There are essentially three options for management of a community association: volunteer or self-management, association-employed manager, and professional HOA management company. Deciding which form of management to pursue is one of the single most important decisions a board of directors will make on behalf of their community. The decision is often determined based upon the size of the community, level of professional services desired by the board and community, and the costs associated with the services. Even in a small association, the responsibilities in serving the members and maintaining basic service levels and administrative and financial records make hiring of professionals almost a necessity. Ultimately, this decision can affect the scope and quality of services provided to residents, the condition of the community’s physical assets and amenities curb appeal, and the overall financial health of the association.
Deciding to Seek Bids
The first step in determining what company to hire is the solicitation of formal bids or requests for proposals. This process is important for the first company hired by the association board or when a board wants to make certain they are paying a competitive price for the management company already on retainer.
Length of Management Contracts
Bidding professional management services can be a time consuming process and should not be necessary every year. Management transitions, even in the best of circumstances, unavoidably disrupt association operations. Therefore, the size of your community, the scope of services you are soliciting, and the number of special projects planned by the association should be factors in deciding the frequency of bidding. Multi-year contracts can provide an association with cost benefits, continuity in services, and, with an appropriate termination clause, flexibility to make changes when necessary.
Content in the Bid/Request For Proposals (RFP)
The RFP should include a letter requesting bids, a contact person and address to send the bid, a deadline for response, information on a bidder’s conference (if scheduled), a property tour (if appropriate) and the contact person for any questions on the request. Finally, it is helpful to include a time table for bidder interviews and for a final decision by the board in signing the contract.
Additionally, the RFP should include basic information about the community such as the number of homes, type of homes, amenities, age of the community, special features, the number of board members, the number of committees, a brief summary of any special projects in process, the association’s fiscal year, a current budget, etc. The RFP should also specify a uniform proposal format that will make it easy for the board to accurately compare submissions.
The RFP should include minimum qualifications for bidders such as demonstrated experience with the management of communities of similar type and size, fidelity bond insurance requirements, professional designations for the company and staff, technology capabilities and resources, etc.
Finally, the RFP should include a statement of work (SOW). The SOW should outline the services requested by the community and outline the expectations of the management company such as property maintenance demands, administrative services such as the number of meetings to be attended, financial services including collection duties, and other general support. Defining the expectations of the management company will help the board measure performance and accurately evaluate cost proposals.
Creating a List of Bidders
While the internet can be a useful resource in developing a list of potential bidders, there are other targeted sources. Community Associations Institute (CAI) is nationally-recognized as an excellent source for developing a bidders’ list. Board members may find a telephone survey of other association board members will yield a useful referral in selecting a management company. Also, the association’s legal counsel or auditor may provide insight in locating reliable, qualified management firms.
Evaluating Proposals and Companies
Develop a list of questions for those providing bidder references that will address the services and qualities you are looking for from a new management company. Visit the properties managed by the bidders and visit their corporate offices. You can tell a lot about a management company by meeting their staff and asking questions about how their systems work.
For determining the effectiveness of the current management company, a survey of the property residents will provide a useful gauge of the management of the association. Also, a management audit performed by the board and manager or a third-party consultant can provide necessary analysis.
The Management Contract
Most management companies have standard management contracts explaining their services, the fees for those services, and the terms of the contract. Typical provisions clearly define the contracting parties, the lines of authority, the manager’s responsibilities, insurance requirements, length of the contract, a termination clause, an indemnification provision, and a compensation or fee schedule.
Using Legal Counsel to Assist with the Bid Process
Very often, an association’s board of directors will solicit the assistance of legal counsel for all or part of the bid process. While not necessary, legal counsel can be very helpful in reviewing the contract.
The owners who volunteer to serve as members of the board of directors often become overwhelmed with the duties and responsibilities this service requires for the other owners. A professional management company can assist in executing those duties timely, fairly, and legally.
Source: Community Management Corporation
Published: Association Times: August 2008
Provided by Jorel Association Management: September 2008Share