Cheat Sheet and Action Plan

By Sarah O’Linn, Federal Contracting Surety Expert/Partner at Florida Surety Bonds | Sarah@floridasuretybonds.com | 407-786-7770

Click PDF to print

On April 5, 2025, a baseline 10% tariff was imposed on all countries except Canada and Mexico. 

On April 9, 2025, President Trump imposed new country-specific “reciprocal” tariffs targeting nations with significant U.S. trade deficits to address global trade imbalances. Later that day, a 90-day pause was issued for all countries except China, whose tariff rate was increased to 125% as of EOD April 9. This delays the reciprocal tariffs to mid-July when we will be in the peak of federal bidding season. Miller & Chevalier provided a helpful Tariff FlowChart to assist in identifying applicable rates, though updates are frequent and the chart may become outdated quickly.

⚠️ Why This Matters:

Under key FAR clauses, the date specific tariffs are imposed in relation to your bid or contract award can determine whether you’re eligible for cost recovery.  Missing this window could mean absorbing material cost increases. 

Fortunately, the 2025 Federal bidding season is just starting to heat up, so its not too late to take action.  

When it feels uncertain or chaotic, good leaders focus on key protections within our control and mitigate those that are outside of our control. Retaliatory tariffs and uncertainty in material pricing and availability are impacting the markets. It can feel like the sky is falling to sureties and banks, so it’s important to recognize the resilience we’ve built into our organizations after the past 5-6 years of material/labor shortages and price increases. We have a much better playbook to help us defend our organizations from the potential blows, so let’s lean on those lessons.  

Key FAR Clauses to Review Immediately

Federal contracts are typically firm-fixed-price — meaning price increases caused by tariffs won’t automatically be reimbursed. However, some FAR clauses do allow cost recovery or schedule relief if properly included in your contract..this is readers digest version and not legal advice.

FAR.229-3(c): The contract price shall be increased by the amount of any after-imposed Federal tax, provided the Contractor warrants in writing that no amount for such newly imposed Federal excise tax or duty or rate increase was included in the contract price, as a contingency reserve or otherwise.

🔹 FAR 52.229-3 – Federal, State, and Local Taxes

• Allows for price increase/ recovery of tariffs if a new federal tax or tariff is imposed after contract award.
• To qualify:
  

  • Tariff must be imposed after bid opening.
  • In negotiated contract or modification, tariff must be imposed after the effective date of the contract or modification
  • Contractor must warrant in writing that the cost was not included in the bid.

• 📌 Important: Tariffs imposed after bid submission, but before contract award do not qualify because they will not be considered “newly imposed” under FAR 52.229-3. Also note that not all contracts include this clause, so be sure to check for it.

🔹 FAR 52.229-3 for Subcontractors

• Limited authority on this one
• Hegeman-Harris & Co., Inc. v. United States (1971), the court ruled that a prime contractor could recover increased taxes passed on by subcontractors—but only if the prime was contractually responsible for those costs. This applied when the subcontract either specifically included the taxes or was awarded after the tax increase with those costs priced in. However, the court denied recovery for subcontracts made before the tax increase unless they had an escalation clause or another clear agreement covering such cost changes.

🔹 FAR 52.249-10 – Default (Fixed-Price Construction)

•  May provide assistance in schedule relief, not cost recovery, for delays caused by unforeseeable events (e.g., material shortages due to tariffs)

🔹 FAR 52.216- 2, 3 and/or 4- Economic Price Adjustment (2-Standard Supplies, 3-Semistandard Supplies, 4 – Labor and Materials)

• Enables price adjustments based on meaningful material cost increases (e.g., steel/aluminum) IF this FAR clause is included in the contract. 
• ⚠️ If not present in the solicitation, formally request its inclusion with the source selection authority or contracting officer before bidding.
• FAR subpart 16.203 specifically allows for economic price adjustments clauses in fixed-price contracts, but the increase must be implemented through FAR clause 51.216-2, 3 or 4

For Federally-Assisted and Federally-Funded Projects

Federal Highway Administration (FHWA) policy permits states to include FHWA-approved escalation clauses in their contracts, which allow for reimbursement for increased costs with documentation/justification.

