OC Management Hunger Games – 3 Mistakes for OC Committees to Avoid

In a scenario reminiscent of the infamous dystopian novel and film series The Hunger Games, multiple OC (Owners’ Corporation) management companies are pitted against each other in a cutthroat bidding process. This fierce competition often disregards industry standards and ethical considerations, creating a high-pressure environment.

The result? A “race to the bottom” where fees and service quality are sacrificed, to the detriment of all involved.

[July 2024 update]

After a few weeks of silence,  all of the recipients of the original email finally heard back from the Committee. A month or so later, after being jammed in like sardines with their competitors – ‘thanks for your time but you were unsuccessful’. No other explanations or details.

I’m sure the Committee was well-intentioned in its endeavours but in our experience, there’s always a small element whereby they know exactly what they’re doing. OC Managers – do you ever ask 5 or 10 electricians or plumbers to attend the site at the same time to quote on the one job knowing all the others would miss out? Homeowners – sure you might ask 3 real estate agents to visit one after another to appraise (and hopefully list) your property but surely not 10 at the same time?

[16 May 2024 article]

A large building in Melbourne CBD invited 15-20 OC management companies (!) to pitch for the management of their building…

An email goes out en masse presumably with inputs from Committee Members, Owners, and other people throwing names into a hat.

The problem?

• They mistakenly sent it to an insurance broker (presumably thinking it was OCM).
• They sent it to a ‘one-man band’ – a nice young guy but with just him trying to start a small business with perhaps a dozen small buildings… probably not the right fit for a multi-OC Tier 1 complex.

So all the OC managers showed up for the site visit on Friday, only to be surrounded by a room full of their competitors. There were so many people in attendance that they had to split 3-4 groups to take the elevators up and then be crammed into the meeting room. At this point, the Committee might as well have laid out a table of weapons and have them battle it out for the contract.

The strata industry knows that this has happened time and time again…

1. Isn’t this also a surefire way to drive down OC management fees when there are 12 to 20 elbowing each other for 1 OCM contract?
2. The ‘race to the bottom’ element that’s been widely talked about – isn’t this compounded when large OCM companies are directly being compared to the small operators and one-man bands?

Should the good and self-respecting OC management companies be replying to these mass emails with this message?

Hi Committee, thank you – can you please confirm that we are not part of 6 or more OC companies that you’re canvassing?

• A few years ago a building in Docklands called on a group of a dozen or more OC managers to attend their building on a Saturday morning. All the OC managers arrived in Docklands to be surrounded by their competitors – 2 got up, advised that it was a waste of their time, and left. The other OC managers stuck around to walk through the building with the hope of winning favour with the Committee (and ultimately being that lucky 1 in 10 that gets awarded the OCM contract).
• In late 2019, Frank the Chair of a building with over 500 lots in Carlton had extensive discussions with us about helping him and his OC to run the OCM tender for their building. Quite frankly (no pun intended) we couldn’t see eye to eye or get on the same page about how the process should be run. Frank’s take was it should be advertised in the newspaper and every OC management company in Victoria should be invited to tender…

We wished Frank all the best with his OC management tender and knew that Frank would surely get the 30 or 50 companies that he wanted to participate given the number of lots that he had on the fishing line.

Fast forward 6-7 months to 2020 and we were sitting for coffee with Greg (the head of BDM of a large reputable OCM). Greg informed us that the Committee/OC did end up taking out that ad in the newspaper for their OC management contract and it became a bit of a joke with all his colleagues and peers. Did his company and in his view a lot of the better companies participate? No – as in Greg’s words, “Why would anyone good want to be putting their time to be in with a 1 in 50 chance”.

Surely there are better ways of doing things?

Here are 3 things to avoid – and if not for the sake of the OC Committees then for the dignity and profession of all OC managers in Victoria.

1. Throwing out a very wide net in some general direction

   Owners Corporations by their legal definition are a large group of owners. What happens when you get a group of people in a room? Everyone has their own opinions and thoughts how who’s good and who’s not and how things should be run. This is probably the biggest challenge for any OC Committees and any OC manager. When it comes to tendering and changing OC management companies it’s no different. The Committee canvasses opinions and everyone wants to throw a name into the hat. Sometimes (and often) the medicine prescribed doesn’t match the symptoms nor will it be capable of fixing the underlying issue. Which to say – we’ve had small suburban buildings thinking they heard something good about a large OCM company where they would be lost as a drop in the ocean. We’ve had large buildings (quite a few over the years) coming to us in dire straits because their one-man operator disappeared or did something untoward.

   Have a defined understanding of what your building needs and only assess companies that can match up to those needs. Do your due diligence the best you can but sometimes be mindful that some things behind the corporate curtains can be harder to see. i.e.

   • the OCM planning to exit and sell to another company, and the owner/Directors retiring
   • an exodus of experienced staff due to company culture
   • the OCM taking on a new development that consumes all their time and resources etc.

2. Copying and pasting the basic OCM functions out of the SCA (Vic) management contract

   The SCA (Vic) templated contract is used by our estimation of 70-80% of the OCM industry in Victoria. It was drafted by Jonathan Cohen a few decades ago and is mostly the norm when it comes to OCM contracts. Committees looking to assemble a scope of works for the OCM RFT will often just simply straight copy and morph this into a tender scope. It might work for running basic cleaning tenders but when it comes to the complex professional role that OC managers play the focal points are elsewhere.

3. Making the wrong choice on the wrong priorities

   Established companies have established hiring and screening processes so logic dictates that this isn’t true for OC Committees when it comes to doing something they’re doing for the first time or not often. A by-product of having been in the OC industry for 10+ years means that we’ve had a few buildings come back to us (after having done it their way). Some common mistakes/issues?

   • The OCM they appointed was over-promised and under-delivered.
   • The OCM staff left not longer, and they regularly had a different assigned manager for their building.
   • They didn’t have the capability or knowledge to provide advice on complex issues (i.e., those defect issues haven’t been actioned or progressed).
   • The OCM was chosen on the lowest or second lowest price and became disinterested in servicing the OC (or then overcharges in other areas or forms).

Strata Management Consultants Melbourne

Since January 2014, we have helped Committees take the weight off their shoulders (and sometimes the blame at their feet) when it comes to changing and tendering OCM contracts.

We specialise in OC management consulting and tendering. We don’t manage any buildings ourselves nor are we affiliated with any OC management company. And we only recommend proven, responsive, and competent Owners Corporation Management Companies.

Speak to us about tendering and changing an OC management company for your Tier 1 building – 03 9007 2618.

• Strata Management Industry – Time to Increase Management Fees?
• Is the Strata Management Industry in Australia Under-pricing Itself on Smaller Buildings?
• Don’t Trust a One-man Band with Your Money (or Owners Corporation Management)