Benefits of Bonds: Surety Brings Prominence and Protection
March 23, 2017
Merchants' leadership is often asked to address industry topics for leading publications. Vice President of Marketing Therese Wielage addresses contractor benefits with the use of suretyship in Engineering News Record's March 2017 Insurance Today Section.
Contractors with reputable surety support reap considerable reputational benefits. A surety bond firmly states that a contractor has the character, capacity and capital to perform the job.
The message to public officials and private owners is simple: If the contractors and subcontractors you choose for the construction project are bonded by a reputable surety company, then as a steward of the taxpayer or investor money, you have done your job well.
Construction company leaders know that their businesses are risk-filled enterprises. Over the past several years, we've seen that even the very capable and well-established contractors with many decades of experience can reach the point of failure.
The Surety and Fidelity Association of America (SFAA) reported a 22% failure rate through arguably the worst recession in decades. Quoting BizMiner, SFAA said that there were nearly 900,000 general contractors, heavy construction and special trade operators in business in 2009; by 2011, 200,000 of them were out of business. Even if the contractor has gone through the rigorous prequalification of a good surety, sometimes default is unavoidable.
The good news for professional bonded contractors is that if events begin leading to a default, a professional surety agent and underwriter can help save a project and a business's reputation.
Not only does the surety protect the project owners and taxpayers by providing performance and payment bonds, but it also protects the contractor if a default is declared improperly. In that case, the bond will have preserved the contractor's right to pursue legal action.
Suretyship has a long history dating back to clay tablets in 2750 B.C. To this day, professional surety agents and companies provide the most reliable way to mitigate construction risk.