COMMON INTEREST COMMUNITY STANDARDS COUNCIL Governance Standard OPS-001 — Vendor Procurement and Contract Standard Version: 2.3 | Effective: January 2026 | Review Cycle: Annual Authority: CICSC Governance Standards Council | Status: Current ================================================================ PURPOSE This standard establishes the minimum procurement, contracting, and vendor-management requirements for Common Interest Community boards. It is designed to protect the association from substandard work, inadequate insurance, and unfavorable contract terms. ---------------------------------------------------------------- 1. COMPETITIVE BID REQUIREMENTS ---------------------------------------------------------------- 1.1 Bid Thresholds Under $5,000 Requirement: Manager authorization within budget $5,000 - $24,999 Requirement: Two competitive bids, board approval $25,000 and above Requirement: Three competitive bids, board approval, documented bid process Capital projects Requirement: Three competitive bids with written bid specifications Note: Lower thresholds may be required by state statute or governing documents. The board must use the most restrictive applicable threshold. 1.2 Bid Specification Requirements Every competitive bid must be based on a written bid specification that: - Defines the scope of work with sufficient specificity to allow apples-to-apples comparison - Specifies materials, standards, and performance requirements - Defines the completion timeline and schedule - States insurance and indemnification requirements - Is identical for all bidders Verbal or informal specifications do not satisfy this requirement. 1.3 Bid Evaluation The board must evaluate bids on defined criteria. Low bid alone is not a sufficient basis for award. Evaluation should consider: - Price - References and reputation - Insurance compliance - Licensing and bonding - Demonstrated capacity to perform the work - Warranty terms The board must document the basis for selection in the meeting minutes, particularly when the lowest bid is not selected. ---------------------------------------------------------------- 2. CONTRACT REQUIREMENTS ---------------------------------------------------------------- Every vendor contract for services above $5,000 must be reviewed against five mandatory provisions before execution. 2.1 Scope and Performance Standards The contract must: - Incorporate the bid specification by reference - Specify measurable performance standards (not vague "workmanlike" language) - Define the deliverables and frequency of service - Specify reporting requirements to the manager 2.2 Term and Termination The contract must include: - A defined term (commencement and expiration date) - A defined renewal mechanism (automatic vs. affirmative renewal) - Termination for cause with a cure period (10-30 days written notice of default, right to cure) - Termination for convenience with a defined notice period (30-90 days written notice, no breach required) The absence of a termination-for-convenience provision is a significant risk. The board should not execute contracts without it. 2.3 Insurance Requirements Prior to commencement of any work, the vendor must provide: Commercial General Liability $1M per occurrence / $2M aggregate Workers' Compensation Statutory limits Hired and Non-Owned Auto $1M Umbrella (large capital projects) As appropriate to project scope The association must be named as additional insured on the CGL policy (and auto policy for vehicle-using vendors). The vendor must provide a Certificate of Insurance and the additional insured endorsement before work begins. Certificates received without the endorsement do not satisfy this requirement. 2.4 Indemnification Standard indemnification language should be mutual and narrowly drafted. Each party indemnifies the other for losses caused by that party's own negligence or misconduct. The board should not execute contracts containing: - One-way indemnification (only the association indemnifies the vendor) - Broad indemnification for the vendor's own negligence - Indemnification for consequential or punitive damages 2.5 Warranties For capital and construction contracts, the contract must specify: - A defined warranty period (minimum 1 year for workmanship; longer for roofing, waterproofing, paving) - The warranty commencement date (substantial completion -- not invoice payment) - The process for warranty claims (written notice to vendor, cure period) - Vendor's obligation to remedy defects at no cost within warranty period ---------------------------------------------------------------- 3. VENDOR QUALIFICATION AND FILE MAINTENANCE ---------------------------------------------------------------- 3.1 Pre-Qualification Before awarding a contract, confirm: - Valid state contractor license (if required for the scope of work) - Current certificate of insurance with additional insured endorsement - At least three verifiable references from comparable projects - No active judgments or liens against the vendor - No disciplinary actions by licensing board (public records) 3.2 Vendor File Contents The association (or manager on its behalf) must maintain a vendor file for each active contract containing: - Executed contract - Original certificate of insurance and additional insured endorsements - License copies - Change orders executed during the contract term - Performance correspondence (complaints, notices of default, resolutions) - Lien releases for capital projects 3.3 Annual Insurance Refresh For all multi-year or automatically renewing contracts, the manager must obtain a current certificate of insurance at each policy renewal period. Files with expired insurance certificates are out of compliance. ---------------------------------------------------------------- 4. MANAGER AUTHORITY LIMITS ---------------------------------------------------------------- The management contract must define the manager's express authority to execute contracts and authorize work orders on behalf of the association. Common structure: Under $X Manager discretion within approved budget $X to $Y Manager may execute with board notice Above $Y Board approval required prior to execution The board must enforce these limits consistently. Inconsistent enforcement creates apparent authority exposure. ---------------------------------------------------------------- 5. CAPITAL PROJECT OVERSIGHT ---------------------------------------------------------------- For capital projects (typically $25,000 and above), the board should: 1. Appoint a project committee or assign a director liaison 2. Require weekly progress reports from the manager during active construction 3. Approve any change orders that increase scope or contract value 4. Conduct a completion inspection before final payment release 5. Obtain a lien release from the general contractor and all subcontractors before final payment 6. Document the warranty commencement date in the vendor file ---------------------------------------------------------------- COMPANION RESOURCES ---------------------------------------------------------------- Quick Reference: OPS-001-QR -- The Vendor-Vetting Checklist Template: Vendor Bid Specification Template Template: Vendor Contract Review Checklist Template: Certificate of Insurance Tracking Log Standard: FIN-003 -- Financial Controls and Audit Standard ================================================================ CICSC provides governance education and standards. This document does not constitute legal advice. Consult qualified legal counsel for contract review and vendor disputes. © 2026 Common Interest Community Standards Council. All rights reserved. cic-sc.org