How to select a competent vendor
I recently joined the board of directors for my condominium association after we were billed a large special assessment resulting from crooked and/or incompetent vendors. Now, it seems that another special assessment may be necessary to repair the damage to the buildings caused by these vendors. What can our HOA do next time before selecting a vendor so that this does not happen again? What are some ways to verify that a vendor is legitimate and qualified?
Our management firm currently works with several associations that are suffering the effects of hiring unqualified and/or culpable vendors that took advantage of, and in some instances severely damaged their community.
Properly vetting vendors is critical prior to approving or entering into a contract.
When bidding out a project, an association’s board should obtain proposals from a minimum of three vendors and utilize a formal request for proposal (“RFP”) process, which includes, but is not limited to, a detailed scope of work, an itemized breakdown on costs and fees, and a request for information necessary to verify that the vendor is capable of performing the work.
If your association employs a professional management firm, your community manager should be able to assist you in this process.
As part of the official “RFP,” make certain that the vendor is required to provide proof of insurance as well as a current contractor’s license.
When obtaining proof of insurance, make sure you receive a copy of the actual insurance policy.
Many companies will provide you with an ACORD certificate of insurance, which is not sufficient.
I would also encourage you to verify with an insurance professional, such as your association’s insurance broker or carrier, that the vendor’s policy is sufficient.
For large capital improvement projects, such as replacing roofs or re-siding a building, I recommend associations hire a third-party construction manager to oversee the bid process as well as the ongoing day-to-day construction operations once a bid is awarded.
Once the competitive bid packages have been received it is important that associations verify the accuracy of the information submitted.
In the age of social media, it is fairly easy to perform an internet search to view consumer feedback regarding a particular vendor’s performance and reputation.
Through websites such as Yelp, CitySearch or Yahoo you are typically able to read customer reviews and feedback.
Although these reviews help give insight into particular company, keep in mind that they are easily manipulated by a vendor’s allies and enemies alike.
There are more legitimate resources at your disposal such as the Better Business Bureau (www.bbb.org) or the state of California website, which is a critical resource when evaluating vendors, most notably the California Department of Consumer Affairs Contractors State License Board (www.sdlb.ca.gov) and the Department of Consumer Affairs (www.dca.ca.gov).
If you do not have access to a computer you can also reach the Contractors State License Board by telephone at 800-312-2752 and the Department of Consumer Affairs at 800-952-5210.
The Contractors State Licensing Board is a great resource, providing educational information such as “The Ten Tips for Making Sure Your Contractor Measures Up” and a “Checklist for Prescreening Contractors”. Additionally, you are able to verify the status of the vendor’s contractor’s license.
An association’s “RFP” should also include a minimum of at least three customer references from each of the vendors invited to bid.
It is important that the references be from similar type projects and I always encourage associations to send a representative from their board to inspect the finished results of the referenced projects.
Although the bid process outlined above may seem like a daunting amount of work, it is important that an association’s board of directors take the time to perform proper due diligence before voting on and awarding a contract.
By vetting potential vendors through a formal Request for Proposal (“RFP”) process and utilizing the resources available to verify the accuracy of the information submitted, associations can mitigate against unforeseen expenses and quality control issues by hiring qualified, reputable vendors to service their community.