It only makes good business sense that if something goes wrong and needs fixing at a condo or co-op, the board or managing agent is going to do some due diligence to choose the correct contractor, and this is normally done by gathering bids. After all, if you don’t compare the price and terms quoted to you by one vendor to those quoted to you by his or her competitors, how will you know if you’re getting a fair price, or being taken advantage of?
Michael J. Motelson, president of Dome Property Management, Inc. in Staten Island says factors he uses to bring in vendors include past performance at jobs at other properties, experience, license/certification/affiliation and reputation in the community. “The goal is to receive quality work for a price that is acceptable to the board, so it really depends on the statement of work (SOW) to determine the number of quotes,” he says. “For example, when planning a large project we recommend three at a minimum.”
Choosing a Vendor
Vendors can come from numerous sources—trade shows like The Cooperator’s, word of mouth from other managers, vendors or boards, and also from direct solicitation on their part, showing good old fashioned marketing still works.
The Internet has also been a great tool for managers and boards to locate specialty vendors thanks to review sites like Yelp and Angie’s List, so they can see first-hand what other people thought of their work.
While board members are allowed to suggest vendors that they may have worked with personally or who were recommended to them, no one vendor should get any special treatment once the comparing and contrasting process comes into play.
Generally, the number of bids you should get varies but most experts recommend at least three. Stephen Elbaz, president of Esquire Management Corporation in Manhattan says it’s important to create an exact scope of work to ensure all bids are in line with each other as much as possible. “If you don’t give the same parameters of the job to everyone, you’re not going to know which really can do the job best at the best price,” he says. “One contractor might include materials, another might not have factored in the number of units—you need to make sure all bids are based on the same parts of the job.”
Steven W. Birbach, president and CEO of Vanderbilt Property Management, LLC in Glenwood Landing, says for a major capital improvement project he would recommend his boards engage the services of a reputable engineer, architect or mechanical engineer depending on the scope of the project.
“The engineer/architect would then prepare specs and submit it to 5 to 7 bidders. Usually the vendors are the professional’s choice but sometimes if a building has had a previous experience with a particular vendor, we would ask that the company be included,” he says. “We also recommend that bids come back to the professional who prepared the specifications of the project as well as the board or management.”
Steven Pinchasick, president of AMJ Equities in Great Neck, adds that typically bids are solicited by the manager along with suggestions from the engineering firm assigned to the project. “Generally we solicit at least six bids for large projects as there invariably one or two will not bid, or will be far below or above the median price level of comparable bids,” he says. “As a general rule the manager and the engineer review bids. In all cases, a bid matrix is prepared and sent to the board with a copy of the bids for the board’s review and discussion.”
Once all the bids are in, Birbach recommends that the boards interview the three lowest bidders. “It is important to know who the principal of the contractors are and to obtain a level of comfort. It is not always the low bidder who gets awarded the contract,” he says. “Experience and prior history with the agent is an important factor.”
Do You Always Need Bids?
According to Pinchasick, there are no laws that govern the bid process in New York and the association docs are generally silent on the issue. Common sense usually dictates the process.
Still, there are some association’s governing documents that outline procedures and protocol for obtaining bids. In New York, some governing documents mandate gaining competitive bids when the project is over a certain dollar amount, but others simply say it’s at the board’s judgment. For his part, Motelson thinks it’s a good idea to implement a bidding process in the governing documents through a resolution passed by the board or association members. This will alleviate any potential disagreements that could arise down the line.
According to Elbaz, in certain situations, bids aren’t strictly necessary, but a board needs to be cautious when making such decisions.
For smaller projects that wouldn’t require the expertise of an architect or engineer, Birbach only seeks out two bids. Most buildings have their approved plumbers, electricians, HVAC companies etc., so these smaller jobs are handled by the building approved vendors. “After being in business for 30 years, a good management company has weeded out bad vendors over the years,” he says. “It would be a mistake to only solicit two bids for a major project.”
Motelson says circumstances arise, particularly on smaller projects and specialized work, where less than three bids could be acceptable. For example, if a board is familiar with the work of each vendor, and pricing is consistent with similar recent jobs, it is not a mistake to not seek out bids, but one should treat each job on an individual basis.
In the case of an emergency, bids are usually not required and it’s up to the board or management company to make a smart judgment call. “If there is an emergency leak, or boiler breakdown we would not engage in a competitive bidding process. My goal in an emergency is to stop leaks, maintain essential heat, hot water, electric or elevator service to my residents,” Birbach says. “My boards trust that I will use the right vendors to accomplish the objective.”
Motelson agrees that there are three circumstances for not needing a bid: If an association has an ongoing relationship with a vendor who provides consistently acceptable service at an acceptable price, a board may bypass multiple bids; in an emergency where it may not be possible to obtain multiple bids; and sometimes with jobs where pricing is standardized.
The Paper Trail
The bid process is handled through a Request for Proposal or RFP, an outline with all of the specific specifications for the job. For larger contracts/jobs, the vendors are normally invited to board meetings to give a presentation and support their pricing and bid structure.
“Bid solicitations generally include the scope of work along with a request to demonstrate financial capabilities to complete the project, work experience, time to complete, key persons assigned to the project,” Pinchasick says. “Most contractors are familiar with what needs to be included, so there’s not much error.”
Larger projects should include detailed specifications to ensure an apples-to-apples comparison. Other general/routine work may be communicated informally through email with a description of the SOW and time frame for response.
While money is always a chief concern, Pinchasick warns that going with the lowest bid is not always the smartest decision and other factors should come into play.
“We don’t recommend that our clients always go with the low bid for a variety of reasons. This is why we use a bid matrix to evaluate each bid,” he says. “The matrix allows us to break down the bids to identify line items in the bids which may be high or low as it relates to other bids. Imagine if the space shuttle was built with nothing but the lowest bids.”
No Friends and Family Discount
When jobs need to be done and boards begin discussing solutions, it’s amazing how many people have friends and/or family in “the business” who can help at low, low prices. While it may be tempting to just hire the board treasurer’s nephew to repaint the lobby or to accept the lowest bidder for a given job just to save some bucks—taking the easy route can backfire, costing a lot of money in damages, legal fees, and insurance payouts.
Plus, you have to consider the fallout that could come from the conflict of interest—especially if two board members have competing friends. According to Elbaz, full disclosure is a must when friends and family members are involved in the bidding process. It’s also a good idea to leave that board member out of the voting process.
One way to avoid contractor favoritism, Birbach says, is to request sealed bids where they are opened at the same time with all board members present.
Regardless of who is awarded the bid, getting a list of referrals from the contractor is prudent for all associations. A good tip is for boards to look for referrals that outline the contractor’s successes in the specific area of work the project will cover. Having your engineer or architect review the bids will also be helpful in weeding out the preposterous or the unreasonable ones.
“There are many things to consider when selecting, and price is an important factor. If all else is equal, we suggest you go with the lowest price,” Motelson says. “But, all else is usually not equal, so many other factors are considered depending on the SOW, such as prior work, experience, reputation, scheduling to name a few. If you receive multiple bids and there is a large variance, you should ask the ‘too good to be true vendor’ for references from other associations and/or management companies where they provided similar work at that same price.”
Keith Loria is a freelance writer and a frequent contributor to The Cooperator.