When does an Association common area repair, capital improvement or maintenance contract need to go out to competitive bid? How many vendors should be invited to bid? And how long should the competitive bid process take? These are three important questions that come up regularly. While there are many variables to consider when determining whether or not to bid out Association work and how much time to allocate to the competitive bid process, there are some general best practices Boards should follow.
When to bid out Association Work? Depending on the size of the Association’s annual operating budget, Associations should only bid out repairs or improvements with anticipated expenses in excess of $1,000.00. Associations with larger operating budgets may set a higher monetary threshold to bid out Association work (example $2,500.00), but at no time should an Association take repairs or improvements with anticipated costs less than $1,000.00 out to bid. A competent and comprehensive competitive bid process is time consuming, as I will elaborate next, and there are simply better uses of Association resources than to take every little repair or improvement out to bid.
How many bidders are appropriate? As it relates to the number of vendors to invite to participate in the competitive bid process, we recommend three. Inevitability, I find that at least one bid is going to be an outlier, usually because the vendor misunderstood the scope or underbid the job. By only inviting two vendors to bid, in this scenario you will only have one realistic bid option. I also find that inviting four vendors to bid may become too confusing and cumbersome, complicating the vetting and selection process.
What is the recommended bid process and how long should it take? The competitive bid process is far too important to rush. The first step is for the Board of Directors to approach the competitive bid process systematically, with realistic time expectations. I am often told by members of our Management Team that a Board will request competitive bids for a repair or improvement and expect comprehensive, comparable bids back within 30 days, which frankly, is not realistic. PMP’s four step recommended bid process is as follows:
1) Prepare a Detailed Request for Proposal (RFP)
The first step in the competitive bid process is to meet as a Board to prepare a
comprehensive request for proposal package (RFP), with a detailed scope of services. Thiswill most likely take place during an Executive Session Board Meeting, and your PMP Community Manager would be happy to provide an RFP template to assist in preparing a thorough RFP. A proper RFP will request the vendor’s pertinent information, including but not limited to, the company name, contact information and insurance summary requirements. The RFP is also a great opportunity for the Association to share important community information that the bidders should consider (example: vendors must park off-site or construction noise is limited to Monday – Friday, 8:00 am to 4:00 pm). RFP’s should also detail the submittal requirements, such as due date, number of copies, the next steps in the competitive bid process, and who to address questions to. Lastly, the RFP should include a detailed scope of services. This will ensure that the proposals will be comparable, “apples to apples” bid packages for easy review and understanding. Once the RFP is completed, it will take a few days for your Community Manager to formally distribute it to the respective vendors invited to participate.
2) Allow Vendors Adequate Time to Bid
Based on the scope of work, it is important to give vendors adequate time to review the RFP, visit the community, and prepare a comprehensive bid package. It is imperative not to rush this process, as this is when mistakes happen and important site conditions impacting the bid are missed. Allow vendors at least one to two weeks to visit the community, with at least another one to two weeks to prepare a bid package. Please note, larger jobs will require more time.
3) Management Review of Bid Packages
Vendor bid packages will typically be sent to your Community Manager for review before they are forwarded to the Board or included in a Board Package. Please allow your Community Manager time to review the bid packages against the RFP to ensure the bids are complete and the vendors followed directions. More often than not, there are revisions that need to be made to a vendor’s bid package, but in the interest of saving time and unnecessary frustration, it is better that the Community Manager catch the error before the bids are forwarded to the Board. At this point, the Community Manager will prepare a competitive bid compare and contrast spreadsheet, detailing differences between the bids. Your Community Manager should be allowed at least one to two weeks to complete this task.
4) Forward the Bid Packages to the Board for Review and Consideration
The final step once bids have been received, and reviewed for completeness, is for the Community Manager to forward the competitive bid packages along with the compare and contrast spreadsheet to the Board of Directors for review in advance of the next properly noticed Board Meeting. Simultaneously, the Community Manager can set up vendor interviews with the Board of Directors, at the Board’s request.
So long as the competitive bid process steps outlined above are followed, the Board of Directors should have comparable bids and the information necessary to make an informed decision. While it may seem like a long burdensome process, following this best practice competitive bid process protocol will actually save the Association time, money and frustration in the long run.