• The FHWA must approve the price adjustment index in advance AND clause has to be in the contract.
• A state and, in turn, a contractor, will not be reimbursed for retroactive adjustments to contract prices if an escalation clause is not originally included in the contract. 
• If escalation clauses aren’t included, states may reimburse increases from non-federal funds to Contractor – but not guaranteed, so its important to check each contract. Reference: FHWA Price Adjustment Guidelines

✅ Federal Contractor Action Plan

1. Audit All Active and Upcoming Contracts for Escalation Clauses, if Federal contract(s) check for:

• FAR 52.229-3 (Allows for price increase if a new federal tax or tariff is imposed after contract award)
• FAR 52.216.2, 3 and/or 4 (Economic Price Adjustment clauses) 
• Delay clauses (FAR 52.249-10)
• Buy American Act (BAA) and Trade Agreements Act (TAA) compliance

📌 Now you can evaluate the increased cost and performance risks that should be included in bid/contracts. Evaluate how long your working capital and bank line will sustain your business operations if cashflow impacted

Don’t leave profit on the table by assuming you can recover costs later — build the protections in now!
Federal contracting is tough. Teaming up with an experienced attorney and surety partner is often the edge that wins you profitable work and protects your bottom line.

2. Preserve Documentation

• Keep dated supplier quotes and correspondence
• Maintain records showing pre- and post-tariff pricing
• Create a paper trail to support claims / REAs for:
  

  • Price adjustments
  • Delay-related damages
  • Changed conditions

3. Lock In Material Prices Now

• Negotiate early buys or price guarantees for high-risk materials 
• Consider bulk procurement for stable pricing

4. Submit Pre-Bid Questions

• If the bid solicitation lacks price adjustment clauses, formally request them
• This protects against underbidding or inflated contingencies

5. Negotiate subcontracts accordingly and maintain good subcontractor communication

• Experienced federal contracting attorney can advise the necessary flowdown provisions to include in your subcontracts; this is tricky and federal court law often surprises us
• Clarify who bears material cost risks. Bond back subs. 
• Negotiate early delivery schedules or escalation clauses with suppliers

Legal Disclaimer: I am not an attorney. The above is not legal advice. If you desire legal advice, consult a competent, licensed attorney. I’m happy to connect you to one. 

The post The FAR Clauses Every Federal Contractor Should Know for Tariff Relief appeared first on Florida Surety Bonds.

Traditionally most construction businesses qualified for licensure through an individual who both held the license and controlled the financial aspects of their business. Over the years construction businesses have changed with mergers and acquisitions, as well as the separation of financial management from construction supervision. More and more, the qualifying individual for a construction firm is no longer the firm\’s owner. In these instances, the original qualifier could be in breach of their original certifications for business entity licensure, namely they no longer have \”final approval authority on all business matters, including contracts, specifications, checks, drafts, or payments, regardless of the form of payment, made by the business organization.\” See Fla. Stat. § 489.119. If you have bought a construction business or are selling the business in which you are the qualifier, there is a good chance you will need to bifurcate the financial responsibility by appointing a Financially Responsible Officer (FRO). Florida Statute § 489.1195 outlines the option for construction businesses to appoint a financially responsible officer (FRO) who assumes responsibility over all financial matters of the business.

The Role of a Financially Responsible Officer

The Financially Responsible Officer is entrusted with various responsibilities, all aimed at upholding financial accountability within the construction entity:

• Financial Oversight: The FRO is tasked with overseeing the financial operations of the construction company, ensuring compliance with state regulations and contractual obligations.
• Bond Requirements: One of the primary obligations of the FRO is to secure and maintain a sufficient surety bond, as mandated by Florida law. The bond required under this statute is specifically set at $100,000, providing substantial coverage for potential liabilities.  This bond serves as a form of financial security, providing for payment of fines and penalties that the licensing board could levy in the event the financially responsible officer mismanages the company\’s finances.
• Record-Keeping: Maintaining accurate financial records is essential for demonstrating compliance with statutory requirements. The FRO oversees the maintenance of these records, including financial statements, contracts, and payment records.
• Compliance Monitoring: The FRO must ensure that the construction company complies with all relevant laws and regulations concerning financial matters, including tax obligations and licensing requirements.

Additional Considerations

It\’s important to note that when a construction company is sold or the qualifying agent no longer has ownership in the company, a FRO bond is likely required at that time. This ensures continuity of financial responsibility and protects stakeholders in the event of significant changes in company ownership or management. The agents at Florida Surety Bonds are well versed in the requirements for Financially Responsible Officer Bonds and stand ready to help you ensure compliance with the licensure of your business.

