Category: Construction Bonding Specialists - page 3

Relationships are vital in the commercial construction industry, specifically between general and trade contractors. While general contractors subcontract work to a variety of subcontractors, trade contractors focus mainly on projects given to them by general contractors, making this dynamic for both sides mutually advantageous.

The partnership between subcontractors and general contractors can be complex. General contractors typically require subcontractors to get prequalified before performing any work or being invited to submit bids on jobs. Subcontractors usually need to provide information to the general contractors, including safety records, finances, bonding capabilities, litigation history, insurance coverage, relevant work history, experience, and more. Trade contractors also perform their own vetting process to determine goals and ensure they are able to work with a reputable general contractor.  

In both cases, information should be funneled to owners during pre-qualification or when securing the contract. All plan changes or specs should also be reviewed so extra work doesn’t add up down the road. 

Clauses are generally what to look out for in contracts. Here are some examples:

Pay-when-Paid and Pay-if-Paid
These two main contract provisions should be analyzed intensely before any signature. Pay-when-paid contracts require the general contractor to pay the trade contractor when the owner pays them. Pay-if-paid requirements outline subcontractor payment if the general contractor gets paid. If they do not receive compensation, neither does the subcontractor. 

Flow-down and Pass-through
While incorporating the terms of the general contract with the owner into the subcontract, the subcontractor assumes the same duties toward the general contractor as they would to the owner. Prime contracts should be reviewed if these clauses are on the table since they can help specify whether there are terms that should be avoided. 

Change Orders
All work should be submitted in writing, and jobs should never be completed without an agreement from the owner. There should be a designated change order authorized person as well. 

Indemnification Clauses
General contractors who are negligent will be disciplined accordingly due to this clause. For subcontractors, their indemnification should only require them to assume liability for their own carelessness. 

Payment Bonds
General contractors are almost always required to post a payment bond to protect the owner, while private owners are also increasingly requiring them. If established, these bonds help to avoid liens filed against their property. 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Construction firms highly covet commercial government contracts, as public spending on construction projects exceeds hundreds of billions of dollars yearly, making them a lucrative opportunity. While most construction firms rely on government contracts as their sole source of revenue, others bid on various public and private jobs.

Public construction contracts are governed by lengthy laws, which vary based on the agency. However, there are some consistencies between requirements that all agencies abide by. Read on to learn more about bidding on government construction contracts. 

Construction Bonds
Contractors often need to guarantee bids, construction work, and payments to subcontractors or suppliers by government agencies. Moreover, the terms of the bid should be obeyed. Typically, three parties are involved: the obligee, the principal, and the surety. The three most common types of bonds required on construction projects are bid, performance, and payment. 

Pre-Bid Site Visit
To allow contractors to better understand the project at hand, owners will often allow site visits. Often, contractors can ask questions regarding the bid or network with relevant contractors. Sometimes, these meetings are mandatory, and failing to attend will result in bidding ineligibility.

Competitive Bidding
Budgets are top-of-mind for most public construction projects, and most often, contractors can bid on projects after an architect completes the full plans. Prior to the bid date, projects must be advertised in one way or another. The lowest responsive, responsible, and eligible bidder will be given the job. 

Special Programs
Women, minorities, and small-business owners should have an equal opportunity to bid on projects, so a number of state, local, and federal agencies have created programs to ensure they are awarded accordingly.

Davis-Bacon Act of 1931
This federal law forces contractors to be paid local wages based on earnings paid to the various classes of laborers working on other local construction projects. Varying from state to state, wages will differ based on location. 

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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

The industry offers a large variety of surety bonds, which are required to bid or work on all public works projects, private construction, remodeling, and new construction.

The different types of surety bonds include bid bonds, performance (contract) bonds, and payment bonds. These bonds offer protection for the project owner, taxpayers, investors, etc., associated with private projects. Typically, projects need all three bonds.

Bid Bonds
These bonds guarantee that the contractor will accept a job if they win the bid. They are required by federal law on all projects over $100,000. State-sponsored public work projects also usually require bid bonds. If the winning contractor decides not to accept the job, the project owner is able to submit a claim to cover costs linked to evaluating new contractor bonds. 

Performance Bonds
Sometimes called contract bonds, they guarantee that the contractor will fulfill the entire project, abiding by laws and industry standards. If they fail to do so, the project owner can file a claim to recover any financial loss resulting from another contractor re-doing the work. 

Payment Bonds
These bonds guarantee that the contractor will pay if the work is not completed in accordance with the terms of the contract by the workers, subcontractors, or suppliers. A claim by any of the aforementioned parties can result if the contractor fails to remit payment. 

