In a world turned upside-down by a global pandemic, contractors are likely working extra hard to make sure their business is braving the storm. They may be experiencing a variety of struggles, including a shortage of labor & supplies, cash flowing payroll and liabilities, and completing contracts on schedule.
During a time like this, it’s important for contractors to turn to their trusted advisors who can provide reliable information and guidance. Here are five measures from a bonding perspective to ensure your business can continue to run smoothly, while staying out of trouble with the surety company:
1. Have a construction attorney review your current contract(s) to avoid performance bond issues.
Understand what rights you may have in this situation, especially related to force majeure. Force majeure is a contract provision that allows you to call a stoppage on work during a crisis like the Coronavirus pandemic, without incurring performance bond claims. If your contract was signed after the President declared a State of Emergency on March 13, however, the owner/GC could state that COVID-19 was a known risk, and any delays could be the responsibility of your company and result in liquidated damages. This is not legal advice and we’d recommend consulting with your construction attorney on this matter.
2. Keep an open line of communication with subcontractors and suppliers to avoid payment bond issues.
This is a challenging time for all parties to meet payment obligations. Be sure you are communicating with your subs/suppliers on existing payment terms. They may be more understanding of extending payment terms by an additional 30-60 days. At the end of the day, it is to everyone’s benefit that existing company infrastructure stays in place, and thus there may be some added flexibility for those who communicate and have a good relationship with their vendors.
3. Ensure you are liquid and keep cash in your company.
This may be essential if collecting receivables or receiving payment from owners becomes slow. Now is an important time to consider increasing your business line of credit, applying for an SBA loan for added liquidity, and having strong cash reserves to ensure payroll liabilities are met.
4. Take a close look at your current bonding and insurance coverage to ensure you are well protected.
This includes reviewing your bonding limits, receiving excellent service, and having in place the necessary business interruption insurance. These measures will help mitigate the financial impact of the coronavirus.
5. Approach this situation calmly and rationally.
Understand that everyone is going through a challenging time – keep an open line of communication and take a constructive approach in working with owners, GCs, subs, and suppliers. There will be significant adversity during this time, so remember to treat your workers well and work as a team. If your crew is still working, make sure that every is taken to protect their health and well-being.
Lastly, it is important to work with key personnel and trusted advisors to make thoughtful, prudent decisions during this challenging time. By following these suggestions, contractors should be able to minimize the impact of this pandemic and keep their businesses running smoothly.
Your Partner in Construction & Bonding
If you have any questions or need advice related to your surety program or strategic business plan, please reach out to Surety Bond Professionals today. Our experienced bonding team can help your business successfully navigate through this uncertain time.
Call us today: 781-559-0568