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Every construction project presents a host of potential risks that need to be addressed. Although it’s no guarantee that you can eliminate all of them; you can help manage them and de-risk your business. The best way to eliminate as much risk as possible is to have a Risk Management plan. Risk Management is the practice of identifying & analyzing loss exposures and taking steps to minimize the financial impact of the risks they impose.

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The National Association of Women in Construction (NAWIC) and Safe Site Check-In shared the results of a workforce survey. This survey consisted of over 700 women in construction and was conducted in early February 2021, over a variety of construction jobs and titles.

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There can be a myriad of problems when a Contractor cannot fulfill its contractual obligation in connection with a construction project. This puts the Owner in a position to suffer a financial loss. In addition, the Contractor’s subcontractors and material suppliers may not receive payment from the Contractor for labor performed or materials supplied.

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This article was written by TSIB’s Andrew Waterbury and is published in the ABC Southern California Monthly Newsletter, The AGGREGATE, November Edition. Andrew is the Director of Surety at TSIB’s Santa Ana, CA, office servicing Orange County, Lost Angeles County, and Riverside County.

The fiscal year-end for many companies is just around the corner. Subsequently, now is a good time to begin tax planning while keeping in mind how your year-end financials will look when presented to your banks and Surety companies. Banks utilize year-end financial statements to underwrite your credit facilities as well as Surety carriers to establish your bond program throughout the year.   

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In the construction industry, Surety bonds are often an important part of a project. They help keep a project on track and ensure that there is a backup plan in place for an Owner, in case a Contractor cannot complete their work. In this situation, a Surety bond is a guarantee by a Surety company to fulfill the obligation of a defaulting Contractor. Bonds protect the Project Owner against a loss as a result of the Contractor's failure to meet this contractual obligation. Here are a few ways that surety bonds can help project owners minimize their risk.

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Subrogation is a circumstance where an entity (Surety) is substituted into the place of another entity (the Principal) with regard to a claim or legal right of the Surety’s Principal. As a result, the Surety will “step into the shoes” of its Principal and assume the Principal’s claims, legal rights, and remedies.

The Surety promises the Project Owner that it will fulfill the contractual obligations of its Principal in the event the Principal defaults on a bonded contract.

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This article was written by TSIB’s Jeremy Pendergast and is published in the Construction News from Austin, Texas- Construction News October 2020 Edition.

In these unprecedented economic times, the ability for Contractors to have a Surety Bond program that meets their need to bid work and sustain their overall capacity to build a backlog is paramount to successfully navigate this changing environment.

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Despite the fact there is a set project schedule, we often find that construction projects are delayed and finish later than expected. As a result, Owners will often attempt to assess their liquidated damages against their Contractors for the delay at the end of the project. In doing so, Contractors typically claim that the delay was either Owner-Caused or a Concurrent Delay, which means the delay occurred due to acts of others beyond their control by multiple, independent parties.

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Last week, we learned about calculating your company’s Return on Investment (ROI). We discussed that, in general, the lower the risk, the lower the return—whereas, the higher the risk, the higher the return. This week, we will dig further into Net Profitability and Rate of Return with our example Contractor, XYZ Company. With that as a backdrop, what should the Owner of a construction company require in return for the risks taken?

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What is the appropriate compensation for the Owner of a construction firm? Is a healthy salary plus expenses enough to justify the business risk that a Contractor takes—or should that Contractor also be building wealth using the construction firm as an investment vehicle?

Unfortunately, there is no one right answer to these questions. However, answering the question on an individual basis does depend on the Return on Investment (ROI) a Contractor expects for their business.