The post Financially Responsible Officers and the Bond Required appeared first on Florida Surety Bonds.

Great day networking with Florida contractors & government officials at the KSC Small Business Networking Fair.

The post Kennedy Space Center Small Business Networking Fair appeared first on Florida Surety Bonds.

The post Legislative News for Contractors appeared first on Florida Surety Bonds.

1 : For a contractor to pay or waive an insurance deductible, and it is insurance fraud to intentionally files an insurance claim containing false, fraudulent or misleading information.

•  Separate Roof Deductibles – allows property insurers to include a separate roof deductible and an option to decline said deductible by signing documentation approved by OIR. If a roof deductibleis added to the policy at renewal, the insurer must provide notice of change in policy terms andallow the policyholder to decline the separate roof deductible.
•  Roofs-Insurer Underwriting – prohibits an insurer from refusing to issue or refusing to renew ahomeowner\’s insurance policy because the roof is more than 15 years old.
•  Insurer Claims Handling – requires property insurers to conduct any physical inspection of theproperty related to a claim within 45 days of receiving proof of loss statements. This deadlinedoes not apply to hurricane claims.
•  Civil Remedy – requires a claimant to establish a property insurer breached the insurance contractin order for the claimant to prevail in a bad faith claim for extracontractual damages.
• Attorney Fees – Assignment of Benefits (AOB) – prohibits assignment of the right to obtainattorney fees in suits arising out of a property insurance policy to persons other than a named or omnibus insurance or a named beneficiary under the policy. Assignments may occur, but the assignee vendor may not recover attorney fees in suits against the insurer.
•  Attorney Fees – Fee Multipliers – attorney fee multipliers may only be awarded under rare and exceptional circumstances with evidence that competent counsel could not be hired in a reasonable manner.
• Attorney Fees – Dismissal for Failure to Provide Notice – A defendant insurer may obtain attorney fees and costs associated with securing a dismissal without prejudice for failure to provide the required notice of intent to initiate litigation at least 10 days before filing a suit against a property insurer.
• Assignment of Benefits (AOB) – makes new requirements to langrage and assignments to increase clarity and transparency.
•  Regulation of Insurers and Insurer Transparency – establishes a series of new reporting requirements for the Office of Insurance Regulation (OIR).Senate 4 D – Building SafetyWhen first filed, this legislation dealt only with building code regulations and rules relating to
  roofs. However, at midday on Tuesday of this week, the Florida House and Senate mutually agreed to \”expand the call of session\” to include language on Condo-Safety that reflected the Surfside bills that had failed to pass in the final hours of the original 2022 Legislative Session. The negotiated and agreed to language was added on to Senate Bill 4D as an amendment. Taken together, the bill now does the following:

•  Requires the FL Building Code to provide that when 25% or more of a roofing system or roof section is being repaired, replaced, or recovered, only the portion of the roofing system or roof section undergoing such work, must be constructed in accordance with the current code in effect at that time.
• Establishes a statewide structural inspection program for aging condominium and cooperative buildings to ensure that such buildings are safe.
•  Establishes that any condo unit, three stories in height or more, must have a \”milestone inspection\” by December 31st of the year in which the building reaches 30 years of age, based on the date the certificate of occupancy was issued. If the building is withing 3 miles of the coastline then the first milestone inspection must be done withing 25 years of when the CO was issued. In both instances, inspections must be repeated every 10 years after the initial one

2. It will be up to local jurisdictions to provide written notice to the condo association that a milestone inspection is due by certified mail, return receipt requested

