What is the obligation to get 3 bids and the mandate to take the lowest one?
Sample CC & R’s
To solicit bids for contracts of repairs in accordance with the terms of this subsection.
With respect to each contract made by the Board of Directors for repainting exterior surfaces of building(s) and car storage spaces, and each contract for work and/or materials related to the maintenance, repair, rebuilding or replacement of any building, structure or other improvement situated on the Common Area in which the amount to be paid by the Board of Directors exceeds $500.00, the Board of Directors shall secure at least three (3) bids from licensed contractors and must accept the lowest bid so obtained.
If the amount of the contract exceeds $1,000.00, the Board of Directors shall, regardless of the nature of the work involved, secure at least three (3) bids from licensed contractors and may accept either of the two lowest bids, and shall, in addition, require the contractor so chosen to furnish a bond assuring completion of the work and payment of all labor and materials bills for which a lien on the Common Area or any unit could be claimed. The Board of Directors shall require, from each contractor which it engages, satisfactory evidence that adequate worker’s compensation and liability insurance is carried with respect to employees and activities of such contractor. In cases where a completion bond is not required, the Board of Directors shall require labor and material releases from the contractor prior to making payment to same unless the Board of Directors deems such requirements to be impractical or unnecessary to afford protection against liens;
Business Judgement Rule
Davis Stirling.com – Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with public policy.
Corporations Code §7231(a) protects directors from personal liability if they make decisions that result in damage or loss to others, provided their decisions were made:
In good faith,
In a manner which the directors believe to be in the best interests of the corporation, and
With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.
Boards will have difficulty obtaining bids for small repairs, Many contractors will not waste time preparing written proposals for a $500 repair. For routine plumbing repairs, most boards call a plumber who is familiar with the development and pay him as-needed to repair leaks. This is an acceptable business practice.
Boards are not required to accept the lowest bid.
Low bid is not always the best bid. The company may be small and inexperienced and may be operating on a shoe-string budget with low levels of insurance, limited equipment, and minimal staffing. If someone quits or equipment fails, your project may suffer. With a more established company, the chances are better that the work will be done on time and within budget.
A critical factor for bidding projects is the preparation of specifications. It will be impossible to properly compare bids if companies are not bidding the same work. For a large painting project, are all bidders power washing the exterior? Are they filling cracks and caulking around window frames? Are they using the same quality paint and applying it to the same thickness? To compare apples to apples, have a consultant prepare the specifications. Only then can boards truly compare bids. See Request for Proposal.
ECHO-CA.org – Problems with outdated governing documents
The law never requires impossibilities.