Think about it – what could be better than writing a bond to build a church? What could possibly go wrong?
The sad truth is that these projects can be high risk for the contractor and surety.
Unique Risk #1
Church construction contracts include obligations for both parties. The builder must perform the construction correctly, on time, and for the agreed price. The church (the “owner”) must pay for the work as it progresses. When compared to public work such as for the city or state, church work (and other non-profits) can be more hazardous if the owner does not have all the funding in place.
Suppose they are depending on a successful fund drive? If the contractor performs work, incurs costs, and is then not properly paid it could be detrimental to both the contractor and surety.
Unique Risk #2
An additional threat arises from the design and administration of the contract. If there is no architect, or if the architect is terminated or withdraws during the project, the contractor may be answering to the church building committee. This is likely to be a loosely organized group of non-professionals with no construction design experience, each with their own ideas on how to proceed – bad for the contractor!
To assure a reasonable level of professionalism and predictability on church work, it is important to confirm full funding in advance (prudent on ALL private contracts). This could be in the form of an approved building loan or funds on deposit in an escrow account.
It is also necessary to have an architect engaged throughout the process. Note: Design / Build contracts present more risk, not less. (Projects where the contractor is responsible for both design and construction.)
Church projects can be a heavenly experience if the proper safeguards are followed.