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Jul 15, 2022

Vendor Selection for HOAs: What Board Members Need to Know

Sponsored Content provided by Mike Stonestreet - Founder, CAMS (Community Association Management Services)

As a board member of a community association, you have a lot of responsibilities. One of the most important is ensuring that the association gets the best services possible at a reasonable price. This includes selecting qualified, licensed, and insured vendors (also called service providers) to provide services to the community. However, it's crucial to remember that price isn't the only thing you should consider when selecting vendors. Board members must be sure that they look at all aspects of a vendor contract before signing on the dotted line. In this blog post, we will discuss what board members need to know when selecting vendors.

Screening Vendors

When it comes to maintaining a community association, one of the most important things is to make sure that all vendors are properly licensed, insured, and qualified. This is essential to protect the association from potential legal liabilities. Furthermore, using vendors that are properly licensed and insured helps to ensure that the work will be of high quality and meet all local code requirements. 

Finally, by guaranteeing that vendors are properly qualified, the association can be sure that they are getting the best value for their money. While it may take a bit of time to screen vendors, ensuring the community's safety and security is well worth the effort. Keep in mind that your community management company will have a list of vendors who have been vetted and have a record of doing excellent work at a reasonable price.

Hiring Vendors and the Board's Fiduciary Duties

The board of directors' responsibility to hire licensed, insured vendors who will do the work correctly and at a fair price is an important one. The board has a fiduciary duty to the association, and hiring the correct vendors is part of that duty. If the board does not do this, the association could be held liable for any damages that occur. Therefore, the board must take this responsibility seriously.
 
When choosing vendors, board members must strike a delicate balance. On the one hand, they have a duty to steward the community's finances carefully. But on the other hand, they must ensure that the community receives high-quality services.

Unfortunately, these two goals are not always compatible. In many cases, the lowest-priced vendor is also the one offering the poorest quality work. As a result, board members must be extremely careful when evaluating vendor proposals. Furthermore, simply choosing the lowest-priced option is not necessarily in the community's best interest. Instead, board members must take a comprehensive approach, considering price, quality, and reputation before deciding. 

Another best practice when hiring vendors is getting several bids on the job, which gives you room to negotiate. Only by considering all these factors can board members be sure they make the best choice for their community. 

Vendor Contracts

When a community association enters into a contract with a vendor, the contract must contain clear, concise provisions regarding the timeline for the work, the scope of the work, and how the work should be performed. This ensures that both parties are aware of their respective obligations and helps to avoid misunderstandings or disputes down the road. 

Additionally, the contract should include a provision outlining how payments will be made. For example, will the association pay the vendor upfront or upon completion of the work? Having a clear understanding of these financial arrangements is crucial to maintaining a good working relationship between the association and the vendor.

Finally, the contract should spell out what happens if either party defaults on their obligations. What are the consequences of a breach of contract? These provisions allow the association and the vendor to feel confident that they are protected in case anything goes wrong.

Pro tip: Be sure to look over your ongoing contracts each year in case of potential rate increases or changes to the services vendors provide.

Your Community Management Company Can Help

As we've said, choosing the right vendors is essential for maintaining a well-run community association. But with so many companies to choose from, it can be difficult to know where to start. That's where a community management company can help. A good community manager will have a list of fully vetted vendors they can recommend to the board. They can also assist with negotiating contracts on the association's behalf, ensuring that the terms are favorable and that the work is carried out as promised. However, if you find a contract complicated or question its provisions, talk to your association's attorney.

Sometimes, the community manager may oversee the vendor's work to ensure everything is being done according to plan. However, remember that community managers aren't engineers, general contractors, or plumbers, and, while they may be able to ensure the work is being performed, they are not authorities on all types of vendor work. In some cases, the community manager may recommend that a third-party engineer or independent project manager be contracted based on the size or specialty of the project. Nevertheless, with the help of your management team, choosing vendors doesn't have to be a stressful experience.

When hiring a vendor, the board of directors should ensure they have done all due diligence to protect their community's best interests. Community association management companies can be an invaluable resource when screening and selecting vendors for your organization as it ensures that only qualified service providers are chosen, saving time from having to go through this process again later down the road!

Is your community getting the Trusted Guidance it deserves? Visit our website or give us a call at 888.789.2624 to learn more about the fantastic services CAMS provides.
 
 

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