The Manager's Conflict on a Vendor Contract
A licensed strata manager manages 14 strata corporations through her firm. One of her clients, a 90-unit strata in Victoria, is tendering a three-year landscaping contract worth about $210,000. The manager's brother-in-law owns the lowest bidder. The manager discloses the relationship verbally to the council president, who says "don't worry about it, just bring us the recommendation." The manager prepares a comparison that ranks her brother-in-law's company first on price and includes favourable commentary on its service history that she drafted from the bidder's own marketing materials. Two council members later learn of the relationship and complain. Separately, the manager has been asked by another client to sign a contract that would make her firm the strata's exclusive insurance broker as well as manager.
1. Analyze the conflict of interest in the landscaping tender. What should the manager have done, and what should she do now?
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The disclosure was inadequate. A verbal disclosure to one council member, followed by an assurance to "not worry about it," is not a proper conflict-management process. The conflict is material: a family relationship with the lowest bidder on a $210,000 contract. The manager should have:
- Disclosed in writing to the full council, with enough detail for members to judge the relationship.
- Stepped back from the evaluation. She should not have prepared the comparative ranking or drafted favourable commentary sourced from the bidder's own marketing. Someone independent - another council member, a second manager in the firm, or an independent consultant - should have scored the bids against pre-set criteria.
- Ensured the bid process was documented (criteria, scoring, references checked independently) so the outcome can withstand scrutiny.
Now: the manager should withdraw the tainted recommendation, disclose in writing to all council members, and propose an independent re-evaluation. If the contract has not been awarded, pause it. If it has, the strata should consider whether the process was fair to the other bidders. The manager should also consider her own reporting obligations to her regulator - a failure to manage a conflict properly is a conduct issue, not merely an awkward meeting.
Key principle: disclosure to one person who waives it does not cure the conflict. The obligation is to the strata corporation as a whole and to the integrity of the process.
2. Evaluate the proposal to act as both manager and exclusive insurance broker. What are the risks and the correct response?
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This is a structural conflict that disclosure cannot fix. The manager would be negotiating insurance on the strata's behalf and earning commission from the placement - her firm's interest in maximizing premium or commission is directly opposed to the strata's interest in cost-effective coverage. Exclusive arrangements also remove the strata's ability to test the market, which is the very thing council relies on a manager to do.
Risks: (1) breach of the duty to act in the strata's best interests and to avoid conflicts; (2) potential regulatory consequences for the manager, including discipline or conditions on licence; (3) insurance-placement conduct rules may independently prohibit or restrict such arrangements; (4) exposure of council members who approved it.
Correct response: decline the dual role. If the strata wants insurance-placement help, the manager should refer it to an independent broker, disclose any referral arrangement, and ensure council obtains at least one competing quote. If the firm genuinely wants to offer brokerage services, it should do so through a properly separated entity with written disclosure and owner/council consent, and the manager should not be the person recommending or selecting the broker. Put the advice in writing so council cannot later say it was not warned.