Key Takeaways

Why Vendor Management (VW) Matters for CRE Portfolios

Strong VM programs lift financial and operational results. Properties with structured vendor programs often report higher NOI through compounding improvements.

Common results include 12–18% reductions in maintenance costs and up to 40% fewer emergency repairs. Emergencies cost far more than planned work. Reducing them protects budgets and tenant trust.

Energy is a major lever for cost saving. Optimising HVAC vendors and building systems can yield 15–25% utility savings. These savings flow straight to NOI. Industry guidance from U.S. energy programs supports similar ranges for well-executed operations and maintenance practices. See DOE O&M best practices and ENERGY STAR for buildings.

A Business Case at a Glance

• Maintenance cost savings: 12–18% annually
• Emergency repair reduction: up to 40%
• Energy savings via optimized systems: 15–25%
• Tenant retention improvement: 5–10% in competitive markets
• Administrative time savings: ~50% faster vendor onboarding

Such gains can only be achieved by from moving beyond transactional buying to strategic partnerships backed by a proper vendor management program.

Sourcing & Vetting Vendors

Sourcing vendors should always start with a needs assessment by property and asset class. This assessment will the be followed by defining services, timelines, pricing expectations, and performance standards. 

Standardised Sourcing Framework

Use a repeatable process. Begin with market research to benchmark pricing and service models by region. The "three bids and a buy" approach supports competition and choice.

Remember to evaluate more than just price. Check a vendor’s ability to scale, geographic coverage, and technology for systems integration. It's best practise to favour vendors that match your footprint and can connect to your platforms.

Contractor Pre-qualification

Pre-qualification reduces risk. Core elements of this include licensing, safety record, and relevant experience. You can see a sample framework from the California State University system here.

For contractors that you hope to have a long term relationship, it's also important to understand financial stability. Make sure that your process includes a review of audited financial statements. Look for steady revenue, manageable debt, and adequate working capital. Financial strain often leads to delays or quality issues.

Credentialing & Compliance Tracking

Credentialing protects you from liability and downtime. It sets clear standards for safety, insurance, and operations. Make sure to align your credentialing with local, state, and federal requirements.

Insurance Requirements to Verify

Always verify Certificates of Insurance (COIs). Without proper documentation, owners may be liable for accidents or claims. See this COI primer from Insureon.

• Commercial General Liability (CGL): minimum $1M per occurrence; owner named as Additional Insured
• Commercial Auto Liability: owned, hired, and non-owned coverage
• Workers’ Compensation: state-compliant; waiver of subrogation
• Professional Liability: for design or specialized consulting
• Umbrella/Excess Liability: typically $2–5M based on scope

It's very important confirm and keep track of dates, endorsements, and exclusions. Setting up renewal notifications will help you prevent lapses.

Licensing and Safety Compliance

Licensing varies by trade and jurisdiction. In the USA, the Occupational Safety and Health Association (OSHA) sets great baseline safety standards for PPE, fall protection, scaffolding, and hazardous materials. You can review OSHA guidance at osha.gov.

Different types of vendors may require specific licenses to operate. One example - HVAC vendors need EPA refrigerant certifications. 

Subcontractor Controls and Ongoing Monitoring

Prime contractors remain liable for their subcontractors. This is why it is important to require proof of insurance, licensing, and safety compliance for all subcontractors. Once again, you want to set up automated alerts for expirations, renewals, and certification updates.

Communication & Work Order Integration

Integrate VM with your daily operations by connecting to your current tech stack. Modern work order/property management systems can help with coordinating, tracking, and document maintenance in one place. See this overview from ProptechOS.

Work Order Automation Benefits

• Faster triage and assignment to qualified vendors
• Real-time status updates for managers and tenants
• Complete documentation with photos and sign-offs
• Automatic compliance checks before dispatch
  
  

Emergency Protocols and SLAs

Response time expectations must be explicit. Many programs require 1–2 hours for critical safety issues and 4–6 hours for non-critical emergencies. What the time frame is, the escalation paths must be defined and enforced via SLAs.

SOWs and Change Orders

Use Statements of Work (SOWs) to prevent scope creep. These must include governance, scope, deliverables, milestones, budgets, and acceptance criteria. If changes to the SOWs are needed they must be documented through a formal change order process before extra work begins. 

Measuring Vendor Performance

You generally improve what you measure. This is why we recommend focusing on metrics that matter to cost, reliability, and satisfaction. For a deeper dive on KPI design, see this guide.

KPIs That Matter

Response Times: Track actual vs. SLA for emergency (2 hours), urgent (4–8 hours), and routine (24–48 hours). Consistent delays indicate capacity issues.

First-Time Fix Rate: Target ≥85% for routine work. Lower rates point to diagnostic or parts gaps.

SLA Compliance Rate: Measure the share of SLA requirements met. This shows overall vendor reliability. See a calculation overview from Vendr.

Cost Variance: Compare actual to budget and to market benchmarks. Include overtime, emergency premiums, and change order frequency.

Safety Performance: Track incidents, near-misses, and violations. One serious event can erase years of savings.

Vendor Scorecards and QBRs

Combine KPI results into a simple vendor scorecard. Use it to drive Quarterly Business Reviews (QBRs). 

Leveraging Software for Vendor Oversight

Technology turns vendor management into a strategic advantage. With modern platforms can cut onboarding time by about 50% and reduce project delays. See examples from Cflow.

Core Capabilities

Centralized Vendor Database: Secure, searchable records for contacts, contracts, certifications, and performance. 

Automated Compliance Tracking: COI automation with expiration alerts and work order lockouts for non-compliant vendors. 

Mobile Field Tools: Real-time work orders, documentation, and messaging for field teams and vendors.

Performance Analytics: Dashboards for KPIs and trends help teams act before issues escalate.

Integration Capabilities: APIs connect your vendors software to your internal property management, accounting, and maintenance systems to avoid double entry.

Conclusion & Next Steps

Effective vendor and contractor management reduces risk and lifts NOI. Start with standardised sourcing, credentialing, and performance expectations. Then layer technology to automate workflows and surface insights.

Set yourself up for long term value by aligning terminology, defining SLAs, and measuring performance consistently. Even the smallest process improvements compound across a portfolio.