The Vendor Network Advantage: How HOA Management Companies Secure Better Contractor Rates

Whether you are a homeowner, HOA board member, or community association leader, it is essential to understand the importance of how HOA management companies secure better contractor rates. The implications can affect each of the aforementioned in key ways, but primarily in terms of negotiating lower contractor rates that still allow for improved service quality, budget planning, and cost efficiency.

While it is true that some HOA boards operate on their own rather than under an HOA management company, it may leave the organization and its members unnecessarily exposed to risks. By delegating the securement of better contractor rates to professionals with experience in this area, it may be possible to negotiate a better deal than the HOA board would have been able to secure alone.

In general, the role of an HOA management company is to support overseeing a residential community with an HOA board by assisting with daily operations and the administration of them. These companies exist to support the HOA board in ensuring community matters are handled smoothly.

HOA Management Company Experience Could Equal Contractor Discounts

If an HOA board were to take on the task of negotiating vendor rates themselves, it could result in higher prices due to the contractor serving just one neighborhood and the possible inexperience of the board.

The benefit of having the professionalism and experience of an HOA management company is that they should have a comprehensive knowledge of market standards that equips them to identify the difference between an exorbitant rate and a fair one.

In the event that a contractor first offers a rate much too high, the company has the ability to compare quotes with other contractors to avoid a situation in which they are forced to go with an overpriced option. Because HOA management companies work with contractors on a fairly regular basis, many of those contractors realize they must be competitive in their pricing to secure a sale. This knowledge alone can help cut down on the number of contractors trying to get away with a lucrative deal that is more than the service they are providing.

The Value of Strong Relationships with Quality Contractors

Because an HOA management company typically represents multiple residential communities, it is in their best interest to simultaneously prioritize a contractor’s performance and reliability with their ability to provide a reasonable rate.

Bringing on a contractor with a reasonable rate should not equate to sacrificing performance and reliability. To do so would be a detriment to the HOA’s integrity and may well negatively impact their community.

To avoid this situation, HOA management companies can heavily screen and evaluate contractors before striking a deal to ensure that any relationship they enter into will be a strong one that results in better service to a community, lower rates over time, and faster response times.

Contractor Bidding and Vetting Is a Science

It is one thing to know that quality services are needed from upstanding vendors and at a reasonable, and possibly discounted, price. It is entirely another to fine tune a contractor bidding and vetting process that does exactly that.

As HOA management companies usually work with multiple residential communities, they typically have experience in issuing requests for proposals (RFPs) and getting the word out to upstanding contractors. The ability to effectively communicate what community need must be met and ensuring that it is seen by reputable contractors is critical.

With the right applicants in place bidding against each other to meet a community’s need, the management company then looks to compare contractors’ bids, past performance, insurance, licensing, and references. This step is vital to reducing risk to the company, the board, and neighborhood homeowners.

The Art of Negotiation

The art of negotiation goes well beyond securing a good deal. When an HOA management company is actively negotiating a deal with a potential contractor, they also evaluate the following:

• Timeline for the project
• Expected project completion date
• Warranties for labor and materials
• Payment systems and terms

A good deal without any of the other above components means saving on the budget, but not necessarily helping the community you represent. This is why HOA management companies evaluate each of these points before signing a negotiated contract.

In addition, a reputable HOA management company will also have a strong and foundational understanding of contract law so that they are equipped to better protect an HOA’s interests.

Strong Contractor Relationships May Equal Budget Transparency

How HOA management companies secure better contractor rates can also impact an HOA board’s budgeting abilities.

Because an HOA management company can often negotiate lower contractor rates than a board could alone, it can help keep the board’s budget in check. Not only that, but by being able to better estimate the cost of contract work, it can help an HOA board more effectively anticipate annual costs while also avoiding unexpected ones.

A Case Study in HOA Management Companies Securing Better Contractor Rates

A small, 150-home residential community in Arizona contracted out landscaping services for their neighborhood. The contractor’s services had been renewed annually for more than five years.

Unfortunately, the fine print in the contractor’s annual renewal contract accounted for a price hike. In addition to this added expense, homeowners started to notice a decline in the quality of work from the contractor, with overgrown and dead landscaping as well as inconsistent upkeep of the community grounds. So, the HOA board voted to bring on an HOA management company.

After examining the contract, the HOA management company found that the contractor was offering their services at almost thirty percent above the market rate without putting in any extra work. There was not much recourse because there were no clear performance clauses in the contractor’s contract with the HOA.

After the management company stepped in and distributed a request for proposals from reputable landscaping contractors who submitted competitive bids, they selected a new contractor that saved them approximately eighteen thousand dollars. This contractor’s work also resulted in a marked increase of almost forty percent of homeowner satisfaction with the work.

In the end, the change in contractors shrunk the HOA budget and lowered related fees for homeowners. The improved work of the new contractor even resulted in a two to three percent bump in neighborhood home values.

HOA Management Companies Can Help Secure the Best Vendors for the Community

Regardless of whether you sit on an HOA board or you are a homeowner governed by one, it is wise to enlist the services of an HOA management company for a number of reasons, primary among them securing better contractor rates for your community.

Homeowners should consider attending their next HOA meeting to find out if their board works with a management company. If they do not, it may be helpful to layout the benefits of working with one and the advantages it can have for the community.