Save Thousands on Your Next HVAC Project with CPA
Now more than ever, organizations are doing all they can to reduce operating costs and capital expenditures. In this article, we’ll dive into a HVAC RFP and pull back the curtain on the ways that our group purchases help organizations save money.
This RFP included two charter schools and three houses of worship. We invited three, well-established HVAC companies to bid on a range of projects, from 50-ton rooftop unit replacements, to a multifaceted church system, and a complex automated controls upgrade. We also gathered pricing on preventative maintenance contracts, hourly rates, and company profiles.
Every time we do one of these RFPs, we learn more about the industry and how to help our members get the best deal, while choosing reliable contractors. We wanted to share some of the key learnings with you in the hopes of helping you be more informed the next time you need to make a large (and expensive) HVAC decision.
Here are the key highlights:
When in doubt, bid it out
Compare HVAC systems Apples to Apples
The devil is in the (warranty) details
The best way to drive down the cost of your project is to get at least 3 proposals from well-regarded contractors. When manufacturer representatives who supply large HVAC equipment to contractors know that a project is out for bid (because they’ve received multiple price requests from various contractors on the same project) they will often lower the wholesale price of the equipment. This can immediately reduce costs by 10% or more. You can save thousands or even tens of thousands of dollars by putting your project out to bid. But it’s important to follow a few simple rules to make sure you get the most competitive proposals from vendors and that you are comparing apples-to-apples when making your decision:
Repair or Replace? First, read our blog post to learn how to determine if you need to repair or replace your existing equipment. The general rule is if the cost of repairing equipment is more than 50% of the cost of a replacement, it might be time to get a new unit.
Direct Replacement or System Redesign? If you determine that your equipment needs to be replaced, read this article from our resident HVAC expert to learn how to determine if you need a direct replacement or a newly designed system. If your old equipment served the space well until it failed and the usage patterns in your building haven’t changed much over the years, you can usually go the path of a direct 1-for-1 swap.
Find Vendors you can Trust. When selecting companies to participate in your bid process, get referrals to vendors that people you trust have had good experience with in the past. Don’t just look for companies online. CPA only invites pre-qualified contractors to participate in their HVAC RFPs, who have been referred to us by multiple organizations.
Get a Scope of Work First. If you are simply doing a direct replacement of old equipment, get a scope of work done by a contractor first. Ask them to specify the exact manufacturer and model number of the new equipment you need. Ask them to include all additional work and materials that will be needed to complete the project (including cranes, permits, and street closures). Then ask all vendors to give you a price based on that scope of work. That way you can make a fair apples-to-apples comparison of all proposals. Make sure to ask bidders to include any extras that they think will make for a better installation, but have them list those suggestions as a separate line item.
Ask about all the details. The RFP isn’t just a pricing exercise, it’s an opportunity to get as much information as possible about the project itself and companies you are considering. In our RFP, we ask for lots of details. Here are a few important ones:
Vendor Profile - You need to know how many service technicians and how many vehicles each vendor has. This gives you a sense of what they’re equipped for in terms of delivering reliable maintenance and ability to respond to service calls.
Ask for Equipment and Labor costs to be separated. This helps to understand vendor pricing and who may be charging higher margins on equipment or who has costlier labor. If a company has higher margins on equipment, you may be able to more easily negotiate the price down a bit with them.
Hourly Rates and “business hours” - this will have an impact on how much you spend on service calls, especially if their “business day” ends early.
Know your Warranty Options. All equipment comes with some type of warranty from the manufacturer but warranties vary depending on the type of equipment. And there are often different warranties for different components of the same unit (e.g. compressor warranties on rooftop units are covered for 5 years while all other parts are covered for 1). Many manufacturers also offer extended warranties for an additional cost.
Timing is everything. It’s important to know how long it will take for your equipment to arrive and how long your building may be without heating or cooling while new equipment is installed. Ask about lead time for equipment and how long the installation will take once it begins (and specifically how long you’ll be without heating or cooling). Some equipment (especially larger units like chillers, air handlers, and large rooftop units) is not available “off-the-shelf” and needs to be assembled when you place your order. Some equipment can take 12 weeks or longer to arrive at your building from the time your order is placed, so make sure to plan your project well in advance if the season you’ll need it for.
Don’t be shy to negotiate. We’ve learned that there are significant margins on HVAC equipment. Getting competitive bids will be helpful to compare pricing and it’s important to select the two top bids. You can then go back to the top 2 vendors to let them know that they are finalists and ask them for their best and final offer. We were able to help one of the organizations in our most recent RFP save over $10,000 on their project compared to the original quote they received from the same contractor!
Putting it All Together
Once you’ve gathered all the information from the bids, it’s important to organize the data in a way that will allow you to easily compare the merits of each proposal. CPA RFP participants get this sort of synthesis as part of CPA’s Group Purchase Process. We use a comprehensive bid sheet that vendors must complete to be eligible for the purchase and then help decision-makers evaluate the data. We also meet with you and your decision makers to help choose the best contractor for your needs and help facilitate a smooth installation once you’ve picked your vendor. So next time you are wrestling with a daunting and expensive HVAC project, give us a call to save your organization thousands of dollars and find the right contractor for the job.
Does all of this sound a little overwhelming? …
CPA can help you at every step of the way. We take the knowledge we’ve gained from years of experience with our member organizations and make complex building management straightforward. We can even help you manage the entire project using our 4-step vendor selection and project implementation process:
Screen and pre-qualify vendors using our network of organizations to check references, get reviews, and identify high-performing contractors to invite to bid on your project.
Issue a Request for Proposals (RFP) on your behalf with 3-4 recommended vendors. We use a detailed Scope of Work to use for bidding process to ensure we can make apples-to-apples comparisons of the proposals.
Deliver an RFP results report with vendor recommendations based on price, experience, reference checks, and worker equity practices.
Provide Owner’s Rep/Project Management services to help ensure your project goes smoothly. We coordinate pre-construction meetings and conference calls, take detailed notes, facilitate project schedule creation, and communicate regularly with all parties.