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Secrets of Bonding #67: Get to Know FedBizOpps

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“FedBizOpps” or www.FBO.gov, is a federal website presented by the General Services administration. It is officially described as a “web-based portal which allows vendors to review Federal Business Opportunities.”

This site can be a great help to bonding agents and is a critical resource for contractors pursuing federal work.  Open another browser while you read this and and connect to the site.  We’ll go through the highlights.

The main purpose of this site is to connect contractors with upcoming federal projects.  Let’s try the Quick Search on the front page.  For Type select Presolicitation. For Keyword enter Janitorial, then press Search. A list of upcoming janitorial projects appears. They are all available for bidding!

Do another search using Place of Performance: Alaska. For Keyword, enter “snowmachines” then click Search.  This should take you to a page showing an Air force contract award for $35,500. Here you see the details of a company that successfully acquired a contract.

FedBizOpps provides all the federal contract activity centralized in one web site.  What a great resource!

How to get involved

Contractors are considered “vendors” to the government, so step one is to follow the Vendor / Citizen registration link near the bottom of the front page.

After you register and classify your business, you are ready to perform a contract search. Log in to the site if necessary, and do a Quick Search under My FBO. Use Presolicitation and Janitorial again.

My search resulted in a list of 25 contracts. If you click on the first one it immediately shows you the nature and location of the work, the response date and other key details.  If you wish to pursue this contract, additional information is provided.  When you click Add Me To Interested Vendors, your company info is immediately included under the third tab “Interested Vendor List.”  This entitles you to automatic updates that will arrive in your email.  You will be advised as this opportunity moves through various stages resulting in an award.

When listed as an Interested Vendor, you may find that suppliers and other companies will contact you.  They may offer to assist in your solicitation effort or be your supplier if you win.

As a prospective bidder, you will also see who you are bidding against.  Good stuff!

Saved Searches

Here is an excellent feature of the site. Under My FBO, follow Search and Create Saved Searches. You can use very specific parameters.  After you run the search, choose Save Search Agent. At the bottom follow Save and Schedule Search Agent.  You can instruct the site to run this search every day and email you the results!  You can also set up any number of additional searches you may desire.

There is always a button near the top for the User Guide, which is a very helpful “FedBizOpps for Dummies” type resource.

For Bond Agents, the site provides the names and contact info of federal contractors.  Other vendors and suppliers use the site for the same purpose.

If you have an interest in federal contracts, get to know FedBizOpps!  Make it work for you every day.

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site and Subdivision Bonds since 1979 – we’re good at it!  Call us with your next one, Bid and Performance bonds, too.

Steve Golia: 856-304-7348
First Indemnity of America Ins. Co.

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Secrets of Bonding #29: When Federal Contracts Are Not

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In bonding, like insurance, we are always careful to review specifications and requirements when bonding a new contract.  The specs will state if a bond is required, the amount, and other relevant aspects such as acceptable credentials for the surety, and the bond form.

When it comes to contract documents, it is immediately evident if a project is federal. The solicitation or award letter will identify it as such, and an entity like the Army Corps of Engineers, will be named. It would be clear that the Federal Acquisition Regulations (FAR) apply and that you must have a 100% P&P bond on the federal bond form, issued by an acceptable T-Listed Corporate Surety.

So what are the bonding requirements on federally funded contracts? An example would be a local housing association project that has state and federal grant money. Is that a federal contract?  Do all the federal bonding requirements apply?

For the answer, we must review the solicitation or award and determine who is offering the work. A local housing association contract is just that – a local project, not federal. This is an important distinction because, at least partially, it answers the question about the bonding requirements.

  • True federal projects must follow the FAR. http://www.acquisition.gov/far/
  • Local or private contracts may follow aspects of the FAR if the obligee so choses, however it is voluntary.

This is an important distinction for agents to appreciate because it determines which sureties can be called upon to issue the bond.

For Federal, Corporate Sureties that appear on Circular 570 (the T-List) may be acceptable.

