performance bond

Secrets of Bonding #151: It’s Time For…Timing!

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Need a bond?  Talk to the Pros!  856-304-7348  www.BondingPros.com

Brokers protected.  Contractors welcomed.

With Surety Bonds, Timing can be critically important.  There are certain things that must happen first.  You can’t get them out of order. Here are some examples.  Do you know which comes first, and why?

Cover the answers with a piece of paper as you scroll down. (Paper is white stuff people used to write on. Really!)

  1. Bid Bond / Performance Bond
    • OK that was an easy one. They get harder. Bid bonds always come first – if there is one.  Not all performance bonds are preceded by a bid bond. Negotiated projects would be an example.
  2. Bond execution / Indemnity Agreement execution
    • The Indemnity always comes before the bond. It is the promise to pay back the surety in the event of a claim / loss. Sureties want this protection in place before they assume any risk.
  3. Surety Consent to Final Payment / Obligee Status Inquiry Form
    • The Status Inquiry form comes first. It is the obligees statement that the work is acceptable.  The surety requires to see this before agreeing to release the final payment.  If there are unresolved issues, the contractor must address them before the last contract funds come over. (That’s true motivation!)
  4. Payment Bond Release (exoneration) / End of Lien Period
    • Since the bond guarantees the payments that may be owed during the lien period, the time for liens must end before the bond is concluded.
  5. Contract Acceptance / Maintenance Bond Issuance
    • Sureties want the contract accepted first and the P&P bond released before assuming the risk associated with a Maintenance bond. Some obligees require issuance of the maintenance bond simultaneously with the P&P bond at the start of the project, but underwriters resist this.
  6. Bid Results / P&P Bond Issuance
    • Underwriters want to evaluate the adequacy of the contract price prior to bond issuance. They do this by evaluating the bid results, comparing the various proposals from different companies.  In some cases, the bid results are not published, in which case they have wing it!
  7. P&P Bond for Started Project / All Right Letter
    • The All Right letter is the obligee’s assurance that there is not already a problem on the contract that will result in an immediate bond claim. Sureties require a clean bill of health before bonding a started project (unless the degree of completion is very low i.e. 5%).
  8. Award Letter / Notice to Proceed
    • Award letter comes first, then the contract signing and Notice to Proceed is issued. Then “Grab ya hamma!”
  9. Tough Bond Problem / Call Bonding Pros!  856-304-7348
    • You can call us for discussion or general info any time. However, when a tough bond problem arises, that’s your cue to call in the experts.  Getting with us is as easy as making that call.  We have the markets and the expertise.  Bonds are all we do – since 1972!

Insurance Agents and Contractors: Love the “Secrets” articles? You’ll really love it when we solve your tough bonding problem! We have the markets and the know-how to succeed even when others have failed.  Call us with your next surety bond need.  We guarantee a same day response.  856-304-7348

Not available in all states.

Secrets of Bonding #143: Surety Bonds and Brain Surgery

Brought to you by…Secrets of Bonding is brought to you by Bonding Pros

Need a bond?  Talk to the Pros!  856-304-7348  www.BondingPros.com

Brokers protected.  Contractors welcomed.

Your doctor says “You have a problem.  We need to call in a specialist.” How do you determine who to call? What do you expect from the specialist? The choice could not be more critical.

We are faced with important decisions every day.  And there are plenty of people trying to influence the outcome.  You need the skills to sort through the “BS” and make the choice that is most beneficial to you. 

Here is an example you have seen in many different forms:

“Our doctors have over 25 years experience”

What exactly does that mean?  You could select that firm and get a doctor with ONE year of experience.  They may have 25 doctors, each with one year in the saddle. Ugh, how misleading!

Another example:

“Dr. Mavromoustafakis has specialized in brain surgery since 1980.”

OK, Dr. Mavromoustafakis  has over 25 years experience as a brain surgeon.  See the difference?

Next question: Does the difference matter?

To answer that, think about why expert help was required.  If there is a special need, and an experienced, expert problem solver is desired, then… Yes! 

That’s how it works with brain surgery and also surety bonds.  Some situations are more complicated.  They require unique solutions and strategies.  The key may be to know a special underwriting technique, or a special underwriter.  The surety business is all about relationships. So your best problem solvers have many years under their belt and deep relationships with the right underwriters.  They deal with them every day.

Conclusion
Surety Bonds: They’re not brain surgery.  But when you need expert assistance, real experience does matter. Pick up the phone and take advantage of our long devotion to this one product. 

Steve Golia’s personal surety bond expertise dates back to 1972 (started in grade school.) Solutions to every problem you’ve seen, and some you haven’t.  Our experience is the key to your success and our service is the best.  We have the market access and expertise to handle bonding problems large and small. 

