Elements of a Successful Proposal Office of Transit Ohio Department of Transportation June 28, 2007

? Why Submit a Proposal? Maximize Use of Existing Resources Expand Revenue Base and Spread Fixed Costs Generate Local Match Become Viable Player in Local Community

How Do We Let Agencies Know We Are Interested? Networking Normal interactions with agencies Speeches to community groups Attendance at Pre-Bid Meetings Participation in Community Groups Working through Board Members and Government Officials Newspaper Articles

Self Assessment: Can We Do It? Legal Restrictions — Service Area, Type of Service, Funding Program Limitations Vehicles — Number, Type, Utilization Facilities — Size, Capability Staff — Number, Capability, Flexibility Type of Service — Is It New or More of the Same?

Self Assessment: Do We Want to Do It? Agency Mission Board Direction Management Interest Capability Local Political Realities

What are the Keys to Successful Proposing? Understanding the Solicitation Preparing a Good Response Developing a Good Business Plan Planning for Start-Up and Operation

Understanding the Solicitation

Understanding the Solicitation Understand the Environment Reading the Solicitation

Key Transportation Actors Transportation Agency Director Board Local Governments Ohio Department of Transportation Federal Transit Administration Potential Contractors Private Human Service Agencies

Labor May Also Be An Important Actor Be Aware of What You May be “Inheriting”: Existing employees Wages and fringe benefits Past employees practices

Key Laws and Regulations Ohio Revised Code ODOT Review Schedule Federal Transit Administration

The Public Process is Slow! Everything is a Process Publicly-Funded Agencies Cannot Make Snap Decisions They are not allowed to! Conclusion: Follow the Rules!

ODOT Review Schedule

ODOT Review Schedule (Cont’d)

Federal Transit Administration Many Required Contract Clauses Outlines in FTA Circular 4220.1C

Typical Procurement Methods Invitation for Bid (IFB) Request for Proposals (RFP) Multi-Step Strategies

Invitation for Bid (IFB) Requires Complete and Comprehensive Specifications Involves Two or More “Responsive and Responsible” Bidders Award Based on Price (Low Bid)

IFB Requires High Degree of Agency Certainty High Risk for Contractors Since Few Agencies Can Do This Well! Contractor Must Be Proactive to Seek Clarification at the Beginning of the Process

Request for Proposals (RFP) Prefer General Description of Service Specifications May Need Oral/Written Discussions With Prospective Contractors Award Based on Comparative Evaluation of Price, Quality, Contractual Factors Primary factor need not be price Preferable Approach Due to Increased Flexibility and Opportunity for Creative Responses

Bid Evaluation and Award IFB and RFP Steps Invitation for Bid (IFB) Invitation for Bids Bidder Submissions Bid Evaluation and Award Request for Proposal (RFP) Request for Proposal Composite Evaluation and Award Proposer Submissions Technical Evaluation Additional Negotiations Cost Evaluation

Multi-Step Strategies Pre-Qualify Responsible/Responsive Bidders Invite/Evaluate Different Technical Approaches Conduct Discussions to Select Best Technical Approaches Award Contract to Lowest and Best Contractor in Accordance with Sealed Bid Process Incorporates RFP Flexibility into IFB Process

Multi-Step Strategy Steps Two-Step Invitation for Bid Invitation for Technical Bids Bidder Submissions Technical Evaluation Request for Pricing Bid Bid Evaluation and Award Request for Qualifications (RFQ) Qualifications Evaluation and Selection IFB Process or Two-Step IFB Process Bid Evaluation and Award Request for Qualifications Biddor Submissions

Considerations By Procurement Method: IFB, RFP and Multi-Step

Considerations By Procurement Method: IFB, RFP and Multi-Step (Cont’d)

Typical Solicitation Outline Cover Page Overview of Contracting Agency Statement of Need Service Specifications Contractor Qualifications Contract Mechanics Agency Protections Required Clauses Evaluation Methodology Format of Submission

Service Specifications Start-Up Date and Performance Period Service, Routes, and Operating Hours Fare Collection and Recordkeeping Required Vehicle Maintenance Performance Reporting Capital Items Can You Do It and What Will It Cost You?