On non-federal projects, such as local contracts that include federal funding, the specs may vary – so no assumptions can be made. Chances are they will differ from the federal guidelines.  Only a review of the documents will reveal the answer.

Non-federal contracts can be local public work, such as a state or municipal job, or they could be private. Private contracts are all unique and as a long established surety, we have bonded many of them.  We have the flexibility to support a wide variety of special bond forms and other challenging aspects such as dual obligee riders that name lenders.  For more info about bonding private contracts, review Secret #18.

Summary:

So when are federal contracts not?

You now know merely having federal funds does not make the contract “federal.”  It is only required to follow the FAR if offered by a direct branch of the federal government.

For non-federal contracts, you will not know the bonding requirements until you review the written requirements – and there is no predicting what you may find.

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site, Subdivision, Bid and Performance Bonds since 1979 – we’re good at it!  Call us with your next one.

Steve Golia, Marketing Mgr.: 856-304-7348

First Indemnity of America Ins. Co.

(Don’t miss our next exciting article.  Click the “Follow” button at the top right.)

Secrets of Bonding #26: Bond Request Forms (The Gift That Keeps Giving)

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For the agent and client, there is plenty of paper to handle on contract surety bonds.  So just when you get through the questionnaire, business plan, resumes, references, WIPs, and financials there is STILL ONE MORE DOCUMENT THAT WE NEED!

Yes, it is true.  Bond Request Forms are the gift that keeps giving because you get the opportunity to do one as each bond comes up.  So, considering these forms are not going away, let’s get comfortable with them.

Why Needed

The Bond Request Form is a summary of key factors concerning the specific contract and bond in question. The form is used for both Bids and “Final” bonds (Performance & Payment). It covers basics such as the name of the contractor and obligee, description of the work and the specific bonding requirements.

The form is used for underwriting and administrative purposes.  The underwriters review the details and may literally sign their approval on the form.  The admin staff will type the bond based on the Request Form – so completeness and accuracy are crucial.

Let’s break it down and go over some key areas:

  • The Principal is the contractor and the Obligee is the party paying for the work.  Sometimes the word “Owner” is used interchangeably with Obligee. If you see Owner on the Bond Request, it is not asking for the name of the owner of the construction company; it means “Obligee.”
  • The description of the work should read as stated on the related contract or bid invitation.  If you are bonding a roofing contract, the description should not be “4th Avenue Elementary School.” It should say “…roofing…”  On a final bond such errors are embarrassing. In a bid situation an incorrect job description could result in a bid protest (by the second bidder) and loss of an award.
  • For Bid Bonds, show the estimated contract price (ECP), not the actual bid amount.  This is to protect the bid confidentiality.  Sometimes we bond more than one contractor on the same bid.
  • Always submit a sufficiently high ECP to allow room for a last minute bid increase. (See Secret # 8.)
  • Show the actual bid date, not the day before for “safety.”
  • Bid results are important to show if they are available.  Typically they are on public work.
  • When indicating the final bond requirements, do not indicate “100% P&P” unless the spec actually calls for this.  Some projects require a Performance Bond but no Payment.  It would be important to not automatically issue a Payment Bond, since they are the most frequent source of surety claims. The Principal and Surety should never voluntarily assume this risk.
  • Work On Hand: The current WOH figure is comprised of the “estimated cost to complete” of all open work – excluding the project in question.
  • Be sure to fully complete the form, include required attachments and sign if necessary.
  • Points of interest:
    • Sureties are usually reluctant to provide a 125% P&P Bond.
    • If the bond is for less than 100% of the contract amount, there may be no reduction in the bond cost.

Bond Request Forms: We love them and you should too!  Every one is a chance to serve your client and  make money. 

Call us with you next Contract, Site or Subdivision Bond.

Steve Golia

FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
Office: 973-541-3417

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Secrets of Bonding #18: Private Owners

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This is a study in motivation.  “What’s in it for me?”  When it comes to Performance Bonds for Private Owners, you need to understand the odds and pick your spots carefully in order to maximize your effectivity.

