How Surety Bonds and Subcontractor Default Insurance Round Out Construction Risk Management

June 15, 2020
Craig Tappel - Construction Executive

The good news for the North American construction industry these days is that business is booming. In the U.S., a growth rate that’s been running annually at 4.5% is expected to push output to $1.2 trillion by 2020. In Canada, planned infrastructure investments should help grow production to $304.6 billion by 2023 (in U.S. dollars)—a significant rally following last year’s dip when residential construction fell off dramatically.

The not-so-good news is the pressure that it puts on the industry. The abundance of work contributes to the “fear of missing out” and the temptation to take on more contracts, increasing the risk of subcontractor defaults. Although claims are rare, Subcontractor Default is the most costly type of dispute that General Contractors experience. The added stress creates a domino effect of project backlogs, leading to over-extension on capital and manpower and plugging up cash flow. Other subcontractors may be affected, and sometimes costly rework may be required.

Reprinted courtesy of Craig Tappel, Construction Executive, a publication of Associated Builders and Contractors. All rights reserved.


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