Hiring residents, thier relatives, board members thier personal friends or professional colleagues

If there are already discussion threads on this I apologize. If I missed something please point me in the right direction.

This topic concerns accepting bids, hiring residents or close relatives of residents. Also extends to allow personal friends and professional colleagues of board members do the same. We had a case of this that cost this community a lot of money and forced the board the solicit bids for our snow removal. The board member involve is not longer on the board. However, many of the board members did not learn a lesson from that experience. Our covenants and by-laws don’t explicitly prohibit above. Basically, states that the board can hire, fire, supervise contractors at will. Our community documents don’t prevent the use of common sense either.

We recently received an inquiry from a resident about how his father can bid on our lawn care contract. The President received the request and told him to have his father send in a bid. After our board meeting she had to retract that because it does not follow our policy. Furthermore, the contract is not up for bid at this time.
At our last board meeting myself along with another board member brought up the need for our board to put a policy in place that governs accepting bids and/or hiring residents, their relatives or anyone who has personal/profession relationships with board members. Also to have our legal counsel provide guidance. Four of the six directors just don’t get it. They feel anyone should be able to business with us regardless of relationship. Basically no conflict of interest in their eyes some even think offsetting dues for work is acceptable.

Comments from some of the board members:
• “Who cares if someone bidding on work with us has access to our budgets, and expenses?” “That means a better bid.”
• “Who cares if we hire a resident who is behind on HOA fees? That won’t affect what kind of work they will do for us. If we are suing them for HOA fees that has nothing to do with a business contract.”
• “If we don’t do business with members, relatives,… we are discriminating.”
• “We are not running a business here so stop acting like it!”

Two of us (directors) are asking the rest of the board look at this objectively. That they take into account that we are working with the community’s money, that we take all steps to minimize risk and impropriety (real or perceived). With great argument we managed to get them agree to have our lawyer look at this and we are awaiting his response.
Professionally, I would never enter into accepting bids or execute a contract with residents, their close relatives, professional colleagues on behalf of our community. Thoughts?

OH, YES YOU ARE!!!!

Most HOAs are corporations registered with the Secretary of State. You must also file federal and state tax forms. You must comply with your state's laws regarding corporations.

You ARE running a business. You're dealing with other people's money (in some cases, a lot of it). It's not a social club.

EW

As you said:

"At our last board meeting myself along with another board member brought up the need for our board to put a policy in place that governs accepting bids and/or hiring residents, their relatives or anyone who has personal/profession relationships with board members."

I would caution not to make a policy that is to restrictive.

As an example. If I am on the BOD and I use a company that plows my business lots and they do a great job for me so I recommend they be considered. I would not see this as any conflict even though I have a business relationship with them.

Another example. My son works for a nationally known disaster restoration company. It would be foolish to somehow eliminate his company being considered for doing work for our association based on the fact that he is my son.

Also be sure if an emergency arises and work is needed now (toilet overflowing in the cluhouse), that it does not take an act of congress to get it done now.

Were it me I might discuss how to tighten up on bidding and contract procedures as in request, review, awarding, procedures, etc. more so then anything that would limit who can bid.

I made similar points to the board member who actually made that statement and he laughed. Really, makes me wonder.

Quite often many on BOD's are "running a business/budget" bigger then they they ever ran in their life and quite often get confused/do not understand their responsibility, so they fall back on stuff like we are not running a business here comments.

I was on a BOD of a fraternal organization where one BOD Member was really never able to get his arms around basic budgeting and Ecomomic 101 issues. He made proposals from his heart. He once asked me why I generally seconded his proposals but almost always voted against them. I replied to try and show/convince you that we are fair and will discuss but things need to be paid for. I said no matter how good they feel, we have a fiscal responsibility and that has to come first before the feel good stuff.

In the short run, feel good can outweigh responsibility but in the long game responsibility wins.

Wow a con man on the board. I have never seen that before... well actually we have had our issues. Two of our members are very shady and not trusted by the community but that is another discussion.

For insurance we require comprehensive general coverage of $1M per occurrence, $2M aggregate. Workman's Compensation coverage in our state. Certificates of insurance must be submitted and their expiration must not be within 30 days of the contracted work period. Contractors must be licensed in our state and provide official proof. For lawn care, road work, other construction bidders must attend a pre-bid meeting (at their cost) to walk down the areas covered by the statement of work (SoW) in the RFP. No show means no bid. There are several other clauses as well. We have a lot of very shady contractors here. Bids are sealed, must be postmarked by given date, and be on the company's official letter head. Minimum of three recommendations from customers who had work done in the last year. These rules were vote in two years ago.

It is entirely possible that resident or a relative of a resident who does not live here could meet above. Therefore, could submit a bid. Outside of the conflicts noted in the rest of the threads, community members have access to our budgets and income & expense reports. That means bidders from the community will have an unfair advantage and by extension their relatives could have the same advantage. If that gets out and it will, we will have problems getting reputable bidders. Furthermore, we don't want residents sharing our financials with individuals who do not live in the community, family or not. We just went through this with a former board member. He gave our financials and project budget to a potential contractor. Guess what the quoted price was!

Two of us( myself and the Treasurer) have made it known that we will review all qualified bids in their totality. Quoted price is just one part of the decision. Decisions and justifications to be posted in detail in the meeting minutes.

We have the same rule about recommendations, made in writing or at board meetings and openly discussed, documented in the minutes. I think we are getting a litle closer here but I has taken a long time. Too many people wanted to just let things fly and some are still holding on to some of that. We have been burned and their have been public cases of other local HOAs getting caught up in shady practices.

We are fortunate that at least two board members here want to avoid those issues. The other members worry me.

Back to the original OP, The association should be interested in hiring the best person for the job at the lowest cost it can get regardless of who it is. If you have someone in your neighborhood who runs a legit business, has all the proper insurance, etc. and submits the lowest bid then I see no reason they shouldn't be hired. The bid process has to be fair for all, and they need to be treated the same as an outside contractor. In my experience businesses that live within your neighborhood tend to do a better job because their fellow residents know who they are and what they are doing.

The key is it has to be a fair bid and they have to meet all the requirements that you would place on any business you hire.