Understand the Basics

A Private Owner is an entity that is not funded by public money.  If it was, we’d call it a Public Body.  Examples of Public Bodies include the federal government, your state, city or school district.

A Private Owner could be a company that is renovating their office building.  Another example would be any subcontract regardless of whether the overall project is public or private (Note: ALL subcontracts are Private Contracts).

There are some distinct differences between public and private work:

  • Legal Basis: Public bodies must comply with a variety of regulatory requirements and statutes.  Private contracts are made based on business decisions. They are governed by the Uniform Commercial Code and state common laws.
  • Funding: On Public work the source is known and presumed to be dependable.  On Private each situation is different.  It is possible that the Owner signing a contract may not have adequate funding in place to pay for the work.
  • Specifications and Bond Forms: With Public contracts this tends to be consistent and predictable.  Insurance and contractual requirements are standardized.  A 100% Performance and Payment Bond (P&P) typically is required.  The approach to the bond forms is known in advance.  For example, the federal government has their own mandatory bond forms.  With Private, the owner can make any requirements they want, including the use of mandatory, unique, bond forms or no bond at all.  (Review Secrets #7 for more insights on this subject)

Now we’ll talk about motivation.

  • The Insurance / Bond Agent: Wants to serve the client and earn a commission.
  • The Surety: Wants to earn the bond fee or premium.
  • Contractor: Wants to acquire the contract and maximize their profits.
  • Owner: Wants the work performed correctly by a capable contractor for the lowest reasonable price.

Picking your spots on Private Contracts

Our point of view is obviously that of the Surety.  We have been an active writer of Subcontract Bonds and other Private Contracts for many years and here’s what we’ve learned.  Private owners know that the first service the surety provides is pre-qualifying the contractor for the work.  The surety wants to avoid a loss so there is an extensive review of all the contractors’ capabilities.  If there are weaknesses or a likelihood of failure, the surety will refuse to support the project.  So a P&P bond is like the Good Housekeeping Seal of Approval for a contractor.  The Private Owner knows that a bonded contractor has been thoroughly checked out.

Now bear in mind that the bond cost is included in the contract.  The Private Owner that requires a bond, pays the bond cost in the contract amount.  Since the bond may be optional on a private contract, some owners use the surety to screen the contractor, but then they do not actually pay to bond the project.

The losers in such cases are the surety and the agent as well as the Private Owner.  The surety and agent performed services and incurred expenses – but then don’t get paid. If there is any kind of problem on the project, failing to obtain a P&P bond could cost the Owner dearly. Bonds are an effective and economical way to prevent significant problems down the road.

Bottom line: When private contract specifications do not indicate a MANDATORY P&P bond requirement, agents should be cautioned that the bond could be waived. It is true that there is no substitute for actually having a bond in place  (guarantees good workmanship and materials, on time completion, no cost overruns, no liens against the property).  But for some private owners, the chance to save a few dollars is irresistible – even if it means engaging the surety’s services under false pretenses.

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site, Subdivision, Bid and Performance Bonds since 1979 – we’re good at it!  Call us with your next one.

Steve Golia, Marketing Mgr.: 856-304-7348

First Indemnity of America Ins. Co.

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Secrets of Bonding #14: Financial Statements – Timing

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When it comes to financial statements, no news is bad news.  Let’s talk about the timely delivery of annual financial statements.

Many construction companies have a 12/31 fiscal year-end (FYE).  This means their most important Financial Statement (FS) are based on this date each year.

By the end of March, bond underwriters and bankers are expecting to see the financial statements for the FYE.  90 days after the date is normally the time allowed for this info.  Beginning on April 1st (or 90 after the FYE, whenever that is), the contractor enters the tap dancing zone.

Q. “When will we see the 12/31 FS?”

A. “There is a slight delay due to…” (choose one)

  • My CPA was ill and got a late start
  • Our software crashed and it delayed the accounting process
  • The dog ate it

While it’s true there are outside or uncontrollable factors, sometimes contractors intentionally hold back the info.  One example we’re seen involves loan covenants.  The company may have fallen out of compliance with their lender and now is attempting to obtain a waiver from the bank.  Having such a waiver will enable the CPA to comment that the FYE non-compliance has been resolved.  That sounds a lot better!