When you need a bond, call the Pros!  856-304-7348

Insurance Agents and Contractors: Love the “Secrets” articles? You’ll really love it when we solve your tough bonding problem! We have the markets and the know-how to succeed even when others have failed.  Call us with your next surety bond need.  We guarantee a same day response.  856-304-7348

Not available in all states.

Secrets of Bonding #127: “The Call”

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Secrets of Bonding is brought to you by Bonding Pros

Need a bond?  Talk to the Pros!  856-304-7348  www.BondingPros.com

Brokers protected.  Contractors welcomed.

A couple of times every week we talk to a new contractor who wants to get their bond account set up for the first time.  Here’s how it always goes:

  • Contractor: We want to go after bonded projects but we’ve never had bonds before.  What’s involved?
  • Bonding Pros: OK Hi! Who am I speaking to?
  • Contractor: I’m Humphrey.
  • Bonding Pros: All right Humphrey, can we start by asking you a few questions?  What is the size and nature of the work you intend to pursue?TelefMan-07

Scenario #1 (Pursuing contracts up to $350,000)

  • Contractor: We have performed residential and light commercial work.  We want to go after general construction contracts up to about $250,000.
  • Bonding Pros: Great! Tell me the ownership and structure of your company.
  • Contractor: The company is an LLC owned by me and my partner Bogart.
  • Bonding Pros: Are you both married?
  • Contractor: Yes, but not to each other.
  • Bonding Pros: We have a very easy program that may be a perfect starting point for you.  To be eligible, the owners and spouses must have good personal credit reports. Are the reports favorable?
  • Contractor: Yes.
  • Bonding Pros: There are some other criteria.  For example, the program cannot be used for long-term contracts or difficult / unique construction – needs to be plain vanilla.  The good thing is that no financial statements or other documentation is required, only a simple one page app. If this program fits your needs, you’ll never find anything easier or faster!
  • Bonding Pros: Give me your email address and we’ll send you the one page app.  We can probably get you pre-qualified within 24 hours!

Scenario #2 (Pursuing contracts in excess of $350,000, or for applicants with low credit scores)

  • Bonding Pros: We have an excellent group of bonding companies, and even offer exclusive capacity not available from other sources.  We find that most contractors are able to qualify for bonding if their account is developed properly.  That’s where our expertise (since 1972!)  comes into play.
  • Contractor: What info will be needed?
  • Bonding Pros:  Getting approved for bonding is like applying for a bank loan. The same kind of financial and background info is needed.  Your relationship with the surety is similar to banking and you promise to protect the surety from loss, just like signing a promissory note with a lender.  That’s why surety bonds are not insurance policies.
  • Contractor: OK what’s the next step and how much does it cost?
  • Bonding Pros: We don’t charge for setting up your account!  We’ll send you an email with a list of items that are needed initially.  Gather as much as you can and send over so we can get started.  The process normally takes a week or two.  You don’t pay until you win a contract and need a performance bond.

Conclusion

Have we oversimplified the process? Actually, no.  It is easier than people assume to get their bond account arranged – when you know the ropes.  That’s our niche.  We don’t pretend to be good at everything, but we are experts at this!

Insurance Agents and Contractors: when tough bonding situations arise, we have the markets and the know-how to succeed even when others have failed.

Give us a call today!  Bonding Pros: 856-304-7348

Not available in all states including Idaho.

Secrets of Bonding #123: Who Was Edward Aloysius Murphy, Jr. (& Why Contractors Should Care)

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Need a bond?  Talk to the Pros!  856-304-7348  www.BondingPros.com

Brokers protected.  Contractors welcomed.

(January 11, 1918 – July 17, 1990) An American aerospace engineer who worked on safety-critical systems for the U.S. Air Force. He is best known for his namesake Murphy’s Law, which  states, “Anything that can go wrong will go wrong.”  Murphy regarded the law as crystallizing a key principle of defensive design, in which one should always assume worst-case scenarios.Murphys_Law

Keeping Major Murphy’s principle in mind, what are the critical steps contractors can take to get their projects off on the right foot, and bring them to a successful conclusion – while keeping Murphy’s Law out of the equation?

The first key to having a successful contract is to have a contract. It sounds obvious, but contractors are sometimes induced to start work, or perform change orders / additions to contracts, without an executed document in hand.  Maybe the project owner is in a rush, “We need for you to start right away so we can be completed on time.  We’ll do the paperwork later.”

The contractor wants to maintain good will.  They proceed in the hope that their responsiveness will pay off – and sometimes it does.  There are also times when the contractor incurs costs that are never reimbursed because the contract is not executed.  There could be engineering problems, governmental interference or lack of funding. There are any number of reasons for things to go wrong (as our hero indicated.) And for the contractor, they are all bad.

murphyslaw

On the other hand, let’s say there is no problem with the contract.  The paperwork is signed, the work proceeds, is paid for, and the contractor is completed with a profit in hand. So is that the end?

