Failure Rates: 2002-2012 Source: BizMiner Building, heavy/highway, and specialty trade contractors...
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![Page 1: Failure Rates: 2002-2012 Source: BizMiner Building, heavy/highway, and specialty trade contractors In BusinessSurvivorsFailure Rate 853,372 (2002) 610,357.](https://reader033.fdocuments.in/reader033/viewer/2022042623/551c0665550346a34f8b4eab/html5/thumbnails/1.jpg)
![Page 2: Failure Rates: 2002-2012 Source: BizMiner Building, heavy/highway, and specialty trade contractors In BusinessSurvivorsFailure Rate 853,372 (2002) 610,357.](https://reader033.fdocuments.in/reader033/viewer/2022042623/551c0665550346a34f8b4eab/html5/thumbnails/2.jpg)
Failure Rates: 2002-2012
Source: BizMiner
Building, heavy/highway, and specialty trade contractors
In Business Survivors Failure Rate
853,372 (2002) 610,357 (2004) 28.5%
850,029 (2004) 649,602 (2006) 23.6%
1,155,245 (2006) 919,848(2008)
20.4%
897,602 (2009) 702,618 (2011) 21.7%
918,483 (2010) 696,441 (2012) 24.2%
![Page 3: Failure Rates: 2002-2012 Source: BizMiner Building, heavy/highway, and specialty trade contractors In BusinessSurvivorsFailure Rate 853,372 (2002) 610,357.](https://reader033.fdocuments.in/reader033/viewer/2022042623/551c0665550346a34f8b4eab/html5/thumbnails/3.jpg)
Financial Strength
Character Experience
EquipmentCredit History
Banking Relationships
Prequalification
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RISK
HighMaterials
prices
Unreasonableowners
Onerouscontracts
Shortage of qualified,skilled workers
Contractor Failure Risks
Insufficient Capital
Slow collections
Low profit margins
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RISK
MaterialsShortages
OverExpansion
NewOwner
Inclement Weather
Contractor Failure Risks
SubFailure
Change inScope of
Work
Inadequate Management
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Reasons for Contractor Failure
AccountingProblems
Change inLeadership
Scope of Business
Material/EquipmentShortages
UnrealisticGrowth
Failure
LaborDifficulties
Lack ofExperience
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Accounting Issues Inadequate cost tracking
systems
Estimating or procurement problems
Underinsured
Improper accounting practices
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Management Issues
Leadership changes
No continuity plan when key person dies or becomes disabled
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Personnel Issues
Key staff leave company
Character issues
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Performance Issues Unrealistic growth
Change in type or scope of work
Poor project selection
Onerous owners
Unsettled claims & change orders
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Unrealistic Growth
UnrealisticGrowth
Increase in Backlog Work
Shorter Lead Time
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Factors Beyond Control
MaterialsShortages
SiteConditions
Inflation
LaborDifficulties
WeatherDelays
EconomicDownturn
Failure
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![Page 14: Failure Rates: 2002-2012 Source: BizMiner Building, heavy/highway, and specialty trade contractors In BusinessSurvivorsFailure Rate 853,372 (2002) 610,357.](https://reader033.fdocuments.in/reader033/viewer/2022042623/551c0665550346a34f8b4eab/html5/thumbnails/14.jpg)
Ineffective Financial Management System
Tight cash flow
Slow receivables
Past due bills
Vendors demanding cash
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Bank Lines of CreditConstantly Borrowed to
Limit
All credit fully secured
Lines not renewed
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Poor Project Management
Inadequate supervision
Not getting best prices
Projects behind schedule
Claims
Litigation
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No ComprehensiveBusiness Plan
No contingency plans
No“road map”
No goals
No objectives
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Poor Estimating & Job Cost Reporting
Revenue & marginsdecrease
Continued operating losses
Loss of bonding capacity
Bid jobs too low
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Communication Problems
Disputes between contractor and owner
Poor communication from field to management
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Loss of Loyal Customers Decreasing reputation
for company’s ability to perform contracts on time & within budget
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Tips for Contractors to Avoid Default
Rights & responsibilities
Capabilities
Growth & overhead
Causes & warning signs
Communication
Contractors
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Tips for Contractors to Avoid Default
Contract
Bond forms
Qualify surety
Qualify owner
Surety Relationship
Contractors
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Tips for Contractors to Avoid Default
• Construction-oriented CPA
• Adjust overhead
• Bank credit
• Conserve capital
• Bond subcontractors
Contractors
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Claims
Rights Obligations
Resolution
Completion
Expectations
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• Understand bond
• Cooperate
• Comply with contract
• Don’t overpay
• Lien waivers
• Timely default
• Termination
Tips for Owners – Navigating a Claim
Owners
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For More Information
Surety Information Office (SIO)
www.sio.org | [email protected]
SIO is a joint initiative of The Surety & Fidelity Association of America (SFAA) and National Association of Surety Bond
Producers (NASBP).