o The milestone inspection must take place within 180 days of receiving notice
o A milestone inspection takes place in two phases. The first must be completed by a licensed architect or engineer and must include a visual inspection of habitable and uninhabitable areas including major structural components. The second takes place if any substantial structural deterioration is identified during phase one.
o The bill establishes details of how the findings of the inspection are delivered and shared by the architect or engineer
o The bill establishes details, deadlines and requirements of how quickly repairs to a building must take place if and when structural issues are identified as part of the inspection process
o Notice requirements to condo leadership along with policies and penalties are established o The Florida Building Commission shall review the milestone inspection requirements and make recommendations the Legislature to ensure the inspections are sufficient to determine the structural integrity of a building.
o Defines structural integrity reserve study to mean a study of the reserve funds required for future major repairs and replacement of the common areas based on a visual inspection of the common area.
o Establishes rules and regulations between how studies are conducted and how long they must be maintained.
o Establishes items where maintenance may not be deferred
o Establishes that, effective December 31, 2024, the members of a unit-owner controlled association may not determine to provide no reserves, or less reserves than required by this legislation for any of the following items – roof, load bearing walls or other primary structural members, floor, foundation, fireproofing and fire protection systems, plumbing, electrical systems, waterproofing and exterior paint, windows, and any item that has a deffer maintenance expense or replacement cost that exceeds $10,000.

o Before a developer turns over control of an association to unit owners other than a developer, the developer must have a structural integrity reserve study completed for each building on the condo property that is three stories or higher in height.

o Establishes a series of new reporting requirements from deadlines, to notices, to copies kept on hand, to make public and readily available, etc.

Governor DeSantis has signed both of these bills into law.

The post What you want to know about the new residential property market legislation in Florida appeared first on Florida Surety Bonds.

It is the “Golden Age of Funding for the Corps” and Emily Golecki and Sarah O\’Linn were honored to support the U.S. Army Corps of Engineers New Orleans Industry Day and hear about the unprecedented infrastructure opportunities first hand. Mississippi Valley District is exceeding their small business set-aside contracting goals and Dave Willis (pictured, center) and the New Orleans district have already contracted out 56% of their opportunities to small business for the year. 

Reach out to Emily or Sarah if you want to learn more or get connected.

The post U.S. Army Corps of Engineers New Orleans Industry Day appeared first on Florida Surety Bonds.

WHEN TAX TIME rolls around, contractors often feel like the deck is automatically stacked against them. But the right tax planning strategy helps to ensure the House, in this case the IRS, doesn’t catch you off guard. These tax benefits could help you save a substantial amount of money. Contractors should consider several tax credits and deductions as they build their 2021 tax planning strategies.

Work Opportunity Tax Credit

The work opportunity tax credit (WOTC) is a federal general business tax credit obtainable by employers for hiring employees from certain targeted groups like veterans and supplemental security income recipients. Eligibility is based on pre-screening requirements, and there are credit limitations.

The Consolidated Appropriation Act (CAA) extended the WOTC until December 31, 2025.

Employee Retention Credit

The employee retention credit (ERC) is a tax credit available for eligible employers to claim against qualified wages paid after March 12, 2020, feature Planning for 2021 Taxes: What Contractors Need to Know through September 31, 2021. Eligible employers may claim a refundable tax credit against their share of Social Security tax equal to 50% of qualified wages paid to employees after March 12, 2020, and through December 31, 2020, and 70% of qualified wages paid to employees after December 31, 2020, and through September 31, 2021. Qualified wages for 2021 are limited to $10,000 per employee per calendar quarter, meaning the maximum ERC is $7,000 per employee per quarter.

179D Commercial Buildings Energy-Efficiency Tax Deduction

The 179D tax deduction allows eligible builders to claim a tax deduction for installing certified energy-efficient systems and buildings. The CAA made the deduction for energy-efficient commercial buildings permanent. Generally, a tax deduction of $1.80 per square foot is available to owners or contractors of new or existing buildings who install interior lighting, a building envelope, or HVAC or hot water systems that reduce the related energy and power cost by 50% or more in comparison to the minimum requirements in place.

Research and Development Credit

The federal R&D Tax Credit was established to keep jobs closer to home to promote growth and development with innovative new technologies, designs, and engineering. Most states in the U.S. offer R&D tax credit incentives as well.

The expenses your business acquires to research and develop new ways to run your business may qualify for the research and development (R&D) credit. Construction companies can take advantage of this tax credit for research activities that are new to the world or new only to the company itself. There are no limitations on the expenses that you can claim each year as long as all of the activities and expenses qualify as research and development.

Under the Tax Cuts & Jobs Act, research and development costs would be amortized beginning in 2022.

