We are seeing increased requirements for subcontractor bonding by general contractors.  Only a year ago we saw subcontractor bonding requirements only on subs with contracts in excess of $250,000 or if they made up the critical path of the project.  Today we are hearing of generals requiring all subs with contracts as little as $50,000 being required to bond. 

In talking with some generals this presents an interesting dilemma.  Jobs are so competitive these days with profit margins being slim that bonding a vast majority of subcontractors can actually have a negative impact on securing the work.  On the flip side, with so many new subcontractors entering the public arena and other subcontractors being essentially desperate to win work to stay alive, it is risky to list a low bid subcontractor you do not know without requiring them to bond. 

What is the right balance of bonding to remain competitive and mitigate risk?  There is no right answer as this depends on your business philosophy.  However, bonding the critical path always makes sense in my opinion.  The peripheral trades, unless they are specialized, my not be as necessary.  For these trades, replacement contractors may be easily obtained without impacting job performance and profitability.

This entry was posted on Friday, May 15th, 2009 at 10:01 am and is filed under Michael Strahan Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.