Request For Proposal
When the board decides to undertake a new project, the manager or, in some cases, a professional hired for complex construction projects, prepares a request for proposal for the board’s consideration and approval. It’s important that the Board have a clear idea of what it wants and spells that our for the potential bidders. If the governing documents dictate the board’s bidding process, that process needs to be scrupulously followed. Otherwise, some general guidelines are as follows.
In condominiums, Florida Statute 718.3026(1) requires any project that in the aggregate exceeds 5 percent of the association’s total annual budget (including reserves), the board and/or manager shall obtain competitive bids. In HOAs, Florida Statute 720.3055(1) does the same, but the threshold is 10 percent of the annual budget.
For larger contracts/jobs, the vendors are normally invited to board meetings to give a presentation to explain and support their pricing and bid structure.
It is important to have a uniform basis upon which to compare the solicited bids. A proposal might be as simple as an email requesting that a vendor submit a bid. Complex jobs may require an engineer to prepare plans from which the vendors can prepare bids. All communications in writing so that the association has a record of the process.
Bids can be solicited from previous vendors or from vendors gathered from research, recommendations from other associations or management companies. There is no “magic” number of bids to solicit, although three seems to be relatively standard. For minor jobs, one may be sufficient, or, in some cases, there may only be one vendor available to do the specific task. That said, boards should not shy away from an RFP process when it can only identify two, or even one, potential vendor. The process of defining the board’s expectations and requirements is a valuable one.
All vendors should be pre-screened that they have the proper license and insurance. For vendors with whom you are unfamiliar, it is important to ask for and check their references. Given the large number of vendors vying for association business (some of whom can be unscrupulous), the manager can also check with trade groups like the Community Associations Institute (CAI). Once the bids have been submitted, the board needs to begin the evaluation process.
Cheapest Isn’t Always Best
Price should never be the sole criteria of the board’s evaluation. Credentials, experience, and references need to be reviewed and compared. The best choice might be the lowest, the middle, or highest bid, depending on the parameters of the job and what the board requires.
Remember that some unscrupulous vendors intentionally underbid a job, only to hit the association with numerous change orders
Beware of Conflicts of Interest
Pre-existing relationships between prospective vendors and management or board members need to be fully disclosed. If a board member has the conflict, they have to recuse themselves from voting to approve the contract. While it may be tempting to hire a board member’s son or daughter to power wash the pool area because they offer to do it on the cheap, ignoring conflict of interest rules can end up costing a lot of money in damages, legal fees, and insurance payouts.
Once the manager receives the bids and prepares a recommendation to the board, it’s up to the board to decide on which bid to accept. As long as the board has followed the statutes and governing documents, and solicited advice from the appropriate experts, a board’s choice is protected by the business judgment rule, which limits a board’s liability if a lawsuit is filed in the future to challenge its decision. But, if the board has followed a methodical and rigorous process, that should not be an issue.