Weighing cost versus benefits in vendor contracts can ensure that managed communities get quality work done at the best price
Finding the right vendor is one of the most challenging tasks for a community manager or HOA board. There are many things to consider, including experience, compliance with insurance and certification regulations, and of course, the price. When faced with hiring a vendor for either ongoing or short-term projects, it is tempting to let price be the most important factor in the decision. However, sometimes paying more means better quality of service.
Finding a balance is the tricky part. VendorSmart discusses how to master the fine art of balancing price and cost in vendor searches.
Why price should not always be the deciding factor
Any HOA board or community manager will prioritize spending money wisely. Overspending can lead to budget catastrophes and leave funding shortages for maintenance and other important projects around the community. On the other hand, the phrase “you get what you pay for” exists for a reason. Sometimes a low quote really is too good to be true.
So while price is important, it is not always the most important factor in the decision.
What does the proposed contract include?
Compare what each company is offering in exchange for its fee. Pay attention to exactly what services are included in the proposed contract. Take special note of what is not included as well. For instance, the company might be offering a low monthly retainer based on X number of hours of service, while intending to charge a lot more for “extras.”
Here are 9 questions to ask about every proposed contract:
- Exactly what services will be provided and how often?
- How will services be requested?
- How will services be rendered?
- What are timelines for providing services?
- Will you pay a monthly retainer fee or work on an as-needed basis?
- How many hours a week/month will the company work? What happens if it goes over the allotted hours?
- Are there extra fees for particular services or emergency services?
- What happens if service is needed during off hours, weekends or holidays?
- Who do you contact for emergencies?
A low monthly retainer means nothing if the HOA gets charged an exorbitant price for services not specified in the contract. Sometimes it’s worth it to pay more if the contract includes more-comprehensive service. Or perhaps the vendor will bundle services in order to offer a better deal.
Tips to remember when selecting vendors
There are several things for the HOA to keep in mind when going through the process of selecting a vendor. This will help management determine budget and needs.
Review governing documents – Before hiring a vendor, management should be sure it understands the rules in the HOA’s governing documents. They should also consult HOA policies and procedures to clarify how to go about hiring a vendor.
Things to review:
- What is the process for hiring vendors?
- How do you choose which vendors to ask for a request for proposal (RFP)?
- What is the required number of bids?
- What is the length of vendor contracts?
Following HOA rules isn’t just the right thing to do, it’s often a matter of law. Failing to comply with government regulations could open up the board to legal action and financial penalties.
Determine needs – Be specific about what the vendor is being hired to do. Write a detailed description that includes all of the duties the HOA expects the vendor to handle. This will ensure the proposal fits its needs.
Determine a budget – Be clear on how much the HOA can spend and how much it expects the service to cost, whether it’s ongoing maintenance or a one-time project. Do some research and see what other HOAs or managed communities are paying for similar services in the area.
Research, research, research the vendors – It’s up to management to research vendors. Check out the company website to see if they handle projects similar to what the HOA needs. You can also look at ratings from the Better Business Bureau or online review sites. Also be sure to verify that a vendor has the necessary licenses, certifications, and insurance.
Let VendorSmart help you vet vendors
Managing a building or community is a big responsibility. It is up to you to hire the right vendor to ensure your residents and members are satisfied with the quality of service. VendorSmart can help you vet vendors and manage bids. We also provide ongoing support, including risk- and compliance-management. If you are looking to hire a vendor or manage the certifications of current vendors, contact us to get started.