Find Out More

Access all NASBP Virtual Seminars here: https://learn.nasbp.org/. Access free NASBP Podcasts here: https://letsgetsurety.org/episodes/.Opens in modal lightbox

David V. Jean, CPA, CCIFP, CExP, is a principal at ARB and the Practice Leader for the firm’s Construction & Real Estate, Succession Planning, Professional Services Firms, and Business Advisory Services Teams. Jean provides specialized tax, financial accounting, and business advisory services primarily to construction, real estate, and manufacturing companies. He is a participant on the NASBP’s Certified Public Accountant Advisory Council. He can be reached at djean@arbcpa.com or 207.772.1981.

Access NASBP Virtual Seminars on this topic here: https://learn.nasbp.org/p/EmployeeRetentionCredit

The post Planning for 2021 Taxes: What Contractors Need to Know appeared first on Florida Surety Bonds.

Hope everyone has a safe and happy Memorial Day weekend.

The post Happy Memorial Day appeared first on Florida Surety Bonds.

• # 1 Disorganized Accounting and Lack of Training in Claims Preservation.
• # 2 Too Much Work with Too Little Staff.
• # 3 Not Considering Effects on Insurance.
• # 4 Poor Hiring and Slow Firing.
• # 5 Not Considering Effect of Growth on Bonding.
• # 6 Failure to Grow Tech Capabilities to Match Growth.
• # 7 Rushed Project Mobilization.
• # 8 Daily Crises Preventing Management from Long Run Planning.
• # 9 Chasing Bad Jobs.
• #10 Failure to Plan for Liability Mitigation.

# 1 Disorganized Accounting and Lack of Training in Claims Preservation.

Everyone knows a good builder or trade contractor who has stagnated or failed in business because they did not implement proper accounting and risk management systems for their growing business. 

• Common problems revealed in a surety’s post-mortem on 10 recent contractor failures:
  • Cash flow management issues – 10/10 failed contractors;
  • Poor internal systems- 8/10 failed contractors;
  • Inadequate job cost updating- 8/10 failed contractors;
  • Overextension- 7/10 failed contractors;
  • Inadequate claims preservation- 5/10 failed contractors.
• Accounting Systems
  • Does your accounting system and team provide you with an on-demand view of your overall financial condition and current job cost? 
  • Are changing conditions in the field reflected in your job costing system? 
  • Ideally you are regularly updating your cost to complete based on revised field estimates.
  • Are you automating your payment systems?  You can build supplier loyalty if you send out checks quickly and at predictable intervals.
  • Are you tracking use of your owned and rented equipment to ensure you are minimizing expenses and maximizing return on these investments?
• Claims Preservation
  • Contractors are constantly asked to do additional work on the fly.  This can be costly if you don’t have systems in place to preserve your right to payment.
  • At the outset of a job, review the contract and highlight the notice procedures.
  • Note the deadlines for lien and bond claim preservation in the file, make calendar reminders to furnish notice to owner/contractor etc. 
  • Demand written change orders or written change directives before starting additional work, but if you are acting on an oral order, memorialize it in an email and ask for any disagreement to your email to be in writing.
  • Don’t accidentally sign a lien waiver without documenting your change order.
  • Put your insurance carrier on notice upon learning of claims, don’t delay because it can cost you coverage.

# 2 Too Much Work with Too Little Staff.

Many contractors in Florida are sitting on record backlogs and at the start of 2020 they are more opportunities than ever, but in a growing construction business, field and office staff alike are overstretched and the pipeline of talent isn’t flowing fast enough.  

Problems for overstretched contractors include: 

• Declining quality of work product and limited resources for corrective work:
  • The speaker believes decline in quality is inevitable as volumes rise and you have less workhours available for each project.
• Geographic Overreach- When contractors follow customers farther and farther from home:
  • Small inefficiencies become more obvious and painful at greater distances.
  • Equipment and personnel are harder to move from one job to the next.
  • Simple matters like weekly paycheck distribution get more complicated.
  • Knowledge of local labor pool, subsurface conditions, and other location specific information is more limited.
• Staff Expectations- are overstretched contractors managing their people and their people’s expectations?
  • Staff might be getting used to overtime and bonuses, cutting back to regular hours will feel like a pay cut.
  • Manage expectations for the inevitable decrease in volume.
  • Are your people getting burnt out?  Know the signs in your employees.
• No time for long-run thinking or strategic planning:
  • If you are spending all of your time putting out fires you cannot effectively lead your business.
  • Delegation and a change of mindset are essential for managing a growing company and growing staff.
    • As Your Team Gets Bigger, Your Leadership Style Has to Adapt

