Bids 101: Final Changes Before Accepting the One That Works Best for You
May 26, 2015
By Frank Lovece
Last week, we took a look at the stage in the bidding process where boards get to meet vendors in person. In this fourth and final installment, we review making last-minute changes to bids, deciding who gets the project, and drawing up the contract. Sometimes you might have to request changes to all the vendors’ bids after they’ve come in. “One contractor will say, ‘You left [something] out of the request,'” says Warren Schreiber, president of Bay Terrace Cooperative Section 1 in Queens. “Sometimes it can be a contractor who is just looking to drum up more work, but in my experience, more often these are just people who are really knowledgeable, who have been doing it 20, 30, 40 years, and sometimes you’ll reexamine the project and say, ‘That’s right, we did overlook this.'” When that happens, he says, “we ask [the vendors], ‘Could you also give us a bid on this particular item?'”
To accept a bid and choose a vendor, it generally helps to have all the particular bid items laid out clearly on a spreadsheet. But as clear as a spreadsheet might be, a board should not analyze one without help from its professionals. And unlike a municipal agency, a co-op/ condo is not required to accept the lowest bidder.
At this point, it’s time for your attorney to prepare a contract. You should ensure he or she avoids using as a model a common construction agreement created by the American Institute of Architects (AIA), since it tends to favor contractors and architects over boards.
“The building owner should not use it off the shelf,” Leonard H. Ritz, of counsel at the law firm of Adam Leitman Bailey, cautions. “There are many provisions in that contract the [building] owner should not agree to.” And the industry is aware of this, says Ritz, who, as a member of the New York State Bar Association’s construction committee, has helped promulgate a proposed rider to the AIA contract to make it more owner-friendly.
You should also avoid accepting a contract provided by the vendor without having your attorney scrutinize it. After the contract is signed, keep in mind there may be cost increases because of unexpected circumstances. Conversely, a board can’t enlarge the scope of a project after an agreement is reached without expecting to pay more.
“Before finalizing your choice for the project, contact your insurance broker to review the insurance information provided from the contractors,” advises [an insurance broker]. “Getting full copies of the contractors’ insurance is extremely important, especially for large jobs.” Sometimes, she warns, “the contract is too general and will not have all the stipulations as to the quality of the contractors’ insurance policy. [It] usually just states the required limits they must maintain. We have seen cases where contracts were signed and later the building’s insurance company reviews the contractors’ insurance [and] makes additional requirements. Or even worse, there is a claim and you find out their insurance will not respond because of an exclusion.”
If the job is large enough, you might also want to consider requiring such items as a bid bond and a performance bond, she says. The former protects the building in case the contractor backs out after his bid is accepted but before the contract is signed. The latter protects the building if the contractor walks off the job.
“Contractors who are able to provide such bonds will usually be more expensive in the long run than other contractors, but you already will know that their insurance carrier has reviewed their job history and financials. If a contractor is unable to qualify for a bond [it] is a good indication that you may not want to do business with them.”
Finally, don’t make the process harder than it has to be for you, your professionals, or your vendor. Once the bid has been accepted, the contract signed, and the work begun — you’re done with that crucially important portion of the job.