GASB 45 - Chapter 3: Evaluating the proposals and selecting a consultant
Once you have all the proposals in front of you, you face the time-consuming task of sorting through them and picking the best consultant. You may be facing this decision on your own, or you may be sharing it with other buyers and/or users of the report. You may be grading the proposals according to a formula set out in the RFP itself, or you may be doing it based on intuition and a seat-of-the-pants analysis of the strengths and weaknesses of each firm. Whatever your particular set of circumstances, there are certain guidelines we think you should keep in mind. It's up to you to decide the relative importance of each of these points.
(1) Are they qualified?
The overriding concern is whether the consultant is qualified to do the work. You can determine this by reviewing credentials, looking at experience with similar projects, and checking references. It's not necessary for the bidder to have performed precisely the same project - but you want to stay away from firms that would be making a quantum leap from their most similar previous assignment. What constitutes a qualified actuary? One that has kept up with current events, recent developments in the field, and either has the knowledge or has access to the knowledge necessary to complete the assignment.
(2) Can we work comfortably with them?
Almost as important, if not equally important, is the answer to the question: "Can I work with the person assigned to head up the project?" Does the person communicate in a clear and logical style? Will they use technical language as a screen to hide behind when you ask tough questions, or will they say "I don't know the answer to that, but I can find out for you?" Will they be reliable in meeting deadlines and keeping promises? You don't have to like the person you hire, but it sure makes life easier if you can at least be comfortable when you communicate with them. A brief telephone call might help you to decide here: call the contact person to ask clarification for a couple of items in the proposal. Not all actuaries have the speaking skills of a Winston Churchill, so be forewarned.
(3) Are their fees competitive?
Where should price fit into all this? The key here is to select the best fit at the most competitive price. Let's say you've narrowed it down to two proposals that have easily met criteria (1) and (2) above. Then, take a look at price. If one is significantly higher than the other, you may reasonably wonder, "Why the difference?" Don't assume that you always get what you pay for. If you've done your homework, and you feel the lower-priced bidder is equally qualified, then by all means, trust your judgment. On the other hand, you may have to make some tough choices. For example, if you have narrowed it down to two proposals - one for $25,000, from a firm whose proposal you really like, and one for $15,000, from a firm whose proposal meets your minimum standards but not much more - then you have to step back and ask how important the $10,000 savings is to your organization - a question that might have a different answer in lean economic times.
Conclusion
There will be other considerations that enter in to the decision, such as familiarity with the incumbent, the ability for a firm to deliver extremely quick turnaround, compliance with insurance requirements, political pressures, and so forth. We believe that these other considerations should be viewed as icing on the cake - and if two or more cakes are quite similar in regard to items (1) through (3) above, then the icing matters. But don't buy the icing and ignore the cake, or you could be in for a rough time of it.
