Volume 42, Issue 10 - October 2007

Issue @ Hand
The Top Ten List —
In Bonding, That Is 
 
Megan Headley’s excellent report on bonding begins on page 32. In addition, USGlass magazine asked a number of contract glaziers what their company does when, for whatever reason, it can’t bond a job. These experts, who were all candid on the condition of anonymity, said you first must understand why your company can’t bond a particular job and how you counter the reason for the denial. Here’s what they suggested:
  1. First, understand the true reason why bonding is not possible. Does the particular project exceed your company’s total bonding limit or your per-contract bonding limit? If the latter, you might be able to work with the general contractor to divide the project into separate contracts, none of which exceed your company’s project limit.
  2. Determine if it’s a timing issue. Each project bond makes the dollar amount of that project unavailable to you until the job is finished. “Sometimes a company will not have the capacity when the contract is awarded, but completion of another job a few months down the road frees up some capacity,” explains one expert. “You should have a capacity calendar that shows you what’s available and when it becomes available,” he suggests. “Sometimes, just a delay in getting paperwork signed will give you enough time to free up some bonding capacity. 
  3. Never lie. Never lie to the bonding company, the bank or the general contractor. It should go without saying, but experts suggested we remind readers. “If you can’t get a bond, you lose a job,” says one. “If you are discovered to have lied, all your bonds will be revoked and your whole business is gone.”
  4. Consider a partner. Joint venturing with another glazing contractor can increase your capacity. “I’ve joint-ventured a few jobs where we do the work, but our partner provides the bond. It’s worked out well,” says one of our experts.
  5. Look up and down for help. Consider asking for bonding help from suppliers, customers or minority partners. This must be done carefully, but can work. “If I am working with a particular supplier who knows if I don’t get the job, they don’t get the job, that supplier has a major incentive to help me make it work,” one expert says.
  6. Take bonds when you don’t need them. Experts say that it’s a good idea to bond a small job you know your company will complete well, especially when you are starting out. “You want to build a record of completing increasingly more costly and complicated jobs,” says our team of experts.
  7. Remember to estimate your bonding costs. Bonding costs not only include the cost of the actual bond, it includes lost opportunity costs because your capacity is being used by the job. “You have to think about what jobs you want but won’t be able to do when you take a bonded job.… and your costs should include the cost of financing and carrying the bond, which usually is not released until everything, including retainage, is paid.”
  8. Have your skin in the game. Those in the surety business want to make sure that you have put and kept value in the business itself. Equity and capital paid-in by owner(s) are all important in assessing your business.
  9. Don’t limit yourself to just one agent. Our experts suggest having one main agent with which you work, but getting bonds from at least one or two other agents every year. 
  10. Don’t get thrown off jobs. “I don’t care where it is, that news goes around town faster than the speed of light,” comments one expert. “Everyone, including your bonding company, will know you were kicked off and they’ll remember it.”

Do you have other ideas or experiences regarding bonding that would be helpful to our readers? 

E-mail me at deb@glass.com

—Debra Levy 


USG
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