Banking Services Request for Proposals
Getting the Most From Your Banking Relationship

 By Tami Olszewski, Senior Investment Advisor
and Dawn Lawson, Senior Client Service Advisor

Do you ever open your community’s bank analysis statements and wonder if you’re getting the best value or benefit from your current banking relationship? Are your interest earnings competitive? What are your total hard charges per month?  Does your bank provide the latest in fraud protection services?  For many, the potential benefit of conducting a more thorough study of those questions is often overshadowed by the convenience and familiarity of “just staying put” with your current banking services provider.  Yet, as the steward of public funds, you have an obligation to review banking service contracts periodically.  In fact, GFOA Best Practices suggest that public funds depositors should complete this exercise at least every five years and your community may have its own policies governing the timelines and requirements for the review process.

RFP Basics:

The most practical tool to evaluate your own banking services provider relative to what other financial institutions may provide is a Request for Proposal, or RFP.  It’s a document that, when crafted well, helps you gain better insight as to what services and resources are available in the marketplace to fulfill your community’s banking needs. It also establishes a series of benchmarks by which you can evaluate any number of banking organizations in an “apples to apples” way.

Whether you’re simply hoping to confirm the best available prices for the services you currently use or want to explore additional services and new technologies, all RFPs should include the following content:

• General information about your entity and its objectives for seeking a banking partner
• Primary contact information
• RFP timeline
• Minimum banking qualifications
• Account descriptions
• Detailed descriptions of banking services required
• Proposal scope and format
• Required vendor exhibits
• Evaluation criteria

You can generally expect the RFP solicitation and evaluation to take anywhere from 10-12 weeks, depending on the complexity of your needs. A typical timeline for tasks and milestones looks like this:

While the overall process to build a banking services RFP and solicit responses from qualified providers may initially appear fairly straightforward, it is time consuming and carries certain nuances that can’t simply be reduced to a final scorecard tally.  As you consider how your own RFP process may unfold, there are several key factors to consider.

Evaluation Criteria

When you develop the benchmarks against which your RFP respondents will be graded, start with those that can be scored objectively and applied consistently to each proposing bank.  They may include:

• Availability and quality of the minimum required services and reporting capabilities
• Availability and quality of additional services, technologies or security measures that can deliver new efficiencies and protections
• Qualifications and experience of assigned banking services team
• Financial strength and stability of respondent
• Cost of services, including an easily comparable matrix by product and service, as well as a net benefit/cost to your organization

Once you’ve determined the top five to six criteria you wish to leverage, it’s important to assign appropriate weighting to each. If you’re organization is more price sensitive, you may choose to place a higher weight on the cost of services; if you’re more concerned about lockbox locations or purchasing card capabilities, you may weigh the availability and quality of services higher.  Be sure to coalesce your staff around criteria weighting as those sensitivities can be the deciding factor relative to which respondents move forward as finalists in the RFP process.

Below is an example of a scoring matrix we often use when assisting clients:

The key thing to remember when establishing proposal scoring criteria and weighting is to clearly communicate it in the RFP.  This way, all potential respondents will have a strong picture of what’s most important to your organization and the proposals you receive will be easier to score consistently.

Selecting Finalists

Depending on the number of proposals you receive in response to your solicitation, leverage your established criteria, weighting and scoring matrix to narrow the field of potential providers to anywhere from two to five finalists. There may be situations where you have two or more respondents who garner the same overall score, so you may want to establish certain “tie breakers” based on what’s most critical to your organization.  For example, if two banks tie in overall score, you could give the entity that scored best on your highest weighted criterion or even a ranking of the top three criteria the advantage.  Also, if the incumbent provider is involved in a tie with another bank, you may choose to apply a preference given past experience or inherent knowledge of your organization. Be sure to engage directly with respondents to have complete clarity on pricing and specifics about the service offering.  You may find that pencils get sharper after the Q& A portion of the process, as the potential respondents better understand your situation and what’s important to you.  Again, the goal with this first round of scoring is to grade respondents objectively and consistently.

