Category Archives: In the news

Government Construction Contracts

In the news

Construction firms highly covet commercial government contracts, as public spending on construction projects exceeds hundreds of billions of dollars yearly, making them a lucrative opportunity. While most construction firms rely on government contracts as their sole source of revenue, others bid on various public and private jobs.

Public construction contracts are governed by lengthy laws, which vary based on the agency. However, there are some consistencies between requirements that all agencies abide by. Read on to learn more about bidding on government construction contracts. 

Construction Bonds
Contractors often need to guarantee bids, construction work, and payments to subcontractors or suppliers by government agencies. Moreover, the terms of the bid should be obeyed. Typically, three parties are involved: the obligee, the principal, and the surety. The three most common types of bonds required on construction projects are bid, performance, and payment. 

Pre-Bid Site Visit
To allow contractors to better understand the project at hand, owners will often allow site visits. Often, contractors can ask questions regarding the bid or network with relevant contractors. Sometimes, these meetings are mandatory, and failing to attend will result in bidding ineligibility.

Competitive Bidding
Budgets are top-of-mind for most public construction projects, and most often, contractors can bid on projects after an architect completes the full plans. Prior to the bid date, projects must be advertised in one way or another. The lowest responsive, responsible, and eligible bidder will be given the job. 

Special Programs
Women, minorities, and small-business owners should have an equal opportunity to bid on projects, so a number of state, local, and federal agencies have created programs to ensure they are awarded accordingly.

Davis-Bacon Act of 1931
This federal law forces contractors to be paid local wages based on earnings paid to the various classes of laborers working on other local construction projects. Varying from state to state, wages will differ based on location. 

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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

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Vehicle Dealer Bonds Increased

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Since January 23, 2023, the Michigan Uniform Vehicle Dealer Surety Bonds (also known as Michigan auto dealer bonds or Michigan motor vehicle dealer bonds) has increased from $10,000 to $25,000. 

Mandated by Michigan Compiled Laws 257.248, the surety bond requirement has yet to be distributed to all motor vehicle dealers. Any individuals or business entities who sell or deal in five or more motor vehicles within a 12-month period are subject to the code. This ensures the public will receive compensation for any damages if the auto dealer is not in compliance with the dealer licensing law.

Regulated by the Michigan Secretary of State, the Michigan legislature enacted the license to guarantee dealers engage in ethical business practices such as remitting payment for taxes and fees. Specific licenses are required for auto dealers by the State of Michigan, depending on the nature of the business. Dealers will need to acquire a license for each type of business they are active in. 

The different types of Michigan Dealer Licenses are:

  • Class A: New Vehicle Dealer
  • Class B: Used Vehicle Dealer
  • Class C: Used Vehicle Parts Dealer*
  • Class D: Broker
  • Class E: Distressed Vehicle Transporter*
  • Class F: Vehicle Scrap Metal Processor*
  • Class G: Vehicle Salvage Pool*
  • Class H: Foreign Salvage Vehicle Dealer
  • Class R: Automotive Recycler*
  • Class W: Wholesaler*

*It is important to note that classes C, E, F, G, R, and W are exempt from the surety bond requirement. 

The Michigan Department of State requires that existing bonds be increased with a rider amendment document provided at the next renewal. The deadline for filing paperwork to increase the Michigan auto dealer amount is December 31, 2023. Any dealers who do not file the required documents before the deadline will potentially have their licenses canceled.

All existing bonds are subject to the increase at the next renewal term, so dealers who have active bonds already on file with the state of Michigan can expect the bond amount to increase by inflated premiums on their next renewal term. Any newly paid renewal invoices should be filed with the state of Michigan.

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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/ 

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The SBA Works to Break Down Barriers as the White House Disperses $60 Billion to States

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The Small Business Administration (SBA) is advocating for more small businesses to partner with federal contractors, particularly with the latest advancement to update critical infrastructure throughout the U.S. With the passing of the $1 trillion infrastructure law, the Biden administration made available about $60 billion to the states earlier this month. These funds are earmarked for rebuilding critical infrastructure within all 50 states, including Washington D.C., and Puerto Rico.

