By all accounts, one thing that never slowed during the wake of Covid-19 was the construction industry. Covid-19 caused all sorts of disruption, from construction site shutdowns to project delays to shortages in labor and materials, but it has remained steadfast. And now, while poised for a post-pandemic boom, the industry is feeling some lingering effects, and companies will be facing both short- and long-term challenges.

The great news for the construction industry is that pent-up demand, an abundance of project funding, and continued economic growth in key markets will drive a surge of new work for contractors – possibly for the next five to 10 years. Unfortunately, not everything is sunshine and rainbows. 

The short-term challenges faced by the industry are not new: labor shortages, material price escalation and supply-chain delays. These issues appear to be the new-normal. As a Surety Advisor, I’m going to add one to this list — Bonding Capacity. If you perform public work, your ability to secure bonding is the key to pursuing that next project and growing your business. A bond program is typically defined by a Single Project Limit and an Aggregate Limit. Project sizes and Aggregate Backlogs are growing due, in part, to cost increases.

As such, construction company owners need to have meaningful conversations about bonding capacity with their surety professional agent. Maximizing your bonding limits to fit your current needs is critical. Without proper capacity, companies could miss out on bidding opportunities.

Keep in mind that project owners and general contractors are well aware of the risks that are currently affecting the construction industry. As a result, the industry has seen an uptick in privately funded projects requiring bonding. In addition, as single project size has grown, general contractors are more motivated to require bonds from their subcontractors. So, the ability to deliver a bond is impacting more contractors and is more and more valuable.

Unlike insurance policies, surety bond programs don’t have a set expiration date, and coverage can be increased or decreased at any time. The key is finding a surety bond advisor who has the experience and expertise to properly advise you, and one who has established relationships within the industry to secure the best rates and terms for your company. 

With that in mind, here are some tips to make sure your construction company is firmly grounded and poised for success as the market rebounds:

  • Treat employees well and enhance recruitment efforts. The pandemic exacerbated pre-existing labor shortages because of an aging workforce and fewer high school graduates entering the trade.
  • Cost increases affect your bottom line. Adjust bid estimates accordingly – know your costs. The market is ripe for gross profit margin increases.
  • Consider stockpiling inventory of regularly used material or taking possession of material as early as possible.
  •  Be selective on the projects you bid. Establish a grading process to determine whether a project makes good business sense. 
  • Communicate regularly with your professional team: Surety Advisor, CPA, Attorney, Banker, etc.

With proper planning, informed management decisions, and a strong surety program in place, construction companies will be on solid footing to take full advantage of the opportunities coming down the road and ready to handle future challenges.

David Catanese, AFSB, is a Construction & Surety Bond Advisor with Overmyer Hall Associates.

About Overmyer Hall Associates

Overmyer Hall Associates is one of the fastest-growing agencies in the country, quickly becoming one of the largest property and casualty insurance agencies in Central Ohio. Overmyer Hall Associates provides clients with insurance and risk management, specializing in Business Insurance, Surety Bonding, and Home & Auto Insurance. Since its founding in 2011, the firm has been awarded Columbus Business First’s “Fast 50” and “Best Places to Work” awards, the IIABA’s “Best Practices Agency” recognition, Columbus CEO Magazine’s “Best Insurance Broker” and the Columbus Young Professionals Club’s “Wonderful Workplace for Young Professionals” award.