Hiring an HOA Contractor: Why the Lowest Bid Costs More

Every board wants to be a good steward for its members’ money.  So, when three bids come in for roofing, repainting, or landscaping, hiring the HOA contractor often comes down to the lowest bid.  It is a decision easily defended at the next meeting in a single sentence.

It is also the decision that lands many associations in trouble more often than almost any other. This is because short term gains loses out to long term outcomes.

The Lowest Bid Is a Starting Number, Not the Final One

Nevada HOA attorney Troy Isaacson has watched this pattern play out dozens of times across communities. “The problem,” he says, “Is that boards compare bids as if they all describe the same job.”

“Hiring the least expensive contractor is not always the best choice,” Isaacson says. “Sometimes the most expensive guy is the better choice, because the most expensive guy includes everything, including the unanticipated or unexpected costs.  Whereas the least expensive guy is going to make his money on change orders.”

That last phrase is one boards should really remember.  A change order is a revision to a contract after work has begun, and it is where a thin bid quietly becomes a thick invoice.

The contractor who priced the job realistically has already accounted for the rot behind the siding, the drainage issue under the slab, the permit that took longer than expected.  The contractor who came in dramatically under everyone else has not.  He will find those things too.  He will just bill you for them later, one at a time, after you have already committed.

By the time the project is finished, the association will often have paid more than the highest original bid, and will have absorbed delays and homeowner complaints that came with each surprise.

“Associations should be careful and even reluctant in going with the lowest bidder,” Isaacson says.  But, asking questions of each contractor to ensure the bids, and what is included in each, is clear.

What to Confirm Before Hiring an HOA Contractor

Reluctance is not the same as refusal. A low bid is not automatically a bad bid. It is a signal to ask more questions before you sign.

What is explicitly excluded. Every bid received should have exclusions. The cheapest bids tend to have more of them, and they tend to be buried. Ask for the exclusions list as a separate document.

How change orders are handled. Is there a cap? Does the board approve each change, or does the contractor proceed and invoice later? A contractor who resists putting their change order procedure in writing is telling you something.

What the contingency looks like. A realistic bid on an older property usually carries a contingency line. A bid with no contingency at all is either unusually confident or unusually uninformed.

Whether the scopes actually match. Boards frequently compare a bid that includes prep, disposal, and permits against ones that do not. Those are not apples to apples and competing numbers are missing. They are bids on jobs that appear fundamentally different.

What happens if the work is defective. Warranty terms, licensing, and bonding matter when something goes wrong. Poor workmanship on a common elemental failure turns into a construction defect claim years later, and the association’s position in that claim depends heavily on what the original contract said.  Terms like whether attorneys’ fees are recoverable are essential in determining the association’s legal rights.

The Self-Management Connection

This is where the cost conversations get uncomfortable for the self-managed associations. Finding good contractors is in itself a rare skill.

When Isaacson is asked what self-managed boards are actually saving, his answer is narrow. “They are not really saving on much other than the management fees,” he says. “Because they cannot necessarily find the best contractors or the best people for their community.  A lot of times those projects will end up costing more in the long run.”

A professional management company works with various area vendors across many communities. It knows which contractors finish on schedule, which ones honor their warranties, and which ones have histories of problems or change orders.  A volunteer board working toward the three names turned up by an online search engine might not move in the best direction.

“In the long run, professional management companies are helping you find the right people,” Isaacson says. “They are helping you find the right individuals who are going to help move your community forward, which in the long run can save the association a great deal of money.”

The Real Question Boards Should Ask

The question is not just which bid is lowest.  It includes which bid is complete. Those are rarely the same document.

Short-term savings that create long-term exposure are not savings.  They are deferred costs with interest, and the interest is paid in special assessments, in emergency repairs, and in credibility a board loses when a project doubles in price.

For more on the rules that govern how Nevada associations operate, see our Nevada HOA rules, regulations and resources page.

Frequently Asked Questions

Is an HOA board required to accept the lowest bid? Generally, no. Boards have discretion to weigh scope, qualifications, licensing, and history alongside price.  Your association’s governing documents may impose their own bidding requirements, so review them.

What is a change order, and why do they matter so much? A change order modifies the contract after work has begun and usually adds scope or cost.  Bids that are tightly priced usually lead to more change orders.  Requiring board approval for every change order in the contract itself is one of the simplest protections available.

How many bids should an HOA collect? Three is common practice.  And some governing documents require a minimum number above a certain dollar threshold.  What matters more than the count is that the bids describe the same scope of work.

Can board members be held responsible for a bad contract? Board members who make decisions in good faith, particularly after consulting with appropriate professionals, are in a considerably stronger position than those who do not.  The association itself can still face liability for a poor decision.

Talk to a Nevada HOA Attorney

If your association is evaluating a significant contract and you are unsure whether the scope protects you, a short review before signing costs far less than a dispute after the work has started. Contact Isaacson Law to discuss it.

This article is provided for general informational purposes and does not constitute legal advice. Every association’s governing documents and circumstances differ. Contact Isaacson Law to discuss your community’s specific situation.