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.
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 that 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.
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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