$191,812N/A$44,62323%$104,016,213 BVO Transactions3492%$213,730N/A$17,6488%$6,159,152 Direct Reimbursement12,00068%$213,730$6,454$22,591*11%$271,092,000 Total17,712100%N/A $446,731,277 *Total Avg. Home Selling Costs for Direct Reimbursement Program = $16,137 in broker’s commission and selling costs + $6,454 in RITA.

30 Comparison of Direct Reimbursement Programs to Home Purchase Programs ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Type of Transaction No. of Trans. % of Total Trans. Average Home Price RITATotal Avg. Cost Cost as % of Home Price Total Cost BVO Transactions3492%$213,730N/A$17,6488%$6,159,152 Direct Reimbursement12,00068%$213,730$6,454$22,591*11%$271,092,000 *Total Avg. Home Selling Costs for Direct Reimbursement Program = $16,137 in broker’s commission and selling costs + $6,454 in RITA.

31 Suggestions to consider based on data analysis Cost differences of Direct Reimbursement programs vs. BVOs Direct Reimbursement programs cost, on average, $4,943 more per employee than BVO programs $4,943 x 12,000 moves = $59,316,000 This excludes an average of $7,358 of employee out-of-pocket expenses to cover seller repairs ($1,000), carrying costs ($3,836) and mortgage interest costs ($2,522). $7,358 x 12,000 moves = $88,200,00 ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

32 Suggestions to consider based on data analysis Other impact issues of Direct Reimbursement programs Productivity Loss Household Goods Storage Temporary Quarters ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

33 Suggestions to consider based on data analysis Savings if Direct Reimbursement and homesale mix emulated private sector $4,943 x 12,000 moves = $59,316,000 BVO/Amended rate = $35,148,425 $94,464,425 ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

34 Suggestions to consider based on data analysis Lessons learned Variances exist in any homesale numbers analysis Important to look at aggregates and averages Data is available – 2 weeks’ time Integrity of data is critical ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.

35 Break

36 Each respondent is a vigorous competitor in the federal government market, where supplier selection is frequently price driven. Actual fee structures are so confidential that they are exempt from the Freedom of Information Act (5 USC §552 (b)(4)), and constitute a trade secret under the Trade Secrets Act (18 USC § 1905), as was reinforced in 2001 by the United States Attorney General [Attorney General’s Memorandum for Heads of All Federal Departments and Agencies Regarding the FOIA (10/12/2001)]. Federal Relocation Contracts are firm-fixed-fee contracts which “place on the contractor maximum risk and full responsibility for all costs and resulting profit or loss” (FAR ). Finally, the maximum prices for each home sale transaction under SIN are published in the supplier’s online catalog. Contractors cannot charge more than this amount, but because of the competitive nature of the industry, the actual fee in an individual case may be less. ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C. Service Fees

37 ? Questions

38 Governmentwide Relocation Advisory Board Meeting March 23, 2005 Governmentwide Relocation Advisory Board Meeting ©2005 Worldwide ERC/Employee Relocation Council and Raffa, P.C.


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