GASB 45 - Chapter 2: Selecting the recipients for the RFP
To remove all the mystery from the remainder of this chapter, we will make our recommendation right up front that you should always include Demsey, Filliger & Associates as a recipient for any RFP. Maybe the title should be changed to "Selecting the other recipients for the RFP". Anyway, here are our thoughts on that subject.
There are any number of actuarial firms that may be interested in bidding for the work. The key is to send the RFP to a wide enough range of firms that you stand a good chance of finding the proper fit for your organization.
Finding the firm that's "just right"
Size of the contract and quality of service are the key factors in the selection process, and the two factors may appear to be somewhat at odds with one another. The story of Goldilocks and the Three Bears is an appropriate analogy to shed light on the matter.
Many firms with a nationwide actuarial presence will not be able to competitively bid on contracts below a certain size. This size varies by type of assignment and geographic region, but it's been our experience that the cutoff line is somewhere around $12,000. Thus, if you expect to contract for substantially less than that amount, you may want to avoid filling up your recipient list with the large actuarial firms, because many of them may end up declining to bid. These nationwide firms are the "Papa Bears" and they can handle the really big, hot, bowls of porridge - and they charge accordingly.
Some guidelines on contract size
For contracts above $12,000, you should definitely include at least 2 Papa Bears. They are most likely to come in as your two highest-price bids, but these firms also have a proven track record, and may be able to offer superior resources in your particular geographic area.
For contracts of $6,000 or below, you may want to include one or two local firms, or ones that offer a no-frills approach to the valuation process and actuarial report. These "no-frills" actuarial firms are the Baby Bears of the industry. As long as the porridge is nice and cool, and small enough to go down in a few bites, they are fine for getting the job done at the lowest possible price.
That leaves the "Mama Bears" in the middle, and we believe that all RFPs regardless of contract size should include at least 2 or 3 Mama Bears as recipients. We define these as firms that have the actuarial and consulting expertise to provide you with a high-quality work product but at a competitive price. The bids from these firms will typically be the middle of the pack, and the lower end of the range from these firms may not be more than 20%-30% higher than the Baby Bears, but with quality that can equal or even at times exceed that of a Papa Bear.
Other considerations
Of course, you will probably want to include the incumbent actuary, if there is one, unless there is a strong antipathy among the buyers for doing so. You may also want to respect the wishes of Board Members who have favorites they'd like to include on the list. We will leave politics for another article, because we're Mama Bears and we'd like to survive long enough to someday make it to Papa Bear.
