All the warning signs are out there – your contractor doesn’t seem to be able to close out jobs, or jobs are significantly over or under budget. The contractor’s cash-flow position seems tenuous with no sign of realistic forecasting, or the contractor doesn’t seem to have a handle on indirect and G&A overhead rates. How can you help troubled contractors?
- Communication: Contractors, even those with whom you have worked with for years, may not know all the resources that bond companies have available to assist them – including help with closing out jobs, accounting resources, or legal resources. Make it your job to communicate your ability to help them get back on track.
- Review cost structure: It may be that your contractors need help with making cost-cutting decisions. You can help them take a step back to determine where they can trim the fat without affecting the integrity of the project.
- Help your contractor prequalify subcontractors: Even though they might have worked with subs for years, it’s still good to review contracts, and ensure that these subcontractors are doing a good job at a fair price.
- Make sure controls are in place for billing, project management, and bidding: Improve timeliness and accuracy of billing, make sure that regular project management meetings are taking place, and verify that the bidding process has integrity and best practices incorporated.
- Help restructure debt: Find short-term and long-term solutions to help free up working capital in contractors’ LOC.
- Help set a realistic surety program expectation: Advise contractors to focus on profitable projects where the size and scope is within their capacity.