Remember:

• Volume isn’t leadership, the goal of your business is to produce the best bottom line results while reducing the risk of loss.  
• To survive at higher volumes with too little staff, your team has to shift from a “work ethic” paradigm to more “results-oriented” and “efficiency” paradigms.  This can be painful for some of your team.
• Know when to turn work away.  This is easier said than done, because turning away one job might cost you future opportunities.  Take an honest appraisal of your situation:
  • Do you have the staff to handle the new opportunity?
  • Does the new opportunity pose different or more difficult challenges compared to your other work?
  • Does the new opportunity fit with the rest of your backlog or could it create or exacerbate a cashflow crunch?

# 3 Not Considering Effects on Insurance.

As you expand your business and work program, do you have enough coverage on all your insurance lines? Are you actually covering the risks involved with the new work?

• Commercial General Liability
  • Your CGL insurance is looking at your payroll, your revenue, and your risks.  If any of these start changing, you’ll probably be looking at rate changes at renewal.
    • For example, suppose you suddenly start working on condominium projects in the middle of your insurance year, your rates are going to go up. 
    • More importantly, you might not even have coverage for those jobs if they are an exclusion on your CGL policy.
    • When you are taking on a new project, make sure to check that project specific exclusions are removed from the policy and that you actually have coverage.
  • Beware starting work before signing a contract.
    • Some carriers require you to sign the contract before mobilizing or starting work, so if you were rushed to start a job before signing a contract you may not have coverage.
    • You might also lose your waiver of subrogation-this waiver protects you!
    • Even if you have a signed contract, you might not get payment from the owner or GC until you produce the certified policy and endorsements from your carrier.
• Workers Compensation
• Is your Worker’s Compensation being properly reported at project initiation? 
• You can adjust reported/projected payroll at regular intervals and pay the upcharge as its incurred if your carrier allows for it. 
• Even if you don’t pay the upcharge upfront, you’ll want to retain those funds in preparation for the year end audit.
• Adjust payroll and Worker’s Comp at regular intervals in advance of an audit.
• As your volume increases, you will want to get an umbrella policy if you don’t have one in place already.
• Do you have professional liability exposures? Are you involved in discussions with the architects and engineers in a way that someone might blame you for design liability? Consider professional liability insurance.
• Auto insurance costs are rising, and commercial auto claims are costly for insurers.  They are starting to look more closely at employee driving records, they may refuse to ensure poor driving new hires. What are you doing to figure out if your potential new employees are safe drivers?

# 4 Poor Hiring and Slow Firing.

Due diligence for new hires has been rushed and poor quality in the construction industry for the past few years.  The result is that contractors hire problematic employees that increase the risk of claims and undermine corporate culture.

• Create a roadmap for hiring:
  • Start with Job Descriptions:
    • Broad enough to cover everything that might be required in the role
    • Specific enough to set expectations for performance.
  • Identify trusted referral sources and nurture referral relationships.
    • Pursue quality prospective employees and quality referral sources like you would pursue a long-term customer.  
  • Due Diligence, beyond interviewing:
    • Check litigation history via name search in state and federal courts.
    • Review social media- LinkedIn, Facebook, Instagram, Twitter
    • Personality testing can reveal good fits
    • Trust your gut
  • Probationary Periods
    • Legally, your employee is your employee regardless of probationary period, but the psychological effect of a probationary period still works.
    • Usually 90 days long.
    • Full benefits aren’t extended to employee.
    • If you see any red flags or problems in this period, you should cut bait.
    • Maybe no unemployment benefits if terminated during probation.
  • Track your current and upcoming needs
    • Knowing your backlog, job schedule, and pipeline is crucial to making sure you have the right staff on hand and you aren’t overstaffing or understaffing.
• Reviews:
  • Hold regular in-person reviews.
  • Use the job descriptions to assess employee performance.
  • Encourage employees to provide honest feedback as well.
  • Identify the issues early and make a plan to resolve them.
• Employee Manual:
  • If you decide to have a manual, you need to update it regularly to keep up with changes in law.
  • Review it annually.
• Establish a disciplinary process and use it:
  • Consistent documentation will help you know if an employee needs to be terminated. 
  • Failure to address issues using your disciplinary process could leads to disgruntled employees of two types:
    • employees who feel targeted by uneven enforcement.
    • employees who carry the load for peers who aren’t performing.

