Vendor contracts negotiated by property manager have inflated prices: common?

ChrisE8
Posts: 454

Posted:

In one HOA that I have been involved with, the property manager had sole control over the HOA's bank accounts (which I now understand is relatively common) and sole authority to negotiate and sign contracts.

One vendor agreement charged the HOA what I now discover are prices that are nearly twice the market rate for the services that the vendor provided. When the vendor was contacted recently on behalf of the HOA, the vendor immediately agreed to drop the prices by half, resulting in a savings of $25,000+ per year.

Is it reasonable to suspect that the property manager used this vendor for multiple communities that the property manager managed, and the property manager stuck the HOA (which is relatively small) with high prices from this vendor and got the vendor to give better terms to other HOAs that are more important to the property manager? Or is it reasonable to suspect that the property manager got kickbacks? This vendor is a professional services firm.

Would you be livid at the property manager for negotiating a contract that resulted in the HOA spending over $250,000 more than market rates over the past decade?

Thanks.

TimB4 (Tennessee)
Posts: 21,061

Posted:

It's more likely that the contractor knew there wasn't going to be competition and so gave a higher quote.

This is why I don't mind a MC obtaining bids, but it should be the board that reviews the bids and awards the contract. That said, I think the board should also be the one's deciding who to send requests for bids to.

Actual example: A previous board was comfortable using a specific landscape company as they had a good working relationship. The contract was always renewed without bids. When I was elected to the board, I did the work and obtained bids. The previous contractor had inflated their prices so much that they were no longer competitive when bids were obtained.

An issue of being too comfortable with the contractor causing expectations that fair prices were being provided and laziness in not seeking competitive bids were the actual issue.

KerryL1 (California)
Posts: 14,550

Posted:

Good grief, Chris, will you never stop writing about your ex-N or SC HOA and the many crooked or suspicious activities he engaged in?

ND (PA)
Posts: 792

Posted:

There are several things that could be assumed, reasonably suspected, or somewhat likely from the situation you described. You listed a couple. I can think of a few more.

I would be upset with a lot of different people if I discovered the existence of such a situation. A few of them are below and possible reasons for being upset:
- the Management Company . . . for potentially being careless (perhaps intentionally) with HOA funds and/or having unethical/ulterior motives for the contract/arrangements.
- the Vendor . . . for potentially inflating prices and/or having unethical/ulterior motives.
- the HOA Board, HOA Officers, and anyone else involved in the HOA governance structure . . . for not being more involved and/or having appropriate oversight, and potentially having unethical/ulterior motives.
- myself and my neighbors . . . for failing over the course of a decade to be more involved, ask questions, obtain information, offer assistance, and be more interested and inquisitive in the running of our corporation and the spending of our money.

ChrisE8
Posts: 454

Posted:

Quote:

Posted By KerryL1 on 01/21/2021 6:32 PM
Good grief, Chris, will you never stop writing about your ex-N or SC HOA and the many crooked or suspicious activities he engaged in?

This is a different property manager.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

BTC needs to go out.

Aack.

SheliaH (Indiana)
Posts: 6,964

Posted:

Quote:

Posted By ChrisE8 on 01/22/2021 12:47 AM

Posted By KerryL1 on 01/21/2021 6:32 PM
Good grief, Chris, will you never stop writing about your ex-N or SC HOA and the many crooked or suspicious activities he engaged in?

This is a different property manager.

Then why aren't you going to the board with your concerns?? Not that that your concerns don't have a ring or truth (maybe several), but how many times must you be told that property managers work at the board's direction?????

I think in your last post about the property manager (the one where you said he or she was arguing with homeowners on the association's message board) you said you weren't involved in the conversation or some such. How in the hell do you expect anything to change if you just sit there and do nothing?

I'm beginning to think there a lot more to this than what you're letting on. You keep saying the managers doing this and that, but could it be you tried to do something you really weren't supposed to, the property manager called you on it and now you're mad and want to find something to get rid of him or her? Maybe you went to the board, they backed the property manager and now you're mad at them too, but don't have the stones to bring this up because your credibility has taken a hit?

