The seemingly never-ending increase in prices of goods and services is affecting more than our personal pocketbooks. It is also affecting the way POAs budget and approach vendor contracts. As POAs have to be more mindful of costs and search for, or renew, vendor relationships, it is important to have a request for proposal (RFP) process in place to be able to select the right vendor for the community and recognize the differences between greed and inflation.
The POA Vendor Contract Approach
The RFP process begins before ever reaching out to a vendor by determining what the POA really wants out of the contract. For example, in the case of a landscaper, the Board needs to determine the cost the Board is willing to pay, what the Board would like the landscaper to service and how often the Board would like the landscaper to service the community.
Once the Board decides specifics, it is time to reach out to vendors for an RFP. The elements in the RFP should include:
- Scope – Description of work being performed
- Specifications – Details on how the work will be completed, equipment required, number of employees/contractors required
- Expectations – What is the start date? What is the term? Are there auto renewals?
- Standards – Explanation of how RFPs will be evaluated.
- Quantifiable results – Estimated completion date, actual completion or substantial completion
- Payment terms – Defines when payments are due, who approves work for payment, who is responsible for sales tax
- Default – What constitutes the default of the contract? Who determines and is there a right to cure?
- References – Examples of previous work and recommendations from previous clients.
- Insurance – List admitted and non-admitted carriers and minimum required coverage amount
The RFP process should be consistent no matter the type of service the POA is requesting. An RFP should set forth what is expected of the vendor in specific detail so that the vendor can provide a proposal that will be reasonable in light of the price being paid for the desired service.
Texas Property Code Sec. 209.0052
Recent changes to state law now require single-family POAs to request bids or proposals for some jobs. Sec. 209.0052 states that POAs seeking contracts valued at more than $50,000 shall solicit multiple bids or proposals using a process established by the POA. This does not apply to condominiums or developer-controlled POAs.
While the law only requires single-family POAs to seek RFPs on contracts for more than $50,000, it is recommended that all POAs seek RFPs for vendor contracts of all types. The RFP established by the POA will provide the roadmap for evaluating which vendor works best for the community and by seeking more than one bid, show which vendors are raising prices due to greed or inflation.
