How to Run a Successful Capital Improvement Project for Community Associations – A Best Practices Primer for Board Members and Property Managers

How to Run a Successful Capital Improvement Project for Community Associations – A Best Practices Primer for Board Members and Property Managers

Now that Spring is come it is time to switch gears from hunkering down and weathering Old Man Winter to planning for successful capital improvement projects.

Capital improvement projects are the most expensive undertakings for a community association.  As a result, associations must ensure that there is professional oversight every step of the way from capital planning to project execution and punchlist remediation.

Capital Planning

The first step to ensure a successful capital project is to take a proactive approach and plan.  Planning is essential to ensure the funds are available when the capital project needs to take place.  One common way associations plan is to hire a reserve study company.  The reserve study is a very detailed document that documents all the capital components of an association and details the timeline of when those items should be replaced.  The study then documents how much the assessments should be for the association to have enough reserves to fund the project. 

Alternatively, the association can forego the reserve study and create a simplified version of the reserve study which would be a capital plan.  However, it is essential that the association have some type of forward-looking capital plan document so that the association can plan the large-scale expenditures and avoid expensive urgent or emergency repairs.

Bid Specification

The next step in the process is to create some type of bid specification document that specifies how the vendors should bid on the capital repair/improvement project.  This document is essential to ensure that all vendors submit bids that are comparable with each other.  Otherwise, there will be more likely than not, no easy way to compare the bids.  This in turn would make it very difficult for the board of directors to make a good decision on who to hire for the capital project. 

Bid Solicitation

Once the bid specification is created, the vendors are issued the document and are requested to submit a bid by a certain date.  The vendors are given the opportunity to review the bid spec and visit the association and examine the scope of work in greater detail.  Then the vendor submits the bid to the association. 

Bid Review and Comparison

At this stage, the association has received multiple bids and the project manager takes the bids and puts them in a spreadsheet and creates an analysis that compares the bids.  This is an essential step in the process for the board to make a good decision. 

Vendor Selection

The next step is for the board to have a board meeting and select the vendor.  The board can only make a good decision if all the previous steps have been followed.  This step might also entail the board interviewing a few vendors by inviting them to a board meeting or having a meeting with the vendor finalists.  The board should always look to hire the vendor that will provide the best long term value not necessarily the cheapest price.  Even thought there is a scope of work involved in the bid process, there is always reasons why the bids vary from vendor to vendor.  And those nuances are important to understand before a decision is made.

Project Oversight

Once the board has made a vendor selection, the project execution phase begins.  During this phase, it is very important that the project manager provides notices and updates to the board members and homeowners on the status of the project from start to finish.  In addition, the project manager should meet the vendor at the association and review the timeline of the project before the project commences.  Lastly, the board and homeowners should know the best way to contact the project manager when there are questions.  This is essential so that complains, and questions are promptly addressed by the vendor and project manager.  The project manager can be a board member, a representative from the management company or a representative from the architect/engineering company.  What is most important, is that someone is clearly identified as the project manager. 

Punchlist Remediation

During this phase, the project manager conducts a full review of the workmanship of the vendor and compares the work to the bid spec and vendor contract.  The project manager then generates a list of items that need to be corrected and/or items that were not completed.  Even though the project manager provided oversight during the project, there is more likely than not going to be a punchlist that will need to be remediated by the vendor.  Therefore, it is very important to hire a vendor that is reputable and reliable and stands behind their workmanship. 

Successful Completion

Once the punchlist is remediated, the project is completed.  This should result in a successful execution of the capital project assuming all the steps have been followed. 

Summary

Capital improvements are very expensive, and associations must plan years ahead to ensure smooth execution of these large-scale projects.  As a result, associations must always keep capital planning on board meeting agendas and constantly plan ahead for the next large-scale project.  Following these steps will ensure associations stay ahead of the curve and don’t get stuck reacting to stressful emergency situations.   Board of directors should ensure that there is never a situation where homeowners are dealing with water infiltration issues and funds are not available for the large-scale repairs necessary to deal with those issues.