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How to put your credit needs up for competitive bidding
 
In the not so distant past, when you needed mitigation credits you picked up the phone and called whatever mitigation bank you knew about. You told the banker how many credits you needed, and they looked up on their price sheet what they were selling credits for that year for your size impact. They quoted you their price and terms - take it or leave it. There was a lot of demand and very few credits available. Chances are you were just happy to find some credits. 

Today, the marketplace for credits is very different. In the mid-Willamette Valley there are several banks with many credits competing for your business - that is if you make them compete. Ask yourself this simple yet important question, "How do I know I'm paying the lowest price for the credits I need?"
Competitive Bidding
The answer is to put your mitigation credit needs up for competitive bid. The following is a simple step-by-step process on how to do it.
 
1. Know What You Need — In order to solicit bids you need to know what you're asking for. More precisely, you need to know how many square feet you are impacting. This information will be listed in your permit application. Consequently, the design of your project needs to be far enough along for the impact to be know with certainty.
 
2. Set the Terms — Particularly when reserving credits for future use, there is more to a credit sales transaction than simply the price per square foot and the impact size. One of the main advantage of competitive bidding is that the buyer sets the terms. The terms set forth your expectations of what the obligations of the buyer and seller will be if certain situations arise. The following is a list of agreement terms you should consider carefully:
   a. Reservation Price — Is there a credit price above which you will not or cannot go? If so, the prospective bidders need to know it up front.
   b. Deposits/Option Prices — How much are you willing to pay for the right to reserve the credits? Is it going to be a set dollar amount, or a percentage of the total sales price?
   c. Term — How long do you want to reserve the credits before you have to purchase them? How can you extend the term and how much will the extension cost?
   d. Documentation — You will need the seller to produce certain proof-of-purchase documents required by the regulatory agencies; likewise, the seller will need proof that the permits were actually issued and that the regulated activity was accomplished.
   e. Refunds & Penalties — What happens if the agencies deny your permit application, or issue permits for less than the original impact? What will happen if you voluntarily withdraw you permit application?
   f. Default — What are the parties' liabilities if they default on the agreement?
   g. Assignment — Is the agreement transferrable? If so, under what conditions? 
 
3. Tell the World — Distill what you need and your terms into a to-the-point prospectus. Mail it and e-mail it to every mitigation bank whose service area includes your impact site. DSL's mitigation bank webpage has service area maps to help you identify the pertinent banks.
In addition, the actual mechanics of the bidding process needs to be specified in the prospectus. Tell prospective bidders the date, time and place where the bids will be opened, and the drop-dead date and time they are due. Choose a venue that can seat all the prospective bidders. You will probably want to reserve the right to waive any irregularities in the bidding, and to be able to reject any or all bids at your discretion. Lastly, the bidders deserve to know how quickly you expect to execute the agreement once the bid is awarded.
 
4. Operate in a Fish Bowl — On the specified date, and promptly at the appointed time, close the bidding and start opening the bids in the presence of any bidders who care to show up to witness it. On a whiteboard, chalkboard, overhead projector, or by some other means, display each bid by lump sum amount and bidder. This is imperative for two reasons. First, the process is transparent and above-board. Second, it gives something valuable to the unsuccessful bidders — the pulse of the market.
 
5. Seal the Deal — Give the low bidder the opportunity to withdraw their bid. If they do, go up to the next lowest bidder, and so forth until you find the lowest earnest bid. Assuming this bid is acceptable, dismiss the other bidders and execute the agreement on the spot if you can. If you can't, amend the agreement by hand if necessary and set a date and time to pay for the option or the credits as the case may be. Be expeditious; nothing spoils a deal faster than the passage of time.
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In general, be reasonable with your terms. Anticipate the needs of the other side and try to meet them halfway if you can. Remember, the more liberal your terms, the more bidders you will attract and the better prices you'll pay for the credits you need.
 
Contact us for example prospectus, option and sales documents, as well as a complete listing of the contact information for all the mitigation banks within the Long Tom Bank's service area.
 
Why Not Just Do an Auction Over the Phone?
Many people looking to buy mitigation credits try to get the lowest price by calling mitigation bankers "round-robin" style -
"I just got such and such a price from XYZ Bank. Can you beat that?" They keep going back and forth until they think they've squeezed out the last penny. This is a poor strategy because it gives away your greatest advantage - seller uncertainty. From a seller's perspective, you have to give him how much the competiton is bidding. Knowing that you'll always be back for another round, and that he only needs to undercut the competition by a penny, a bidder has little incentive to give his rock bottom best price, and you still have to guess when to stop the auction.
Put the uncertainty back on your side! Use a one-time lump sum sealed bid. Knowing that they have only one shot at your business, and not knowing what the competition is bidding, a banker will have to give you their best price first time, every time.
Lump sum sealed bids — the efficient way to get the rock bottom lowest credit price every time.