To make prudent fiscal decisions regarding spending association funds, it is necessary to realize the importance of getting viable bids for large expenses or when contracting for a monthly service. The first step in this process is to determine if you are ready for a formal bid or just looking for information. Yes, there truly is a difference! If the board needs a bid for informational purposes, that intention should be passed along to a contractor who can then give the board a rough estimate that would not be binding, but would provide helpful insight to a board trying to decide whether to proceed with the project. I consider this the first part of the shopping phase. If the board is not ready to decide to have the work done, it is best to ask for this type of “ballpark” proposal first. Contractors who are not informed about the board’s intention often expend time and resources to prepare detailed bids when only a rough estimate is truly needed. Most contractors are happy to supply an educated estimate to an association; it is best to let them know up front.
When soliciting bids, the first step is to determine the threshold dollar amount. Depending on the association, the board may require bids for work exceeding $1,000 to $25,000. Most contractors hesitate to bid on jobs costing less than the minimum amount because the average cost to prepare most bids is approximately $150.00. The cost to prepare bids on larger jobs can easily exceed $500. Thus, if you calculate the profit on a $600 job at 15%, or $90, you can see that the profit is quickly wiped out by the $150 cost to prepare the bid. Often, the cost to prepare the bid is included in the cost calculation of the job, which means that every time a job is put out to bid it costs on average 20% more than if you were to just ask a trusted contractor to do the small job on a time and material cost basis.
For smaller jobs ranging from $1,000 to $5,000, another option is to ask the trusted contractor for a “Not to Exceed” estimate. Estimates for the cost of the job usually must be given and “Not to Exceed” estimates are the primary method for doing this. This way, the board of directors has an idea of the cost before making decisions, and the cost can be budgeted.
If it is determined that the board would like to move ahead based on rough or ballpark pricing information, the next step is to request formal bids. A viable bid starts with specifications for the work to be done. In doing large repairs or replacements, there are often many different approaches to doing the work, such as painting with one coat or two, what type of paint to use, how to prepare the wood, etc. It is often left to the contractor to determine how the work should be done without knowing what the budget is or having the opportunity to explore options best suited for the situation. You’ve heard the saying, “There is more than one way to skin a cat”; this saying can apply to bids, also. I have attended many meetings at which the prices varied significantly from bid to bid. This price difference happens when the specifications are not prepared and delivered to the contractors invited to bid. A formal specification sheet should be completed for each bid request. Typically, managers are not trained in every detailed aspect of maintenance and are not qualified to prepare specifications. If board members are not qualified to create specifications, there are several ways to have them prepared. The reserve study consultant is an excellent resource. In addition, utilizing the expertise of existing contractors or vendors is an excellent means to come up with detailed specifications. Most vendors would be happy to assist with specifications, as long as they are included in the bid process. If you need specifications for a large, complex or expensive project, the association should consider hiring an engineer or building architect to complete specifications that all vendors can follow. Also, many paint retailers are available to set painting specifications, as long as their paint is specified.
Holding a pre-bid walk is another great way to make sure all your bidders are on the same page with your bid request. If you publish a date and time, anyone interested in bidding can meet at the property to review the exact work area and specifications. This gives the contractors a firsthand look and the opportunity to clarify issues before putting their bids in writing. It also saves the board or manager the time consuming task of meeting each property individually onsite.
It is important to select qualified vendors from whom to request bids. A contractor qualification sheet should be used in advance of requesting bids. The qualification sheet details minimum requirements for licenses, insurance, tax information and references Before asking a contractor to bid, the association should verify all information he or she provided to ascertain if the vendor is truly qualified to do the work. Be sure to obtain original documents, not copies! The qualification sheet allows the association to reject bidders if they do not meet every one of the criteria required of them.
After the bids are received, it is important to review them to make sure they meet the specifications. Having a consultant engineer review the proposals and submit a recommendation removes liability from the board and manager, and ensures that the bids are fairly and professionally evaluated.
Once a decision is made, you should not only contact the selected vendor, but also write to the unsuccessful bidders to let them know another vendor has been selected. You should thank everyone for the time and energy they expended on your behalf and encourage them to continue to provide bids for you in the future.
By following these few steps, you will be able to make an informed decision on the best contractors to service your association.
“Good” bids don’t just happen; they start with you.
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This article was provided by Associa Living .