# 5 Not Considering Effect of Growth on Bonding.

• The aggregate size of your surety program is based on a mixture of metrics including working capital, net worth, debt, available bank credit, and cost to complete for your current work program. 
  • Most of the metrics are based on financial condition weeks or months prior to the current bond need.
  • When you are growing your work program rapidly, you can quickly exceed the surety’s underwriting guidelines.
  • You may want to utilize your bank line to scale up for your new work program, but surety underwriters are trained to view bank line usage as a potential red flag.  If you need to rely on your bank line, you’ll want to communicate about it in advance to mitigate against potential negative reaction. 
  • If your collections of receivables slow down as you scale up, receivables over 90 days may end up excluded from your current assets, reducing your bonding capacity. 
  • If your working capital and other underwriting metrics are not keeping up with your work program, the surety may require you to infuse cash into the company.
• Local underwriters may have limited authority, you may find the approval process slows down if you haven’t communicated growth plans to your agent (and underwriter in annual meetings).
• If your backlog is growing, you may find your working capital case becomes thin and the surety will want more detailed cash flow projections to get approvals. 
• Your quarterly work in process reports are very important as you grow, if your internal reporting systems are not producing timely and accurate information about your work program, the bonds will not keep up.
• As volume goes up, you are more likely to experience claims and are more likely to have to make claims against bonds as well. Claims against your bonds may not be well founded, but how you handle those claims has a lot of bearing on how the surety supports your future growth. 
• Claims you make against other contractors bonds unfortunately may result in cash flow slowdowns on those jobs and may lower your overall working capital picture.
• Talking with your surety agent regularly as you grow is crucial.

# 6 Failure to Grow Tech Capabilities to Match Growth.

• You can lose a competitive advantage to other firms who are more flexible due to their use of new technology.
  • Technology makes it possible to handle higher volumes more efficiently.
• Contractors make money by mitigating risk, how can you identify risks and track results without accurate and timely data?
  • If your accounting system doesn’t readily show you profit fade on jobs in progress, you are going to be flying blind and potentially misallocating your attention and resources.
  • Quickbooks may no longer be sufficient since you cannot track pending claims and change orders readily in that program.
• Technology impacts your bond program:
  • If you can quickly deliver an accurate quarterly WIP and internal statements, you will likely stay in the surety’s good graces.
• Other considerations:
  • Does your field staff have to come in to review AP invoices, or do you have a system in place to approve digitally and streamline the process saving time and cost?
  • Set calendar alarms for when you need to obtain subcontractor insurance certificates and prequal packages.

# 7 Rushed Project Mobilization.

• Who is reviewing and negotiating all your contracts?
• As your construction business grows, you have less time to review contracts and more contracts to be reviewed and negotiated. 
• You are taking on risks by mobilizing and beginning work before formal construction contracts are signed. 
  •  A contract you’ve received but not signed may be binding on you if you begin performing work under the contract.
  • On the other hand if you order a subcontractor to begin work, but you don’t give them the subcontract or the prime contract incorporated in it, they might not be bound by the provisions of that subcontract.
• At a certain point you will want to consider hiring a contract administrator.
  • This person needs to have great attention to detail.
  • They also need adequate training on:
    • what contract terms you are willing to accept;
    • what contract terms you prefer; and
    • what contract terms require escalation to a higher authority within your company.

# 8 Daily Crises Preventing Management from Long Run Planning.

• Contractors who are growing too fast often spend their time just reacting to the issues that pop up each day.
• When you are growing too fast, you don’t have the time to change your organization and embrace the painful process of implementing systems necessary to handle higher volumes.
• When your workload goes back to prior normal levels, your organization hasn’t gained any of the efficiencies that best in class larger contractors have implemented during their growth cycles.
  • You have to find a way to make the changes necessary to handle higher volume if you want to be efficient when you plateau at a “new normal” volume or regress to previous normal volumes.
  • If you are suffering from inefficiencies during growth, go through the pain of addressing and solving the issues in your systems to meet the demands of being a larger contractor.
  • Those who put the processes in place will have more efficient systems that produce higher margins even in leaner times.
• We find management at reactive contractors are making the following mistakes more often than contractors operating a comfortable volume levels:
  • Taking on projects they haven’t done before;
  • Making overly optimistic projections regarding cash, resources, and people;
  • Assuming profitability, but not planning for what would happen in the event of non-payment issues, stoppage or other problems on a job;
  • Failing to regularly review project status (which they should be doing at least monthly);
  • Failing to adequately review new contracts or put the proper team in place to review them;
  • Ignoring opportunities to upgrade procedures that would improve operations; and
  • Losing track of who are the prime employees who provide consistent results and instead focusing on the ones who are able to keep up with the daily crises.

