Midsize construction contractors entering the U.S. surety marketplace will find no shortage of bonding capacity, but experts say accessing that capacity has become a much more rigorous process in the past 18 months given recent loss trends.
Recommended best practices for contractors seeking to present themselves as a more attractive risk to surety underwriters include:
• Prepare and maintain detailed financial records, including reports outlining past and current project budgets, staffing histories, pending and completed litigation, and insurance policy holdings.
• Maintain liquidity commensurate with total active workload.
• Review the project to be bonded for compatibility with core competencies and field experience.
• Provide a realistic strategy for the bonded project's completion according to contract terms.
• Set and maintain prequalification standards for subcontractors and their sureties.
• Maintain consistent com-munication with key business partners, including the surety bond producer, project financier and internal general counsel.
Payment and performance failures among small and midsize construction contractors were mostly responsible for the substantial increase in surety losses in 2012, and they are expected to continue driving claims through the remainder of 2013.