Most homeowner and condominium associations engage the services of professionals to help with the operations of the community. These professionals include accountants, landscapers, contractors, and managers. As board members, you have a duty to ensure that association funds are spent carefully and responsibly. Part of the process to ensure financial responsibility is soliciting and reviewing competitive bids prior to hiring professionals or vendors.
- Define the Scope of Work
Prior to seeking competitive bids the board or committee must develop a comprehensive scope of work. In other words, what services does the board want performed? Let's suppose the association wants to hire a landscaping company to maintain the common areas. The scope of work may look something like this:
| SERVICE | FREQUENCY | COST |
|---|---|---|
| GRASS MOWING, FERTILIZING, AND MAINTENANCE | 3X MONTH | |
| TRASH COLLECTION IN COMMON AREAS | WEEKLY | |
| TREE & SHRUB PRUNING & MAINTENANCE | MONTHLY | |
| IRRIGATION SYSTEM MAINTENANCE | BI-ANNUALLY | |
| APPLICATION OF HERBICIDES AND INSECTICIDES | AS NEEDED | |
| TOTAL ESTIMATED COST: |
Each potential contractor receives the same bid form and returns the form to the association with their total estimated costs and a break-down of each line item cost. Otherwise, its easy to be misled. Perhaps one contractor's price appears significantly lower, but it's because they haven't included the costs associated with the maintenance of the irrigation system.
Ideally, three bids should be solicited and compared. However, some associations develop strong and lengthy relationships with vendors. That's ideal, but it makes sense to occasionally compare services and prices of other vendors even if the board is intent on continuing its relationship with its preferred vendor or contractor.
2. Do Your Homework
Once bids are received, ask around about the vendors who submitted bids. What's their reputation? In Oregon and Washington you can check on the status of a contractor's license, review their insurance, and see if anyone has submitted complaints against the company.
For Oregon contractors visit: http://search.ccb.state.or.us/search/
For Washington contractors visit: http://www.lni.wa.gov/TradesLicensing/Contractors/HireCon/verify/Default.asp
3. Hammer Out The Contract
Very few people enter into a contract with the expectation of future disputes or that the other party may breach the terms of the agreement. At a minimum, service contracts should contain the following elements:
- Detailed statement of when and how work will be performed;
- Amount and terms of the contract price;
- Acts or omissions which entitle a party to terminate the contract;
- A warranty of any work or services performed;
- A statement by the contractor that it is licensed, insured and bonded;
- Indemnification language whereby the contractor will indemnify and hold harmless the association and the board members from legal claims arising out of the contractor's work; and
- Provisions governing how disputes will be resolved, i.e. mediation, arbitration.
As always, have an attorney prepare or review all contracts prior to signing.
4. Review
Once the bidding and contracting are done, follow-up with contractors and vendors to ensure that the terms of the contract are fulfilled. The board or a committee should review all association contracts on an annual basis to verify that services have been performed, if new bids should be solicited, and that payments have been made.