Checking References

We often recommend that clients wait to check references until finalists have been selected, simply because it involves scheduling and conducting anywhere from three to five interviews per respondent. As you plan to interview proposer references, consider developing an interview template so you can effectively compare each entity against an established set of questions. Some of the topics you can explore include:

• Length of relationship
• Experience of primary relationship manager
• Service levels and responsiveness
• Primary services used
• Relationship highlights and pain points

Try to keep the interviews to 30 minutes or less to be efficient with your time and respectful to the references’ time. Written responses to prepared questions may serve you better and provide a more uniform evaluation environment.  When speaking directly with someone, you run the risk of forgetting to ask a question, have to take detailed notes, and there’s a tendency to absorb the emotion of the person you’re speaking with.  Like the evaluation criteria scorecard, you may choose to assign weights to each reference response and add that score to the finalists’ totals.

Conducting Finalist Interviews

Finalist interviews are a great way to get to know potential service provider teams, understand their expertise, and delve further into the value they may be able to provide your organization. We often recommend that clients establish an interview format and develop a series of key questions to ask each respondent.  A general one-hour interview schedule may entail:

• Introductions (five minutes)
• Proposer presentation (20 minutes)
• Q&A (35 minutes)

By the time you reach the finalist interviews, assessment of potential providers becomes a bit more subjective, but we generally find it’s helpful to surround this process with some level of rating criteria to support your decision-making rationale.  This is also the time to ensure there is no ambiguity around respondent proposals and pricing.

Choosing a Banking Services Provider

The proposals are in. Scorecards are complete. References checked and interviews conducted.  At this point, you have a wealth of both quantitative and qualitative information to move forward with a final recommendation for a banking services provider.  Now is the time to draft an RFP summary and recommendation document for staff review, discussion, and refinement.  This document should adequately cover the following:

• Executive summary for your governing body
• Project background
• Evaluation methodology
• Response evaluation matrices and narrative
• Finalist evaluation (summaries from references and interviews)
• Recommendation and final basis for decision-making

Once you’ve reached consensus on selecting a banking services provider, it’s likely you’ll need to gain approval from your governing body. While individual policies vary greatly, this step may involve presenting your findings to either the Council or Board and require a resolution approving the provider and its status as a recognized depository for your organization.

Banking Services RFPs are a Team Effort

As we mentioned, Banking Services RFPs take anywhere from two to three months to complete, and they aren’t one-person jobs.  They require collaboration and buy-in from staff, strict project and task management, objective, and consistent evaluation, and ultimately approval from your governing body. Depending on your community’s needs and available resources, it may make good sense to engage a banking RFP services provider, like Ehlers.  A professional team with a practiced hand understands the current banking environment, the universe of qualified providers, how to compare local banking teams vs. regional and national providers and will rigorously evaluate your current situation to best craft the package of solicitation documents.  Our team has decades of experience in this area and stands ready to help!

Required Disclosures: Please Read

Ehlers is the joint marketing name of the following affiliated businesses (collectively, the “Affiliates”): Ehlers & Associates, Inc. (“EA”), a municipal advisor registered with the Municipal Securities Rulemaking Board (“MSRB”) and the Securities and Exchange Commission (“SEC”); Ehlers Investment Partners, LLC (“EIP”), an investment adviser registered with the SEC; and Bond Trust Services Corporation (“BTS”), holder of a limited banking charter issued by the State of Minnesota.

This communication does not constitute an offer or solicitation for the purchase or sale of any investment (including without limitation, any municipal financial product, municipal security, or other security) or agreement with respect to any investment strategy or program. This communication is offered without charge to clients, friends, and prospective clients of the Affiliates as a source of general information about the services Ehlers provides. This communication is neither advice nor a recommendation by any Affiliate to any person with respect to any municipal financial product, municipal security, or other security, as such terms are defined pursuant to Section 15B of the Exchange Act of 1934 and rules of the MSRB. This communication does not constitute investment advice by any Affiliate that purports to meet the objectives or needs of any person pursuant to the Investment Advisers Act of 1940 or applicable state law. In providing this information, The Affiliates are not acting as an advisor to you and do not owe you a fiduciary duty pursuant to Section 15B of the Securities Exchange Act of 1934. You should discuss the information contained herein with any and all internal or external advisors and experts you deem appropriate before acting on the information.