Contractor License Bonds
The only type of construction bond that is not project-specific; they don’t apply to a single project. These bonds guarantee that the contractor will conduct business in a lawful and ethical manner, meeting industry standards. Some states require all contractors to be licensed at the state level to operate legally. 

In terms of cost, the contractor usually pays only a small percentage of the required bond amount established by the project owner or licensing authority. A surety bond company establishes a premium rate for each applicant based on their personal credit score, industry experience, and personal/business financial statements. Those in good standing usually pay one- to three percent of the total bond amount as an annual premium. 

Construction Bonding Specialists is a leader in obtaining construction surety bonds. We can assist you in winning more jobs through bond terms. Contact us today to learn more. 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

At the end of 2021, the 10-year treasury note reached only 1.5 percent, creating low-interest rates. Less than a year later, in October 2022, the rates peaked at more than four percent, which hasn’t been seen since April 2010. These unusual bond market fluctuations force investors to constantly recalibrate to keep up. 

Because of the inverse relationship between bond yields and prices, bond issues fall when yields rise. When the demand decreases, bond issuers typically turn to higher yields, which lowers the value of the lower yields already on the market. 

Higher interest rates often go hand-in-hand with higher inflation, following long-term growth and trends. An inflation surge between the first quarter of 2021 and mid-2022 saw a Consumer Price Index (CPI) level of 9.1 percent, the highest reading since 1981. Bond markets usually fluctuate based on upcoming financial policy shifts. 

Bill Merz, head of capital markets research at U.S. Bank Wealth Management, said, “Bond yields rose in 2022 primarily because the Federal Government pivoted to a much more hawkish position, as investors anticipated aggressive interest rate hikes to rein in inflation.” 

An economic downturn can result from issues such as war, supply constraints, and pandemics, all of which have happened in recent history. Since these various events can disrupt the economy, consumer spending often wavers. Interest rates could skyrocket if the economy gets a second wind and accelerates growth. However, long-term yields could fall if the economy takes a downturn.

Let’s get to the point: what does this all mean for bond investors? In short, buying bonds during a high-interest rate period will yield higher results. 

Merz said, “We’re putting greater emphasis on core bond holdings. We believe that bonds offer compelling defensive characteristics relative to stocks. Our emphasis is on high-quality investment-grade taxable and municipal bonds as well as a dedicated exposure to short-term U.S. Treasury investments to manage overall risk exposure should interest rates continue to rise in the near term.”

The recent housing market activity has paved the way for a beneficial supply-and-demand balance in the mortgage market. 

“This remains a time when investors are likely to benefit from holding more high-quality assets and fewer volatile assets than in a typical period.” 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

Since January 23, 2023, the Michigan Uniform Vehicle Dealer Surety Bonds (also known as Michigan auto dealer bonds or Michigan motor vehicle dealer bonds) has increased from $10,000 to $25,000. 

Mandated by Michigan Compiled Laws 257.248, the surety bond requirement has yet to be distributed to all motor vehicle dealers. Any individuals or business entities who sell or deal in five or more motor vehicles within a 12-month period are subject to the code. This ensures the public will receive compensation for any damages if the auto dealer is not in compliance with the dealer licensing law.

Regulated by the Michigan Secretary of State, the Michigan legislature enacted the license to guarantee dealers engage in ethical business practices such as remitting payment for taxes and fees. Specific licenses are required for auto dealers by the State of Michigan, depending on the nature of the business. Dealers will need to acquire a license for each type of business they are active in. 

The different types of Michigan Dealer Licenses are:

• Class A: New Vehicle Dealer
• Class B: Used Vehicle Dealer
• Class C: Used Vehicle Parts Dealer*
• Class D: Broker
• Class E: Distressed Vehicle Transporter*
• Class F: Vehicle Scrap Metal Processor*
• Class G: Vehicle Salvage Pool*
• Class H: Foreign Salvage Vehicle Dealer
• Class R: Automotive Recycler*
• Class W: Wholesaler*

*It is important to note that classes C, E, F, G, R, and W are exempt from the surety bond requirement. 

The Michigan Department of State requires that existing bonds be increased with a rider amendment document provided at the next renewal. The deadline for filing paperwork to increase the Michigan auto dealer amount is December 31, 2023. Any dealers who do not file the required documents before the deadline will potentially have their licenses canceled.

All existing bonds are subject to the increase at the next renewal term, so dealers who have active bonds already on file with the state of Michigan can expect the bond amount to increase by inflated premiums on their next renewal term. Any newly paid renewal invoices should be filed with the state of Michigan.

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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

Digital bonding in the construction industry is much more common these days, primarily due to the introduction of digitization into the surety industry. Especially since the pandemic, when many everyday activities suddenly were launched into the digital realm, digitization of sureties for the construction industry has only gained momentum. 