Service, Routes, and Operating Hours Issues Make Sure You Know Definitions Understand the “Service Profile” of Demand Time of Day Day of Week Are There Service Guarantees? Minimums? Maximums?

Vehicle Requirements Should Be Reviewed Carefully! Vehicles Provided by Contractor Do you have the vehicles? Where and how quickly can you get them? Can you meet safety and other requirements? Vehicles Provided by Public Agency What are the condition of the vehicles? When will you take possession? Will you have to supplement the fleet? Contingency Plan You need one!

Contractor Qualifications Proposed Personnel Experience The firm as a whole Proposed personnel Total professional experience Experience with firm Financial Capability Agency wants to make sure you are viable Cash Flow — Adequate working capital Capital — Funding of vehicles and facilities

Contract Mechanics Contract Length Amendment Process Reporting Requirements Payments

Contract Length Options Single Year Does not address high start-up cost factors Start-up operations costs Equipment amortization Transition costs from prior contractor Avoid if equipment acquisition is required or other longer-range opportunities are available Multi-Year Addresses high start-up cost factors Should address how service changes are handled

Multi-Year Contracts Are Most Common Often Structured as Minimum Time Frame Plus One-Year Renewals e.g., Three years plus two one-year renewals Maximum Contract Length Limited by Federal, State, and Local Regulations

Typical Amendment Issues Changes (±) in Required Service Amount Vehicles required Changes in Commodity Prices Insurance Fuel New Government Requirements

Monthly Contractor Reports: Keep Them Informed! Operations Revenue/total hours and miles, missed trips, schedule performance Passengers and Fare Revenue Financial Results Accident and Safety Information Maintenance Activities Preventive maintenance inspections, warranty work, major repairs Driver/Mechanic Training Activities Anticipated Issues for Coming Month

Basic Payment Options: Fixed Price Price set for performance period Contractor assumes risk for cost and service increases Conclusion: Avoid if Possible

Basic Payment Options: Fixed Unit Price Most Common Price tied to output measures Service provided — revenue/total hours (miles) Passengers served Contractor preference: 1) total 2) revenue 3) passengers Contractor assumes risk for cost increases Also ridership if price based on passengers carried Conclusion: Reasonable, But Do Your Homework If Based on Passengers

Basic Payment Options: Cost Plus Fixed Fee Accounts for allowable changes in contractor costs Agency assumes risk for cost increases Conclusion: Good Approach, But Few Agencies Willing to Take These Risks

Pass-Throughs Can Reduce Contractor Risk and Cost Approach Agency agrees to pay exact cost for specified items regardless of increases Fuel and Insurance Common Pass-Throughs Risk: Need to Specify How Costs Can Be Disallowed Other Option is to Provide Items Directly e.g., fuel at agency fueling island Conclusion: Discuss with Agency Before and During Solicitation

Payment Terms Key To Cash Flow Key Provisions Required invoicing format Invoice approval process Payment timeline Guarantee is desired

Agency Protections Insurance Bonding Key Personnel Subcontractors Approval of replacements Subcontractors Agency Provided Equipment and Assets Required maintenance program Required maintenance records

Objectives of Bond Requirements Agency Protection Assures contractor will enter into contract (bid bond) Guarantees service performance will meet terms of contract (performance bond) Credit/Financial Screen

Performance Alternatives Holdbacks (1-5%) Penalties and Incentives Post Cash

Incentives Must be: Important Measurable Reasonable Under contractor control Conclusion: Do Not Count Your Chickens Before They Hatch! — Generally Do Not Include in Your Budget

Penalties Must be: Should Be Proportional to “Offense” Important Measurable Reasonable Under contractor control Should Be Proportional to “Offense” Conclusion: Count Your Chickens Before They Hatch! —Include in Your Budget (Things Do Happen Even in the Best Systems)

