2. Surety Bonds • Performance Bond • Payment Bond

3. Benefits Of Bonding Subs • Prequalified subs • Risk Transfer • Improves contractor’s credit standing

4. Prequalification Process Business Operations Financial Strength Experience Sub Documents Exposure & Progress Size & Location Ability To Perform

5. Indemnification • Corporate & personal assets on the line • Incentive for sub to complete bonded work

6. Availability of Surety • Traditional sureties • Specialized sureties • SBA program

7. Confirm Ability To Provide Bonds

8. Limited Surety Capacity • Labor-only contract • Phased contract

9. Qualify The Subcontractor’s Surety A.M. Best Companywww.ambest.com Dun & Bradstreetwww.dnb.com/us Standard & Poor’swww.standardandpoors.com Moody’swww.moodys.com Treasury Dept.www.fms.treas.gov/c570/c570.html State Insurance Dept.www.naic.org/state_web_map.htm

10. Surety Rates $

11. Surety Communications • Job status reports • Provide early warnings of serious problems

12. Dispute vs. Default • Performance obligations defined in subcontract • Notify surety of problems • Formal written declaration of default

13. Why Subcontractors Fail Accounting Issues Management Issues Personnel Issues Performance Issues Failure Unrealistic Growth

14. If Default Occurs • Acknowledge claim • Investigate claim • Determine obligations • Fulfill obligations Surety

15. Surety’s Options • Assist subcontractor to completion • Bring in replacement • Negotiate financial settlement Surety

16. Establishing A Bonding Policy • Establish thresholds • Articulate exceptions • Notify subcontractors & surety Contractor

17. For More Information Surety Information Office 1828 L St. NW, Suite 720 Washington, DC 20036 202-686-7463 | Fax 202-686-3656 www.sio.org | sio@sio.org