BIDDING CAPITAL-IMPROVEMENT CONTRACTORS

I was not particularly shocked. As I had learned from the co-op's current engineer, much of the structural damage had come about as a result of deferred and substandard property maintenance. That former board-member's method was a surefire way to obtain:

• Substandard work

• Time overruns

• Claims for extras

• Contractor disputes

• Job abandonment

This former board member did accomplish his goals, however:

• Expended only a fraction of what was necessary to complete the repairs

• Made cosmetic, substandard repairs

• Passed along major building problems to the remaining tenant-shareholders

This board member owed both the cooperative and all of its shareholders a fiduciary duty to bid the capital improvements properly so as to keep the building structurally sound and to protect the investments of all of the tenant-shareholders. He didn't — but you should.

Bidding Basics

The bidding process starts with securing the service of a competent architect or engineer, one skilled in the type of work to be performed. It should be obvious that a mechanical engineer will not be qualified to do façade work or roofing replacement. Nor should a structural engineer prepare the documents for your boiler replacement.

Managing agents, architects, engineers and similarly situated co-op/condo boards are good sources of recommendations for contractors. On a major capital improvement, line up four to six bidders at least.

Scrutinize each bidder not only for their technical expertise, but their financial capacity to complete the job. The contractor must have sufficient financial wherewithal to pay for its materials, its subcontractors and its own staff while awaiting payment from you. If not, staff and subcontractors may walk off the job and material vendors may stop deliveries – leading to time delays and possibly the abandonment of the work. To perform appropriate due diligence and determine a contractor's financial condition or creditworthiness, secure a Dun & Bradstreet or other financial report.

While you're busy doing that, your architect/engineer should be preparing an "Invitation to Bid" giving the rules and requirements under which prospective contractors will submit their proposals. This should include a required line-item breakdown of the elements of the work, and should require the contractor to indicate the prices for line items – the total of which will be the lump sum price for the work. Such a document is known as the "Schedule of Values" and will aid a property and its professionals in awarding the contract. It will also substantially aid the payment process.

The bid package should also require a "Unit Price Schedule" (cost per unit, i.e., "pointing: $1.50 per lineal foot") so that additional work, or deleted items, have an agreed-upon price. The Invitation to Bid should also require that the contractor inspect the property in advance, set forth the insurance requirements demanded by the building and indicate whether a payment and performance bond (see next page) will be required.

The invitation should also indicate that you have the right to reject any bid and to award the contract to any bidder (regardless of price) and to even renegotiate the bids after they have been received. You're ultimately seeking (to use the legal terms) the lowest "responsible" and "capable" bidder so as to achieve the best work for the lowest reasonable price.

Don't skimp! The key to a quality job completed for the bid price and within the allotted time is to have a knowledgeable professional who makes the appropriate investigation to create a unique set of drawings and specifications

Note: Not all work need be competitively bid. Emergency repairs, or repairs whose costs cannot be determined in advance, can be negotiated with a reputable contractor on a time-and-material basis. But the person negotiating such a contract must be knowledgeable about pricing labor and materials.

What Bidders Should Provide

Contractors bidding for the job should be able to prepare complete and accurate estimates, which eliminates the need for extras and cost overruns. The specifications should include all of the conditions under which the job will be performed and contain all of the terms under which the contractor will be required to perform work, including: .

• Work-schedule adherence (withholding 10 percent of each payment due to the contractor to assure completion)

• Insurance requirements

• Union affiliations

• Supervisory personnel and

• Security issues

It's never a good idea to negotiate to the point where a contractor cannot make an adequate profit. That results in contractors cutting corners in order to make a reasonable profit.