We’ve all seen the news and heard about the economic conditions that have affected the  construction industry.  We have some insight that can assist in maintaining, and possibly even increasing, your bonding capacity during this downturn.  While not all inclusive, here are our suggestions:

• Think about the market from a long-term perspective: Bid the job, not the competition.  There must always be adequate profit in your work to cover unexpected contingencies.  Chasing after work at a lower margin just to keep the firm busy will slowly eat away your financial base.  Do not spend precious time on jobs that do not provide enough of a return to your company.
• Be selective when bidding projects.  Look for those which offer your company a competitive advantage such as geographical location, familiarity with the owner/architect, or experience on similar projects.
• Prepare for executing less work by reducing variable and fixed overhead or reducing staff.  Sell non-essential equipment, trucks and real estate.  Consider outsourcing payroll and other services, and leasing equipment versus owning it.
• Retain and reward your indispensable people:  The core operational team is critical and will be essential to being well positioned for the recovery.
• Offset escalating costs of materials and services by engaging in early commitments.  While bidding a project, make commitments to key suppliers and subcontractors to purchase their equipment and services in exchange for their commitment to freeze quoted prices if your company wins the contract.
• Consider the owners.  The stressed banking and financial sectors will make it difficult for them to finance work.  Offer good service by providing creativity and quality, improving plans when possible with value-adding ideas.
• Maintain strong cash positions with minimal institutional debt.  Changes in bank ownership or management can cause unexpected changes in lending practices.  As interest rates increase, paying off debt obligations will become more difficult.

An experienced SURETY PROFESSIONAL is vital to the overall success of your business.  For more information on how to best handle these challenging times, contact the SURETY PROFESSIONALS

Philip E.Vega, President
Contractors & Developers Bonding