Surety Bond Quarterly - Summer 2014 - 23

specifications, unreasonable expectations and even bad business practices
are preventing them from receiving
numerous bids from quality firms.
Hecker said a major California
city's public utilities commission as
well as a major state university had
both developed a reputation in the
construction industry for not paying
contractors in a timely manner and in
full. The result was fewer construction firms bidding their work and the
ones who chose to bid were often
submitting higher-priced bids. When
contractors need to include the predictable hassle factor of getting paid
or dealing with unreasonable people,
ultimately the owner is paying a premium reflecting that factor.
"We let them know these contractors are adding hundreds of thousands of dollars to their bids because
they know how you're going to treat
them, so they're going to make you
pay for it," Hecker said. "As a result,
you're paying much more for your
work than you need to pay."
Further, because bond producers
must look out for their construction clients, some producers steer
firms away from difficult owners or,
at the very least, inform them about
what they're walking into. In another
instance, Hecker's company noticed
a lot of water districts in a state were
inserting the same onerous language
into project specifications, making
those jobs less attractive to bidders.
Through a little digging, Gallagher
realized those water districts were
all using the same attorney to write
the specifications, so the message
needed to be delivered not only to the
water district, but also to the attorney
drafting the language.
In a few cases, public agencies
have been unrealistic in requiring
A.M. Best ratings of A+ for sureties,
which severely limits the number of
bids the public entity will receive.
When this happens, bond producers not only point out the issue to
the surety companies where they
can address the rating requirement
directly with the agency, but also
they encourage the agencies to
review their ratings requirements so

quality sureties are acceptable. The
end result provides value to both the
construction and surety industries,
as well as to state and local building
authorities.
Similarly, by getting building
authorities to drop onerous terms
and conditions in contracts, such as
holding the construction company
accountable for consequential and
actual damages instead of just liquidated damages stemming from construction delays, building authorities
are more likely to obtain more bids
from prequalified firms.
"If you can educate the public
authority about how bonds really
work, you're managing their expectations," Hecker said. "Our people
have developed really good relationships with city staffers who are
in charge of construction; and, as
a result, we've become their go-to

agency whenever they have questions about bonds."
Change doesn't happen overnight,
but significant progress can be made
when construction company executives, bond producers and surety
company underwriters work together
to educate public owners about reasonable business practices.
Bond producers should emphasize
the valuable services and resources
that they provide to their construction clients and to public and private
owners. These services include market advice, technical expertise, contract and financial statement review,
professional relationship referrals,
and education about the construction industry and business practices.
Construction is a relationship business, and bond producers demonstrate daily that they understand this
tenet well.
‚óŹ

NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS | WWW.NASBP.ORG

23


http://WWW.NASBP.ORG

Surety Bond Quarterly - Summer 2014

Table of Contents for the Digital Edition of Surety Bond Quarterly - Summer 2014

NASBP Upcoming Meetings and Workshops
2014-2015 NASBP Executive Committee
From the CEO: We have a great story so let's tell it!
Practical Insights: What You Need to Know - Cost charging in government contracts can result in common, but avoidable pitfalls
Strength in numbers: Harness the power of networking
Profile: President Thomas M. Padilla
Proving your worth: Surety bond producers provide value to clients and beneficiaries
NASBP Fall Workshops
Contract surety claims: The promise - Pact or fiction
Commercial surety claims: A case study on the bond producer's role in assisting a client to avoid loss and maintain surety credit through bankruptcy
Develop the techniques necessary to be an effective policy advocate
NASBP Annual Meeting focuses on the importance of mentoring and critical industry information
Index to Advertisers
Surety Bond Quarterly - Summer 2014 - cover1
Surety Bond Quarterly - Summer 2014 - cover2
Surety Bond Quarterly - Summer 2014 - 3
Surety Bond Quarterly - Summer 2014 - 4
Surety Bond Quarterly - Summer 2014 - 5
Surety Bond Quarterly - Summer 2014 - 6
Surety Bond Quarterly - Summer 2014 - 2014-2015 NASBP Executive Committee
Surety Bond Quarterly - Summer 2014 - From the CEO: We have a great story so let's tell it!
Surety Bond Quarterly - Summer 2014 - 9
Surety Bond Quarterly - Summer 2014 - Practical Insights: What You Need to Know - Cost charging in government contracts can result in common, but avoidable pitfalls
Surety Bond Quarterly - Summer 2014 - 11
Surety Bond Quarterly - Summer 2014 - Strength in numbers: Harness the power of networking
Surety Bond Quarterly - Summer 2014 - 13
Surety Bond Quarterly - Summer 2014 - 14
Surety Bond Quarterly - Summer 2014 - 15
Surety Bond Quarterly - Summer 2014 - Profile: President Thomas M. Padilla
Surety Bond Quarterly - Summer 2014 - 17
Surety Bond Quarterly - Summer 2014 - 18
Surety Bond Quarterly - Summer 2014 - 19
Surety Bond Quarterly - Summer 2014 - Proving your worth: Surety bond producers provide value to clients and beneficiaries
Surety Bond Quarterly - Summer 2014 - 21
Surety Bond Quarterly - Summer 2014 - 22
Surety Bond Quarterly - Summer 2014 - 23
Surety Bond Quarterly - Summer 2014 - NASBP Fall Workshops
Surety Bond Quarterly - Summer 2014 - 25
Surety Bond Quarterly - Summer 2014 - Contract surety claims: The promise - Pact or fiction
Surety Bond Quarterly - Summer 2014 - 27
Surety Bond Quarterly - Summer 2014 - 28
Surety Bond Quarterly - Summer 2014 - Commercial surety claims: A case study on the bond producer's role in assisting a client to avoid loss and maintain surety credit through bankruptcy
Surety Bond Quarterly - Summer 2014 - 30
Surety Bond Quarterly - Summer 2014 - 31
Surety Bond Quarterly - Summer 2014 - Develop the techniques necessary to be an effective policy advocate
Surety Bond Quarterly - Summer 2014 - 33
Surety Bond Quarterly - Summer 2014 - NASBP Annual Meeting focuses on the importance of mentoring and critical industry information
Surety Bond Quarterly - Summer 2014 - 35
Surety Bond Quarterly - Summer 2014 - 36
Surety Bond Quarterly - Summer 2014 - 37
Surety Bond Quarterly - Summer 2014 - Index to Advertisers
Surety Bond Quarterly - Summer 2014 - cover3
Surety Bond Quarterly - Summer 2014 - cover4
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