Why So Many Contract Clauses? Public Safety Good Public Fund Stewardship Employee Protections

Required Contract Clauses (Standing in the Agency’s Shoes) FTA Circular 4220.1C ODOT Rural Transit Program Manual The Key Clauses Are Covered Next

1. Remedies for Breach of Contract Available Remedies to the Grantee if Contractor Violates or Breeches Contract Terms Administrative Contractual Legal Remedies Provision for Appropriate Sanctions and Penalties Ideally, We Should Never Get This Far

2. Contract Termination (>$10,000) Conditions Under Which the Grantee May Terminate the Contract for: Default: Contractor fails to comply with terms of the contract Convenience: Contractor cannot comply due to circumstances beyond contractor’s control

3. Equal Employment Opportunity (>$10,000) Contractor Agrees to Take Positive Action to Insure that Persons Employed or Seeking Employment Are Treated Without Bias Regarding: Race Religion Color Sex National origin Contractor Required to Conspicuously Post Notices

4. Contract Work Hours and Safety Standards Act Contractor Must Pay Overtime (1.5 x wage rate) to Laborers and Mechanics for Work Exceeding 8 Hours per Day Prohibits Requiring Workers to Work in Unsanitary, Hazardous, or Dangerous Conditions as Defined by Secretary of Labor Applies to: Construction contracts > $2,000 Other contracts > $2,500

5. Access to Contractor’s Records Provisions Cover Access to the Contractor’s: Books – Papers Documents – Records Access Granted to: Grantee ODOT FTA Comptroller General Authorized agents Materials Must Be Maintained for 3 Years

6. Disadvantaged Business Enterprise Contractor Will Take Affirmative Steps Whenever Possible to Use DBEs as Sources of Supplies, Equipment, Construction, and Services Selected Affirmative Steps Place qualified DBEs on solicitation lists Assure that DBEs are solicited when they are potential sources Divide projects into small tasks suitable for DBEs Establish procurement schedules that encourage DBE participation Make Sure You Know Agency Requirements

7. Buy America Steel, Cement, and Manufactured Products Used in FTA-Supported Projects Must Be Produced in US. FTA Can Make Special Exceptions

8. Title VI Civil Rights Act of 1964 Non-Discrimination Selection and Retention of Contractors Procurement of Materials and Leases of Equipment Employment Practices Provide Access to Records Compliance with Regulations Requirements Pass Through to Subcontractors

9. Americans with Disabilities Act Service Provided by Contractor Must Meet All Requirements for Grantee — (Standing in the Agency’s Shoes) Complimentary service Vehicle accessibility Public information Telecommunications

10. Drug and Alcohol Testing Comply with Federal Requirements 49 CFR Parts 655 and 40 Drug Free Workforce Act 49 CFR Part 29, Subpart F

11. Selected Other Contract Clauses Lobbying No Government Obligation to Third Parties Program Fraud and False or Fraudulent Statements and Related Acts Government-wide Debarment and Suspension Non-Procurement

Evaluation Methodology Depends on Procurement Method IFB — Assessment of “Responsive” and “Responsible” RFP — Assessment of Cost and Non-Cost Factors Evaluation Objectives Objective Quantifiable Conclusions Need to write your proposal to cover criteria Need to state “obvious” facts about yourself

Common RFP Evaluation Factors Cost Proposed Technical Approach Service Delivery Approach Maintenance Plan Transition/Start-Up Plan Proposed Personnel Experience

RFP Factors Often Weighted to Aid Contractor Selection Scoring of Bob’s Contracting, Inc. by Barry Bonds, Reviewer Conclusion: Write Proposal in View of Point Emphasis

Preparing a Good Response

Keys for Writing a Good Proposal Demonstrate that You Know: The services to be provided The local operating environment Know Your Competitive Strengths and Weaknesses Who are your likely competitors What sets you apart from them Demonstrate that You Will Provide Value

Pre-Bid Meetings Can Help You Develop a Responsive Proposal Typical Agenda Agency overview Project objectives Key project information Agency contact for questions Contractor questions

Suggestions for Pre-Bid Meetings DO Ask Clarification Questions DO NOT Ask Questions that Reveal Your Approach USE the Meeting to Size Up Your Competition DO NOT USE the Meeting to Reveal Your Proposed Team USE the Meeting to Establish a Good Relationship with the Agency

Write for Someone Who Does Not Know You Describe the Services Provided by Your Company Describe Your Experience and Knowledge of the Local Community Highlight Your Accomplishments Toot Your Own Horn!

