The HOA Manager's Axiom of Horizontal and Vertical
Integration
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As managers we continue our quest to be all things to all people. However,
some times we overstep the bounds of our experience, skills, and available
time. This seems particularly true when the community association is involved
in a large replacement or renovation project. Not wanting to seem unresponsive,
uncooperative, lazy or let our client down, we stand ready, willing and able
to tackle the most complicated types of projects with great enthusiasm. The
problem is that in the process we may actually be doing the association a
disservice. Both manager and board need to realize our limitations and adjust
expectations accordingly. What are the limitations? The axiom of horizontal
and vertical integration pretty much sums it up in a few sentences.
As managers (and often board members as well) we know a “little
bit about a lot of stuff”. We know a little about roofs, something
about landscaping, how to repair a road or parking area, etc. We
are essentially “horizontally integrated” with some knowledge covering
a broad spectrum of tasks and projects. Therefore, we should not
be creating RFP's for roof replacement, road and parking lot replacement,
landscape replacement and the like. Instead, as horizontally integrated
professionals, we should be creating RFP's seeking the assistance
of professional individuals or firms who know a great deal about
each of those subjects. They are essentially “vertically integrated”,
knowing a lot about a limited number of projects as specialists.
As such, the RFP we write to find our vertically integrated professional
should include at least five items:
- What do we have now? We want to know the current
components of the roof structure or take a core sample of the
road to determine the type and depth of the surface coat and
base. If replacement is due to premature failure of these systems,
this testing may indicate the reasons why these systems are failing.
- What should we have? We want to know what
types of materials and construction systems should be in place
to maximize the effectiveness and life of the components. Recommendations
on redesign or changes should also be reflected in this portion
of the report as well. These should be reviewed and approved
by the manager and board of directors for input, evaluation of
alternatives, and decision prior to specifications being written.
- Write the Specifications, Bid Package, and Contract. Our
vertically integrated professional should write the specifications
and project RFP for the bidding process. We may also have them
write the contract to be used and have the association attorney
review it.
- Find Bidders. As horizontally integrated
professionals, we deal day in day out with contractors who fix
stuff. They repair roofs, x-out asphalt, replace sections of
concrete, and generally are not large-scale “road builders”.
Our vertically integrated professional deals with larger scale
contractors on a routine basis and can help to identify and locate
qualified bidders. We can still have our repair contractors bid
on the work if we feel they are qualified. There is nothing wrong
with expanding the number of bids for the work.
- Inspect the work. We want unannounced periodic
inspections as the project progresses by our vertically integrated
professional to be certain the work is being completed according
to the specifications as written and to approve progress payment
requests prior to management preparing a check. Depending upon
which State your community is in may also require the processing
of lien waivers in accordance with Lien Statutes. Who better
to climb on the roof or test the compaction of road sub-base
than the individual or firm that wrote the specifications?
Who are these vertically integrated professionals? Architects,
engineers, construction consultants, and even contractors as long
as the contractors know they will not be a bidder to avoid a conflict
of interest.
What is the cost? It has been our experience that the cost is
minimal when you consider the size of most projects. The cost is
even more reasonable as you work through the process and the board
realizes that the project is being guided by experienced professionals
and that the association will end up with a high quality result.
Generally, fees run 5% to 10% of the project depending on the amount
of work these vertically integrated professionals will perform
on the site itself. For example, an architect may just perform
the five items listed above on a roof replacement but an engineer
working on a road project may physically set grades, curb heights,
drainage system layouts, etc. Remember that on phased projects
you may undertake over a number of years, the only elements you
will need to repeat are the inspection of the work and perhaps
finding new contractors.
This approach can be applied to almost any size project. We have
used it for roof replacement, road and parking lot replacement,
siding and landscape. So realize your limitations as a “horizontally
integrated professional” and seek the assistance of those who are “vertically
integrated”. You will likely get a better product and the association
members will thank you.
Association Times' Staff Writer
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