“Developing a lasting relationship with a financially sound and interactive surety carrier has numerous benefits,” according to Todd Loehnert of Pinnacle Surety of Kentucky. “A surety that is willing to listen, understand the risk and react accordingly, as opposed to someone who has a balance sheet and is simply reacting to a ratio, is essential to a long-term relationship; if you don’t have that partnership, then you have nothing.”

Loehnert, a past NASBP President, was one of four surety experts who participated in a panel session last month at the Ohio Valley Construction Conference (OVCC) in southern Indiana for Certified Public Accountants (CPAs), general contractors, and surety professionals in Indiana, Ohio, and Kentucky. The two-day conference, hosted by the Kentucky CPA Society, provided nearly 150 attendees a program that addressed timely topics including accounting financial issues, onerous construction contract provisions, contractor risk management; and the region’s public-private partnerships (P3s) of concern. The other panelists included Gary Dunbar from Great American Insurance Company, Dave Walla from Travelers Bond of Cincinnati, and Larry LeClair from NASBP.

Loehnert (pictured here) explained the importance of ensuring that a construction company has a strong relationship with its surety and that the surety fits the needs of the contractor. He described ways contractors can research the legitimacy of the surety and the reliability of its claims department, such as verifying that the surety is Treasury listed and has an appropriate financial strength rating. Loehnert explained that contractors need to invest in maintaining communications with their surety partners to keep them informed about changes in the company:

“Your surety relationship is not a checking account. You want to be able to withdraw more than just a number. You should continue to value your surety relationship and have that relationship grow through the development of your company with every job, when employees come and go, when partnerships in the company change, etc. Changes in operations are constant, and you want a surety that is involved in your business; you don’t want someone to just hand you your bond, you want someone who understands the construction process. Obtaining a bid bond is an extension of credit to the growth of the company and the relationship. A contractor’s investment in developing that surety relationship determines if that relationship grows or fails.”

The Program had the panelists discuss the increasing challenges to the surety market. The discussion centered on the changing landscape of surety markets, key legislative issues, contractor failures impacting the market, and compliance with statutory bonding requirements. Walla described the various types of federal contracting for small businesses and the regulations that general contractors need to be aware of when developing teaming arrangements. LeClair addressed legislative challenges the Association continues to work to address, such as legislators proposing to waive bonds and to increase bond thresholds. He described specific issues NASBP is involved with in the Ohio Valley region, such as an ordinance waiving bonding in Cuyahoga County, Ohio and new project delivery methods implemented by the Ohio Governor’s budget bill. LeClair also described legislative solutions the industry has been pursuing at the federal level, such as H.R. 776, which requires tighter restrictions on individual sureties that provide bonds on federal contracts. Dunbar concluded the panel discussion by addressing root causes why contractors fail, such as family feuds, personal tragedy, and difficult owners.

This was NASBP’s second opportunity to present at the OVCC, which is held every other year.