Selection and Contracting of Service Providers
A comprehensive written contract between a community association and each of its service providers should include many components. Each of these key provisions are necessary to clarify the agreed upon terms and conditions of the contract, and for the protection of both the Association and the service provider.
Prior to entering into a service contract the Association should always follow certain steps in the solicitation of proposals from qualified service providers. This solicitation will include the preparation of the bid request to be sent to select contractors that have been identified as potentially capable of completing the assignment as outlined in the request for proposal, and who have passed any reference verifications administered by the Association and/or management.
The Request for Proposal should contain all relevant information about the projected task to be performed, and should include most of the following items:
- Identification of the parties to the contract.
- Relevant time constraints for submitting the bid, starting the work, and completion of the work.
- Penalties for failure to adhere to the contract.
- Schedule for payment or draws.
- Dollar amount of the contracted work.
- Identification of type of materials and who supplies these materials.
- Location for storage of materials during the project.
- Responsibility for damages.
- Vendor performance bonds if necessary.
- Responsibility for permits and/or licenses.
- Warranty on both labor and materials.
- Provision for debris removal and cleanup.
- Identification of crew on-site supervisor.
- Clarification of both Association and Contractor liability.
- Responsibility for selecting materials.
- Provision for periodic inspections.
- How to handle cost overruns and additional work during the project.
- Retainage of final funding.
- Contract cancellation provisions.
- Jurisdiction or laws prevailing.
- Provision for no verbal agreements affecting the contract.
- Identify the location of the required work.
- State the hours/days that work can be done.
- Who will provide necessary tools and equipment.
- Identify who will supervise the contract management of behalf of the Association.
Together the Board of Directors and management should review the proposals received to assure that they have properly addressed each of the above referenced items. By doing so, the Association will be more likely to compare similar bids with corresponding scopes of work.
Once the Board of Directors has selected a contractor based upon the proposals received, the Board and management will be tasked with making sure the contract contains all the necessary information and provisions, including the following:
- Complete identification of all the parties to the contract. This includes both the Association and the service provider.
- Complete specifications of the work to be completed and the time frame for which it is to be done, including a requirement to meet any applicable codes, manufacturers' specifications, or industry standards. This provision will also identify the working days/hours allowed, exact location of the work to be completed, cleanup requirements, and who will provide the necessary tools and equipment. The type of materials should be thoroughly identified, as well as responsibility for providing the materials and the storage of the materials during the job.
- Amount of compensation for the work provided. This should always include a periodic draw schedule if necessary, and the identification of when those draws will be authorized. If necessary, it will also disclose the amount of the retainage, and the terms upon which it may be released. Notification of necessary change orders, and identification of who may approve them should be clearly outlined. The requirement for the contractor to provide necessary lien waivers should also be clearly stated.
- The time period for which the work must begin and be accomplished. For an ongoing service contract, it will identify the service schedule and what work will be performed on each service date. This provision will also provide for penalties for non-compliance by the contractor.
- Some type of standard of performance should be identified. This allows both parties to fairly judge the quality of the contractor's work.
- All applicable warranties should be completely outlined. This will include manufacturer's warranties and any workmanship or labor warranty provided by the contractor. The warranty should properly identify the covered item, length of coverage, and the responsibilities for failure of the material or workmanship.
- Provision for the responsibility for restoration of any common area damaged by the contractor during the work.
- Indemnification stating that the Association will be reimbursed and/or defended against all claims as a result of the contractor's performance.
- Requirement for adequate insurance coverage for the contractor before commencement of any work. This should include both general liability and worker's compensation coverage. The contractor should be required to provide insurance certificates of coverage naming the Association as a certificate holder. The terms and amount of any necessary performance bond should also be clearly stated.
- Identify who will be responsible for providing any licenses and/or permits required for the work. These licenses and permits should be provided before the commencement of any work.
- Provision for the termination of the contract. This termination provision will identify the terms upon which either the Association or the Contractor may terminate the contract.
- Identification of what constitutes a default or breach by either party, and the relevant rights for each part upon such default by the other.
- The contract should state whether it can be assigned by either party, and if the Contractor may employ subcontractors for the work.
- Identification of the governing law affecting any contract disputes, and a provision stating that the contract contains the entire agreement between the parties.
Proper documentation of the bid request process helps both the Association and Contractor fully understand the required scope of work. A properly drafted and comprehensive contract will then ensure that the Association's interests are fully protected, and the Association will be more likely to receive the quality and scope of work for which it has contracted.
Mark Southall, PCAM®, AMS®, CMCA®, COS®, CPM®, PCAM®, Association Times, May 2006