Strong vendor relationships can be a valuable asset for any business. Over time, familiarity often leads to smoother communication, quicker problem resolution, and a sense of trust. However, even the most comfortable vendor relationships should never be left on autopilot. From a financial and legal standpoint, businesses must regularly evaluate whether those relationships continue to make sense—especially when fiduciary duty is involved.

Vendors who understand that their contract is not guaranteed are more likely to remain competitive, responsive, and focused on delivering value. This is not about creating tension or mistrust. It is about maintaining accountability and ensuring that services remain cost-effective and aligned with your organization’s responsibilities.

This becomes especially important when vendors play a role in employee benefit programs, such as retirement plans, where fiduciary duty is not optional—it is a legal obligation.

Why Fiduciary Duty Raises the Stakes

When a vendor is a retirement plan third-party administrator, record keeper, or investment service provider, the relationship carries an added layer of responsibility. As a plan sponsor, your fiduciary duty requires you to act solely in the best interests of plan participants—your employees.

Courts have consistently reinforced this responsibility. There are numerous class action lawsuits involving employers whose retirement plans were found to be paying excessive fees for asset management or plan administration. In many cases, the issue was not fraud or intentional wrongdoing, but failure to regularly review and evaluate vendor costs and services.

The financial impact of excessive fees falls primarily on employees, not the company. Over time, even small differences in fees can significantly reduce retirement savings. Because of this, fiduciary duty demands ongoing oversight, documentation, and decision-making that can be clearly defended if questioned.

Lowest Cost Is Not Always the Right Answer

Fulfilling fiduciary duty does not mean selecting the cheapest vendor available. Quality, reliability, experience, and service scope all matter. However, fiduciary responsibility does require ensuring that fees are reasonable relative to the services provided.

If two vendors offer comparable services and one does so at a significantly lower cost, continuing to overpay can raise red flags. Likewise, paying for services that are rarely used or no longer relevant to your plan structure can expose employers to scrutiny.

Employees may not immediately notice these issues, but over time they may begin to ask questions—particularly if investment performance lags or account growth appears slower than expected. When concerns escalate, legal action can follow.

Why Businesses Should Periodically Seek New Bids

Rebidding vendor contracts is not solely about saving money. It is a broader exercise in accountability, performance evaluation, and risk management. Reviewing bids helps demonstrate that fiduciary duty is being taken seriously and actively managed.

Here are several reasons why seeking new bids can be a prudent step.

Performance Commitments

Different vendors hold themselves to different service standards. During the bidding process, you may find that competitors offer clearer performance benchmarks than your current provider.

Consider practical questions:
How quickly are phone calls returned?
How efficiently are transactions processed?
How timely and accurate are reports?

If another vendor offers stronger commitments at a comparable price, it becomes reasonable to ask why those options were not explored.

Performance Track Record

In certain areas, such as investment management, vendors cannot guarantee specific returns. However, they can be evaluated based on consistency and adherence to benchmarks.

If investment managers regularly underperform or fail to meet expectations over time, fiduciary duty may require considering alternatives. Ignoring underperformance without documented review can be difficult to defend.

New Capabilities and Technology

The financial services landscape evolves quickly. Vendors that were cutting-edge years ago may now be behind the curve.

Competitors may offer improved digital access, better reporting tools, enhanced cybersecurity measures, or participant education resources that improve employee outcomes. Many of these features surface during a request for proposal (RFP) process and may not otherwise come to light.

Capacity and Growth Considerations

Businesses grow, and vendor capacity must grow with them. A provider that was a good fit when your workforce was smaller may struggle to keep up as participation increases and plan complexity grows.

Declining service quality is often an early warning sign that capacity issues exist. Addressing this proactively supports both operational efficiency and fiduciary duty.

Considering a Rebid Without Burning Bridges

Unless service quality has deteriorated significantly, seeking a rebid does not have to signal dissatisfaction. In many cases, simply requesting a rebid can motivate your current vendor to sharpen pricing, improve service levels, or offer enhanced features.

This process reinforces that the relationship is professional and performance-driven. Vendors who value long-term partnerships generally understand the need for periodic evaluation.

The Value of Outside Perspective

Depending on the complexity of the service contract, engaging a consultant may be advisable. Consultants who specialize in specific service categories understand the competitive landscape and can help structure an effective RFP.

They know how to ask the right questions without overcomplicating the process and can help interpret responses objectively. Access to benchmark data is particularly valuable, as it provides context for evaluating whether bids are competitive or out of range.

Experience also matters. A seasoned consultant may have insight into how responsive and reliable various vendors are in real-world situations, not just on paper.

Involving Employees Thoughtfully

In some cases, employee input can add meaningful perspective. Employees interact directly with certain vendors and may have valuable feedback about service quality, accessibility, and communication.

Their views may confirm that the current arrangement is working well—or reveal frustrations that leadership was not aware of. Employee feedback can also help assess interest in optional services, such as onsite financial education or access to financial planning resources.

If employees express interest in these services, they can be included in the RFP to better align offerings with actual needs.

Why Size Still Matters

Company size can influence how attractive your RFP is to prospective vendors. Smaller organizations may need to be strategic to ensure they receive enough competitive responses.

Vendor size also matters. Smaller service providers with the right infrastructure may offer more personalized service than larger firms stretched across many clients. Including a mix of vendors can yield better comparisons and uncover strong candidates that might otherwise be overlooked.

Requesting multi-year contract bids can also improve response rates. These arrangements signal commitment and stability while still allowing room for performance safeguards and exit provisions if expectations are not met.

What You Gain, Even If You Stay Put

After completing a rebid process, you may determine that your current vendor remains the best choice. This outcome does not mean the effort was wasted.

You gain documentation supporting your fiduciary duty, reassurance that fees and services are reasonable, and renewed leverage in managing the relationship. Your vendor also gains clarity that performance and pricing are being monitored, which can lead to improved service moving forward.

Final Thoughts

Managing vendor relationships responsibly requires balance. Trust and continuity are important, but they must be paired with accountability and review—especially when fiduciary duty is involved.

Periodic evaluation, competitive bidding, and clear documentation help protect both your employees and your organization. These steps demonstrate thoughtful stewardship and a commitment to acting in the best interests of all stakeholders.

For businesses navigating these responsibilities, working with an experienced CPA firm can provide valuable guidance. Burton McCumber & Longoria helps organizations evaluate financial decisions, assess risk, and uphold fiduciary duty with confidence. To discuss your situation and explore your options, contact Burton McCumber & Longoria today.