Failure Rates
Failure Rates 2011-2016 Building, Heavy/Highway, Specialty Trade Contractors 2011-2013 2014-2016 25.4% 29.3%
Failure Rates
Surety Losses & Profitability
Prequalification Financial Statements Capacity Organization References Credit History Banking Relationships
Contractor Failure Risk Low profit margins Onerous contracts Slow collections RISK Unreasonable Owners High Materials Prices Insufficient Capital Shortage of qualified, skilled workers
Contractor Failure Failure Accounting issues Management issues Personnel issues Performance issues Failure Unrealistic growth
Accounting Issues Inadequate cost tracking systems Estimating or procurement problems Underinsured Improper accounting practices
Management Issues Leadership changes No continuity plan when key person dies or becomes disabled Changes in scope of business
Performance Issues Unrealistic growth Change in type or scope of work Poor project selection Onerous owners Unsettled claims & change orders
Personnel Issues Key staff leave company Character issues
Unrealistic Growth Unrealistic Growth Increase in Shorter Backlog Work Lead Time Unrealistic Growth
Factors Beyond Your Control Economic Downturn Inflation Failure Weather Delays Site Conditions Labor Difficulties Materials Shortages
Ineffective Financial Management Tight cash flow Slow receivables Past due bills Vendors demanding cash
Bank Lines of Credit Constantly Borrowed to the Limit All credit fully secured Lines not renewed
Poor Project Management Inadequate supervision Not getting best prices Projects behind schedule Claims Litigation
No Comprehensive Business Plan No contingency plans No “road map” No goals No objectives
Poor Estimating and Job Cost Reporting Revenue and margins decrease Continued operating losses Loss of bonding capacity Bid jobs too low
Communication Problems Disputes between contractor and owner Poor communication from field to management
Loss of Loyal Customers Decreasing reputation for company’s ability to perform contracts on time & within budget
Tips for Avoiding Default Rights & responsibilities Capabilities Growth and overhead Causes and warning signs Communication
Tips for Avoiding Default Contract Bond forms Qualify surety Qualify owner Surety Relationship
Expectations Rights Obligations Resolution Completion
Tips for Owners: Navigating a Claim Understand bond Cooperate Comply with contract Don’t overpay Lien waivers Timely default Termination
For More Information www.surety.org