Academy/Procurement, Bids & Contracts
Vendor references
Calling a vendor's past clients before you sign, not after something goes wrong
A vendor reference check means calling people who already hired this vendor and asking direct questions about the work, not just collecting a list of names the vendor handed you. It matters because a board's decision to hire only holds up as sound business judgment if the board can show it actually investigated before deciding, not just that the outcome happened to be good.
Why a phone call, not a list
A vendor who hands you three names has handed you three satisfied customers by definition. That list is marketing, not due diligence. The reference check that actually protects the board is the one where someone calls and asks open questions, then writes down what they heard.
"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
Courts protect a vendor decision under this rule only when the board can point to evidence it investigated, not merely that the price looked fair. Exactly what counts as adequate investigation, and how strictly courts apply this doctrine, is decided under your state's corporate law and case history. Check your bylaws and ask your association's attorney what a defensible record looks like.
What to actually ask
A yes-or-no question gets a yes-or-no answer. Ask about the things that actually predict how this vendor will behave on your property: did the work stay inside the quoted scope, how were change orders handled, did the crew show up on the days promised, and would this person hire the vendor again for the same job. Write the answers down next to the vendor's name, not in your head.
One piece of a larger check
References answer only one question: how has this vendor behaved with other customers. They do not tell you whether the vendor is currently licensed, whether its insurance is active today, or whether it is financially stable enough to finish the job. Treat a good reference as one input alongside those checks, not a substitute for any of them.
Write down what you learned
Guidance aimed at HOA boards frames a documented comparison, including the board's reasoning for its choice, as what actually gives directors the information needed to exercise business judgment in selecting a contractor. That means the notes from a reference call belong in the board's file next to the bids themselves, not in a board member's memory, per Kuester's guidance on comparing HOA vendor bids.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Three reference calls all go well for a landscaping vendor. Before signing, what should the board still confirm?
The vendor emails a list of three phone numbers to call for references. What should concern the board about relying only on that list?
A board member calls a reference and only asks, "were you happy with the work?" The reference says yes. What is missing from this reference check?
Sources
- Wex, "business judgment rule", Cornell Law School, Legal Information Institute
- How to Compare HOA Vendor Bids and Choose the Best Value for Your Community, Kuester
- Business Judgment Rule Does Not Protect the Willfully Ignorant, Tinnelly Law Group, HOA Lawyer Blog
- HOA Vendor Compliance Checklist, 7 Documents to Collect, TrackMyVendor
Related elsewhere in the Academy
Procurement, Bids & Contracts
Next, build out the rest of your vendor due diligence checklist before the contract goes to signature.
What counts as an adequately investigated board decision, and whether your own bylaws or purchasing policy require reference checks at all, varies by state corporate law and by your governing documents.