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Understanding Surety Bonds: A Guide for Contractors

Join Joanne Brooks, Vice President and Counsel of the Surety and Fidelity Association of America, from June 8-10, 2014, for an insightful session on surety bonding fundamentals. Explore the historical context, including the Heard and Miller Acts, and current laws governing surety bonds. Discover how bonding can enhance your contractor opportunities, protect taxpayer dollars, and support subcontractor payment. Learn key factors that surety companies consider, strategies for sustainability, and the importance of having a professional bonding agent to guide you.

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Understanding Surety Bonds: A Guide for Contractors

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Presentation Transcript

  1. Demystifying Surety, the Product and its Value June 8 – 10, 2014 Joanne Brooks Vice President and Counsel The Surety and Fidelity Association of America jbrooks@surety.org

  2. The Fundamentals of Surety Bonding • Proverbs 11:14-16 • 1894-Heard Act • 1935-Miller Act • Current Law • $150,000 Performance • $30,000 Payment • Little Miller Acts • State Law • Thresholds vary • Prequalification • Capital (Credit) • Capacity (Capability) • Character (Reputation) • Claim Services • Performance-protecting taxpayer dollars with a contract completion focus • Payment-protecting subcontractors/suppliers

  3. Contractor Failure Rates

  4. Large Established Contractors Fail Too • Morrison Knudsen (1905-1995) • Guy F. Atkinson (1926-1997) • J.A. Jones (1890’s-2003) • Modern Continental (1967-2008) • Ballenger (1937-2012)

  5. What Surety Companies are Looking for: • Sustainability • Profitability • Continuity • Proven track record • Pay subs timely • Responsible • Reference

  6. Surety as a Tool to Build Sustainable Contractors • Economic Empowerment • Job Creation • Sustainability • Legacy Wealth

  7. How Does Bonding Benefit the Contractor • Bonding capacity can increase your project opportunities • Objective 3rd party with a broader perspective-evaluating contractors is what they do • Trusted advisor • An advocate • Access to expertise in accounting, law, engineering, with deep relationships and understanding of surety and construction

  8. The Surety Industries Commitment to Small, Emerging and Minority Contractors • SBA-Surety Bond Guarantee Program- bonds issued by surety companies and guaranteed by SBA • MCDP-created by the SFAA to provide assistance to small, emerging and minority contractors • Partnership with US DOT BEP

  9. Runway to Success • Get a Professional Bonding Agent • Work with someone with a proven track record • Follow the advise given • Get a Construction CPA • Know Your Credit Score • Nothing beats a failure but a try…let a surety professional assess your bondability • Bonding is a process get started now!!

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