Do you need to get contractor bids for your HOA? If so, how many bids should you get? And what preparations should you do prior to obtaining the bids?
Determining the Number of Contractor Bids for Your HOA
Homeowners associations are in charge of managing entire communities. And these communities often require professional services, such as maintenance, repairs, cleaning, construction, etc. Try as one may, an HOA typically does not have the manpower or resources to provide these services in-house completely. Hence, the need for contractors.
Every HOA board should do its due diligence and fulfill its fiduciary duties by ensuring the right contractor is hired for the job. Thus, it is important to secure multiple contractor bids. Bids allow the HOA to set a budget for long-term planning. They also let the board pick out the best contractor to finish the required work on time and according to the agreement.
But how many bids for HOA work contracts should your board get?
In general, experts recommend securing three contractor bids, but the actual number will depend on the association. State laws can have a say on how many bids are appropriate. For instance, Nevada law does not require three bids if the cost of the service or project falls below 3% of the HOA’s annual budget (for communities with fewer than 1,000 homes) or below 1% of the annual budget (for communities with more than 1,000 homes).
Another place to look is the association’s governing documents. Sometimes, the CC&Rs or bylaws dictate how many bids an association should obtain. Other times, you can check past board resolutions that have already set a precedent.
That said, three bids are not always the standard. Your HOA board should determine the appropriate number of bids based on a few factors. These include the project’s price range, the contract’s length, and the service’s frequency or complexity of the job. When in doubt, boards should consult a professional.
Do All Projects Require HOA Contractor Bids?
You might think the answer to this question is obvious, but there is more to it than meets the eye. Generally, for large-scale projects or services, obtaining contractor bids for your HOA is a good idea. On the other hand, for small jobs, it is unnecessary to secure multiple bids.
It is important to remember that preparing bids does come at an expense. Contractors have to shoulder that expense themselves. Thus, if a job only pays a little, contractors might not think it is worth their time even to put in a bid. After all, there is no guarantee that they will win the bid, so investing time and money in something uncertain or doesn’t have a high price tag would be unwise.
Contractors are not the only ones at a loss, though. Your HOA board might also spend unnecessary time reviewing the bids for such a small project, thereby delaying it.
If a job only costs a few hundred dollars, it is not worth obtaining multiple bids for it. Contractors are unable to justify the expense associated with the bid preparation, so your HOA likely won’t even get many bids. Normally, it is best to reserve bidding for more detailed projects or frequent services such as landscaping, repairs, pool maintenance, pest control, and regular cleaning.
HOA Bidding Procedures: How to Prepare to Obtain HOA Bids for Contract Work
There are a few things associations should do before obtaining bids. When put into proper action, these tips will help your board efficiently secure more detailed bids from contractors for HOA work.
Tip #1: Give Your Board Enough Time
Collecting bids takes time, and you want to give your board some breathing room. If you want the project to start by a specific date, make sure to start collecting bids way ahead of time. Contractors are busy and might not jump at every offer they get.
Tip #2: Evaluate Your Needs
How do you expect to collect bids if you don’t know what your HOA needs? Make sure to establish the length of the contract, the budget for the project or service, and the extent of the work.
Tip #3: Get Professional Help
Sometimes, your board will need to consult third-party professionals. Enlisting the help of an engineer, architect, or some other specialist could help you determine the exact specifications and scope of the work.
Tip #4: Use Proper Documentation
Homeowners will grow suspicious if it’s for a large or ongoing project and your board can’t secure three bids. To avoid this, it is essential to document everything. Make it clear, with supporting evidence, that your board tried its hardest to obtain multiple bids but ultimately failed to do so. Even just putting together a list of the contractors you contacted and those who responded is enough to wash away any doubts.
Tip #5: Make Sure Your HOA Can Pay
Before collecting bids, your board should ensure that the association has the budget to cover the expenses. Contractors will not wait for you to secure funding. And in the time it takes for you to levy special assessments or get a loan, prices may go up and affect the initial bid.
Tip #6: Don’t Be Afraid to Negotiate
Just because a contractor is reputable doesn’t mean you should settle. If you can’t afford their price, don’t be afraid to sit down and negotiate.
It is equally imperative to have a contract that isn’t unfair to the HOA. Most contracts have terms that significantly favor the contractor. And, if you can’t have your lawyer review every contract, you can at least have them draft one that indicates your terms and compel the contractor to use it.
Tip #7: Consider Spreading Out Work or Working During the Off Season
If a job takes time, consider spreading out the work over 12 months. This allows the HOA to make smaller monthly payments as opposed to shelling out one big lump sum. However, it does have its downsides as the work won’t be finished right away. Logistical and even security issues may also be a concern.
If you can’t spread out the work, consider working during the off-season. That way, the work won’t cost as much as it would during peak seasons.
Tips for Working With a Vendor
Once you choose one of the contractor bids for your HOA, it’s important to foster a good working relationship with the vendor. Here are some tips to keep in mind as they complete the work.
1. Communicate Closely
As the saying goes, communication is key. That’s true with all relationships — including professional ones with HOA vendors. Make sure to work with them closely so the project finishes on time and according to your specifications.
2. Don’t Expect More Work
Sometimes, homeowners associations mistakenly think they can ask the vendor to do everything they want. Their minds change as time goes by, so they add more to the workload.
However, it’s never a good idea to expect the contractor to do more than what was agreed upon. This is because the contractor will certainly charge the HOA more for the added services. As a result, HOA boards are taken aback by how much they’ve spent on the project.
If you want to add more to the work, talk it over with the vendor first. They may give you a quote for how much the additional work will cost. Keep proper documentation of the new specifications, timeline, and other information to protect both the HOA and the vendor.
3. Complain Through the Proper Channels
If the HOA has any complaints, it’s best to direct them to the proper channels. Don’t simply voice your complaints to any worker present. Speak with the designated point person. This goes for complaints involving the work done or any misbehaving employees.
4. Consult an Insurance Agent
A lot can happen during the project. Remember to consult with an insurance agent beforehand so you can determine your needs regarding association and contractor insurance.
How Often Should HOAs Change Vendors?
Contracts don’t last forever. Typically, they have a fixed term that renews when the term expires. However, it’s important to evaluate each vendor the HOA works with before the contract is renewed. This way, the HOA can decide whether or not they need to change contractors.
However, remember that changing contractors means you need to obtain contractor bids for your HOA again. If an HOA solicits bids too often, the community may get a bad reputation in the industry. As a result, vendors within the area might avoid the HOA altogether. Vendors who do agree to work with the HOA may also impose demands knowing no other vendor is willing.
Hence, it’s crucial to exercise prudence when switching vendors. If the problems are minor or inconsequential, it may be best to simply talk it out with the current contractor.
That said, when should an HOA change vendors? There are two main reasons to consider:
- Poor Performance or Work Quality. If the vendor delivers poor-quality work or performs poorly, it might be time for a change. Otherwise, the HOA may not be getting its money’s worth from the contract.
- Fee Increases. Prices will always fluctuate. However, if the price increases too much that the HOA can no longer afford it, it may be time to consider other options.
The Final Word
When it comes to obtaining contractor bids for your HOA, three bids are usually enough. But, if it is a small job that only costs a few hundred dollars, securing multiple bids is not worth the time. Boards should tailor the number of bids according to the nature of the project or service.
Cedar Management Group can help your HOA board secure bids and manage vendor relations. Call us today at (877) 252-3327 or contact us online to get a free proposal!
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