Most HOA board members are unpaid volunteers that have no training or education in financial management. It’s a challenge for some board members to manage budgets, approve invoices, hire contractors, and sign checks. It’s even more challenging to hire the right contractor.
We know that even honest, reputable contractors have an uphill battle trying to be hired by associations. Unfortunately, bad vendors exist. Knowing common red flags can help boards hire reputable contractors.
Warning Signs in Contractor Proposals and Presentations Vague or Incomplete Proposals
Compare all proposals, and you’ll most likely find one or two that stand out as unprofessional. If one vendor’s proposal isn’t professional, consider eliminating that vendor. Here are some red flags to look for:
A vague description of scope of work. Professional, reputable contractors understand what’s expected of them and describe the scope of work in detail. Red flag phrases include “landscaping services” or “necessary repairs.”
No itemized costs. Compare proposals side-by-side and make sure all proposals include an itemized breakdown of costs. Without them, it’s impossible to create a baseline for comparison.
No detailed product or material specifications. Itemized costs are meaningless if the products or materials aren’t specified. Without them, the association may be exposed to low-quality products or materials and the proposal isn’t enforceable.
Unclear timelines. Look for phrases like “flexible,” which doesn’t provide a basis for comparison with other bids.
- Failure to identify workers who’ll be completing the scope of work.
- Pressure Tactics During Presentations
- Watch out for high-pressure tactics that seem unprofessional, including:
- Creating a false sense of urgency (“this price is only good if you sign today”);
- Bad-mouthing competitive bidding;
- Refusal to provide references;
- A defensive or evasive attitude when asked about insurance, licensing, bonding, etc.
Professional Credentials That Don’t Check Out
Before signing a contract, make sure the contractor is licensed, bonded, and insured and that those credentials reflect the scope of work. Many states’ websites provide free contractor search capabilities so board members can verify a contractor’s license, bond, general liability with adequate coverage, and worker’s compensation coverage. It’s a simple search that takes about 15 minutes, yet this quick vetting tool could potentially save the association from hiring an untrustworthy vendor. If a contractor seems reluctant or offers excuses for not producing the appropriate documentation, cross that contractor off your list.
Price Anomalies That Raise Questions
Most associations are encouraged to get three or more bids for major projects. Getting multiple bids helps the association understand what’s considered a fair and reasonable price. If one bid is substantially lower than the rest, dig deeper before awarding the contract. The contractor may be unlicensed, uninsured, inexperienced, etc. It’s better to pay a little extra upfront than pay for corrections and fixes later.
Likewise, be wary of bids that are substantially higher than others. Ask for an explanation about their approach. It could be that the higher-bid contractor thinks it’s providing quality products/materials while other bids provide less desirable ones. However, a good contractor should be able to articulate how their bid is different.
Building Systems That Prevent Problems The Power of Competitive Bidding
Associations should consider competitive bidding on most major projects. Contracting work without bidding can be interpreted as a favor or kickback arrangement unless there’s a valid, documented reason for awarding a no-bid contract, such as emergency repairs or when the product or service is available from only one source. Competitive bidding also levels the playing field for honest, reputable vendors. It puts forth a process to hire a vendor.
Creating a Request for Proposals (RFP) ensures contractors are bidding on identical products/materials and services. It should include a brief overview of the association and a detailed scope of work, timeline, payment terms, credentials (license, bond, insurance), warranty, etc.
If the contractor is reputable and honest, the entire vendor selection process shouldn’t feel like a burden. However, if the contractor seems reluctant to provide specific information, move on. There are plenty of vendors in your area. It’s worth finding one you trust.