Here is the downside: We have seen construction clients hold back the FS for 10 months in some cases.  Obviously the delay itself can become an even bigger problem.  At some point underwriters say to themselves “If the FS was good, the contractor would want us to see it…”

So the point is that timely financial reporting is beneficial to bonds and banking.  It shows that the company is well organized and professional.  There is no hiding from the financials.  If there are issues, prepare an intelligent explanation,  describe the corrective actions management is taking and provide projections for the current year.

Producing financial info on time is as important as the numbers themselves!

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site, Subdivision, Bid and Performance Bonds since 1979 – we’re good at it!  Call us with your next one.

Steve Golia, Marketing Mgr.: 856-304-7348

First Indemnity of America Ins. Co.

(Don’t miss our next exciting article.  Click the “Follow” button at the top right.)

Secrets of Bonding #7: Bond Forms

Steve GoliaLeave a comment

This probably sounds like a boring subject. “Mundane” comes to my mind. But you’d be surprised how important it can be.  The bond form can bring an agent’s production opportunity to a screeching halt.  They can also turn a previously good project into an ugly mess.

Let’s break it down.  Bond forms can be categorized in the following groups:

STATUTORY / STANDARD – required by statute or regulation such as city, state or federal forms. There are also industry standard forms such as the American Institute of Architects (AIA).

COMPANY FORMS – devised by the surety itself.

SPECIAL OBLIGEE FORMS – These are written specifically (manuscripted) to satisfy the expectations of a private obligee such as a general contractor (GC) who requires subcontractors to use them.

So how do you recognize each category and what happens next?

A STATUTORY FORM is stipulated by a public body (such as federal form 25 Performance Bond).  It will have their name pre-printed on the form and may have edition numbers or other ID showing it is theirs.  If you bond a federal contract, you MUST use this – no option.  STANDARD FORMS are used when the bonding requirements say an AIA bond form must be issued.  These are reasonably fair to all parties and are well accepted by all parties involved.

COMPANY FORMS are written in a manner the surety prefers.  These are the underwriter’s first choice and may be accepted by the obligee (party requiring the bond) if no mandatory bond form was indicated. Spot these by their ID numbers or copyright info.  The surety’s name will be pre-printed on the form.

SPECIAL OBLIGEE FORMS – may look different than normal.  Sometimes they are extremely short.  Less is not more in bond forms.  Generally, short forms omit the “rules of the road” that determine what should happen when trouble occurs, how a claim is made, what remedies are available, etc. These forms can be troublesome.  With perfectly good, tried and proven bond forms available such as AIA, why would a GC spend time and money to invent a new one? Assume such special forms are more beneficial to the GC and less fair for the subcontractor (called the Principal) and the Surety. Sometimes these forms are practically normal.  But most often we find they place unique burdens on the Principal and Surety.

Since the GC is a contractor, in the event of a default, they may just want to step in, finish the subcontractors work (not worrying about the cost) and then hand the bill to the surety.  This would be evident when reading the bond form.  The surety will consider this a forfeiture bond or financial guarantee because they were deprived of the opportunity to arrange for the economical completion of the work. Such bond forms can prevent the surety from supporting the project, no matter how confident they are in the contractor.

Summary: Contractors and their bond agents cannot ignore the bond forms.  The contractor may only be concerned about signing the contract.  But experienced bond agents and underwriters will always evaluate the forms.  If the surety throws up a red flag, the contractor should be equally concerned.  Problems caused by a bad bond form may start with the surety, but they end up on the shoulders of the contractor.

FIA Surety is a NJ based bonding company (carrier) that has specialized in Site Bonds since 1979 – we’re good at it!  Call us with your next one, Bid and Performance bonds, too.

Steve Golia, Marketing Mgr.: 856-304-7348

First Indemnity of America Ins. Co.

(Don’t miss our next exciting article.  Click the “Follow” button at the top right.)