3.8.1 Compare the proposal pricings | Owners Corporation Network

3.8.1 Compare the proposal pricings

There is no substitute for careful examination of the proposals. Strata companies can deliver quotes which vary significantly, so look closely at what services they are offering for that price, and what you will be paying extra for. Some companies may give an all-inclusive price. With others, you pay extra for every phone call they make, and every stamp they buy. This can make the second manager far more expensive than the first, even though at first glance it looks like a real bargain. Sorting all these differences out and working through each quote can be difficult, but it’ll be well worth the effort in the long-run. It could be useful to hire in someone to do this for you if you don’t have the time or expertise.

Don’t just rely on their proposal without understanding every line or possible charge.

It can be very difficult to compare proposals if one has disbursement costs charged at scheduled rates and another has a fixed up front amount. However, if this is the case then you will have to try and estimate the actual cost of disbursements charged at the specified rates. Follow up their quotes with a phone call asking questions on any point you’re not sure of such as what might they expect ‘various stationery charges’ to add up to for a year? You may be able to do this by looking at past charges or going through the schedules and estimating the time spent (see Detailed schedule check list4.7). An example could look like this:

TABLE 1: Strata Manager Proposals: Cost Comparison

Component

Incumbent 1

Proposal2

Proposal3

Proposal4

Initial Contract Period

Current

1 year

1 year

1 year

1 year

Costs Estimate Totals

 

 

 

 

 

      Variable Costs Contract

$48,500

 

 

 

 

      Fixed Costs Contract

 

$36,500

$48,000

$28,500

$26,500

Costs Estimate Components

 

 

 

 

 

      Fixed/ Base Costs

$27,000

$16,000

$45,000

$24,000

$24,000

      Fixed Disbursement Allowance

 

$10,000

 

 

 

      Insurance Commission

$6,500

 

 

 

 

      Disbursements + Incidentals

$15,000

$10,500

$3,000

$4,500

$2,500

Costs Estimate Assumptions

 

 

 

 

 

      ECMs included

 

5

5

5

5

      Additional ECMs /GMs

 

$350

$350

$500

$250

Costs Escalation

 

 

 

 

 

      Annual Increase

3%

3%

CPI d

CPI d

CPI d

      Cost in 10 years

$65,000

$45,000

$48,000

$35,000

$33,000

  • ‘$0’ excl GST
  •  Estimates based on actual charges and 'Detailed Schedule Comparison' assumptions
  • ECM refers to Executive Committee meetings, GM refers to General Meetings
  • CPI estimate of 3.18% = Ave CPI since 2000 from http://www.osr.nsw.gov.au/taxes/lease/rates/cpi/

Note: Many agreements have a 5% annual price uplift as standard, this means that management fees may outstripped inflation. This figure – as with everything else – can be negotiated.

For comparison, some components of costs can be captured and estimated from historic annual Income and Expenditure reports. See below for example of the incumbent’s annual costs roll-up.

TABLE 2: Incumbent strata management recent full year costs (variable cost contract)

Management Fees ($0’s, excl GST)

Contract Fees

27,000

Commission on Insurance

6,500

External Agent Costs

2,500

Incidentals -Additional Fees

2,000

Incidentals -Risk Assessment

1,000

Disbursements

9,500

                Postage

1,500

                Microencoding Levy Notices

1,200

                Photocopying

1,000

                Accounts Printing

1,200

                Strata Admin. Photocopying

600

                Microencoding Cheques

400

                Additional report Printouts

20

                Telephone

1,500

                Compile ltr

100

                Key Administration Fee

200

                Digital Imaging / Archiving

2,00

Total

48,500

Note: Actual figures taken from strata expenditure accounts