To make practical financial decisions about spending homeowners association funds, your Board needs to obtain bids for large expenses, monthly services, maintenance and seasonal work. It’s important to distinguish between “shopping” for information versus seeking an actual bid from a vendor. Most contractors are happy to provide a “ballpark” estimate based on experience when your Board is shopping. Contractors spend more time and resources providing detailed bids, so it’s best to let them know upfront.
Small Job Pricing
Check your governing documents to determine the dollar amount for which the association requires a bid. Preparing bids require work for contractors, so don’t be surprised if you find contractors hesitating to bid on smaller jobs. For smaller jobs ranging from $1,000 to $5,000, another option is to ask a contractor for a “Not to Exceed” estimate. This way, the board of directors has an idea of the cost before making decisions, and the cost can be budgeted.
Contractors must have all the specifications of the work to be done to prepare an accurate bid. There are often items left up to the discretion of the contractor, such as the type of material to use. This can cause significant variation in bid pricing because formal specifications are not provided to each contractor. If your Board doesn’t have enough knowledge to prepare specifications, ask a contractor for input. Most vendors are happy to assist with specifications when they will be included in the bidding process. Another option is to hire an industry expert to complete the formal specifications.
Conducting a pre-bid walk-through is a great way to even the playing field for all bidders. This gets them on the same page, and gives them a chance to clarify any issues before putting their bid in writing. Communicate a time to all vendors so that they can have someone at the property to review the work and specifications if they wish. Not only does to give the vendors a firsthand look at the work, but it also saves your HOA Board the time-consuming task of meeting with each vendor individually.
Contractor Qualification Sheet
Choose qualified contractors to bid on your HOA projects. Prepare a contractor qualification sheet that outlines minimum requirements for licenses, insurance, tax information and references. Before asking a contractor to bid, verify information to ensure that the vendor meets the requirements. This also provides the framework to reject bidders who do not meet all the qualification criteria.
Evaluate Contractor Bids
After the bids are received, it is important to review them to make sure they meet the specifications. To ensure that bids are fairly evaluated when you lack expertise in the work, your Board may choose to have an industry expert or consultant review the proposals. When a decision is made, contact the selected contractor as well as notify the unsuccessful bidders to let them know that another vendor was chosen.
A formal bidding process helps your HOA Board to make better decisions and eliminates the surprises that come from lack of communication. In general, formal bids help to identify better contractors and are more cost-effective. Good bids don’t just happen; they start with your HOA Board.