Procurement, Bids & Contracts

Why "get three bids" is not a law you can cite

Most boards assume a statute somewhere requires competitive bids once a purchase crosses some dollar line. For most associations, no such statute exists. The threshold that triggers "get bids" is typically a rule the board adopted for itself, or a line in its own governing documents, not a citation from state law. See When to obtain multiple bids.

What the law actually protects is the process behind the decision, not a specific bid count.

"The business judgment rule provides a director of a corporation immunity from liability when a plaintiff sues on grounds that the director violated the duty of care to the corporation so long as the director's actions fall within the parameters of the rule."

Source: Wex, "business judgment rule", Cornell Law School, Legal Information Institute

A board that skips competing bids and comparison has nothing to point to as evidence it investigated. A low price with no comparison and no documented rationale is closer to the fact pattern courts have found unprotected than protected; the shield follows the investigation, not the number on the winning bid.

Whether your own governing documents set a bid count or dollar threshold, and what it is, varies by association. Check your CC&Rs, bylaws, and any board-adopted purchasing policy.

The authority stack: what actually controls a vendor decision

A vendor contract sits inside a stack of authority, and confusing the layers is the easiest way to get procurement wrong.

At the top is statute and regulation that applies whether or not the contract mentions it: tax law on withholding, consumer protection law on automatic renewal, nonprofit corporation law on a director's own financial interest in a contract, and anti-indemnity statutes that void indemnification clauses reaching too far. All of these vary by state, several sharply; check your own state's statutes, not another state's, before relying on any of them.

Below statute sit the association's own governing documents and purchasing policy, which usually set the actual bid threshold and approval dollar amount, because no general statute does.

Below that is the negotiated contract itself: the scope, price, term, and the specific indemnification, termination, insurance, and change order language the parties agreed to. This is where a board's real leverage lives.

Industry standard forms like the AIA A201 family, or federal contracting language such as a termination for convenience clause, sit outside this stack entirely unless a contract expressly adopts them. They are borrowable drafting models, not law that applies on its own.

Three assumptions about the contract that are usually wrong

A Form W-9 does not get filed with the IRS.

"your correct Taxpayer Identification Number (TIN) to the person who is required to file an information return with the IRS."

Source: About Form W-9, Internal Revenue Service

The requester, the association or its manager, keeps the form on file to support its own reporting; the IRS never sees the W-9 itself. Skipping it does not just create a paperwork gap, it can trigger a withholding obligation on payments to that vendor. See W-9s.

"Termination for convenience" does not usually mean walking away owing nothing. Even the federal contracting clause this language is modeled on still requires paying the contractor for completed work plus a reasonable profit, up to a cap; "for convenience" describes why the contract is ending, not what is owed when it does. See Termination clauses.

Being named "Certificate Holder" on a vendor's certificate of insurance means the association is holding proof a policy exists, nothing more. Only actual additional insured status, created by a policy endorsement, extends real coverage to the association. See Insurance clauses.