By Sherri Hall
When it comes time to send out a “Request for Proposal” (RFP), a community association may be wondering when to contact their attorney during the process. Oftentimes, associations will have their attorneys review RFPs before sending them out, but some may wait for attorney involvement until after the contract has been awarded. Does the association’s attorney need to review every single RFP beforehand? What are some items that associations should be including in their RFPs?
According to Loren Lightman, an attorney with Hill Wallack LLP in Princeton, New Jersey, depending upon the scope and circumstances pertaining to the project, an attorney may not need to review the RFP. However, she explained that there are specific times when it’s especially important for an association’s attorney to become involved early in the RFP process, such as when there is something unique about the association’s governing documents or the project itself.
For example, Lightman noted that if the potential exists for unit owners to have responsibility, whether financially or by needing to allow access to their units, it would be helpful for the attorney to review the RFP. She added that gaining access to the units can impact the timing of the project, which is something contractors would need to take into consideration when preparing their bids. Therefore, in situations such as this, it’s important to have the association’s attorney outline the process for unit access in the RFP.
In addition, Lightman said if there will need to be a special assessment or homeowner authorization to approve the funds for the project or if a project involves elements that are part of individual units in addition to common elements, these are also concerns that should be brought up to the attorney to potentially address in the RFP as it may impact how quickly the project will begin and how readily the contractor will be paid.
She noted that another concern is when a project carries potential significant liability for the association. For example, in a roof replacement project, people will be on the roof for an extended period of time. Another example are those projects where residents may have to co-exist with heavy machinery and other equipment which could present attractive nuisances, particularly to children. This may impact insurance and indemnification provisions of the RFP which the attorney will want to review.
According to Lightman, community associations are bound by the business judgment rule, which provides that decisions need to be supported by a rational basis, must be authorized by law and may not be fraudulent or motivated by personal agendas. Boards don’t want to find themselves accused of self-dealing or fraud in securing contracts for the association. “One of the ways to insulate yourself from that is to put out an RFP, because it’s an objective process that sets out the structure of the project and everybody bids on the same set of criteria that are objectively determined,” she explained. “You want everything to be as consistent as possible with respect to the bid process so that everyone is on the same playing field.”
In addition, Lightman said it’s important to be sure of what is being asked of the bidders before sending out an RFP, including the time period for when the project is scheduled. Some contractors may not even bid on a project due to its timing. “You have to be fair and put everything out there so everyone is bidding apples to apples,” said Lightman.
“When you’re putting together your RFP, everyone should be on the same page—your manager, your board, your engineer—as to what is realistic,” she noted. “It’s much easier to change something early on rather than once the project has been bid.”
She added that associations must also pay attention to deadlines when developing their RFPs. “Deadlines are really important because the contractor is going to look at their timing and it’s going to go into the pricing,” she noted.
If the association would like to start a project at a certain time of year, that could also potentially impact the timing, Lightman explained. This can be the case, for example, in the case of a seasonal community where there will be more people in their units during some parts of the year rather than others. To the extent that the association may have a hard deadline for the start and finish for the project, it should be included in the RFP. “You can’t anticipate every last variable, but you can anticipate the things you will know about ahead of time,” said Lightman. “So, when you sit down and work out what’s going into that RFP, you need to be as honest as possible as to what variables are going to be involved that make it easier or harder because that’s what the contractors will be bidding on.”
Lightman noted that it’s also important for associations to rely on their professionals (i.e., engineers, attorneys, etc.) when gearing up for a project because doing so can help insulate the association from liability. This includes input from the association’s engineer and attorney in helping draft the content of the RFP.
“You want to protect the association from exposure,” Lightman added. That’s why it’s important to have an objective RFP for contractors to bid on, and after receiving and opening the bids, have an attorney not only write up the contract, but also take part in negotiations with the contractor’s attorney or the contractor themselves. “It helps protect everyone involved,” she said.
Lightman noted that when drafting the RFP, the association should take into account not only what the project itself is going to be, but also the terms and conditions. This includes hours of work, how invoices and payments are going to be handled throughout the course of the project, and if there will be a retainage at the end to be paid following the final inspection.
Lightman said that it is important to determine how it is decided if work is not acceptable and under what standard, and if there is a breach of contract, what the remedy is going to be or if the association has the right to terminate. “You want to protect yourself and build that into the contract in case things don’t work out,” she noted.
Lightman also discussed the inclusion of insurance and indemnity provisions which can help protect the association in the event a lawsuit arises related to harm or loss. Since this requirement may impact the prices that are quoted in the bids it should be included as a requirement in the RFP.
In addition, it’s important to include information regarding any warranties and guarantees once the work has been completed, said Lightman. This may also impact the price quotes which the bidders will need to take into consideration when preparing their responses to the RFP.
Safeguarding construction materials is another matter that should be addressed, said Lightman. If there are significant quantities of materials to be stored on site during the project, there can be potential liability issues if they are not secured properly. Additionally, if the project requires a dumpster on site, the association may wish to include language as to where it will be place and which party will bear the cost in the event it needs to be relocated during the project as that may impact the prices quoted in the bid response as well. Safety with regard to COVID-19 precautions is also something to consider including or referencing in the RFP, she added. This may impact whether a contractor will be able to mobilize a large enough workforce to complete the project within the timeline and guidelines set for the project.
Overall, the RFP should try to capture as many of the legal and practical requirements for the project as possible so that prospective bidders can decide (1) whether to submit a bid; and (2) the details of their responses so as to ensure that the responses reflect an accurate statement of the time and cost to complete the project. This in turn will work to protect the integrity of the bid process for the benefit of the association and the prospective bidders.