The SBA has teamed up with the U.S. Dept. of Transportation to offer additional opportunities and access to capital while removing common obstacles small businesses often face. A new avenue was created for small and disadvantaged businesses to help connect companies with contracting opportunities and be able to access some of these funds. This includes actions such as direct introductions and educating small business owners on how to be competitive in securing contracts.

The much-needed critical infrastructure work ranges from rebuilding roads and bridges to buildings and public transit. SBA administrator Isabel Guzman reports, “That technical assistance is going to give them the how-to in terms of going after, successfully bidding on, and winning contracts in the federal space.”  

In 2021, the U.S. infrastructure was given a C- by the American Society of Civil Engineers (ASCE), which is up from a D+ in 2017. Seventeen categories were assessed in 2021, with grades ranging from a B for railroads to a D- for transit.

Small businesses have a difficult time obtaining federal contracts compared to larger entities, in part due to contract bundling. Bundling occurs when multiple tasks are entered into contracts that balloon, causing the contracts to become so large that small and medium-sized businesses can’t take them on.

Another barrier is the lack of history. If a business cannot prove its historical performance, then they fail to compete, making it much more difficult to secure future jobs. This is what the SBA hopes to assist with; connecting businesses with subcontracting opportunities that, in turn, help build up their portfolio and give them a better edge to go after prime contracts.

“It comes down to expanding the number of opportunities and ensuring that small businesses are entering the contracting space, getting certified, and able to know the how-to’s of who to connect to, how to present yourself, and how to get money,” Guzman says.

The SBA is also assisting small businesses within the transportation sector to get bonds, which guarantee agreements. Most federal contracts require businesses to be bonded. Surety bonds are a type of insurance with a three-party contract in which the surety guarantees a contract’s completion, i.e., with the federal government. If a contractor is unable to complete a project, the responsibility falls on the surety company to find a replacement contractor.

It’s estimated that about sixty-five thousand contracts were received by small businesses in 2021, down by almost 40% over the past decade. While the SBA and the U.S. Dept. of Transportation have not enumerated a goal, this partnership aligns with the current administration’s objective to advance the equity in government procurement. The federal administration has set an 11% federal contracting goal for small, disadvantaged businesses, with an increase to 15% by 2025.

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

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MDOT Showcases Roadwork Funded by Whitmer Bonds

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Specific sections of roadway are being showcased by the Michigan Department of Transportation by way of signs that say, “Bond Financing at Work,” which alludes to Governor Gretchen Whitmer’s 2020 road bonding plan. 

MDOT spokesman Jeff Cranson said about 15 green signs ($750 each) have been installed throughout the state with plans to install more. One sign, located in a construction area on Interstate 496 in Lansing, is meant to assure “that the work is being done,” according to Cranson. 

“Installing these signs is consistent with MDOT’s objective to be transparent and provide the public with as much information as possible about road projects,” Cranson said.

House Republicans who have opposed Whitmer’s bonding plan added a stipulation to the transportation budget requiring that the signs mention the monetary amount paid by the state in interest and borrowing costs to repay the bonds. 

Currently, the 2022 budget requires construction and borrowing costs to be listed on the signs. MDOT is not complying with the law, so the 2023 budget approved by the House includes provisions for non-compliance. 

Cranson says the addition of words or signs as outlined by the House budget would increase the cost of each sign. 

In 2020, Whitmer suffered from a failed bid to bump up the state’s gas tax by 45 cents a gallon to finance road renovations. In response, she launched her “Rebuilding Michigan Plan,” announcing it during her 2020 State of the State address. The next day, the Michigan State Transportation Commission authorized the department’s use of bonding.

Rough estimates by economists showed that the $3.5 billion program would total approximately $5.2 billion if the state remits annual debt bond service payments of $206.6 million for 25 years. About $529 million of the $1.6 billion issued thus far has already been spent or is spoken for, with an additional $1.9 billion in bonds to be sold in the future. 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

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Surety Bond Use In Everyday Life

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Surety bonds are a part of everyday life.  Many individuals don’t understand the concept of bonds and how they are used to protect parties entering into a contract with one another.  In basic terms a surety bonds are a binding legal agreement that offer financial guarantees to the parties involved in a multitude of contracts.  Surety bonds state that one party, known as the surety is obligated to a second party, the obligee , in case of a default by the third party, the principal.