You can bring up these conversations as much as you like, but it'll be far more useful if you actually try to do something about it. Otherwise it's just whining and resolves nothing....

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

ChrisE8
Posts: 454

Posted:

Quote:

Posted By SheliaH on 01/22/2021 6:31 AM

Posted By ChrisE8 on 01/22/2021 12:47 AM

Posted By KerryL1 on 01/21/2021 6:32 PM
Good grief, Chris, will you never stop writing about your ex-N or SC HOA and the many crooked or suspicious activities he engaged in?

This is a different property manager.

Then why aren't you going to the board with your concerns?? Not that that your concerns don't have a ring or truth (maybe several), but how many times must you be told that property managers work at the board's direction?????

I think in your last post about the property manager (the one where you said he or she was arguing with homeowners on the association's message board) you said you weren't involved in the conversation or some such. How in the hell do you expect anything to change if you just sit there and do nothing?

I'm beginning to think there a lot more to this than what you're letting on. You keep saying the managers doing this and that, but could it be you tried to do something you really weren't supposed to, the property manager called you on it and now you're mad and want to find something to get rid of him or her? Maybe you went to the board, they backed the property manager and now you're mad at them too, but don't have the stones to bring this up because your credibility has taken a hit?

You can bring up these conversations as much as you like, but it'll be far more useful if you actually try to do something about it. Otherwise it's just whining and resolves nothing....

Does it do any good to swear at someone online?

Did I ever state that I'm not taking any action? Perhaps I am going to the board, but before doing so, I'm trying to determine if my concerns are valid?

CathyA3 (Ohio)
Posts: 6,299

Posted:

Contractors can also submit high bids when they don't want to do that particular job for whatever reason, but they want to emain on the list of vendors that the PM/HOA contacts for future bids.

It's very common for a PM to obtain bids, and in fact that's one of the reasons we hire PMs to start with. If the management company is large, they will have had experience with multiple vendors in multiple communities and will have eliminated the poor performers from their list. (Our previous PM advertises their ability to obtain competitive bids from reliable vendors as one of the services they provide.)

The final decision on who is awarded the contract is up to the board always. However, during board discussions I expected our PM to chime in whenever they knew something relevant. Again, it's one of the reasons we hired that PM to start with.

The PM will commonly handle all of the paperwork. The only thing the board president has to do is sign the contract.

To someone who is not directly involved in any of this, it can look very much like the PM is running the show when that's not the case. I tell anyone who has never served on an HOA or COA board that they should assume that they don't have all the facts. Doesn't mean they shouldn't question things - it just means that ignorance is a more likely explanation than nefarious deeds for whatever they're seeing.

ChrisE8
Posts: 454

Posted:

Thanks (and thanks, CathyA3, for consistently being a voice of reason).

Surprisingly in this HOA, the board president didn't sign contracts, and the board didn't even review or approve contracts. The property manager handled them all, without giving the board choices of what vendor to use or even providing the contract to the board for approval.

ND (PA)
Posts: 792

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Quote:

Posted By ChrisE8 on 01/22/2021 7:15 AM
Thanks (and thanks, CathyA3, for consistently being a voice of reason).

Surprisingly in this HOA, the board president didn't sign contracts, and the board didn't even review or approve contracts. The property manager handled them all, without giving the board choices of what vendor to use or even providing the contract to the board for approval.

Shame on the Board and the MC. Again, a lot could be assumed here; however, without context, it's hard to say if something fishy is going on or if this is SOP in whatever state and/or HOA you're presently talking about.

SheliaH (Indiana)
Posts: 6,964

Posted:

So, you’re mad because of a few swear words, but haven’t answered the question – did you go to the board with your concerns or not? At least you seem to pay attention to something.

As you know, vendors charge what the market will bear (something you may have noticed when renting out your last home) and it’s up to the customer to accept the price or not. That’s why people do comparison shopping when they buy things like groceries and why it’s often suggested on this website that HOA boards get at least three bids before making a decision.

