The COVID-19 pandemic has affected every single industry, including surety bonds. That doesn’t come as much surprise considering that surety bonds are weaved into the fabric of the broader economy. Many professionals and businesses need them to operate legally, and most contracts aren’t complete until bonds are in place. When the outbreak of a global pandemic causes business activity across states and sectors to take an unprecedented plunge, one would only expect the surety bond industry to feel the impact.
What does that impact look like exactly? Rather than relying on our own experience to comment, we reached out to industry experts for different perspectives. We asked them about the impact of COVID-19 on applicant’s seeking surety bonds and on the companies that issue these bonds. The experts we spoke with have important insights to offer anyone involved with the surety bond industry at this uncertain time. These are the key takeaways:
Tough Times for Contractors
According to Dan Bailey at WikiLawn, the COVID-19 pandemic has put extra pressure on contractors of all types. “Contractors can only abide by the rulings of state governments and CDC guidelines. Many contracting projects haven’t been deemed as essential infrastructure, and surety bonds have little legal room to challenge this ruling right now.”
Moving forward, Bailey think contractors need to form partnerships with their bond provider. “There needs to be a stronger relationship between the contractor and those responsible for issuing surety bonds. Being able to deliver on the obligee’s needs regardless of current operating procedure is something that’s hard to trust if there’s no established relationship.”
Despite the hardships of the pandemic on contractors in particular, Bailey feels confident some relief is coming. “In general, I feel there will be more provisions moving forward to help ensure that the contractor is not unjustly pressured into satisfying a contract that brushes up against state or federal guidelines for handling the pandemic.”
Fewer Options for Bonds
Randy Charach, the personal finance expert behind INCOME.ca, offers a dire warning for both surety companies and those who depend on them. “There’s a large chance that contractors will need to rely on more than one surety provider as these providers will be looking to lessen their risks during this time.”
Important as bonding may be, most contractors treat it like any other business requirement – something they want to manage effectively using the fewest resources necessary. Learning that bonding may now require relationships with more than one surety provider can only mean this business requirement will require more time, energy, and possibly money than it did previously.
Combined with the challenging business climate outlined in the previous heading, the outlook for contractors isn’t bright right now.
Complex Contract Clauses
Mark Strohl, Founder of Protax Consulting, warns that COVID-19 could add new levels of uncertainty to the construction process. “Contractors in this age of uncertainty should be taking extra care to note contract clauses that give the client or owner the right to suspend or even terminate the project if the suspension lasts for a certain amount of time. Contractors should make sure they are aware of these clauses and should keep an eye out for actions by owners that could be interpreted as a suspension even if it isn’t specifically named as one.”
Now, morose than before, contractors need to closely scrutinize contracts and potentially enlist the help of experts who can make sense of the details.
Key Takeaway – Pick a Great Surety Bond Partner
The common theme among all the people we spoke to is that the uncertainty of the present looks likely to carry into the future with no clear end in sight. As many of our experts noted, things don’t look great for contractors. Work won’t necessarily dry up overnight, and there’s no reason to think construction starts and home renovation projects won’t return to pre-pandemic levels soon. That being said, countless forces – some obvious, others invisible, all unpredictable – could throw the construction industry into relative turmoil for years to come.
Bond providers are an important asset in the midst of that turmoil. Since bonds are so instrumental to the construction industry – something that most projects can’t proceed without – contractors can’t afford for bonding issues to compound other sources of uncertainty in the industry. They need bonding to be a box they can check reliably and consistently, particularly if they’re going to remain competitive. Some bond partners will go above and beyond to ensure contractors get the bond they need on schedule. Others won’t.
Viking Bond Service falls squarely into the first category. We understand the pressure facing contractors right now. We’re also well aware of how the bonding process can make life easier or harder for stressed-out builders. COVID-19 makes everything harder for everyone – but we’re dedicated to keeping the bonding process open to all and easy to access.
If you’re ready to pursue a bond, complete this online application at your convenience. For more information, call us at 1-888-278-7389 or use the contact form on this page.