Contract bonds are more prevalent in the construction industry than ever before. More and more commercial contractors are required to furnish bid, performance or payment bonds before they will be hired. Continue »
‘Incompetence’ Is Not Material: Contractor’s Defective Performance Doesn’t Excuse Owner’s Noncompliance With Pre-Termination Notice to Cure
In a recent Pennsylvania federal court decision, a surety in a construction dispute was found to be protected by a 30-day notice-to-cure provision in its principal’s construction contract, resulting in the dismissal of the owner’s claim against the surety. Continue »
Subcontractor default is neither understated nor under-reported. Everyone in the industry is familiar with it and the consequences of the likely, yet always surprising, situation when a subcontractor defaults on a project. Continue »
An unbonded contractor on a public or private construction project is a bad idea. Rarely will such contractors, especially on bigger projects, be contracted at all due to the significant risks at play. Continue »
It has been more than a decade since the U.S. first considered legislation permitting public works projects to be delivered through public-private partnerships (P3s). Thirty-two states currently have laws enabling the use of P3s. Continue »
Surety executives reveal how contractors can make the most of the surety relationship. They also speak out on the need for diversity in the industry and why a contractor should share its safety program and results with the surety.
Edmund Scarborough, who is well-known as an individual surety, filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida on July 17. Scarborough listed assets of $4.5 million and liabilities of $16.2 million. Continue »
The Small Business Administration (SBA) final rule to conform the regulations governing the Surety Bond Guarantee Program to certain provisions of the National Defense Authorization Act for Fiscal Year 2013 (NDAA) took effect Feb. 12. Continue »
In light of recent news stories about fraudulent surety bonds, questions about the legitimacy of a surety bond demonstrates how important it is to verify the authenticity of the surety bond, a process that takes minutes but could prevent thousands of dollars in losses later. Continue »
Every time the economy slows into a recession, it seems to correlate to a higher incidence of fraudulent or bogus bonding. During the past three years, there has been an uptick in firms with very similar websites and verbiage. Contractors must take precautions to prevent being duped by unscrupulous brokers purporting to represent bonding programs willing to underwrite contractors “regardless of credit.” Continue »
Subcontractor defaults are seldom expected yet remain a serious risk for general contractors to manage as part of a successful construction project. Generally, they occur when a subcontractor fails to meet its contractual obligations. Financial insolvency is among the leading cause of subcontractor defaults. Other hallmarks cited for defaults include the inexperience of the subcontractor, over-extension on other projects, and lack of effective business systems and practices such as estimating or accounting.
Defaults happen not only during periods of economic decline but also in periods of prosperity. In fact, attention to default risk should be heightened during periods of recovery, during which new inflows of work can exceed the capacity of a contractor’s balance sheet. Continue »