COOPERATOR NEWS OCTOBER 2021
The Bidding Process: Finding the Best People at the Best Price
by A.J. Sidransky
One truism of home ownership is that there is always something that needs to be fixed or upgraded. That’s true in condo and co-op communities as well, both large and small. There’s always a roof to replace or a boiler to upgrade, or a lobby to refurbish. The challenge is finding the right contractors to get these jobs done efficiently and effectively at a cost that the building or HOA can handle.
Types of Jobs
Work in and around multifamily buildings usually falls into two categories: one-time, big-ticket capital improvements like roof or boiler replacements or façade overhauls, and smaller, recurring maintenance work like pest control and landscaping/snow removal. While the scale and frequency of the work falling under each category are different, the vendors and contractors that do the work are identified and engaged through the same process of research, bid solicitation, final selection, and awarding of contracts.
How Does the Bidding Process Work?
Michele Schlossberg is an account executive with Gumley Haft, a management company based in New York City. “The funny thing about the bidding process is that it’s pretty similar for both large capital improvement jobs and annual vendor services,” she says. “What’s different are the pre-bid activities.” Schlossberg describes the bidding process for large capital improvements as follows: “Let’s say I need to replace a roof—so I call in an engineer who specializes in roofs. They come out and inspect the property and then create a request for proposal, or RFP. From there, the engineer will draw up project specs and a bid package that will be sent to between three and five vendors, depending on the preferences of the board. Also, vendors and contractors are very busy—so if you only send an RFP to three, you may not find one.”
To ensure fairness and impartiality, says attorney Hubert Cutolo, founding partner of Newark, New Jersey-based law firm Cutolo Barros, LLC, an RFP should stipulate a deadline for submissions—usually around 20 days—after which no other bids will be considered.
Once all the responses are collected, says Cutolo, they’re delivered back to the board and/or manager in a sealed format, and all opened at the same time. (Opening bids as they come in could give an early bidder an advantage—or allow other bidders to adjust their proposals to undercut the known bid.)
Some boards elect to unseal bids at a regularly scheduled board meeting. Others limit it to the manager and the board president (and the engineer or other professional if involved), who coordinate the unsealing together according to their schedules, and then share the results with the rest of the board online. Regardless of a board’s preferred method, at least two people should be charged with unsealing the bids together to ensure transparency and accountability.
And, says Cutolo, “While price is not the sole factor in determining which vendor the board selects, the process of bidding under seal ensures that the vendors submitting bids will offer the most competitive prices. Without soliciting multiple bids, the board and its management may not be able to reasonably determine if a bid is in line with market forces.”
“We also tell boards that the lowest [price is] not necessarily the best,” adds Schlossberg. “At this point, we pare it down to three candidates based on previous experience with the companies and/or referrals from other people who have used them. Then comes a meeting with the engineer and companies one at a time to ‘sharpen the pencil’”—a common euphemism for adjusting their proposals to a more favorable price or offering. “We get their best price and best schedule, check for contingencies, and whether there’s a cushion in the price for unexpected problems. They come back with final revised bids, and then the board picks a vendor.”https://gumleyhaft.com/services/construction-management/ The pros add that this ‘pencil-sharpening’ stage is also a good time to leverage future projects, or suggest bulk purchasing or other efficiencies. For example, managers handling multiple properties may be able to negotiate favorable prices when buying large quantities of necessities like snow melt that can be shared among those client properties.
Even if a board-management team comes into the bidding process well prepared, with i’s dotted and t’s crossed, there can still be challenges. “The biggest problem today is finding the bidders to do the job,” says Scott Wolf, CEO of Boston-based management firm BRIGS. “We had a situation recently where we went for five bids. Of the five, three vendors backed out, one was just not a great contractor, and the other was outrageously priced. Contractors have so much work these days, they can be that way. We now say we need to know in the bid that the contractor can start within ten days of contract signing.”
Smaller Jobs & Long-Term Services
How does the bidding process change for smaller jobs—or for potentially long-term service contracts like pest control or landscaping maintenance?
“Right now,” says Wolf, “smaller jobs are harder to fill, because everything is bottlenecked. We don’t bid out jobs less than $10,000. We just find someone to do it. For smaller buildings we have a $5,000 threshold. Otherwise, it’s the same process.”
