Competitive Bidding: An Undefined Standard NRED and the Commission Ignore

Before publication, NVHOAReform asked NRED, the Department of Business and Industry, and the CIC Commission Chair to comment on the concerns raised in this post. NRED responded: “The Division respectfully declines to correct your pending post, nor is it expressly authorized by statute to do so.” That response is itself revealing. NVHOAReform did not ask NRED to edit or “correct” an article. It asked the agency responsible for administering Nevada’s HOA laws to comment on whether the concerns identified here are accurate—including how NRED interprets the “when practicable” bidding standard, how that standard is applied, and what happened to a formal petition seeking public clarification.

The Division declined to engage those questions. Whether NRED has a statutory duty to review a private publication is beside the point. The larger issue raised by this post is whether Nevada’s HOA regulatory system provides a meaningful way for the public to obtain clear, public explanations of how important regulatory standards are interpreted and applied.

____________

Competitive bidding should be one of the simplest protections in HOA governance. Boards spend money that belongs to homeowners. Competitive bids help test price, compare services, expose alternatives, and reduce the risk of favoritism or self-dealing.

Nevada recognizes that principle. Legislative intent appears clear. But Nevada's regulators still has not clearly told homeowners, boards—or apparently even investigators—when competitive bidding is actually required. The problem comes down to two words in a Commission regulation: “When practicable.”

NAC 116.405(8)(d) says the Commission may consider whether board members caused an association to obtain, “when practicable, at least three bids” before purchasing services. NRED has also said publicly that it expects associations to obtain three bids unless doing so is not reasonably possible. That sounds straightforward.

But what makes bidding “practicable”? What facts make it impracticable? What evidence does NRED require? What reasons for avoiding competition are acceptable? Despite years of administering this requirement, neither NRED nor the Commission has provided homeowners and boards with a meaningful public standard answering those questions.

And both have been repeatedly asked to do so.

The Problem Is Bigger Than the Word “If”

Much of the debate over Nevada's competitive-bidding law has focused on one word in NRS 116.31086: “if.” The statute provides that if an association solicits bids for certain contracts above specified financial thresholds, it must, whenever reasonably possible, solicit at least three.

NRED has relied heavily on that language. In its Winter 2022 Community Insights, the Division stated: “The word ‘if’ cannot be ignored, therefore if no bids are solicited, the Division cannot state that a violation of law took place.” But that is only part of what NRED said.

The Division immediately acknowledged that soliciting bids is a best practice, cited NAC 116.405(8)(d), recognized the potential fiduciary-duty implications of failing to bid, and said a board deciding that bids were unnecessary should thoroughly discuss its reasoning at a public board meeting.

That distinction matters. NRS 116.31086 may answer one question: If bids are solicited, how many must be sought? But NAC 116.405 raises a different and potentially more important question: Should bids have been solicited in the first place because doing so was practicable?

A board cannot logically make that second inquiry disappear merely by deciding to solicit zero bids.

NRED Has Already Recognized the Real Question

NRED issued Advisory Opinion 11-02 in 2011 under the title: “Determining Whether Executive Board has Performed their Duty for Bids for Services ‘When Practicable.’” The opinion explains “practicable” generally as something performable, feasible, or possible and recognizes that the determination depends upon the particular circumstances. More importantly, the advisory opinion describes an enforcement process in which, when a failure to obtain bids is alleged, NRED examines the particular facts and determines whether there is sufficient evidence to allege a violation.

The Commission ultimately determines whether a violation occurred. That means NRED's own framework points to the question that should be central whenever an HOA awards a substantial contract without competition: Was obtaining competitive bids practicable under the circumstances?

But the advisory opinion also exposed the problem the Commission should have addressed years ago: “practicable” remained a circumstance-dependent standard without clear regulatory criteria for applying it. An advisory opinion was not the proper vehicle to create those criteria; the Commission, which adopted the regulation, was. Yet the Commission never supplied them.

Saying that practicable means performable, feasible, or possible provides little meaningful guidance for deciding real HOA cases. Consider a management contract, a typical board event, coming up for renewal.

Can the board say it likes the current manager and therefore see no reason to seek alternatives? Does continuity of service make bidding impracticable? How much inconvenience or additional work is enough? Must there be an emergency? Does bidding become more important when the contractor is affiliated with the declarant, manager, or another person controlling the association? Must the board determine and document that bidding is impracticable before awarding the contract?