Paperless, fully digital bonding platforms are up-and-coming. McKinsey and Company recently reported the world will need to spend roughly $57 trillion on infrastructure by 2023 to keep up with GDP expansion. To meet that immense demand, the construction industry will be forced to embrace more digital options to support organization, efficiency, and finalization. 

Surety digitization in the construction industry has a bright future since time and cost savings can be recuperated. Managing a range of developments can be challenging without a specific digital solution to procure an effective bidding and bonding process. Two essential areas that can help in this realm include advanced analytics for intelligent asset management and digital collaboration, such as moving to paperless projects. 

Construction firms can immediately benefit from the simplicity and overall capacity of employing technology in surety and underwriting management systems by implementing cloud-based software. Those already immersed in the digitization transition have found their business growing more rapidly. With the bidding and approval of contracts fully automated, firms can minimize time-consuming offline work, instead focusing on workflow efficiency. 

Some benefits of digitization include better managing workflow, automating underwriting, managing portfolios, improving document functions, forecasting sales productivity, and connecting with brokers in real-time.

The construction and surety industries have adapted in previous times of uncertainty, such as the global pandemic, supply chain obstruction, and overwhelming worker shortages. Due to the industry’s apparent resiliency, the future will continue transforming as needs arise. 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

The Small Business Administration (SBA) is advocating for more small businesses to partner with federal contractors, particularly with the latest advancement to update critical infrastructure throughout the U.S. With the passing of the $1 trillion infrastructure law, the Biden administration made available about $60 billion to the states earlier this month. These funds are earmarked for rebuilding critical infrastructure within all 50 states, including Washington D.C., and Puerto Rico.

The SBA has teamed up with the U.S. Dept. of Transportation to offer additional opportunities and access to capital while removing common obstacles small businesses often face. A new avenue was created for small and disadvantaged businesses to help connect companies with contracting opportunities and be able to access some of these funds. This includes actions such as direct introductions and educating small business owners on how to be competitive in securing contracts.

The much-needed critical infrastructure work ranges from rebuilding roads and bridges to buildings and public transit. SBA administrator Isabel Guzman reports, “That technical assistance is going to give them the how-to in terms of going after, successfully bidding on, and winning contracts in the federal space.”  

In 2021, the U.S. infrastructure was given a C- by the American Society of Civil Engineers (ASCE), which is up from a D+ in 2017. Seventeen categories were assessed in 2021, with grades ranging from a B for railroads to a D- for transit.

Small businesses have a difficult time obtaining federal contracts compared to larger entities, in part due to contract bundling. Bundling occurs when multiple tasks are entered into contracts that balloon, causing the contracts to become so large that small and medium-sized businesses can’t take them on.

Another barrier is the lack of history. If a business cannot prove its historical performance, then they fail to compete, making it much more difficult to secure future jobs. This is what the SBA hopes to assist with; connecting businesses with subcontracting opportunities that, in turn, help build up their portfolio and give them a better edge to go after prime contracts.

“It comes down to expanding the number of opportunities and ensuring that small businesses are entering the contracting space, getting certified, and able to know the how-to’s of who to connect to, how to present yourself, and how to get money,” Guzman says.

The SBA is also assisting small businesses within the transportation sector to get bonds, which guarantee agreements. Most federal contracts require businesses to be bonded. Surety bonds are a type of insurance with a three-party contract in which the surety guarantees a contract’s completion, i.e., with the federal government. If a contractor is unable to complete a project, the responsibility falls on the surety company to find a replacement contractor.

It’s estimated that about sixty-five thousand contracts were received by small businesses in 2021, down by almost 40% over the past decade. While the SBA and the U.S. Dept. of Transportation have not enumerated a goal, this partnership aligns with the current administration’s objective to advance the equity in government procurement. The federal administration has set an 11% federal contracting goal for small, disadvantaged businesses, with an increase to 15% by 2025.

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

What is a surety bond?

A surety bond is a signed agreement that guarantees compliance, payment, or job performance. Sureties are a type of insurance with a three-party contract in which one party (the surety) guarantees the performance of a second party (the principal) to a third party (the obligee). Surety bonds written for construction projects are called ‘contract surety bonds;’ otherwise, they’re known as commercial surety bonds.

Who is the surety?

A surety is an insurance company or surety company licensed by a state department of insurance that guarantees the performance of a principal. If the principal fails to act as promised, then the surety is liable for losses sustained.  

Who is the principal?

The principal is the person or entity who purchased the bond. In construction, the bond is given to the contractor or subcontractor who undertakes the obligation to perform the job as promised. The surety guarantees the principal’s responsibility.