When seeking long-term vendors, Schlossberg says, “We speak to other managers and supers, for instance, to find a great exterminator. We will go to three vendors to make sure they’re proposing a good deal, then bring the bids straight to the board and review the terms with them. The board will pick based on price and services offered.” Schlossberg says that the bidding process for this type of contract doesn’t require an engineer, and is a less intense process overall, “but it does require a lot of research on our part.”
In regions where snow and ice factor into building and grounds maintenance, Wolf explains that landscaping and snow removal are often bid together. In New England, where his firm is based, “It’s one contract per season. A lot of associations do one for both. If you get damage from snow removal, the same guy fixes it. Bids for these types of services are less technical; there’s no RFP drawn up by an engineer. Instead, a request for bids is drawn up by the property manager and goes out to between three and five vendors. The board choses one, and you go forward.”
How Are Potential Bidders Identified?
So how do managers and boards find all these contractors and vendors from whom to solicit RFPs and bids? “It’s industry knowledge,” says Schlossberg of identifying potential contractors and vendors. “It’s not a huge community. We talk to each other from other companies, etc. We know who will do a good job and who is iffy. If someone does a great job on one building, we are likely to bring them in for another building. On large jobs we consult with and defer to the engineering specialist, because they know the nuances of any particular job and any particular contractor.”
Schlossberg continues: “If the engineer writing the RFP has a preference for a particular vendor with whom we’ve had a bad experience, we will talk it out, but likely won’t work with that vendor again. We then will inform the board in any event. If the board says ‘go ahead,’ we will make clear our prior experience. The board makes the ultimate decision.”
“All managers have their preferred vendors,” says Wolf. “We do too—many of them are long-term relationships. We trust these guys, so we use them. I’ve had issues where vendors get angry because they bid many times but don’t get the jobs. I tell them to bid better. It’s not a big issue for boards if you always bring in the same people, as long as everything’s done fairly. We get more guff from the vendor side than the client side.”
Should board members insinuate themselves into the bidding process? Should they recommend their cousin or brother-in-law for a major capital improvement job or a regular, on-going contract? It depends on where that recommendation is coming from.
According to Schlossberg, “It has never happened in any building I manage, but hypothetically, if a board member recommended someone, we would let them bid—it would be up to the board whether they got the job. Board members come from all walks of life; some are engineers, and I would take recommendations directly from them—but from their cousin’s cousin, not so much. If they have the proper background, it’s one thing. If not, it typically doesn’t work out well.”
All of this may beg the question: does every contract or project need to be bid out? According to Richard Brooks, a partner at the law firm of Marcus, Errico, Emmer, & Brooks in Braintree, Massachusetts, the short answer is no—at least not legally speaking. He says it’s really more an exercise in common sense. Small jobs often don’t merit taking the time and effort to solicit multiple bids, and in an emergency situation, obtaining bids just isn’t practical.
Cutolo agrees, though he does add that “while the body of law does not address the competitive bidding of contractor vendors, it’s my opinion that the best practice for communities depends on the circumstances. As a general practice, it is wise to solicit multiple bids when the board is seeking to contract with a vendor. However, where a project is emergent, it is not always reasonable to solicit bids,” he says. “Due to the time-sensitive nature of emergent projects, such as remediating water intrusion, it may be necessary for the association to enter into a contract immediately. To ensure the health, safety, and welfare of the community, the association may not have the time to solicit numerous bids.”
Brooks adds that when it comes to longer-term contractual relationships like with a manager or an attorney, “there’s no reason to go out to bid unless things aren’t going well.” In fact, those relationships benefit from their longevity, where institutional knowledge, personal comfort, and familiarity with the property have value that likely outweighs saving a few bucks by switching to a different provider.
What if your Association Is Self-Managed?
Wolf suggests that self-managed buildings can solicit and analyze bids as efficiently as buildings with managers. He says, “Don’t be afraid to bring in the expertise of an engineer or architect if necessary. If not, be as detailed as possible to get a contract that meets your expectations. Meet with the contractors on site and walk through and express your expectations. Communicate the details. Communication is the key.”
What to Watch Out For
“Be suspicious if a price is much lower for one contractor than the others,” says Wolf. “There’s something wrong there. In today’s market, if they say they can start tomorrow, ask why, because it’s just impossible today. If they say they have an opening because of a cancellation, be careful. It can be a problem. If they pull up in a landscaping vehicle to do a roofing job, it’s a problem. Always ask if they actually have insurance. It’s very important. Your association doesn’t have coverage for hiring an uninsured contractor.”
A J Sidransky is a staff writer/reporter for CooperatorNews, and a published novelist.