Original document prepared by former Worldwide ERC® General Counsel, Richard H. Mansfield III
Mansfield & Mansfield
Updated by Worldwide ERC® Government Affairs Adviser, Tristan North
Current as of January, 2017
Many federal agencies contract for relocation services through a blanket agreement – known as the Schedule – published by the GSA. Even those agencies which sign separate relocation management contracts often incorporate some or all of the Statement of Work (SOW) contained in the GSA schedule. The Schedule was first adopted in 1992, and has undergone some revisions since then. In fiscal 2007, federal agencies purchased about $300,000,000 in employee relocation services from the Schedule. Because of the rapid decline in the real estate market, many RMCs were unable to continue to offer relocation services to government agencies, in part because the Schedule and its accompanying Statement of Work were not flexible enough to handle the downturn. As a step to remedy this situation and encourage bidding for federal relocation contracts, in July 2009 the GSA released a complete revision of the Statement of Work for Home Sale Services (SIN 653-1) and customized Home Sale Services (SIN 653-5). The revised SOW incorporates flexible options for services and prices, and allows federal agencies to contract for services which more closely resemble those offered to private employers.
The SOW for Home Sale Services was revised to include four optional service/pricing groups which can be contracted for by an agency; each option is based on a different set of services provided by the relocation management company, which can bid on a known basket of services. The options are more flexible than the previous SOW, and much more closely follow commercial practices.
A quick summary:
Pricing Option 1 “Full Choice Guaranteed Buyout with Mortgage Payoff” is an Amended Value (AV) program consisting of services which were commonly included in the previous Schedule, including the right of the employee to choose brokers in both locations, no restrictions on previous marketing arrangements, and no restrictions on mortgage providers. However, unlike many previous contracts, the employee must choose an appraiser from the list provided by the relocation management company, and the SOW specifically includes a reference to (and a copy of) the Worldwide ERC® relocation appraisal guidelines. In this option, the relocation management company must pay of the employee’s mortgage.
Pricing Option 2 “Full Choice Guaranteed Buyout without Mortgage Payoff” is an AV program requiring the same services and restrictions, but in which the relocation management company is not required to pay off the employee’s mortgage.
Pricing Option 3 “Managed Guaranteed Buyout with Mortgage Payoff” is an AV program more closely resembling many current non-government policies. For, example, it specifies that the transferee is required to use an approved broker at both the departure and destination locations, that the house must not have been listed within the past six months, that the list price not exceed 105% of the AV offer (or two BMAs), that the employee select an appraiser form an approved (by the relocation management company) list, and that the employee may select a mortgage supplier. Under this option, the relocation management company must pay off the employee’s mortgage at the time the house goes into inventory.
Pricing Option 4 “Managed Guaranteed Buyout without Mortgage Payoff” is similar to Option 3, with the exception that the relocation management company is not required to pay off the mortgage when the house goes into inventory.
As in the non-government market, many government agencies do not have policies which include an AV program, and, there are many houses which, for policy reasons, are excluded from those programs. The SOW for “Employee Relocation Services – Agency Customization Services” is that part of the Schedule designed for these programs. Like the AV SOW, this includes pricing options for Buyer Value Option (BVO) programs and special handling properties (Specials).
BVO Pricing Option 1 “Full Choice with Mortgage Payoff” allows the employee to choose brokers, allows the house to have been previously marketed, allows the employee to choose a mortgage provider, and requires the relocation management company to pay off the mortgage at acquisition if the sale to an outside buyer falls though.
BVO Pricing Option 2 “Full Choice without Mortgage Payoff” removes the requirement that the relocation management company pay of the mortgage in the event of a purchase after a fall though, however, the relocation management company is required to assume the mortgage under terms set forth in the SOW.
BVO Pricing Option 3 “Managed Home Sale with Mortgage Payoff” requires the employee to choose an approved broker at both locations, requires that the house not be listed at more than 105% of a BMA, and allows the relocation management company to make an offer based on a contract which is lower than the BMA. It also requires the relocation management company to pay off the mortgage in the event that it buys the house after a fall through.
BVO Pricing Option 4 “Managed Home Sale without Mortgage Payoff” is the same as Option 3, without the requirement for mortgage payoff; however, the relocation management company is required to assume the mortgage under terms set forth in the SOW.
Finally, the SOW provides a mechanism for handling properties which do not qualify for a BVO or AV program. These options include:
Special Handling Pricing Option 1 “Managed Home Sale with Mortgage Payoff” which requires the employee to choose an approved broker in both locations, allows the appraisals to be delayed for up to 30 days, requires the employee to use a certified appraiser, does not allow the house to be listed for more than 105% of the BMA or appraised value offer, and requires the relocation management company to pay off the mortgage at the time of acquisition.
Special Handling Pricing Option 2 “Managed Home Sale without Mortgage Payoff” is identical except with no payoff requirements.
The SOW (applicable to both) specifies that fees may be expressed as a percent of the appraised value or the amended value, and that flat fees are permitted for the appraised value range of under $100,000. The actual pricing is negotiated between an agency and the relocation management company, based on the option or options chosen, and a GSA pricing schedule.
The Statement of Work gives specific instructions regarding relocation services. Ordering agencies, however, are permitted to tailor this statement of work in order to meet agency-specific goals, as long as the tailoring does not change the scope or purpose and intent. Tailoring may have an impact on the resultant price but the price charged may not exceed the GSA Schedule price. Examples of tailoring that are permitted include altering time frames and eliminating the equity advance. The following SOW requirements may not be changed: required use of appraisers authorized by the relocation management company, requirement for mortgage payoff under all pricing options for VA/FHA loans, prohibition to use auction properties as comparables in appraisals, and employee choice of mortgage lenders. Agencies are encouraged to share tailored SOW requirements with GSA for review prior to distributing solicitations.
The SOW modifications summarized above are of course more detailed and should be studied in their entirety by those providing services under them. They have been accompanied with a GSA pricing schedule (maximum amount which can be charged for the services listed under each pricing option) which recognizes the changes in the real estate market.
The SOW remains essentially the same, with a few pricing variations reflecting market changes. The GSA Centers of Excellence Program has begun to educate the federal agencies regarding best practices for government relocation, and more vendors have entered the government market, easing what was in the past few years a tight market.