Should an HOA Risk Accepting the Low Bidder?? The answer is Maybe – Article by Carl A. Brown, RCI, RRO
The purpose of soliciting bids from contractors is, of course, to get the best price or Lowest Bid. All association directors want the best price and all have learned the “three bid rule”. Is the lowest bid always in the best interest of the association? Is the association required to accept the lowest bid? (Answer to both is likely no!)
Roofing is usually the largest expenditure an association will ever make. How can the association get both the lowest bid and the lowest risk of a poor job or even worse, end up in litigation over the project?
There several proven ways that associations and their managers can help themselves to keep their construction project costs as low as possible and still get a high quality job.
Here they are.
First: Use all possible means to pre-qualify the invited bidders.
- Verify insurance coverage to the limits you require, and that HOA coverage is in effect, and not limited to a number of jobs (or dollar amount of projects). Evaluate the policy to determine if it is Claims Made or Occurrence. See your insurance agent to find out how the policy type may affect your HOA Ask if there is any cost to having the HOA named an additional insured on the policy for your project. Of course verify a Workman’s Comp policy is in effect.
- Contact several of the references listed by the contractor, selected at random. It is very rare that a contractor will list a bad job, but it happens. Simply ask the reference party “would you hire this company again for this work??
- Have someone qualified actually go to some reference projects to observe the workmanship. They should also visit a project in progress to determine if the contractor keeps a clean, organized jobsite; with no dogs, drinking or loud radios.
- Obtain verification that this contractor has experience with the type of roof you have selected, such as a manufacturer’s approval or certification of training. Not every roofing contractor has the equipment or training to successfully perform every kind of roof system, some of which are quite specialized.
- Go onto the Contractors State License Board website and check the status of the license. Verify that no un-resolved actions are indicated and the license is active.
Second: Complete Bidding Documents.
Obtain custom specifications created by a professional architect or roofing consultant. Project specifications will vary as the conditions on each job does. No two roof projects are exactly alike. Therefore generic specs from a catalog will not likely adequately apply to your project. Everyone wants “apples to apples” bids, but only clear, concise bidding documents can produce them. A community manager should never send out an RFP that simply says “provide a bid for a new shingle roof”. That is an open invitation to problems for all parties. Responsible contractors will not bid on such an open spec.
Hold a job walk with the bidders to explain the overall project and what work is included and what is not included in the project. Answer all questions in writing by addendum.
The Directors should find out about Labor/Material Payment and Performance Bonds.
The HOA needs to understand them as they will cost you an additional 3-5 percent.
Third: Bid Evaluation:
After the sealed bids are in to the management company, they should be opened by the Board and the community manager all at once and a review made. If there are any questions about any bids, the bidders should be contacted for clarification. Then the lowest 2-3 bidders should be personally interviewed by the Board, at which time they can ask what resources the bidder has and how he intends to organize the project. The Board can get a better feel for the contractor and his capability.
Fourth: The Roofing Contract.
Get a good contract from your roofing consultant or architect, and then have the association’s attorney review it before signing by either party. Make sure the start and completion dates are in the contract. Set the payment terms so that the contractor does not get paid ahead of the work installed or more than actual cost of materials stored onsite. Never give large “Deposits”. Good contractors have 30 day accounts. Make sure the terms are clear and you are prepared to pay the roofer promptly upon receipt of all lien releases and warranties that may apply.
Fifth: Quality Assurance:
Obtain the services of a qualified roof observer to monitor the progress of the work and verify completion or benchmarks for payment. Most quality oriented contractors will welcome a well qualified observer onsite with them. Even a good contractor can have a bad day (after a holiday for example). A team effort can help assure the association will get the workmanship it is paying for. It is also a good idea to have the roof observer verify the wood replacement quantities to double check for billing errors. The roof observer can sign off each building as complete and approve it for payment. You may recall a quote from Former President Ronald Reagan: “Trust But Verify”.
Roofing is not rocket science, but there is a lot of science in roofing work. For example, drying time and temperatures can have a direct affect on the results obtained. The spacing of fasteners can prevent wind damage. Taking the steps listed above can help lower the risks and lower the cost at the same time.
Although no construction project is 100% risk free, the above suggestions, can significantly contribute to the Risk Management of selecting the Lowest Bidder.
Permission to Publish is hereby granted by the author: Carl A. Brown, RCI, RRO
Carl is the general Manager for AWS Consultants Inc in Santa Ana, Ca
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