# 9 Chasing Bad Jobs.

• Many Contractors can get caught up in the intoxication of growth and momentum.
• Revenue is Vanity, Profit is Sanity, and Cash is Reality. 
• The numbers worth growing are at the very top of the balance sheet and very bottom of the P&L statement.
  • We all know of contractors who have chased volume only to make the same amount of net profit as a competitor who took on a fraction of the volume and risk and slept much better that year.  

# 10 Failure to Plan for Liability Mitigation.

• Construction is a litigious business, contractors who are growing too fast tend to forget this.
• Do you have the insurance coverage necessary to defend yourself against claims?
• Do you have the resources necessary to perfect and pursue your own claims, or are you so stretched that you cannot enforce your agreements to get the value you bargained for?
• One risk mitigation strategy:
  • You might be able to reduce some risk by creating subsidiaries for asset protection.
  • Make sure you follow the right licensure, corporate formation and corporate formalities to avoid risk of being considered one entity for liability purposes. 
  • You also need to be upfront and honest with your surety about subsidiaries and related entities.

The post Top 10 Mistakes Contractors Make When Growing Too Fast appeared first on Florida Surety Bonds.

\”The three major credit-reporting bureaus—Equifax, Experian and Trans­Union—have logged the most complaints for four years running, according to a report from the U.S. Public Interest Research Group. Most of the complaints involve hassles remedying inaccurate information on credit reports. But some are from consumers who find themselves caught in a tangle of red tape or facing an impenetrable wall of indifference. \”

\”In a battle of you versus the credit bureaus, the bureaus have most of the power—and Congress has been reluctant to regulate them. It took Equifax’s massive data breach two years ago to get the attention of lawmakers. That led to the legislation that allows you to freeze your reports for free but provides few other new protections involving the credit bureaus.\”

\”You may have discovered that something was amiss when you were un­expectedly rejected for credit or received notice of a change from a credit-monitoring service. Rather than wait for a surprise, make it a habit to regularly visit annualcreditreport.com, where you can collect one free report from each bureau every 12 months. Review your reports to ensure that all of the accounts are yours. Check that any accounts you’ve closed are marked as such (accounts in good standing continue to appear on your reports for about 10 years after they’re shut down) and that details such as balances, credit limits and dates that accounts were opened are correct. Make sure your personal information is accurate, too. An incorrect address, for example, could be a sign of a mixed file or identity theft. If your credit report shows information that is inaccurate or incomplete, you have the right to dispute it and have it corrected or deleted. Fixing an error is especially important if it could prevent you from getting credit (or result in a higher interest rate on a loan), renting a home or getting a job. A new collection account that mistakenly appears in your name, for example, will likely cause your credit score to drop significantly. Errors crop up for a variety of reasons. A lender or other furnisher of information may tell the credit bureaus that you’ve missed payments when you haven’t or provide an incorrect balance for your account. Or a bureau may continue to report a delinquency after it should have been removed from your credit file (by law, negative information must disappear after seven years—except for bankruptcies, which may remain for 10 years).\”

To read the full article and get their full guide, including tips and tricks to battling the credit bureaus and improving your credit click HERE to go directly to the article on Kiplinger.com. Remember, it pays to stay on top of your credit reports. Take advantage of the access you have to your free credit reports. You can get your free report yearly at www.annualcreditreport.com or the Kiplinger article shares other ways to get additional free reports throughout the year.

This blog is in reference to an Article by Lisa Gerstner, Contributing Editor / From Kiplinger’s Personal Finance.
https://www.kiplinger.com/article/credit/T017-C000-S002-battle-the-credit-bureaus-and-win.html

The post How To Battle The Credit Bureaus and Win. appeared first on Florida Surety Bonds.