Various categories of surety bonds:

Contract surety bonds offer both financial security and construction assurance on projects both building and construction.  Contract surety bonds assure the project owner that the contractor will meet the requirements set forth in the contract.  If the contractor fails the project owner the surety company will cover the contract requirements so that the project owner is not at risk of loss.  The surety offers a guarantee that the contractor will perform the job stated while meeting their financial obligations to subcontractors, material providers and employees.

Bid bonds ensure that a contractor submits a bid that is intended to meet the needs of the contract.  The price of the bid that is submitted covers the financial obligations of performing the work as stated in the contract while covering the expenses on their end.

Performance bonds ensure the project owner is covered from loss if the contractor fails to perform the contract as stated and agreed upon.

Payment bonds are in place to make sure that the contractor is liable for the expenses to subcontractors, laborers and materials related to the contract that was entered into.

Maintenance bonds protect project owners against defects in materials or workmanship for a specific, agreed upon period of time.

Subdivision bonds ensure cities, counties and states that the principal, contractor of a subdivision, will financially cover and construct improvements within the sub like streets, sidewalks, curbs, street gutters, and more to make sure the sub meets stated requirements.

License and permit bonds are obtained to allow certain businesses to do business. An example of these bonds include: construction bonds, motor vehicle bonds, employment agency bonds and more.

Fiduciary bonds secure that administrators, executors, guardians and such will perform duties in line with court stated orders.

Different bonds are used in special situations to guarantee that contracts or duties are performed as contracted.  Many people confuse insurance and bond however they are completely different.  Insurance is used to protect individuals or businesses from themselves or others where as bonds are used to make sure expectations are met by others.  Both protect against loss of finances.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at https://www.bondingspecialist.com.

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Confusion When Hiring A Contractor?

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If you are confused about hiring a contractor to do work around your home you are not alone.  The terminology is a bit confusing, laws in each state are different and regulations are constantly changing which makes the whole process of hiring contractors to perform work on your home is difficult.  Licensing within different trades be it electricians, plumbers, construction or heating and cooling are very specific as well.  Below we attempt to define the terminology used throughout the industry and how it relates to specific contractors within different industries.

  • Licensed Contractors: A license is granted to contractors throughout different trades as authorized by local and state laws. This ensures that the contractor has passed tests regarding their business practices, trade skills and ability to pay for the fees associated with the required license and bonds.
  • Registered Contractors: Contractors that have been registered are only required to prove they are offer insurance and can pay the required fees. These requirements are often less stringent than what is required for a contractor to become licensed.  To be a registered contractor you rarely have to pass any trade related competency tests or to be bonded.  Licensing and registration terms are often used interchangeably.
  • Bonded Contractors: Contractors that are bonded have obtained an agreement with a third party, a private company that offers surety bonds, to ensure that the consumer is protected against any misdoings by the contractor. If contractors fail to perform work as contracted, fail to pay for materials or their subcontractors or what not, their customer can petition the surety company for reimbursement for the failure of the contractor to perform as stated within the signed contract.
  • Insured Contractors: Contractors should all be insured. They should hold two types of insurance: liability insurance and workers compensation.  Liability insurance protects the homeowner against damage done to their property.  Workers compensation protects workers hired by the contractor from coming after the homeowner if injured or killed while working on your home.

Before choosing a contractor to complete work around your home verify you are protected from wrongdoing.  Ask contractors for all certificates that state they are registered, licensed, bonded and insured.  If the status of any of these certifications is questionable don’t feel pressured into hiring this individual contractor.  All certificates should be current and cover all aspects of the project that is to be completed.  Once you have confirmed and verified a contractor be sure to file copies of all paperwork, certifications and such in a place that is easily accessible.  This will ensure if proof of you will have it at your finger tips.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at https://www.bondingspecialist.com.

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