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Understanding Construction/Surety Bonds & Expanding Your Company’s Bond Program

Understanding Construction/Surety Bonds & Expanding Your Company’s Bond Program. By: Scott Mahorsky. What is a Surety Bond?.

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Understanding Construction/Surety Bonds & Expanding Your Company’s Bond Program

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  1. Understanding Construction/Surety Bonds & Expanding Your Company’s Bond Program By: Scott Mahorsky

  2. What is a Surety Bond? A surety bond is a written agreement where one party, the surety, obligates itself to a second party, the obligee/owner, to answer for the default of a third party, the principal/contractor. Surety Contractor Owner

  3. Types of Surety Bonds • Bid Bond • Performance & Payment • Maintenance • Others – Supply, Subdivision, Judicial, Mining, etc…

  4. Where Do I Get a Bond? • Agent • Execution • Role

  5. Surety – Bonding Companies • Large Markets • Travelers • CNA • Arch • Liberty • Zurich • Small/Medium Markets • Aegis • Capitol • Hudson • IFIC • NAS Surety

  6. Surety – Bonding Companies • Differing Sizes • Large Sureties = Larger Contractor • Smaller Markets = Smaller Contractor • Preferences • Federal Work • State Work • Subdivisions • Commercial Surety

  7. How Do I Qualify? • Character • Financials

  8. Work In Progress (WIP)

  9. Completed Contracts

  10. How Do I Qualify? • Bank Line of Credit • Experience/Work History • Resumes of Key Employees • Job References • Awards

  11. Ratios • Working Capital • Equity • Total Bond Program • Cost to Complete

  12. Quality of Agent Makes Difference

  13. How to Maximize Your Bond Program • Agent • Relationship with Sureties • Technical Ability • Focus on Surety • Understands Federal Marketplace • Sureties • Track Record • Overall - Losses • Resumes

  14. How to Maximize Your Bond Program • Construction Accountants & Financial Reporting • Project Types & Profitability • IDIQ • SATOC • MATOC/MACC • Build a Team • Construct a Long Range Plan/Strategy

  15. Benefits of Maximizing Bond Program • Profits • Letters – Better Opportunities • Less Dependence on Large Contractors

  16. State of Surety Marketplace • Economy • Increased risk for owners, contractors & sureties caused by current economy • Continued disciplined underwriting, exposure management & project analysis • More competition, fewer projects

  17. State of Surety Marketplace • Mergers

  18. Questions

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