Contractors who want to bid on public works projects (cities, states and federal) must collect a lot of information. This information will include the history of the company, its capabilities and the resumes of key employees.
The ability to provide a surety for each contract is one of the assets that are required.
Bond underwriters will review the qualifications of applicants in a comprehensive manner. The underwriters will consider many factors, including: financial condition, prior experience and technical expertise, staff, equipment and banking relations, affiliates and legal issues.
If there is any suspicion that the account may be manipulated, underwriters will not accept it. The purpose of the underwriting questions is to uncover both the applicant’s strengths and weaknesses.
Some aspects of underwriting information come from independent third-parties, such as CPA prepared statements, bank records, credit reports, and supplier references. Some items can be provided directly by the applicant, who is not an independent party but a “interested person.” It is inevitable that this will happen in the creation of each bonding file. The underwriter will rely on applicants to provide accurate and truthful information. There can be no relationship of underwriting without this certainty.
The applicant can follow these steps to foster a good relationship:
1. Fill out all forms and questionnaires completely and truthfully. Sign and date your document. If you have negative items to mention, be honest about them but include a written explanation of the situation or any other documents which may assist.
2. Include all other companies you own, any lawsuits and even old bankruptcies. Describe any tax or banking issues. Underwriters are likely to uncover these issues during the process. It is better to volunteer facts, then explain them.
3. Include the key employees’ resumes and any bonuses or employment agreements. Include their resumes. Include any awards and good guy letters.
Remember that sureties earn money from writing bonds. Even if they don’t seem to be motivated, sureties do have a reason to say yes.
You are asking your surety to be your business partner. If you succeed, the surety will be successful on the project. How will you treat this new partner? Be honest and upfront! You will not succeed in hiding the negative aspects, but the relationship will be irreparably damaged.
Steve Golia has extensive experience in providing bid and performance bonding for contractors. Since more than 30 year, he has been helping contractors solve bond issues and finding solutions when others have failed.
Steve Golia offers his clients market access and underwriting expertise. The service is outstanding and the accessibility is excellent.