5 Red Flags to Avoid on Your Next Bonded Project and How to Overcome Them

Welcome back, fellow contractor,

I know navigating bonded contracts can be a challenge. But fear not! Let's unveil the 5 critical red flags you need to spot before signing that contract. Together, we'll safeguard your interests and propel your projects to success. Time is tight, so let's jump right in!

1. Extended Warranties: A Surety's Nightmare

I've been there, battling for you – urging project owners to ditch those lengthy warranties. Let's join forces and avoid contracts saddled with warranties exceeding two years. Here's the deal: sureties exist to protect everyone, and limiting liability after a project wraps up is key. By dodging contracts with extended warranties, you're not only protecting yourself, but also aligning with industry standards.

Action Plan: Before inking any deal, be a hawk and scrutinize the terms. Spot an extended warranty? Don't be shy – negotiate its removal. Remember, once the contract is signed, the owner has the upper hand, making changes difficult.

2. Excessive Liquidated Damages: A Contractor's Trap

Watch out for a hidden pitfall: sky-high liquidated damages (LDs). These hefty penalties, exceeding $2,500 per day, can send shivers down underwriters' spines. But worry not, I've always fought to slash these excessive fines. Let's simplify your construction journey by avoiding contracts with outrageous LDs.

Here's the reality: If your project runs late, the owner can legally charge you for each day beyond the deadline. When LDs climb above $2,500, the financial burden becomes overwhelming for both you and the surety. Before signing, be extra cautious of the LD limit. Remember, once the contract is signed, the owner has the upper hand, making changes a challenge. Every overdue day adds up financially. By staying informed and proactive, you can shield yourself from the weight of excessive LDs. Let's navigate construction free from the burden of sky-high penalties, together.

Action Plan: Choose contracts wisely, ones that are fair and flexible. With my unwavering support, we'll redefine the LD landscape, ensuring your projects flourish and your finances stay healthy. Stay informed, stay empowered, and let's build a future where excessive LDs no longer dictate your success.

3. Unfair Payment Terms: A Contractor's Kryptonite

Take the time to meticulously dissect payment terms. It's crucial to request a copy of the owner's payment bond before signing. This ensures all project subcontractors receive timely payments. Let's make fairness and transparency our top priorities.

Here's why this matters: We're all in this business to get paid! Countless times, contractors have poured their heart and soul into projects, only to wait a year (or more!) for payment. Before committing to any contract, dissect the payment terms with a fine-tooth comb. Is it "pay when paid"? Can you be paid before the owner? What's the timeframe (30, 60, or 90 days)? How do change orders impact payments? How long do you have to submit charges? These are essential questions to ponder while reviewing the payment terms before signing a bonded contract.

Remember, once the contract is signed, the owner has the upper hand, making modifications challenging. Avoid unnecessary headaches by reviewing the payment terms beforehand. Let's prioritize clarity and ensure a smoother payment process.

Action Plan: Stay informed, protect your interests, and let's build a future where fair payment terms are the norm. Together, we'll build a foundation of trust, ensuring you and your subcontractors receive the well-deserved compensation. Choose contracts that prioritize your financial well-being. With my unwavering support, we'll navigate the realm of payment terms, guaranteeing your success and eliminating payment-related hurdles. Keep your eyes peeled, ask the right questions, and let's revolutionize the world of payment terms, one contract at a time.

4. Unrealistic Scope of Work: A Recipe for Disaster

Carefully assess the scope of work and ensure it aligns with your team's capabilities. Don't get caught in a trap! If anything raises red flags, don't hesitate to negotiate changes before signing. Remember, once the contract is signed, you're locked in.

Here's why this matters: You don't want to be held accountable for work you can't perform or lack the necessary materials and labor to complete. It's crucial to address these concerns before signing any bonded contract because once it's finalized, the owner has the upper hand, forcing you to fulfill every aspect of the agreed-upon scope.

Action Plan: Protect yourself and your team by meticulously reviewing the scope of work, identifying any potential limitations or challenges. Engage in open and constructive discussions to ensure the scope aligns with your capabilities and resources. By addressing these matters upfront, we can avoid future complications and deliver successful outcomes.

5. Unreasonable Timelines: A Project's Downfall

Scrutinize project completion dates and be mindful of the consequences of missed deadlines. The looming threat of liquidated damages (LDs) can wreak havoc on your finances. Each day of delay can result in substantial financial losses. It's crucial to stay in control and protect your bottom line.

Here's why this matters: LDs are not to be taken lightly; they are legally enforceable by the project owner if you fail to deliver on time. It's essential to be fully aware of this reality and carefully evaluate the project timeline. Assess whether you can realistically meet the specified deadlines. If you anticipate challenges or foresee potential delays, have an open and honest conversation with the project owner.

Action Plan: Negotiate an extended timeline that allows you to comfortably deliver the project without compromising quality or incurring unnecessary penalties. Remember, once the contract is signed, the project owner holds the leverage, making it challenging to make any changes. By proactively addressing timeline concerns before finalizing the agreement, you can set realistic expectations and establish a mutually beneficial arrangement.

Together, let's prioritize effective project management, transparent communication, and realistic timelines that foster collaboration and drive project success. Take charge of your projects, negotiate wisely, and let's rewrite the narrative of construction timelines, ensuring our mutual satisfaction and prosperity.

Now, friend, the ball is in your court. Armed with knowledge and awareness, it's your turn to act and protect your construction company. I have full faith in your ability to navigate the complexities of bonded contracts. Trust yourself, trust the process, and let's forge a future where our collective interests are safeguarded. Together, we'll build a thriving industry built on fairness, trust, and shared success.

Go get em!

See you next weekend, fellow contractor.

Cheers,

Neb Aynu

Founder & Owner Kingdom Bonding

[email protected]

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