Tips on the Community Association Bidding Process
Whether it’s building painting, roofs, concrete or any of a multitude of repair and replacement projects, they all start at the same place-the bidding process. This can seem like a Herculean undertaking, but here are some pointers to assist in the task.
Before starting to solicit the bids, the first objective is deciding on the scope of the work to be performed. Does the expenditure require repair or replacement? It is the whole of the component or just a section? Can the work be completed in phases? What is the timeline the work needs to be completed in? Once these decisions are reached, the next point is to put together a spec sheet, or a form that lists the exact details what the association needs done for the project. (Though a number of projects will be fairly simple, the association may need to bring in additional assistance to complete the spec sheet.) This will not only cover what needs to be accomplished, it will also help to keep the bids similar, if not exact, as concerns the work and materials.
It is at this stage that the Invitation to Bid is prepared. This is a detailed letter sent to the vendors requesting a proposal for the work to be done. It’s best to send it out to as many vendors as possible, as to get a good handle on the market range average as well as weed out the extremes at each end of the spectrum. There is also the possibility that a number of the companies may not respond, so doing a large number of them will not leave the association short-handed on options. The contractors that should be targeted are those who do more commercial projects, as they will be better able to perform the obligations at hand.
What should be included in the Invitation to Bid:
- The Spec Sheet-to be attached as a separate form to the letter
- The Scope of Work-this will be written out in the letter
- The levels of Workman’s Comp insurance the association is looking for them to carry
- A request for proof of any licenses the contractor is required to have. Check with the county and state to find out what is mandatory.
- A Performance Bond, if necessary. Though not a common requirement, check your documents before had to see if this is necessary.
Once the bids come in, watch for specific details. Check the warranties for both labor and materials. If the expenditure has an expected life span of 20 years, a one-year warranty will not be adequate. Review to see if there will be any sub-contractors the vendor will be working with. Check with them to make sure their warranties and labor are adequate. Check to be sure that all the specs provided are covered in the bid. If anything extra is added, question why and don’t be afraid to get a second opinion. Most imperative, review the payment terms. These are terms the association should insist on:
- Upfront deposits should not be more than 5-10%. The vendor’s business and money management matters are not the burden of the association. It is the fiscal responsibility of the board to management their homeowners’ funds sensibly.
- Always retain 10—15% of the payment of all phases until the work passes the inspection to the satisfaction of the board and, if involved, the management. This will conserve funds that will aid the association if the contractor walks, and another one must to be brought in to finish the project, as well as fix the previous work.
- Only make payments once the punch list is completed. Paying upon word of the contractor that a phase, or the entire project is completed gives them no motivation after the fact to correct anything found substandard.
Finally, before the contract is signed, take time to have the association’s attorneys examine it. The writer of any contract will draft it in their favor. An attorney well versed in contract review will be able to bring to the board’s attention points of contention that could be problematic for the community. Yes, it will cost money to have done. But a few hundred dollars to the law firm could save the association ten, if not hundreds of thousands of dollars later on.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2018 Kristen Willms