It only makes good business sense that if something goes wrong and needs fixing at a condo or co-op, the board or manager is going to do some due diligence to choose the correct contractor, and this is normally done by gathering bids. After all, if you don’t compare the price and terms quoted to you by one vendor to those quoted to you by his or her competitors, how will you know if you’re getting a fair price, or being taken advantage of?

Michael J. Motelson, president of Dome Property Management, Inc. in Staten Island, says the factors he uses to bring in vendors include past performance at jobs at other properties, experience, license/certification /affiliation and reputation in the community.

“The goal is to receive quality work for a price that is acceptable to the board, so it really depends on the statement of work (SOW) to determine the number of quotes,” he says. “For example, when planning a large project we recommend three at a minimum.”

Choosing a Vendor

Vendors can come from numerous sources—trade shows like The New Jersey Cooperator’s, word of mouth from other managers, vendors or boards, and also from direct solicitation on their part, showing good old fashioned marketing still works.

The Internet has also been a great tool for managers and boards to locate specialty vendors thanks to review sites like Yelp and Angie’s List, so they can see first-hand what other people thought of their work.

While board members are allowed to suggest vendors that they may have worked with personally or who were recommended to them, no one vendor should get any special treatment once the comparing and contrasting process comes into play.

Generally, the number of bids you should get varies but most experts recommend at least three. “With respect to any contracts, you should get at least three bids, so that you can compare them and see if they’re reasonably in line,” says David Dahan, a partner at the law firm of Hyland Levin, LLP in Marlton.

Stephen Elbaz, president of Esquire Management Corporation in Manhattan says it’s important to create an exact scope of work to ensure all bids are in line with each other as much as possible. “If you don’t give the same parameters of the job to everyone, you’re not going to know which really can do the job best at the best price,” he says. “One contractor might include materials, another might not have factored in the number of units—you need to make sure all bids are based on the same parts of the job.”

Steven W. Birbach, president and CEO of Vanderbilt Property Management, LLC in Glenwood Landing, New York, says for a major capital improvement project he would recommend his boards engage the services of a reputable engineer, architect or mechanical engineer depending on the scope of the project. “The engineer/architect would then prepare specs and submit it to 5 to 7 bidders. Usually the vendors are the professional’s choice but sometimes if a building has had a previous experience with a particular vendor, we would ask that the company be included,” he says. “We also recommend that bids come back to the professional who prepared the specifications of the project as well as the board or management.”

According to the professionals, most communities follow a similar protocol, soliciting a redundant number of bids with the expectation of one or two contractors declining to submit a bid at all, and others coming in far below or far above the median price level of comparable bids. After the manager and the engineer review bids, a bid matrix is prepared and sent to the board with a copy of the bids for review and discussion.

Once all the bids are in, most pros recommend that boards interview the three lowest bidders, and not just reflexively go with the lowest one. After all, the saying about getting what you pay for is a truism for a reason. And no matter what the bid, “It’s very important to check their credentials, and how long they've been in business” says Dahan. “Get a list of references, call multiple references, and find out what experiences they had with that particular contractor.”

Those who are overseeing the construction project also need to obtain and thoroughly inspect all of the necessary paperwork for the project, says Peter Lehr, director of management for Kaled Management Corp. in Westbury, New York. “Check their certificates and insurance coverages and make sure they’re all up-to-date.”

Always Need Bids?

So, is it an ironclad rule of law that HOAs and condo buildings simply must bid out every job on their premises, no matter how small, or regardless of the excellent relationship the board or manager may have with an appropriate vendor? While the short answer is no, most managers and attorneys agree that it’s a good idea to implement a bidding process in your association's governing documents through a resolution passed by the board or association members. Having a formalized policy in writing will help alleviate potential disagreements that could arise down the line.

According to Elbaz, in certain situations, bids aren’t strictly necessary, but a board needs to be cautious when making such decisions. For example, for smaller projects that wouldn’t require the expertise of an architect or engineer, a board might seek out two bids. Most buildings have their approved plumbers, electricians, HVAC companies etc., so these smaller jobs are handled by the building-approved vendors.

In the case of an emergency, bids are usually not required and it’s up to the board or management company to make a smart judgment call. “If there is an emergency leak, or boiler breakdown we would not engage in a competitive bidding process. My goal in an emergency is to stop leaks, maintain essential heat, hot water, electric or elevator service to my residents,” Birbach says. “My boards trust that I will use the right vendors to accomplish the objective.”

Motelson agrees that there are three circumstances for not needing a bid: If an association has an ongoing relationship with a vendor who provides consistently acceptable service at an acceptable price, a board may bypass multiple bids; in an emergency where it may not be possible to obtain multiple bids; and sometimes with jobs where pricing is standardized.

The Paper Trail

The bid process is typically handled through a Request for Proposal or RFP, an outline with all of the specific specifications for the job. For larger contracts/jobs, the vendors are normally invited to board meetings to give a presentation and support their pricing and bid structure. Bid solicitations generally include the scope of work, along with a request to demonstrate the financial capability to complete the project, work experience, time to complete, and key people assigned to oversee the project.

Larger projects should include detailed specifications to ensure an apples-to-apples comparison. Other general/routine work may be communicated informally through email with a description of the SOW and time frame for response.

While money is always a chief concern, nearly every professional we spoke with stressed that going with the lowest bid is not always the smartest decision, and that carefully analyzing the bid matrix to evaluate each bid subjectively is crucial.

“The best negotiation tool is education,” says Mary Faith Nugiel, president and owner of RCP Management Company in Monroe. “Boards need to know the going rate for services in their area. This information can be obtained from the property manager or directly from other associations. Boards also need to make sure they are getting a fair price. Using a matrix and not being fixated on the low end of it “helps a board to find out the market value of a service and negotiate a better price,” she says.

No Friends and Family Discount

When jobs need to be done and boards begin discussing solutions, it’s amazing how many people have friends and/or family in “the business” who can help at low, low prices. While it may be tempting to just hire the board treasurer’s nephew to repaint the lobby or to accept the lowest bidder for a given job just to save some bucks—taking the easy route can backfire, costing a lot of money in damages, legal fees, and insurance payouts.

Plus, you have to consider the fallout that could come from the conflict of interest—especially if two board members have competing friends. According to Elbaz, full disclosure is a must when friends and family members are involved in the bidding process. It’s also a good idea to leave that board member out of the voting process.

Another way to avoid contractor favoritism is to request sealed bids, to be opened at the same time, with all board members present.

Final Thoughts

Regardless of who is awarded the bid, getting a list of referrals from the contractor is prudent for all associations. A good tip is for boards to look for referrals that outline the contractor’s successes in the specific area of work the project will cover. Having your engineer or architect review the bids will also be helpful in weeding out the preposterous or unreasonable ones.

“There are many things to consider when selecting, and price is an important factor. If all else is equal, we suggest you go with the lowest price,” Motelson says. “But, all else is usually not equal, so many other factors are considered depending on the SOW, such as prior work, experience, reputation, scheduling to name a few. If you receive multiple bids and there is a large variance, you should ask the ‘too good to be true vendor’ for references from other associations and/or management companies where they provided similar work at that same price.”

Keith Loria is a freelance writer and a frequent contributor to The New Jersey Cooperator.