Surety Bond Education

When you are out of cash, you are out of business. Cash-Flow in your Construction Business – Why positive cash-flow is the lifeblood of your business A contractor should be reviewing their financials monthly or quarterly to evaluate the performance of the company. It is easy to take a quick look at the profit & loss report, see a positive profit and give yourself high marks. But the reality is, you cannot use profits to pay your bills, you can only pay for things with cash. This makes the cash-flow statement the most important report to understand how and when […]

Utilizing Subcontractor Bonds for Prequalification and Risk Management Whether you are a paper general contractor subcontracting nearly 100% of work or a prime engineering firm subcontracting work scope you do not self-perform, subcontractors are often extremely important contributors to a project. Because of this, it is critical to perform both prequalification and contractual risk management to avoid problems. Some solid risk management procedures include properly structured subcontracts which include flow-down of contractual responsibilities from the prime contract, indemnity provisions holding the G.C. and owner harmless, minimum insurance requirements for general liability, work comp, and auto as well as safety plans. […]

We’d like to take the opportunity to discuss the risks with posting cash as bid security in lieu of a bid bond. We want you to understand that you may be jeopardizing that cash.  If you are unable to meet the requirements to enter into the contract you may lose your cash. One of the contract requirements is likely posting payment and performance bonds. What Is a Bid Bond? The first step to understanding why cash may not be the best idea to post as bid security is to first understand what is a bid bond. A bid bond in […]

I had the opportunity to contribute an article to the September 2020 edition of the Austin Construction News publication.  You can find the article here. Common Risk Factors in Surety Underwriting Eric Schmalz, Principal, Schmalz & Associates Surety Bonding When I began my surety underwriting career in 2002 as a trainee, one of the foundational books I was given to read was “Construction Contractors’ Survival Guide” by Dr. Thomas C. Schleifer. The book was written for construction contractors to learn from, but the parallels to surety underwriting make it a tremendous asset in learning about elements of contractor failure that […]

Let’s say that you are a contractor that is interested in bidding work for TXDOT.  We can help you with the steps to bid on TXDOT Projects: Step One – Get Prequalified with TXDOT There are two different routes you can take to get prequalified to bid electronically on TXDOT projects.  The first one, Bidder’s Questionnaire, is the quickest and qualifies you for “waived” or “emergency” projects with TXDOT.  Visit the TXDOT website regarding Contractor Prequalification here.  The second method is the Confidential Questionnaire and you must submit an audited financial statement.  Please see the TXDOT website for more information. […]

Public owners such as the federal and state governments, counties, cities, school districts and the like take in our tax dollars and some of it, if we’re lucky, goes toward capital improvements that we get to use every day.  These public owners have a duty to taxpayers to get the best value available and so they often offer projects under competitive bid letting structure. Financial Security The owner will prepare plans, specs, and an engineer’s estimate for use by contractors as a basis for their estimate or bid.  Once the contractor has prepared their bid, they submit to the owner […]