You said you found out one vendor charged your HOA double the market rate, but when contacted about that, the price was dropped. That’s great, but as ND said, context is important – something you never seem to consider. I’m not sure you always trust your instincts – when something seems out of kilter, it may be due to a lack of knowledge, a misunderstanding or something else you really need to investigate. Put another way, if it seems odd, go ahead and ask so you’ll know what you’re dealing with. If people stonewall you or ignore the question altogether or can’t seem to give you a straight and complete answer, that’s when you should start to wonder why that is.

There are property managers who do represent several communities and are able to negotiate price breaks. Ours operates similar to what Cathy described, and when I was on the board, we would occasionally also ask her to get one or two more bids if we thought the bids we received were too high or there was something about the terms that bothered us. In the end, we still voted on who to accept and our board president signed the contract on behalf of the association.

So, how do you know this property manager “stuck” the HOA with a high price for the service? You also said the board president doesn’t sign contracts and the board doesn’t approve or approve them. And you blame the PROPERTY MANAGER for this????? This is association money and the board is responsible for managing it in a prudent manner – when are you going to hold THEM responsible for this or anything else?

Finally, who elects and re-elects the board? Maybe you and your neighbors need to take a long look in the mirror – are y’all happy with board presidents who don’t sign contracts or board members who don’t review contracts??? If not, better start asking questions and demanding answers? You won’t know if your questions are reasonable or not unless you open your mouth. If you’re not happy with what you hear or don’t get a straight answer, perhaps it’s time to replace the board. Of course, as you know, that will mean others will have to step up and one of them may have to be YOU. It’s easy to criticize but you might be enlightened in a big way when you become one of the folks who have to make the decisions.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

ChrisE8
Posts: 454

Posted:

SheilaH, if you will post messages that are civil and polite, I'll read them and respond to them. Otherwise, I will not.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By ChrisE8 on 01/22/2021 7:15 AM
Surprisingly in this HOA, the board president didn't sign contracts, and the board didn't even review or approve contracts. The property manager handled them all, without giving the board choices of what vendor to use or even providing the contract to the board for approval.

I think this is the Board's choice. It is also the choice of a majority or plurality of members to keep such a board. In my opinion, the grievances here are with the membership, not the manager nor the Board.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By GeorgeS21 on 01/22/2021 5:08 AM
BTC needs to go out.

Aack.

Thbbft!

[slapping hand on forehead] Argh. Now he's got me doing it.

ChrisE8
Posts: 454

Posted:

Quote:

Posted By AugustinD on 01/22/2021 8:40 AM

Posted By ChrisE8 on 01/22/2021 7:15 AM
Surprisingly in this HOA, the board president didn't sign contracts, and the board didn't even review or approve contracts. The property manager handled them all, without giving the board choices of what vendor to use or even providing the contract to the board for approval.

I think this is the Board's choice. It is also the choice of a majority or plurality of members to keep such a board. In my opinion, the grievances here are with the membership, not the manager nor the Board.

Yes, the board should have used more oversight, and members should have been more on the ball. You are right.

However, in my job I'm expected to use basic sense. I order things from vendors, and I don't authorize payment of tens of thousands of dollars for prices that are double the market rate. I'd expect to get my head chopped off by a customer if I did that to a customer. Why is a property manager not required to use basic sense?

AugustinD
Posts: 5,144

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Quote:

Posted By ChrisE8 on 01/22/2021 10:06 AM
Why is a property manager not required to use basic sense?

As noted above, because members do not care. Which means the Board does not care.

JohnC46 (South Carolina)
Posts: 14,265

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Quote:

Posted By ChrisE8 on 01/22/2021 7:15 AM
Thanks (and thanks, CathyA3, for consistently being a voice of reason).

Surprisingly in this HOA, the board president didn't sign contracts, and the board didn't even review or approve contracts. The property manager handled them all, without giving the board choices of what vendor to use or even providing the contract to the board for approval.

Many HOA's defer to, let the PM run the place as they do not want to be bothered. It can work, but it can be costly. The question is are other swilling to take on the responsibility?