When taking on a capital project, you are surrounded by people who know more about the work than you do. The contractor knows roofing. The supplier knows the materials. The consultants know the process. Volunteer board members, who may approve one project of this size in their entire time on the board, are asked to sign the contract and the checks.
That gap in experience is normal, and it is not the real problem. The real problem is that nearly everyone advising you is also being paid by the project. Independent oversight puts one party at the table whose only interest is your property.
Follow the money first
Before any capital project, it helps to write down who is paid, by whom, and what makes that payment larger.
| Party | Typically paid by | Earns more when |
|---|---|---|
| Contractor | You, under the contract | The scope grows or change orders are added |
| Subcontractors and suppliers | The contractor | More material and labor are used |
| A project manager paid a percentage | You, as a share of the contract | The contract price rises |
| A vendor recommending the work | You, if it wins the job | The recommendation is accepted |
| Independent oversight on a fixed fee | You, at a fee set in advance | Nothing changes the fee |
None of this suggests anyone is dishonest. Most contractors do good work and want a satisfied customer. But good people still respond to how they are paid, and you should not have to rely on anyone acting against their own financial interest.
What “independent” actually means
The word is used loosely, so it helps to test it. Oversight is independent when all three of these are true:
- It is paid only by you or your association. No referral fees, commissions, or other payments from contractors, suppliers, or anyone else on the project.
- Its fee does not grow with the project. A fee fixed before work starts gives no reward for a higher price or more change orders. A percentage of the contract does.
- It does not perform the work. Whoever checks the work should have nothing to gain from what is found or from who is hired to fix it.
Ask any party offering oversight to confirm all three in writing.
What independent oversight does at each stage
Before the contract: the scope. If the contractor bidding the job also decided what needs to be replaced, you are relying on the seller to say how much to buy. An independent condition assessment lets you write one scope that every bidder prices.
During bidding: comparable numbers. Bids only help when they describe the same work. Independent review catches the differences in materials, allowances, and exclusions that make a low bid the expensive one.
During the work: verification before payment. Before each payment, someone who does not work for the contractor confirms that the work billed was actually completed, to the scope and quality in the contract.
When changes come up: a second opinion. Change orders are sometimes necessary. Independent oversight asks whether each one is truly outside the original scope, whether the price is reasonable, and whether it was approved in writing before the work was done.
At closeout: leverage while it still exists. The final walkthrough, the repair of any damage to the property, lien waivers, and warranties should all be settled before the last payment is released.
For how these stages fit together, see What Good Project Management Looks Like on an Association Capital Project.
“Isn’t someone already doing that?”
People often assume one of the parties already involved is filling this role. Usually each is doing a different job.
- The building inspector confirms the work meets code. That is not the same as confirming the association received the scope, materials, and quality it paid for.
- The property manager keeps daily operations running, coordinates access, and communicates with residents. Auditing a contractor’s work is a different job, and many management contracts do not include it, or may not be adequately structured.
- The engineer or architect designs or specifies the work where one is required. Unless site verification is in their agreement, they may not be on site to check each stage.
- The contractor’s own superintendent manages the crews. Their progress report tells the board what the contractor says was done.
It is worth asking each of them directly: are you verifying the work before we pay for it? The answers are often a surprise.
What it protects
The budget. Change orders and unverified payments are the most common ways a project’s cost drifts. On the 33-building roof replacement our founder oversaw as an HOA board Vice President and Treasurer, change orders came to $150,000, half of the $300,000 contingency in the contract. A contingency exists to be used, but every dollar of it should be questioned by someone with no stake in the answer.
The property. Crews and equipment damage sidewalks, irrigation, and landscaping. A dated record of conditions before work begins turns a damage claim from an argument into a comparison.
The directors. Board members have a duty to act in the association’s interest. Minutes and records showing that the board relied on independent verification are what protect directors if a decision is later challenged by an owner.
The owners’ trust. A board that can answer any question about scope, progress, and fees from its own file keeps the community’s confidence through a disruptive and expensive project.
What it costs, and what to compare it to
On that same project, the board received bids for project management ranging from $60,000 to $245,000, on a $4.8 million contract. I ran the oversight unpaid instead, giving about 720 hours over more than a year.
Most boards cannot count on a volunteer with that much time and the right experience. The practical choice is between paying for oversight and going without it. When comparing options, look past the price to how the fee is set. A fixed fee quoted before you commit costs the same whether the project comes in under budget or over. A percentage does not.
Oversight matters between projects too
The same principle applies to the vendors an association pays every month. A landscape company reporting on its own irrigation repairs, or a roofer recommending its own repair work, is in the same position as a contractor grading its own project. A vendor’s report is a useful input. It should not be the board’s only source of information about what it owns.
What to ask anyone offering to oversee your project
- Who pays you, and does anyone else on this project pay you anything?
- Is your fee fixed, or does it change with the contract price?
- Will you review the scope and the bids before we sign?
- Will you verify each milestone on site before we release payment?
- What records will the association own when the project is finished?
Capital Project Oversight is our answer to those questions: a fixed fee quoted before you commit, with every milestone verified before payment. If your board is still choosing a contractor, start with 8 Questions to Ask Before Your Board Approves a Roofing Contract.
This article is general information, not legal advice. Review construction and consulting contracts with your association attorney before signing.