No, not quite. Just like there is paperwork to get into the project, there is more to get out of it.  The contractor should obtain written acceptance of the work by the job owner (obligee.) 

  • This important document establishes a completion date for the contract and concludes a portion of the liability that is attached to all open contracts.
  • It will close the Performance and Payment bond if there was one. Closing the file restores the contractors bonding capacity. 
  • It may also be beneficial with lenders.
  • If nothing else, a written acceptance may be a defense when the project owner attempts to call back the contractor at a later date or claim the work was not satisfactory.

Edward_MurphyThese simple procedures are basic, good business practices. Contractors who win work competitively, and are paid under a lump sum contract, already face significant risks.  It is important to have the correct paperwork in hand when starting, modifying, and ending construction projects. 

Major Murphy learned this important lesson the hard way – but you don’t have to! 

 

 

Insurance Agents and Contractors: when tough bonding situations arise, we have the markets and the know-how to succeed even when others have failed.

Give us a call today!  856-304-7348

Not available in all states including Idaho.

Secrets of Bonding #118: Bonding Company = Girlfriend

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Secrets of Bonding is brought to you by Bonding Pros

Need a bond?  Talk to the Pros!  856-304-7348  www.BondingPros.com

Brokers protected.  Contractors welcomed.

I’ve been in the surety business for a long time.  As a student of the industry, I have observed the dynamics that occur between bonding companies and their clients.  My conclusion: Bonding Companies are like Girlfriends!

(My comments are written from a male point of view, but I’m sure you can flip this to be applicable if the reader is “non-male.”)

Think about relationships you’ve been in.  Don’t they always have a “love / hate” aspect? Jokes about relationships often capitalize on this reality:

Marriage is a three-ring circus. First the engagement ring, then the wedding ring, then the suffering.
– Milton Berle

My wife is a light eater … as soon as it’s light, she starts to eat. 
– Henny Youngman

“I am” is reportedly the shortest sentence in the English language. Could it be that “I do” is the longest sentence?
– George Carlin

And for the ladies:

What’s the difference between a boyfriend and a husband?
About 30 pounds.
– Cindy Garner

As very sophisticated types, we know how to deal with the technicalities of these relationships.  It isn’t always easy, but it’s worth it.   Bonding is pretty much the same!

Step One

How does a construction company gain the support of a surety?  It starts with a flirtation and then “getting to know you.”  The underwriter receives information about a bond that is needed. If there is a spark of interest, an application and financial statements are submitted. 

The construction company wants to look attractive:

  • Here is what we’ve accomplished!
  • This is how much money we’ve made!
  • We can really perform!

Think of this as the dating stage.  It is exhilarating and intense! There are probing questions and well-crafted answers.  Both parties want to achieve success and avoid failure / embarrassment. The same as in romance, the underwriter (girlfriend) will walk away if they find that the contractor (suitor) is dating other underwriters.  This is why bond producers may approach only one market at a time.  No girl wants a playboy who may be disloyal.

Ravishing Wedding Rings Clipart Also Appealing Wedding Rings Clipart Hd Pictures 4 Boostnow Wedd - ~ zxtzdb ~

Step Two

If the relationship blossoms, wedding bells may chime! They tie the knot with a pre-nuptial / general indemnity agreement that says “We’re in this together.  But hurt me and you’ll PAY.” 

Step Three

Eventually they become old married folks.  The contractor gripes that “she is never satisfied.”  More info, more questions, more money spent to keep the surety / wife happy. It NEVER ends.  But the contractor needs the surety and works to keep things on track.

Is the underwriter frustrated?  Yes…  “I have to beat everything out of the contractor.  It’s like pulling teeth!” The contractor may be slow in providing the answers and info the underwriter needs to keep the bond account in healthy condition. “I thought we were in this together!”

There is an element of pain in the relationship, but both parties gain if they keep it together.

Yente  (Click for mood music) cupid

So where does the bond producer fit in?  We are the dating service that brings the parties together.  We succeed when we match the contractor with the right surety.  Our role as cupid continues as we shepherd the relationship forward, keeping the info flowing so bonds are available when needed.

The fact is, bonding involves more than paperwork.  It involves people, their perceptions and preferences.  The seasoned bond producer will make the match and guide the relationship forward for the benefit of all parties.  

Sureties, can’t live with them, can’t live without them.

The experts at Bonding Pros can help Insurance Agents and Contractors when tough bonding situations arise. We have the markets and the know-how to succeed even when others have failed.

Give us a call today!  856-304-7348

Not available in all states including Idaho.

Secrets Of Bonding #115: The Most Important Question in Bonding

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Secrets of Bonding is brought to you by Bonding Pros

Need a bond?  Talk to the Pros!  856-304-7348  www.BondingPros.com

Brokers protected.  Contractors welcomed.

