1. The Contractor Development Program
The Basics of Bonding
&
The Contractor Development Program
Presented By:

2. – About Us
The Bond Assistance Program has successfully helped contractors bid on over $760 Million in projects throughout the State of California, of which $216 Million has been awarded to contractors.
Full-Service Property & Casualty Insurance Brokerage Firm
Dedicated Construction/OCIP Practice
Specialty Programs – SPARTA / Prompt Cover
Contractor Bonding & Technical Assistance Programs
Offices: San Francisco, Los Angeles, Oakland & San Diego, San Bernardino, and Sacramento
In Southern California, the Program is supported by the following Public Agencies:

3. Why Do I Need a Surety Bond?
Surety Bonds are Mandated By Law on Public Works Projects
Federal
“Heard Act” (1894) & “Miller Act” (1935)
Require performance & payment bonds for public work contracts over $100,000
State & Local
“Little Miller Acts” (vary by state)
Require performance & payment bonds for on state and local public works projects (amounts vary by entity)
The use of Surety Bonds makes it possible for government entities to use private contractors for public construction projects under a competitive, sealed bid, open competition system where the work is awarded to the lowest responsive bidder.

4. A Three (3) Party Agreement that Guarantees a Contract:
What is a Surety Bond?
A Three (3) Party Agreement that Guarantees a Contract:
CONTRACTOR (Principal)
SURETY
OWNER
(Obligee)
The Surety provides assurance to the Project Owner (Obligee) that the Contractor (Principal) is qualified, will perform a contract, and pay all subcontractors and material suppliers, as stipulated in the contract.

5. What is Surety Bonding? Three Party Agreement Protects another party
You cannot buy it like Insurance
You must qualify for it
Unlike Insurance, no losses are expected

6. Types of Surety Bonds Components of Contract Surety Bonds: Bid Bond
Surety bonds in construction are referred to as “Contract” surety bonds
Components of Contract Surety Bonds:
Bid Bond
Guarantees contractor will enter into contract at bid price, if low bidder
Performance Bond
Guarantee completion of the contract
Payment Bond
Guarantees laborer, suppliers, and subcontractors will be paid
Maintenance or Warranty Bond
Guarantees against defects in workmanship or materials for a stated time after acceptance of work

7. What Surety Professionals Analyze
The Three C’s of Surety
CREDIT
Financial Strength
CAPACITY
Ability to Perform
CHARACTER
Reputation With:
Annual & interim financial statements
Investment strategies
Cost control mechanisms
Work in progress
Cash flow
Net worth
Working capital
Bank & other credit relationships
Prior experience on similar projects
Equipment
Personnel
Past, current, and future workload (bonded & non-bonded)
Continuity plan
Organization
Management plan
Project Owners
Subcontractors
Vendors
Suppliers
Lenders

8. The Process of Obtaining Bonds
Get this done as early as possible!
Step 1: Apply for Bonding Capacity
Obtain A Broker
Gather Required Documentation
Broker Sends Submission to Bond Markets (Underwriting)
of Bondability
Obtain Letter
Step 2: Bid on a Public Works Project
Identify Bidding Opportunity
Request a Bid-Bond from Broker
Submit Bid-Bond along with Bid Estimate to Owner
Bid Results Received
Step 3: Submit Final Bonds to Start Job
Request Final Payment & Performance Bonds from Broker for this Job
Submit Payment & Performance Bonds and Finalize Contract with Owner (N.T.P. & N.O.A.)
Begin Work!

9. Cost of Surety Bonds Bid Bond No Charge Performance Bond
½ - 3% of Contract Price
Payment Bond
Price included with Performance bond

10. Why is it Difficult for Small Contractors to Obtain Bonding Capacity?
Surety Prequalification/Underwriting
Capacity to perform
Financial Strength
Track Record & History of Company
Organizational Structure
Business Continuation Plans
Trade References
Analysis of all Projects in Progress
Credit History
Good Character
Working Capital
Quality CPA Prepared Financial Statements
Broker Representation
The Vicious Cycle
of Bonded Work
Track Record
Net Worth / Financial Strength
Demonstrable
Capacity
Access to Surety Credit

11. What Are the Benefits to Contractors of a Bonding Assistance Program?
Establish their first bond or increase current capacity
Enhance their ability to bid other public works projects
Establish a track record of bonded work
Larger prime contractors can reduce their risk by having small contractors “bond back”

