CMCA Contracting and Vendor Management 3 — Questions and Answers
Question 1: An association hires a contractor classified as an independent contractor, but later it is determined the relationship meets the legal test for employment. What is the PRIMARY risk to the association?
- The contract is automatically void
- The association may owe back payroll taxes and benefits (Correct answer)
- The contractor can demand a higher fee
- The board members face personal criminal liability
Correct answer: The association may owe back payroll taxes and benefits
Misclassifying an employee as an independent contractor exposes the association to liability for unpaid payroll taxes, workers' compensation, and benefits.
Question 2: Which best practice should a manager follow when managing multiple active vendor contracts simultaneously?
- Rely on vendors to self-report compliance issues
- Maintain a contract management calendar tracking key dates and renewal deadlines (Correct answer)
- Delegate all vendor contact to homeowners
- Allow contracts to expire and renegotiate only upon complaint
Correct answer: Maintain a contract management calendar tracking key dates and renewal deadlines
A contract management calendar prevents missed renewal windows, expirations, and compliance deadlines across multiple active agreements.
Question 3: A vendor performing electrical work on common areas does not carry the required general liability insurance. The manager discovers this mid-project. What should the manager do FIRST?
- Allow work to continue since it is nearly complete
- Stop work immediately and require proof of current insurance before resuming (Correct answer)
- Ask the vendor to purchase insurance by the project's end
- Reduce payment by the estimated cost of the missing insurance
Correct answer: Stop work immediately and require proof of current insurance before resuming
Allowing uninsured work to continue exposes the association to unprotected liability; work must stop until the vendor provides proof of required coverage.
Question 4: When evaluating vendor bids for a major common-area renovation, the board should PRIMARILY consider:
- Only the lowest total price submitted
- Price, qualifications, references, scope compliance, and insurance coverage (Correct answer)
- The vendor with the most years in business
- Whichever vendor the current property manager recommends
Correct answer: Price, qualifications, references, scope compliance, and insurance coverage
A thorough vendor selection weighs multiple factors including price, demonstrated qualifications, references, scope compliance, and adequate insurance.
Question 5: A service contract's payment terms specify 'net 30.' The association pays the invoice 45 days after receipt. What is the likely consequence?
- The contract is automatically terminated
- The vendor may charge late fees as specified in the contract (Correct answer)
- The vendor must refund any prior payments
- No consequence unless the vendor files a lawsuit
Correct answer: The vendor may charge late fees as specified in the contract
Most service contracts include late payment penalties; paying beyond net-30 terms triggers any late fees or interest specified in the agreement.
Question 6: Which type of contract is MOST appropriate when the full scope of maintenance work cannot be precisely defined in advance?
- Fixed-price lump sum contract
- Time-and-materials contract (Correct answer)
- Unit-price contract
- Guaranteed maximum price contract
Correct answer: Time-and-materials contract
A time-and-materials contract is suited for work with an undefined scope because it compensates the vendor for actual labor hours and materials used.
Question 7: A board member suggests awarding a painting contract to a relative's business without a competitive bid process. The manager should advise the board that this creates a:
- Business opportunity the association should pursue
- Conflict of interest that must be disclosed and managed per the association's policy (Correct answer)
- Violation that automatically invalidates the board member's seat
- Permissible arrangement if the price is fair
Correct answer: Conflict of interest that must be disclosed and managed per the association's policy
Awarding contracts to related parties constitutes a conflict of interest that must be disclosed and handled according to the association's conflict-of-interest policy.
CMCA Contracting and Vendor Management 3
An association hires a contractor classified as an independent contractor, but later it is determined the relationship meets the legal test for employment.
What is the PRIMARY risk to the association?