When Surety Bonds are needed, there is always a questionnaire to fill out.  Why?  Because the underwriters need some basic info, and quickly.  The app asks for company location, ownership, plus facts about the operation and its history. 

So many questions!  Are they all relevant?  Are they all needed?  Actually… they are not equally important.  In fact there is one question on the app which is undoubtedly THE MOST IMPORTANT QUESTION OF ALL.green_shade

Let’s test your underwriting skills!  Here are some typical bond app questions.  Are they hot ones, or just background music?  Which question is the most important for bond underwriters?

  1. Q. Date Business Formed This is very important because many surety reinsurance treaties require that all the bond clients have certain longevity – such as minimum 3 years in business.  If the applicant has less than 3 years, some underwriters will stop reading at this point and decline.
  2. Q.Has the company, any affiliate or subsidiary, or any owners / spouse or companies in which they have had an ownership interest or managerial role ever experienced a bankruptcy?  Here is another important question, a deal killer with many underwriters.  They may not want to hear about the circumstances of the BK or subsequent positive developments.  Their reinsurance may forbid supporting such applicants.
  3. Q. Formal Buy-Sell Agreement in place? This question concerns continuity.  In the absence of key people, how will the company survive?  How will the bonded jobs get completed if the boss gets run over?
  4. Q. Is full corporate and personal indemnity by all owners, spouses, and affiliates provided? This is important b/c full indemnity is normally required and some applicants are reluctant to provide it.

Got your answer?  Read on.

Conclusion

**All the questions are relevant.  That’s why they are on the questionnaire.**

Let that sink in…

They are ALL important.  So for the underwriter, the question that jumps up off the page is the one left unanswered.

Why do people fill out the app and skip one question?  It has to be either carelessness “Sorry, I skipped over it by mistake,” or intentional “If I answer that question honestly, I may not get the bond approval!”  Both reasons are bad.

We can assume that “N/A” is an option for an irrelevant question, or “Unknown” if you have no info.  But a blank is a problem b/c cause the reader doesn’t know how to take it.

Many facts are double checked during the surety underwriting process.  But for a large portion of the info, the market is simply trusting the applicant to be truthful and transparent.  They depend on having full disclosure, and are entitled to it as the guarantor.

So please, please, please don’t skip any questions.  The app is often the underwriter’s first opportunity to meet the client.  Put your best foot forward by answering completely, and attach additional comments if an explanation is in order.

The experts at Bonding Pros can help Insurance Agents and Contractors when tough bonding situations arise. We have the markets and the know-how to succeed even when others have failed.

Give us a call today!  856-304-7348

Not available in all states including Idaho.

Secrets of Bonding #113: Your 1st Bond – Choose Door #1 or 2?

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Need a bond?  Talk to the Pros!  856-304-7348  www.BondingPros.com

Brokers protected.  Contractors welcomed.

Every week we get inquiries from contractors who need their very first bond.  This is a great question and one we love to answer.  It is particularly gratifying to give a new client their first bond – of many!

There are different paths forward depending on the circumstances.  Each door has different aspects.  Let’s go over them.

Door Number 1:open_door3

Use this door for contracts (federal and all others) up to about $350,000.  This is the fastest / easiest program with the first bond approval coming over in about 1 day!  Only a one page application is needed – no financial statements.  The program is predicated on the work being simple and normal for the contractor, and personal credit reports of owners and spouses must be acceptable.

This door is perfect for companies that are not pursuing contracts in excess of $350,000.  Other applicants can also use it as a quick way to start while completing the application process for higher amounts.

As with all the doors, there is no charge to get pre-qualified for bonding!

Door Number 2:

This is for contracts up to about $750,000.  Similar to Door Number 1, but now add “in house” company financial statements and / or tax returns. A longer questionnaire is needed, and supporting documents such as resumes, references and personal financial statements may be required.

Door Number 3:open_door1

For contracts in the $750,000-1,000,000 range, plan on a CPA prepared Compilation statement.  This is the lowest level (least expensive) CPA financial report.  It is needed once per year.

Door Number 4:

Contracts over $1 million may require an annual CPA Review financial report.

Number 5:open_door5

For large contracts in excess of $10 million, a CPA Audit may be required by the underwriters.

It makes sense that as the obligations become larger, higher quality, more complete information is needed.

Is there some flexibility?  Sure!  It may not seem so, but underwriters are motivated to be flexible and find ways to write the business.  After all, no bonds = no revenues.  They must find ways to say yes – occasionally.

What value does your professional surety agent add?  We have the markets and the relationships to get things done.  We know each underwriter’s appetite and the type scenarios they will support.

Need your first bond?  Choose the door and walk through with us!

Call us today and let’s get started: 856-304-7348

Not available in all states.