Conflict of interest

Started by KurtG1 • 6 replies • 1315 views

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KurtG1 (Texas)
Posts: 30

Posted:

Our HOA has a bunch of problems with our management company and started a search for a new one. Apparently the directors were really worn down with dealing with the problems of the prior company and signed a contract with a new firm for more than 2x what we were paying in hopes that their lives would be made easier. The new firm seems to be doing rip and replace on all the contracts we have and are using companies that pay for advertising on our HOA web site. This seems like a conflict of interest. Should I be worried?

SusanW1 (Michigan)
Posts: 5,202

Posted:

Only if you don't have a budget that must be followed.

KurtG1 (Texas)
Posts: 30

Posted:

I guess I don't get what the budget has to do with it other than to possibly put a cap on things. The board sets the budget to be whatever they want. The issue I have is that when the board asks for bids it isn't very hard for our management co. to get 3 high bids and come in with a bid from someone they have an advertising relationship with. Obviously if the management co does not bring new accounts to their advertisers it makes no sense for those companies to continue paying for advertising. Should the directors be demanding the best deal for the HOA? Or should they be content as long as they come in under budget?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Kurt,

Providing that the management company had the authority from the board to award contracts then there probably is no conflict of interest. There can certainly appear to be a conflict if the specifics are not known on the process, but an appearance is not the same as an actual conflict and even if there is an actual conflict, depending on how the contract with the firm was written, it might not be illegal.

I would suggest that you take your concerns to the Board (not the management company) and offer suggestions on how to minimize the appearance. Perhaps you could volunteer to chair a committee for all contracts - specifying the needs, soliciting bids, and holding the bids until the end of the bidding time frame then make a presentation to the Board for a decision on whom to award the contract to.

Tim

SusanW1 (Michigan)
Posts: 5,202

Posted:

You can ask the MC if they award bids because the company advertises,

OR

if the company is advertising because it has the bid.

In any case, you have hired the MC to get things done - within a budget. So if things don't get done, THEN you have a complaint.

The board does not have to micro-manage things like that. That's why you hire a MC.

JrO (California)
Posts: 7

Posted:

What is your criteria for a high bid? Do you have knowlege of what are usual prices for the work being done? Remember that the kind of bid that comes through for a condo complex isn't going to be the same as what someone might get for their house. Contractors who work with condominium complexes have to have more insurance, and are held to a higher standard. Their prices tend to be higher. And it is true that some management companies have preferred vendors. I have had experience with both kinds: Sweetheart relationships that represent kickbacks to the manangement company, and legitimate relationships that have to do with the fact that they are good contractors.

As to the issue of the cost of the management company. I'm the president of the board of my association. I know from experience that you get what you pay for. Our former mc charged a very low fee but was getting kickbacks on construction and was a big mess. Our current mc costs more but has saved us thousands on construction costs, and in one case made us money. I would advise looking further into the issue, but don't jump to conclusions.

KurtG1 (Texas)
Posts: 30

Posted:

Thanks for your input SusanW1 & JrO. I'm usually quick to overreact to things that seem off. So I'll back off the board menbers until I find more information. Hey, if they are as good as they say they are then maybe they are worth the money. However, a year ago nobody on the board seemed to have a problem with the MC. To use a car analogy, I think we had the equivalent of a Ford Taurus and when they replaced the car they decided to go for the Lexus. I guess I shouldn't whine as long as the savings the new MC brings are greater than the difference in price.

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