Identifying potential problems in advance allows all parties to plan and act daily with a risk-avoidance mindset.
Principals have a lot of control over surety losses. Adequate preparation and consistent follow-through will help prevent losses. Lisa Frasier, VP for claims at Old Republic Surety, recently wrote on NASBP’s Pipeline page about key indicators that trouble could be brewing.
There are four primary, commonsense practices principals can take to protect their financial well-being and their future bond eligibility:
- Make sure everyone’s on board with the contract’s requirements and timelines to prevent over-commitments, delays, and liquidity problems.
- Document all requests and archive the records so you can keep track of progress, problems, workarounds, and promises.
- Use a qualified construction attorney to help review, negotiate, and hone a contract so there are no surprises.
- Trust your surety if troubles arise, because the surety wants you to succeed and can often help resolve problems before they become losses.
Staying on top of the financial side of every job should be someone’s assigned duty. Contractor failures frequently have telltale signs:
- Falling behind on the job
- Labor shortages
- Credit or liquidity problems
- Harsh or unresolved dispute between contractor and owner
- A personal or personnel crisis for the contractor
When the agent, surety, and obligee work together closely, a system of check-ins can be established to help all project stakeholders meet their goals and commitments. Read more details on this topic from Lisa at NASBP’s Pipeline page: www.nasbp.org/pipeline/morearticles/reduce-surety-claims.