Identify and Write to Members of the Agency Evaluation Team Sometimes the Members are Identified in the Solicitation If not, Ask Who They Are

Follow All of the Rules! Order of Presentation Due Dates Number of Copies Size — Pages, Fonts, Tabs, Margins Signatures/Legal Forms Attachments

Remember the Agency’s Procurement Requirements Treat All Prospective Sources Equally Maintain An “Arms-Length” Procurement Relationship Do Not Accidentally Put Your Agency Friends in a Bad Position

Recourse: “Partnering” Meet and Discuss Objectives Keep agency informed about operations Address issues before they escalate into big problems Focus on solutions and lessons learned Recommend Weekly Meetings

Award and Start-Up Agency Responsibilities Contractor Responsibilities

Agency Responsibilities Agency Should Designate Points of Contact Contract Manager Changes/amendments, recordkeeping, respond to inquiries Service Manager Operations issues, monitor performance, initial invoice review, initiate contract changes, assist contractor

Contractor Responsibilities Start-up Plan Hiring and Training of Personnel Procurement of Equipment Communication with Former Contractor(s) Vehicle Repair

Understanding of Your Costs Fixed Costs Do Not Vary with the Amount of Service Provided (e.g., Administrative Salaries) Variable Costs Change Relative to the Amount of Service Provided (e.g., Drivers’ Wages) Fixed Variable Total Output (Hours/Miles) Cost

Example of Expense Assignment

Example of Unit Cost Calculation

Three Estimates of Contract Costs Fully Allocated (Highest) All costs (variable + fixed) Reallocated Fixed Costs Variable costs Fixed costs (spread over more service) Incremental Costs (Lowest) Variable costs only

Sample Problem The transit system wishes to start a new service between a small town and the county government center. What should you charge for this service? Estimated Annual Operating Data for the New Service. Hours = 6,120 Miles = 153,000

Sample Problem: Fully Allocated Cost All Costs Increase with New Service

Sample Problem: Incremental Cost Only Variable Costs Increase with New Service

Sample Problem: Reallocated Fixed Costs Only Variable Costs Increase with New Service Reallocate Fixed Costs Across Existing and New Service

Sample Problem: Reallocated Fixed Cost All Costs Increase with New Service

Sample Problem: Summary of Three Approaches

Business Plan – Non-cost Components Staffing – Drivers Part-time Full-time Overtime Dispatchers Supervisor Coverage Scheduled On-call Management Team Support Local Corporate Financial Manager Budget Cash Handling Fare/Revenue Collection Procedures Expenses Recordkeeping/ Reporting

Startup / Transition Plan Timeline – Work Backwards From Startup Date Understand Interrelationships Between Tasks Be Thorough Incorporate Contingencies Commit Necessary Resources Staff Hours Revenue Outlays Vehicles Facilities Be Prepared to Mobilize Quickly

Startup Plan Components Staffing Recruiting Hiring Drug Testing Training Vehicles Purchase/Lease Inspections Preventative Maintenance Repairs to Minimum Standard

Startup Plan Components (Cont’d) Administration Recordkeeping Accounting/Bookkeeping Procedures Personnel Policies/Procedures Telephone Lines / Internet Procurement Inventory Maintenance Consumables Equipment Supplies Brochures/Ride Guides

Startup Plan Components (Cont’d) Operations Service Design and Characteristics Driver Manifests/Schedules Scheduling/Dispatching Procedures In Place Obtain Necessary Information From Former Contractor – Check for Accuracy/Efficiency