12. How Does A Bond Assistance Program Help Small Contractors?
Mitigate Exposure to the Surety/Finance Company
Bond & Loan Guarantees
Third Party Funds Administration
Contract Monitoring
Pre-Claim / Default Problem Resolution
Better Prepare Contractor for Bond/Loan Underwriting
Consultative Services
Contractor Assessments (Pre-Qualify)
Referrals to qualified resources, broker, bank, CPA
Assistance/Subsidy towards CPA Prepared Financial Statements
Facilitate Collateral Support and/or Funds Administration as Needed

13. Example of how the Bond Assistance Program Help Small Contractors
Contractor currently has $250,000 in available bond capacity
A job opportunity arises and the contractor’s bid estimate is valued at $350,000
Contractor is not able to pursue this opportunity due to lack of adequate bonding capacity
The Problem
The Program work’s with the Contractor’s bonding company to enhance the Contractor’s available bonding capacity
The program posts a collateral guarantee on behalf of the contractor to increase their bonding capacity from $250k to $350k
Contractor now has the adequate bonding capacity to obtain the bonds for this project and pursue this opportunity!
The Solution

14. How Does Contractor Development Program Help Contractors?
Through Our Contractor Development Program, Contractors have access to the following FREE Services:
Program Enrollment & Assessment – Self Assessment, Development Plan, Marketing Profile
Referrals to Resources, Brokers, Banks, CPA’s,
Accounting cost subsidy up to $3,200 towards CPA prepared Financial Statements
Education & Training
Access to Outreach information on upcoming Bid Opportunities, Events, & Workshops
Collateral Support for Bond Guarantees up to 40% of the contract amount or $250,000, whichever is less for awarded City Projects
Third Party Funds Administration
Contract Monitoring & Field Support
Risk Management Services, including Pre-Claim & Default Problem Resolution
Matchmaking with Prime Program Partners - *based on Prime’s requests and qualifications

15. How Does the Program assist Contractors to Maximize their Contracting Potential and Grow their Business?
ENROLLMENT &
ASSESSMENT
Complete a 1-Page Enrollment Form
Have a 1-On-1 Consultation with a Surety Specialist
Refer Contractor to Broker to see if he/she can qualify for Bonding (if necessary)
CONTRACTOR
SELF-ASSESSMENT
Indicates a rating on where you are in “Your” Business
Indicates specific needs you may have
The Self-Assessment is used to provide the Contractor with recommendations to the resources in the Development Plan
CONTRACTOR DEVELOPMENT PLAN
Provides the Contractor with Resources based on their individual Business needs
Short and Long Term Goals are created and given to the Contractor
Contractor meets with their Surety Specialist Quarterly to access progress
PROFILE
FREE Marketing tool to promote “Your” Business to Large Prime Contractors, Public Agencies, & other Peer Contractors
Much more than a Business Card
Update for FREE as your Company Grows

16. Who Are Our Target Contractors?
Aspiring Contractors
Entry Level Contractors
Experienced Contractors
Contractors Transitioning from Private and or Commercial to the Public Sector
Prime and Subcontractors
“No Contractor Left Behind”

17. Contractor Bonding, Technical Assistance & Contractor Development Programs
City of Los Angeles (BAPLA)
Bond guarantees up to 40% to a maximum of $250,000 (whichever is less)
Accounting cost subsidy up to $3,200 for financial statements
Funds Administration payment of fees 1% of contract price
Training - individual counseling and group workshops on bonding, financing and business management
Program Events – Convene contractor program events in Council Districts and participate in Proprietary Department events

18. Contractor Bonding, Technical Assistance & Contractor Development Programs
Los Angeles Unified School District (LAUSD)
Guarantees up to 40% of bond to a maximum of $400,000
Loan Guarantees to banks up to 50% to a maximum of $200,000 on contract specific lines of credit
Contractors may utilize a combination of bond and finance guarantees up to a maximum value of $400,000
Funds Control fee paid

19. Contractor Bonding, Technical Assistance & Contractor Development Programs
San Bernardino Community College District
Guarantees up to 40% of bond to a maximum of $400,000
Training - Individual counseling and group workshops on bonding, financing, business management, and more
Matchmaking – Connecting awarded Primes to smaller Subs

20. Merriwether & Williams Insurance Services, Inc.
Contact Us
Merriwether & Williams Insurance Services, Inc.
523 West 6th Street, Suite 650, Los Angeles, CA 90014
Tel. (213)  Fax (213) 
City of Los Angeles Program (BAPLA)
Malise Cross, Surety Specialist  (213) 
Kristin Chang, Surety Specialist  (213) 
City of Los Angeles – LAWA Program
Rosa Osorio, Surety Specialist  (424) 
Los Angeles Unified School District Program (LAUSD)
Navid Barkhordar, Client Relations Manger (213) 
San Bernardino Community College District (SBCCD)
Shanette Anderson, Program Manger (213) 