Make sure your HOA properly vets vendors/contractors
I recently joined the board of directors for my condominium association after the implementation of a hefty 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. We are pursuing legal action to resolve our existing problems, but 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?
— Cindy H.
Thank you for this extremely important question. Our 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. In many of these cases, the vendors were simply hired in good faith by the board of directors, but turned out to have misrepresented their companies, their services and their experience.
It is critical for an association to properly vet vendors prior to awarding a contract. Additionally, if it is a large capital improvement project, such as replacing roofs or re-siding a building, I also recommend associations hire a third-party construction manager to oversee the initial bid process, as well as the day-to-day operations once a bid is awarded.
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 process, which includes, but is not limited to, a detailed scope of work and a request for information necessary to verify that the vendor is capable of performing the work.
Please note: When seeking three qualified bids, it may be necessary to send out RFPs to five vendors since there’s a chance a vendor may pass on the job.
If your association employs a professional management firm, your community manager should be able to assist you in this process. If not, please feel free to contact me and I would be happy to help guide your board.
As part of the official RFP, make certain that the vendor is required to provide proof of insurance, as well as his or her 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 accord certificate of insurance, which is not sufficient.
Once an association receives at least three bids to compare and contrast, many boards feel that this constitutes the end of a thorough bidding process. To the contrary, once the bid packages have been received, it is extremely important to 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.
Although these reviews help give insight into particular companies; keep in mind, 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” to 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 least three customer references from each of the vendors invited to bid. It is important that the references be from similar 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 might 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 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.