HOA contract bids are a necessary part of selecting new vendors. But, that does not mean you always need to get multiple bids for every little job.
When Do You Need Multiple HOA Contract Bids?
Securing bids from vendors is important for many reasons. It allows your HOA board to scope out possible candidates for a given service or job. When you get contract bids from several vendors, you can review each proposal and determine which one suits your association’s needs and budget the best.
But, that does not necessarily mean your board needs to ask for multiple bids for every job, no matter the size. For instance, if you only require a simple sign repair, it would not make sense to spend time and resources securing multiple bids. Besides, vendors tend to decline low-dollar jobs as it is not worth their time. If they respond, they will probably charge a fee for the amount of time spent while meeting your bidding requirements.
That is not to say, though, that smaller jobs do not require contracts at all. Contracts should remain a consistent part of the HOA-vendor relationship since they outline all the details of the agreement. But, bidding is not always necessary.
As a general rule, it is a good idea to secure HOA contract bids from multiple sources for long-term services or if your association needs extensive repair work. Examples of such jobs can include construction work, landscaping, pool maintenance, road repairs, exterior painting, pest control, and more.
How Often to Change Vendors
Contracts typically last for a fixed amount of time before they either renew or expire. When that time comes, associations will need to evaluate their vendors and decide whether or not a change is needed. But, expiring contracts do not automatically mean restarting the HOA bidding process all over again.
If you change vendors and ask for contract bids very often, then your HOA could develop a bad reputation. The vendors in your area might not want to work with your association if it becomes known for always swapping vendors. Even if a vendor does agree to work with your HOA, they might not sign contracts that favor your association. Again, this is because they are scared that you might drop them mid-contract or immediately after the expiry.
In general, there are two reasons to initiate a change in vendors:
- Fee Increases. Prices change every now and then. But, if your vendor suddenly increases their fees by a lot — so much so that your HOA can no longer afford it (or justify it) — then perhaps it is time to reconsider vendors.
- Lowered Quality of Work. Another sign that it is time for a change is when your vendor is not holding up their end of the bargain and their quality of service declines.
Sometimes, after homeowners have successfully recalled the entire board, new board members will change all the vendors that the previous board selected. Usually, this stems from dissatisfaction or the perception of impropriety. This is essentially an act of cleaning house so that the HOA can start over from scratch. Such a situation, though, does not happen often.
Three Phases of Bidding HOA Contracts
What exactly goes into the contract selection process? Here are the three stages of HOA bidding procedures.
The first stage is when the HOA bids for contracts. During this stage, contracts send in their proposals to the association. These proposals consist of all pertinent details, such as the licenses and certifications, insurance information, vendor’s services, and fee structure. The HOA board will then take time to review all the proposals and select one that matches the association’s needs.
When choosing a bid, make sure to put the community’s interests first. Do not choose a contract simply because it is cheap or a person from your board knows the owner well (could be a conflict of interest). Remember that your board has a fiduciary duty to make the best decisions for the community as a whole.
Then comes negotiation. During this stage, your HOA board will discuss the details of the work or service with the vendor so you can reach an agreement. This includes negotiating the duration of the contract.
An inexperienced board might immediately agree to a 10-year contract, but that is a foolish move. For new vendors, it is generally better to go for shorter contracts spanning an average of two years, three at most. This way, you can review them every so often and have an out if necessary.
Of course, you should keep the nature of the vendor’s services in mind when talking about the contract duration. It makes sense to enter longer contracts with vendors that do infrastructure work. But, for simpler jobs such as exterior painting or even pool maintenance, shorter contracts work best.
For management companies, a three-year contract is a good way to go. This is because management companies tend to invest a lot of time and resources in the communities they handle. When discussing the terms of your contract, though, make sure you have an exit strategy. Ask the vendor to include a clause that allows you to terminate the contract early. Additionally, you should watch out for any auto-renew clauses.
Negotiating vendor contracts takes a lot of work and research, and not all boards are equipped to handle it. Plus, there are legal terms that may be unfamiliar to you. Therefore, it is always best to seek help from an attorney.
The final step is to execute the contract. This involves signing the agreement and subsequently carrying out the terms of the contract.
The vendor will perform the services they have been hired to do, and your association will pay for these services. Contracts are legally binding agreements. Therefore, if one party fails to fulfill its obligations, the other party can take legal action against them.
Of course, you will need to monitor your vendor closely after executing the contract. In doing so, you can make sure they deliver the services they promised and that the results are up to standard. Remember to communicate with your vendor as often as you can. Ask for timelines and updates. If you are dissatisfied with their service, don’t be afraid to bring it up.
Navigating Contract Bids for Your HOA
As you can see, HOA contract bids are an essential aspect of the vendor selection process. These bids allow you to evaluate your candidates carefully and make sure the vendor you ultimately hire is thoroughly vetted. This can save you a lot of legal trouble and disappointment in the future.
Many HOA boards, though, find it difficult to go through the vendor selection process. Everything from securing bids to monitoring the work of the vendors can be very exhausting. Fortunately, an HOA management company like Elite Management Services can help. Call us today at (855) 238-8488 or contact us online to learn more.
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