Given the importance and prevalence of bid bonds, it’s important for contractors to know how current events affect the bond industry. Circumstances outside a contractor’s control could make it harder or more expensive to obtain a bond – or do the opposite. What’s the outlook for bid bonds in 2020 and beyond? We asked experts for their opinions. Here’s what they had to say:
More Bid Bonds Available
The outlook is bright according to Dan Bailey, President of WikiLawn. “The number of sureties in the game has been increasing, with a big jump in the last couple of years. I only expect that to continue, as the construction industry is still booming despite setbacks from COVID, especially in the arena of government contracts which necessitate bid bonds.”
With more options for bid bonds comes more competition for contractors. Once again, Bailey sees that as a good thing. “I don’t believe the risks will change much, though in order to be competitive, bid bond companies may be more trusting than they have been previously. Most get a bit antsy when there’s more than a 10% difference between the highest and next highest bid, so that number may be upped in 2020 and beyond. It only makes sense, as more players enter the market.”
Bailey’s optimism combined with the state of the industry suggests that now is an ideal time to obtain a bid bond.
New Obstacles to Construction Starts
The construction industry has been deeply affected by the coronavirus, like most industries. Disruptions related to the pandemic could put a damper on construction starts, says Jess Silkoff, Co-Founder and President of MyRoofingPay. “There are several large issues with bid bonds in 2020 due to the current pandemic. One of the biggest issues comes from the fact that most construction material comes from China, and a delay, or inability to procure the materials could be detrimental to your project and timeline.
Silkoff also worries that supply chain problems and public health concerns could further complicate construction planning into the foreseeable future. “Another major issue is a mass shortage of N95 respirators. Without the proper masks, some jobs can’t be done, or put you at risk of an OSHA Violation.”
With so much legitimate uncertainty, in the present and on the horizon, contractors can’t let bonding issues jeopardize their ability to win bids.
New Bid Bond Clauses
Kim Chan, Founder of DocPro.com highlights another coronavirus-related issue that could have effects for bid bonds. “Generally force majeure clause is not included in the bid bond, so it is important for bid bonds in 2020 to include such force majeure clause to enable the contractor to exit a situation when it is beyond its reasonable control.”
In this context, a force majeure clause allows a contractor to abandon a bid he has previously won if there are “major forces” outside of anyone’s control. A global pandemic certainly qualifies. As Chan warns, contractors need to scrutinize their bond agreement closely for a force majeure clause, and look for surety bond providers willing to offer this protection against the unexpected.
Viking Bond Service – At the Forefront of Bid Bonds in 2020
According to people on the front lines of the bid bond industry, the outlook for 2020 is both positive and negative. More providers might start offering bonds and competing for business, but the coronavirus and its ongoing effects could mean contractors have less work and need fewer bonds.
What’s your outlook for 2020 and beyond? Do you expect work to pick up, slow down, or stay largely the same? What sorts of projects do you expect to bid on, and what will the bond requirements entail? These are the kinds of questions all contractors need to be asking right now as they navigate through these uncertain times.
Make sure you have a great surety bond partner by your side through it all. When opportunities arise, bonding issues can’t get in your way. That’s where Viking Bond Service comes in – a nationwide surety brokerage licensed to work in all 50 states. Like the experts we highlighted above, we track the bid bond market closely and strive to be the bond company that contractors need in good times and bad. We understand the challenges contractors face right now, the opportunities on the horizon, and the importance of bid bonds through it all.
For more information, contact our team of bond experts at 1-888-278-7389. You can also send us your questions through the contact form on this page. If you’re ready to get a quote for a bid bond in as little as 24 hours, complete this application.