Who is the obligee?

The obligee is the individual or entity with whom the principal is contracted. In construction, the obligee is the project owner or the primary contractor. Often the obligee is a local, state, or federal government organization.

What documents will I need to get bonded?

• Completion of a Contractors Questionnaire
• Fiscal Year End Business Financial Statement for the Contractor and all subsidiaries and affiliates for the last two years
• Current personal financial statement for all owner(s)
• Current work on hand schedule
• Current bank reference letter
• Resume of all key employees
• The current insurance certificate naming Construction Bonding Specialists, LLC as a certificate holder

For Bid, Performance, or Payment Bonds – the following items are also required:

• Contract Bond Request form: Contract Surety
• A copy of the underlying contract and bond forms for our review

What factors does a surety consider in the underwriting and prequalification process?

Obtaining a construction bond is more like getting bank credit than purchasing insurance. Surety underwriters perform a thorough and detailed process to review and evaluate the financial documents submitted. They also consider factors such as the risk under the specific contract for which the contractor seeks a bond, the contractor’s entire work portfolio, past performance, experience, operational efficiency, managerial skills, business plan, and reputation for integrity. Different sureties will weigh varying factors during the underwriting process, but almost all will consider the following factors:

• Financial capacity
• Net worth
• Cash flow
• Assets
• Credit score
• Work in progress
• Work history, including expertise and experience
• The banking relationship
• The nature of project to be bonded
• The character of the contractor

BONDS ARE ALL WE DO!

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For more information about our bonds visit our website or call 248-349-6227

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

Experienced contractors generally make a conscious effort to avoid claims situations, while being proactive about understanding the process. Utilizing the perfect surety gives those contractors the knowledge and power they need for their claims team. For any contractor to take on bonded jobs, basic comprehension is essential.  

The three main types of construction bonds are: bid bonds, payment bonds, and performance bonds.

Bid Bonds
These bonds stem from situations when the principal is the successful bidder but cannot enter into the contract or provide final bonds. In bid bonds, the principal and surety are required to pay a specific sum to the obligee. The bond form caps liability at a particular amount (the difference between the principal’s bid and the next highest bidder’s bid) instead of exceeding the penal sum of the bid bond. The responsibility of this task is between the principal and surety. 

Payment Bonds
When the principal fails to pay subcontractors, laborers, and/or suppliers, payment bonds give the surety the right to assert all of the principal and surety’s defenses, which sometimes include limitations on notice and time. Only proper “claimants” can benefit from these bonds, so the principal and surety need to confirm the claimant can pursue the claim. 

Performance Bonds
A performance bond claim arises when the obligee defaults or terminates the principal for non-fulfillment regarding their contractual obligations. Handling a performance bond claim has various levels of importance, including cooperation, agreements, and challenges. One of the most trying decisions is to admit or deny liability. After analyzing contract documents, bond forms, factual issues, and possible defenses, the surety has to eventually decide whether to perform. 

Surety partners will typically work in conjunction with contractors to avoid claims or mitigate the damages. Selecting the ideal surety with a good track record of minimizing legal fees while resolving claims is paramount for any contractor. 

If you are seeking a construction bond, contact the specialists at Construction Bonding today. 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

While public (federal, state, or local agencies) projects are required to provide performance and payment bonds, private construction generally does not require bonds. For privately-owned construction jobs, it is up to the owner to secure a bond. 

While most contractors will work with a surety to provide the bond, some contractors will make it mandatory for the owner to pay for the bond. Depending on the contractor, size, type, and duration of the project, bonds can range in price between one-half to three percent of the contract.

Some of the reasons why private owners elect to secure bonds include: 

• Lenders: Owners may be required to provide bonds if a lender is financing the job. 
• Contractors: Sureties will thoroughly screen contractors for proficient operations, management, experience, and financial stability. 
• Guarantees: Bonded projects are more likely to be completed.
• Support: If trouble emerges, the surety will intervene and offer support to avoid default. 

Private owners choose to forgo bonds because: 

• Price: Bonds are expensive, and it can be challenging to justify higher expenses. 
• Vetting: Financial and other records are generally difficult to obtain, but some contractors provide access to sureties.
• Contracts: Countless provisions require clear communication between the surety and contractor.

Practically speaking, securing bonds for privately-owned construction jobs depends on the experience of the contractor, size, and nature of the project. Bonding might be justified if the project is big but the contractor is smaller. If the contractor is unfamiliar with the structure or components, a bond might be a good idea. Lastly, if a private construction job does require a bond, it is imperative for the owner to review the form with an attorney to ensure everyone will comply with the stipulations. 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/