As an HOA board member, finding vendors for your HOA is one of your most important duties. Unfortunately, many boards opt to settle for cheap vendors that deliver poor results all in the name of saving the association money. What these boards don’t know, though, is that vendor selection can impact the HOA’s bottom line.
In this article:
The Importance of Choosing Quality Vendors for Your HOA
Running a homeowners association comes with many responsibilities, one of which is vendor selection. Your board is tasked with looking for the right vendor to perform various services around the community. Usually, this refers to maintenance or landscaping services, but it can also extend to single-occasion projects such as roof replacement or parking lot restriping.
A common mistake that many HOA boards make, though, is settling for either the first vendor they review or the cheapest one in the bunch. Such a mistake can be disastrous for the association both in the short- and long-term. Not only does this type of decision-making result in substandard results, but it can also ultimately affect your finances.
Whether you are looking for vendors for a one-time project or an ongoing service, you should go for quality vendors for more reasons than one.
Quality Vendors Are Licensed and Registered
When searching for and hiring a vendor, always make sure they are licensed and state-registered. A licensed business offers more protection for its customers (your HOA). Plus, licensed and registered businesses usually abide by the professional standards of the field.
During your vendor selection process, ask candidates to submit a list of their credentials as well as proof of their credentials. If you encounter an unlicensed vendor, it is a good idea to take them out of the running. Operating without a license is a huge red flag and a risk your board should not be willing to take.
Quality Vendors Are Insured
There are many risks associated with various vendor services. A painter might fall down from a ladder while painting your two-story clubhouse. Landscapers are exposed to hand and eye injuries as well as mildly toxic chemicals. Pool cleaners or maintenance staff can accidentally slip and hurt themselves.
When these things happen, you want to make sure your association does not get entangled in liability. Quality vendors ensure that because they have the proper insurance coverage for such occasions. If you hire an uninsured vendor, your association might face litigation and even need to pay for damages.
Of course, it is not enough to purely rely on your vendor’s insurance. You must also make sure your HOA is covered by comprehensive policies that limit your risk of liability.
Quality Vendors Minimize Risk
Risk is always involved when you hire a vendor or employee. But, you can reduce those risks by going with a quality vendor with an established brand at the nationwide or statewide level.
These HOA vendors are typically larger in size. Therefore, they have more resources at their disposal. They also tend to have more experience in their field of work than newer or more unknown companies. That means they will make fewer-to-no mistakes and be less prone to accidents.
Additionally, renowned companies have a lower chance of going out of business due to their scale, client base, and reputation in the industry. As such, they are less likely to go bankrupt and close down mid-contract, giving you much less to worry about.
Quality Vendors Produce Quality Results
There is just no denying it — quality vendors produce quality results. And a multitude of factors contributes to this truth.
For one thing, quality HOA vendors work hard to make sure their work remains up to caliber. They are not willing to get a bad review or leave clients with a bad impression of their services. Great companies also provide their employees with ample training. This continued education ensures that their personnel remains the best in the business.
Additionally, good companies have access to a wide range of tools and technologies that allow them to perform their services to great success. Between a pressure washing company that uses commercial-grade machines and one that uses less powerful machines, which one would you rather hire?
If you go with a subpar company, they might commit mistakes and force you to hire another vendor to correct those mistakes. Ultimately, you would end up spending more money on two vendors when you could have had great results with just a high-quality one. Quality vendors get the job done right the first time.
Understanding and Fulfilling Your Fiduciary Duty
You might feel tempted to hire the cheapest vendor to make the board look good for “saving the HOA money.” But, cheap services tend to produce cheap, low-quality results. They manage to offer low prices because they compromise on the quality of materials and hire unqualified workers. In hindsight, you will realize that your attempt to save the association money only resulted in costing it more.
As an HOA board member, you have a fiduciary duty to spend the association’s money with good judgment and care. You must always put the community’s best interests first. If that means spending a little more for a better vendor, then so be it.
Remember that breaching your fiduciary duty can lead to legal trouble. If nothing else, you should exercise proper judgment to protect yourself and the association from potential litigation.
Homeowner Opposition: Defending Your Decision
The HOA board may face opposition from some homeowners regarding their decision to go with a more expensive vendor. In these cases, you will need to calmly explain to the membership why you arrived at such a decision.
Make it clear to homeowners that vendor quality is a big factor that influenced your selection. Oftentimes, homeowners blindly lash out because they don’t understand the reasons behind a particular decision. Once you lay down all the facts, many homeowners will change their minds and agree with you.
It is also worth noting that, in many states, homeowners have a right to inspect executed contracts. For instance, in California, Civil Code Section 5200 states that associations should make available all executed contracts not otherwise privileged by law.
A Brief Guide to Selecting the Right Vendors for Your HOA
Now that you know why quality vendors are essential to your community, you can proceed with hiring the best one. Here is a short guide to choosing good vendors for your HOA:
- Follow Procedures. Your governing documents will typically contain provisions on how to select vendors for your association.
- Define Your Needs. What type of service are you looking for? Determine, in specifics, what you need vendors to perform.
- Set a Budget. How much are you willing to pay for the delivery of these services? Remember that cheap does not always equate to good.
- Request for Proposals. Send out an RFP to potential HOA vendors. This should include your needs and your budget, among other things.
- Interview Candidates. An interview will allow you to ask the critical questions and allow you an opportunity to clarify uncertain terms in their proposals (such as their fee structure).
- Confirm Credentials, Insurance, and References. Make sure to verify the license, registration, and insurance of your candidates. You should also contact their references to get an impression of their work, fees, and behavior.
- Ask About Special Offers. If you want to maximize savings, it won’t hurt to ask if your HOA is entitled to any discounts or promos.
- Review the Contract With an Attorney. Every vendor relationship should follow an ironclad contract. Have your HOA attorney look through the contract before signing it.
Quality Over Price, Always
Choosing vendors for your HOA can have a significant effect on your association’s finances. When you go with a substandard one, you run the risk of getting poor-quality results and exposing your HOA to liability. Although looking for ways to save money is a noble effort, it should never come at the expense of the association.
Vendor selection and management is an often difficult aspect of running an HOA community. Make the process easier by outsourcing the task to an HOA management company like Clark Simson Miller. Call us today at 865.315.7505 or fill out an online form to request a free proposal.
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