What About the Bids?
March 6, 2009 • By Kelly G. Richardson
Dear Mr. Richardson:
I currently live in a condo community where the Board refused to act in the best interest of the homeowners and when they entered into a contract with a painter, they only obtained one quote, and when the homeowners heard about it, they were up in arms and went to the next board meeting asking to re-visit the contract which the painters had changed to "time and materials" every contractors dream job, right . . . anyway the Board advised the homeowners they would hold a meeting with the homeowners who had knowledge of construction/painting contracts and hold off. They then recanted and went ahead with what they had without any input from the homeowners who had agreed to meet with the contractors and the board. Now the Board has spent over $500,000 with this contractor, do we have any recourse?
L.M.
Mission Viejo
Dear L.M:
You may need more information before you conclude that the Board is not doing its job on this. Do you know that there were other bidders who would have charged less? Did the Board have expert advice on the issue? As you know, “time and materials” means the contractor is not guaranteeing any maximum job cost. Contractors often charge this where for a variety of reasons, the total cost cannot be reasonably guaranteed. Hopefully, any association embarking upon a major project (and yes, I agree $500,000 is major) on a time and materials cost would also have a construction consultant monitoring the progress, performance and cost of the project. If a job truly is not susceptible to fixed price bidding, competitive bidding may not be useful. The selection of such a contractor depends more upon background, reputation, and references.
Some governing documents require that ALL vendor contracts be obtained on competitive bids, but this blanket requirement creates some nonsensical situations - such as where the total costs cannot be ascertained, or the item is minor, or for professional vendors where cost is not the most important consideration.
All too often, the interview process is conducted in closed session -- this is arguably a violation of the Open Meeting Act (there is controversy among lawyers about this) but it clearly breeds mistrust in the community.
Boards: On major contract bidding, consider hiring a consultant to advise you. If fixed bids are not attainable on the entire job, can parts of it be bid on a fixed basis? Try to obtain as many pre-agreed unit prices as possible. On any major time and materials project, the Board needs an expert to monitor the project work and costs.
If due to circumstances multiple bids are not possible or practical, consider a Board resolution noting that fact in the minutes, or even note it in the community newsletter.
Consider interviewing the candidates or bidders in open session. Don’t discuss terms of bids in open session, as that may taint the bidding process -- you don’t want bidders finding out what others are proposing -- and discuss negotiation strategy in closed session.
Best regards,
Kelly
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