Should an evergreen or automatic-renewal provision be allowed to avoid competitive bidding when bidding would otherwise be practicable? Who bears the burden when practicability is disputed? And what evidence does a NRED investigator actually require before concluding that a no-bid contract complied with the directors' duties?

Nevada provides no meaningful public criteria answering those questions. That is not merely an academic problem. It determines how millions of dollars of homeowner money can be spent.

Has the Standard Ever Really Been Enforced?

This raises an obvious question more than a decade later: How, if at all, has that standard actually been enforced?

If NRED has investigated failures to obtain bids, what facts has it considered sufficient to show that bidding was impracticable? Have boards been required to explain why competition was not sought? Have violations ever been alleged based on a failure to obtain bids when bidding was reasonably possible? Has the Commission ever decided such a case?

Or has the absence of defined criteria effectively allowed the requirement to disappear in practice?

That is precisely why the Commission should have clarified the standard. An undefined exception should not become a reason for non-enforcement. If the rule cannot be applied consistently, the answer is to define it—not quietly allow it to become optional.

That leaves an important regulatory requirement largely dependent upon decisions made inside confidential investigations. One board can award a substantial contract without competition and face a violation allegation. Another can do essentially the same thing and have the complaint closed. Without published criteria or meaningful closure reasoning, homeowners cannot know why. Neither can responsible boards trying to comply with the law.

That is what happens when an undefined standard is combined with a largely confidential enforcement system. Read more at our post The Secrecy Wall: Regulator’s “Confidentiality” Undermines HOA Accountability and Trust

I Formally Asked NRED and the Commission to Address It

This issue has not escaped regulatory attention because nobody raised it. In 2025, I submitted formal rulemaking petitions asking NRED and the Commission to address competitive bidding and ambiguities in NAC 116.405. One of those petitions specifically identified the phrase “when practicable” and asked for clearer standards so the regulation could be interpreted and enforced consistently.

The issue was therefore broader than whether NRS 116.31086 should require bids. It was:

What does Nevada's existing “when practicable” standard mean, and how is it supposed to be applied?

The petitions ultimately appeared in supporting materials provided to Commissioners. But placing a petition somewhere in a large packet of supporting material is not the same as placing the requested rulemaking issue on an agenda for Commission consideration and action. I have found no agenda item in which the Commission was asked to decide what “when practicable” means.

I have found no public Commission discussion resolving the ambiguity. I have found no Commission vote rejecting the requested clarification. And I have found no resulting regulation defining the standard.

NRED and the Commission Have Both Been Asked to Address It

NRED cannot reasonably say the issue is unknown. Neither can the Commission. NAC 116.405 is a Commission regulation. The Commission is ultimately responsible for applying the standard contained in it.

NRED investigates alleged violations under that regulatory framework. Both therefore have institutional responsibilities here. And both have been put on notice.

I have repeatedly asked that the ambiguity—and my related rulemaking petitions—be placed before the Commission for consideration. Commissioners received the petitions in their supporting materials. They are aware that the regulatory language has been challenged as undefined. Yet there has been no public Commission proceeding defining what “practicable” means, no vote declining to clarify it, and no meaningful published criteria telling boards or owners how the standard is supposed to work.

NRED cannot answer that problem merely by saying materials were transmitted to the Commission. And the Commission cannot indefinitely remain passive about ambiguity in its own regulation after that ambiguity has repeatedly been brought to its attention.

At some point, failure to address a known regulatory ambiguity becomes a regulatory choice of its own.

Then the Rulemaking Process Became Part of the Problem

Nevada law provides a mechanism for citizens to ask an agency to adopt, amend, or repeal a regulation. NRS 233B.100 is not an incidental administrative procedure. It gives any interested person the ability to ask an agency to adopt, amend, or repeal a regulation. Nevada’s own rulemaking guidance describes public participation as a central feature of the Administrative Procedure Act and explains that rulemaking can be used to remove uncertainty or ambiguity in the law. That is exactly what these petitions sought to do: identify ambiguous regulatory standards and ask the responsible agency and Commission to clarify them.

I used it. When my petitions still did not receive a clear disposition, I wrote to NRED alleging that its handling of them appears to violate NRS 233B.100. NRED denied that it had violated the statute.

The problem is not that the public lacks a statutory mechanism for raising these issues. Nevada created one. The question is what that mechanism means if a properly submitted petition can be placed into supporting materials and effectively be disposed of without producing either the written denial or rulemaking consideration the statute was designed to require.

