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Marketplace trend: contractor pre-qualification.

The paramount concern of any property manager - the protection of client interests - is fueling an industry-wide drive toward enhanced standards of professional property management. Managers are particularly scrutinizing their interaction with the contractors they hire to serve the buildings in their portfolios. The pre-qualification of contractors is a significant marketplace trend within the field of residential property management.

Century, one of New York's leading residential property management companies, has evolved corporate standards in this area which may reflect the increasing regulated relationships development between management firms and contractors throughout the industry.

Here at Century, we constantly search the marketplace for new contractors who may offer our clients a quality service or product at a more competitive price. We attend trade shows to meet new people and learn about new products, such as environmentally safe carpet cleaners or graffiti removers. A contractor may contact us directly, or we may contact a contractor on the basis of a "word of mouth" recommendation.

Beginning the Pre-qualification Process

After identifying prospective contractors, we begin the pre-qualification process by conducting personal interviews. Among other questions, we ask how long they have been in business and for whom they work in the tri-state area. Vendors such as plumbers, electricians and carpenters must be licensed and bonded. Contractors' financial statements are examined and their references from board presidents and banks are checked. Century representatives visit buildings where contractors have worked to speak to the superintendents and property managers.

Contractors are asked to provide their regular and overtime hourly rates. In some cases it is more appropriate to ask what lump sum is charged for a service, such as installing a new facade, or to ask for costs on a per item or per foot basis. At Century, we strive to offer our clients volume discounts by purchasing the bulk from vendors whenever possible. Occasionally vendors assure us they can beat our current vendors' prices, in these cases we ask for their price lists and do a comparison analysis.

Insurance is a given-any contractor who works for us must have an insurance certificate naming our buildings and Century as additional insureds. We require a minimum of one million dollars generally liability. In addition contractors must provide their own workers' compensation policy. When the cost of a job exceeds $5,000, we ask for lien waivers with every process payment; that is, every time we make a payment to the vendor, he gives us a statement attesting that he has paid his subcontractors. This prevents subcontractors or suppliers from putting a lien against a Century building.

Bidding Out

Century begins a construction project by bidding out, with board approval, for an engineer, who is selected from a minimum of three applicants. The engineer then writes up a request for proposal to be sent out to prospective contractors. The request details the specifications and scope of the project, including insurance, warranties, penalties, references and deadlines. The engineer, the building's board and Century send the bid to a minimum (there is no maximum) of three to six contractors, who are asked to return sealed bids. The engineer, board members and Century representatives then meet at a central location to open and review the bids. Afterwards, the engineer or property manager prepares an analysis of the bids, which is reviewed by all board members, the engineer and the managing agent before a vendor selection is made.

Employee-Contractor Relations

To ensure the integrity of its employees, Century has established a non-fraternization policy between employees and vendors. For example, employees are not to meet vendors for meals or to socialize, nor can they accept gifts or gratuities. Our employees sign an employee handbook which contains a prohibition against accepting inducements from vendors. Century is developing a certification form for vendors in which they specifically agree not to offer any inducement or favor in exchange for influencing the awarding of a contract. Century will sign a similar form at a board's request before beginning work on a building.

The pre-qualification and monitoring of vendors enhances the professionalism of residential property managers. This concern is reflected in the recent formation of the Association of Cooperative and Condominium Managers (ACCM), which deals in part with vendor relations. The principals of Century understand the value that trust and honesty play in a professional service organization. Delivering effective, reliable services to client properties for 25 years has established Century's reputation as a firm with integrity. We welcome the institutionalization of managers-vendor relations - a significant trend which may well result in shutting out contractors who do not adhere to a codified, industry-wide pre-qualification process.
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Title Annotation:Insider Outlook
Author:Barry, Mitchell
Publication:Real Estate Weekly
Date:Jun 28, 1995
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