Stucco Blues: How One Condominium Deals With a Construction Emergency, Part 2

First, I have to apologize for the delay between columns–I had been dealing with a family emergency, but now I should be back on schedule.  Today’s entry is nice and long to make up for things.

In my last column, I discussed how the board at my own condominium has been dealing with a construction defect that has allowed pieces of stucco to fall from the building, some large enough to badly injure a resident if anyone were to be hit.  So of course, we have been treating this as a true building emergency.  As a result our pool, a key asset of any resort-style condominium, has been closed as we sought expert advice on the falling stucco, and commissioned an engineering report detailing the problem and the recommended solution (in this case, removing all of the stucco from the building and re-do the work properly).

Once we had determined that we had no choice but to tackle this huge construction project, it was time to solicit and select a contractor to do the work.  While we had worked with a stucco contractor in the past on small projects, there is a big difference between patching some stucco and re-stuccoing an entire 40 story building.  We wanted this contractor to bid on the project, but we had a responsibility to bring in other bidders and analyze their capacities.

The first step when sending a large project out to bid is preparing a detailed Specification of Work, or “SOW”.  This SOW is usually attached to an RFP, a Request For Proposal.  Having a rock-solid SOW for large contracts is absolutely essential.  There is no way to determine contractor pricing unless all contractors are bidding on the exact same services.  Otherwise, the numbers don’t mean anything.  One contractor may bid on an entire project in a lump sum that seems low, but on closer inspection you may find that they don’t include essential costs like permitting (in many cases amounting to tens of thousands of dollars on a large construction project), or perhaps they backload the contract with high prices for change orders.

An SOW could be prepared by a knowledgeable board or management company, but in the case of a construction project it’s best to have an engineer prepare the specification.  They will be able to really lock down the specifics that contractors understand and care about, and help to guide the bid competition into an apples-to-apples comparison (which is the only way to compare bids accurately).

Once the SOW is complete the board should review it thoroughly to make sure that the specification matches the work that the board is planning on completing.  For example, in our case we wanted the specification to very clearly split the project into four phases, one for each side of the building.  Our key priority to start was to repair the east side, facing the pool.  Once we deconstructed that side we felt we would have more information about the overall condition of the building, and could make a more accurate decision about whether to proceed with the entire project.  We also wanted to make sure that the contractor we hired bid work for our post-tension cables, as well.  In a post-tension cable construction, long cables of steel are run through the concrete and are tightened to give additional support and structure to the building (especially on balconies).  In the case of our property, some of the caps that covered the PT cables were never closed or sealed properly, and the ends of some cables had been left longer than specified.  PT cable work is fairly specialized, and often requires a sub-contractor, but we knew there was no way to properly analyze the bids unless pricing for them was included.

Once we had settled on our SOW, we called a half-dozen contractors to the building for a pre-bid meeting with the engineer.  At this meeting the engineer, under the supervision of our property manager and two board members, instructed the potential bidders on the scope of the project and the specifics of the SOW.  After inspecting the property they were sent off to prepare individual, sealed bids for the project.

A week or so later all bids had been submitted, and they were opened by the property manager and board.  Not a single contractor had bid the project properly.  Now, this might seem incredible, but I can assure you from experience that it’s quite common for contractors to ignore an SOW.  The only step to take if this happens is to have the engineer reinstruct the contractors on the SOW and have them reproduce their bids accordingly.  It’s an annoyance that you should expect to deal with in any large project.

Finally, a few days later we received accurate bids that were all on the same playing field (or, close enough that it was now possible to analyze their proposals).  The next step was to hold a dog-and-pony show–an in-person meeting between the board (open to residents, of course) and several of the top bidders.  At this meeting the board questioned the contractors on their qualifications, the number of other large projects they had recently completed, their capacity for doing the work in a timely manner, their use of subcontractors on the project and anything else that we felt was relevant based on their proposal.  After discussing all of the contractors, the board was able to narrow down our choices to two favorites–one the contractor who had done stucco work for the building in the past, and one who was a large, high-capacity stucco specialist.  There were a few oranges spread between the apples in these two proposals, so we sent them back for some revisions and asked for final proposals within a few days.  At the next board meeting (and note, at this point we had been meeting twice a week, every week for a month) the board selected it’s top bidder and began negotiating a final contract.

This last phase of the process can’t be ignored.  Just because a contractor has prepared an attractive proposal does not mean that the legal contract to be signed by the board satisfies its needs.  In the case of large construction projects there is generally a standard contract that has been approved by an association of engineers, but even so there are often changes or riders that must be added, depending on the work to be done.

Any large contract should be reviewed by the association’s attorney before it is signed.  A lot of associations  skip this step, thinking to save money, but you do not want to save $1000 of legal review on a contract worth tens of thousands, or even millions, of dollars.  Protect yourself and let your lawyer do the job you pay him or her for.

Finally, after nearly three months of investigation, destructive testing, bid preparation and negotiation we were ready to begin our reconstruction project.  Now, if you are a board member facing this kind of reconstruction, and especially if it’s a construction problem that has affected unit owners’ use of the common elements, you can guarantee that a large number of residents are going to be angry with board members.  There will be some who don’t want to spend money on the building, no matter the problem.  There will be those who feel that it should take no more than a week or two to chose a contractor for a seven-figure expenditure, despite that they have never actually personally completed such a project.  Some owners will simply disagree with the direction taken by the board of directors (perhaps they want the board to pursue a repair strategy that they feel would be cheaper, for example).  You will have private contractors who have built a small building or two who feel that they know exactly what the building needs, regardless of the advice of the paid engineering consultant.  In our building, we even had a number of residents who doubted the severity of the issue, and questioned why we could not open a portion of the pool to residents (in our county, the law doesn’t allow a pool to be only partially opened).  Just understand at the outset that this is one of those prototypical “no-win” situations for boards, and you will not be popular for the decisions you make, even if they are the right ones for the building.  Simply do your job to the best of your judgement and ability, and try to roll with the punches.

I hope that our experience helps other boards that have to go through this very difficult and contentious project.  Good luck!

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