When business is on an even keel, it’s relatively easy to get work done. But things get tougher when unforeseen challenges such as COVID-19 disrupt the status quo.

Just as a singer is supported by guitar, bass and drums, the most effective surety bond producers call on different forms of expertise to ensure they hit the right notes during client conversations.

The quality of music, however, depends not just on the ability of the individual musicians, but also on how well they play together. Surety bond producers and contractors that build agile support networks see more bids and projects through to orderly completion and set themselves up for sustained superior performance. In addition, when fundamentals are in place, surety teams can more assuredly anticipate and respond when change happens, as it inevitably does.

Over the past few cycles, nothing has brought as much change to construction surety as COVID-19. Stoppages and shutdowns, supply chain and worker disruptions, as well as unprecedented financial challenges put the onus on contractors—and the teams they have around them—to perform like rock stars.

Those who can make that happen will emerge from COVID-19 bigger and better than ever. So, if you have let your professional relationship with your surety bond producer and other surety team advisors wane or fall by the wayside during the last period of growth, it’s time to get the band back together.

A Relationship Business

As president of Skillings Shaw & Associates, located in Lewiston, Maine, and as a National Association of Surety Bond Producers (NASBP) past president and an instructor at the association’s prestigious William J. Angell Surety School, Robert Shaw is a prime example of a surety bond producer who is accustomed to playing that upfront role, orchestrating success for construction clients.

COVID-19 just makes that responsibility more acute. In a relationship-based business, Shaw is all about putting the most effective team possible around the table.

“That ends up helping all of us,” Shaw says. “Teamwork clearly helps the contractor, but it helps our team, too, because in a situation like what’s going on with COVID-19, surety companies are making credit decisions based on historical information. Moving forward, figuring out how all of that works and what the ramifications are is key.”

Frequently consulting with Shaw and serving many of the same construction markets in New England are: David Jean, a CPA at Portland-based Albin, Randall & Bennett, who leads his firm’s construction services group and serves on NASBP’s CPA Advisory Council; Robert Ruesch, partner at the Portland-based Verrill Dana law firm; and Ralph Pulver, vice president of the construction services/bond practice at Travelers in nearby Hartford and also a faculty member at the NASBP Surety School.

“When I have people who are experts in the construction world in their respective trades, but also extremely knowledgeable relative to what’s happening now, that allows me to work with my contractors and folks at surety companies to maximize capacity during these unprecedented times,” Shaw says.

Bottom-Line Implications of COVID-19

In terms of financial impact, Jean reports, COVID-19 has implications from the bidding stage to project completion, with effective communication among all pertinent advisors key to ongoing viability.

“Advisors need to be talking proactively with their contractor clients about best practices—what we’re seeing in the industry, what changes are taking place, and how they can better prepare to deal with all the uncertainty,” