Building Design and Construction Handbook - Merritt - Ventech!

17.54 SECTION SEVENTEEN
1. A complete balanced financial statement with schedules of the principal items.
This is a condition precedent to the approval of any contract bond. Sureties have
forms on which a contractor may furnish financial information. They should be
completed by the individual responsible for the financial operations of the company
and the data taken directly from the company’s books. It is preferable to
have the financial statement prepared and certified by a public accountant.
2. A report on the contractor’s organization. The surety is interested in knowing
the length of time the contractor has been in business, whether the firm operates
as an individual, a partnership, or a corporation, and certain specific details,
depending upon the form of organization.
3. A report on the technical qualifications and experience of the individuals who
will be in charge of work to be performed.
4. A report on the type of work undertaken in the past, together with information
regarding jobs successfully completed.
5. An inventory of equipment, noting value and age of each piece and any existing
encumbrance. An inventory of materials will also be helpful.
From the construction management point of view, the most important question
involving bonding is: What avenues of business are open to the contractor who
lacks sufficient bonding capacity to do bonded work?
In Art. 17.4 various sources of business are described, and in Art. 17.1 various
types of construction companies are discussed. Many of these types of business and
construction companies do not require bonds for their work. For example, it is very
rare that a bond is required in a construction management contract. When a contractor
lacks capacity for bonding, it is well to pursue the lines of work described
in those articles for which a bond will not be required.
The second question confronting a construction manager is whether or not to
require a bond of subcontractors. In general, if the financial capability or experience
of a subcontractor is sufficiently doubtful as to require bonding, the job should not
be awarded to that company. Exceptions to this can be made to assist young companies
in starting and gaining experience.
There are alternatives to subcontract bonds. These alternatives include the following:
Personal guarantees by the principals of the subcontracting company
Personal guarantees of other individuals of substantial worth unconnected with
the subcontracting company
Posting of a sum of money or of a security, such as a letter of credit, until
performance of the subcontractor’s work has been completed by the subcontractor.
17.17 TRADE PAYMENT BREAKDOWNS
AND PAYMENTS
The Contractor’s Trade Payment Breakdown (Fig. 17.20) is usually prepared by the
contractor long in advance of purchase of materials or subcontracts. Therefore, the
amounts shown may vary from the actual costs of the various items. In addition to
this, the contractor usually has start-up costs for such expenses as mobilization,