Requests For Proposal: The Proper Way To Handle The Bidding Process With Vendors

Every Association faces this issue: What is the proper way to handle the bidding process for an Association contract?

Usually, the theory of the process is straight-forward. Obtain at least three bids for a project, the Board takes a vote, choosing the contractor with the best bid. Occasionally, it is also the lowest bid, but that is not always the case.

But what is the best way to handle a fairly large project? The best idea is to put together a Request for Proposal (RFP)—which would be forwarded to numerous contractors, requesting a formal bid on a specific project to be completed for the Association. The RFP includes the location/deadline for the plan submission, the scope of the work to be completed, projected schedule or completion time for the project, and the contact person for any questions regarding the project.

The idea is simple, however, there are factors which might complicate the bidding process.

For example, suppose that your property manager or a board member is also a general contractor, willing to complete construction projects for the Association. In this case, it is usually improper for the property manager or board member to be the intake person on the bids. In this situation, the Association should make it clear that bids should come in “blind,” in sealed envelopes, and should not be opened by the Board until a specified time when all bids are in. Better yet, have the bids sent to one board member, sealed, and give the property manager or contractor board member the same opportunity to bid. This prevents the undercutting of outsiders’ bids by a few dollars after the contracts are examined, truly forcing each person to give their best bid.

If a board member decides to bid on a project, then the board member should abstain from voting on the contractor for that project. If the property manager decides to bid on a project, it is probably best that the property manager is not sitting on that particular portion of the Board meeting.

The Board must also ensure it is not being pressured into using a particular contractor because they are afraid of alienating a fellow board member or their property manager.

Close relationships between vendors who recommend each other should also be carefully taken into consideration. For example, it would be improper for the Association’s attorney to give a kickback to a property manager for recommending that attorney. This would violate the law and ethical rules governing attorneys. In the same respect, it would be improper for a contractor to give a board member or property manager a kickback because that person secured the contract for the contractor. A contractor should be chosen based on qualifications, bid price, project specifics, etc., rather than influence from a vendor or board member to whom the Association looks to for guidance.

It would be helpful to include language in management contract, for example:

“[Insert management company's name] is licensed by the State of [insert state] to provide the following contracting services under the following company names: [insert company names, types of services, and license #sl. [Insert association's name] is not bound to utilize any of [insert management company's name]’s corporate affiliates for such contracting work. [insert management company's name] encourages the Association to seek competitive bids for all major contracts, such as repairs and landscaping. If a corporate affiliate of [insert management company's name] is bidding on a particular job, all bids shall be sealed and opened only as directed by the Board. [lnsert management company's name] will promptly advise the association if, in the future, it establishes any additional companies that may provide community association services.”

More on Community Associations