That legal disagreement is important, but readers do not have to resolve it to recognize the underlying problem. Look at the result. A formal rulemaking petition identified an ambiguity in an important Commission regulation. The petition asked for clarification. The issue was known to NRED. The materials reached Commissioners. I subsequently challenged NRED's failure to obtain action on the petitions. NRED denied any statutory violation.

Yet the original regulatory question remains unanswered. What does “when practicable” mean?

Whatever one's view of the NRS 233B.100 dispute, the rulemaking process has produced neither a meaningful standard nor a public Commission decision declining to create one. That should concern anyone who believes administrative rules should mean something more than whatever an investigator decides they mean in an individual case.

This Is Also a Transparency Problem

There is an important connection between competitive bidding and the broader transparency problems within Nevada's HOA regulatory system. A vague standard becomes less dangerous when administrative decisions interpreting it are public. Published decisions create precedent. They tell regulated parties what conduct is acceptable. They allow owners to compare similar cases. They expose inconsistent enforcement. And they allow the Commission itself to see how a regulation is functioning in practice.

Nevada's current system provides very little of that.

NRED may decide during a confidential investigation that bidding was not practicable. The complaint may close. The homeowner may receive little meaningful explanation. Other homeowners never see the reasoning. Other boards cannot learn from it. And the Commission may never be asked to determine whether NRED applied its own regulation correctly.

The result is not merely lack of transparency. It allows NRED, through individual enforcement decisions, to effectively develop the meaning of an undefined Commission regulation without creating a public body of law explaining that meaning.

The Commission Has a Role NRED Cannot Replace

This distinction matters. NRED investigates. The Commission determines violations when matters are actually brought before it. Yet an undefined regulation administered primarily through confidential investigations shifts enormous interpretive power toward the Division.

If NRED closes a bidding complaint because an investigator concludes bidding was not practicable, that conclusion can effectively decide the matter without the Commission ever determining what “practicable” means.

If another investigator reaches a different conclusion in another case, the public may never know. That is precisely why the Commission needs to establish the standard publicly rather than allowing its meaning to emerge invisibly, case by case, inside NRED. The Commission wrote the regulation. It should explain what its regulation means.

This Matters Most When Relationships Already Exist

Competitive bidding becomes especially important when an association is considering a contract with an incumbent provider, declarant affiliate, management affiliate, or another party with an established relationship to the people controlling the association.

Competitive bidding does not mean the lowest bidder must win. It does not mean a board cannot retain a trusted incumbent. It means the board obtains information before deciding how to spend somebody else's money. What alternatives are available? What does the market charge? Are better terms available? Is the incumbent still competitive? Those are basic questions of informed governance.

A board may have a perfectly legitimate reason for retaining an incumbent contractor. But if competitive bidding was feasible, homeowners should be entitled to know why the board chose not to test the market. And where the selected contractor is affiliated with the declarant or another person controlling the association, the need for an objective and transparent standard becomes even greater.

Nevada Does Not Need Another Vague Principle

Nevada already has one: “When practicable.”

What Nevada needs is a usable standard. The Commission should define the factors that determine whether competitive bidding is practicable. Those factors might include:

• availability of qualified vendors;

• urgency;

• specialized or proprietary services;

• legitimate continuity concerns;

• size and duration of the contract;

• sufficient time to conduct a competitive process;

• relationships between the vendor and persons controlling the association; and

• other circumstances genuinely making competition unreasonable.

The Commission should also require a board approving a substantial no-bid contract to document, before approval, why competitive bidding was not practicable. That does not dictate which contractor a board must select. It simply requires the board to explain why it did not test the market.

The precise standard should be developed publicly. That is what rulemaking is supposed to accomplish.

NRED and the Commission Should Answer

After years of guidance, investigations, an advisory opinion, formal petitions, correspondence, and repeated requests for Commission consideration, the issue can be reduced to one straightforward question:

When an HOA awards or renews a substantial contract without seeking competitive bids, what facts determine whether competitive bidding was “practicable”?

If NRED already applies an established standard, publish it. If no adequate standard exists, the Commission should develop one. If the Commission believes its existing regulation is sufficiently clear, it should explain publicly why. And if it disagrees with a formal rulemaking petition asking for clarification, it should consider the petition and say so.

What should not continue is the status quo: an undefined standard, applied largely through confidential investigations, while both NRED and the Commission know the ambiguity exists and leave it unresolved.

Homeowners should not have to guess how the rules governing the expenditure of their money are being interpreted. Neither should the boards expected to follow them.