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Insight into Managing Risk

Insight into Managing Risk

Merchants Bonding's Vice President of Contract Underwriting Josh Penwell was featured in the April 2017 Construction Executive magazine Special Section: Managing Risk. Josh gave his insight, answering the following: If there is a burst of construction activity under the Trump administration, what advice can you offer to contractors that might overextend?

His answer:

Industry surveys show U.S. contractors are gearing up for a burst of construction activity under the Trump administration. In one report, three out of four contractors plan to hire more workers to take on new projects.

Surety professionals are advising contractors to tread carefully and avoid the temptation to overextend.

Tight labor markets have put the problem of increased overhead front and center. Contractors are challenged to find qualified people to fill new jobs, as well as offer increased wages or other incentives to retain qualified labor.

Carefully monitor any increase in overhead. Mismanagement of overhead was a key factor that destroyed the balance sheets of many contractors in recent years and even put a few out of business. Smart and sophisticated contractors will predict labor shortages and adjust accordingly.

The profitable contractor of the future will remain disciplined and manage overhead through strict controls, which will lead to profitable operations if the burst of construction activity takes shape.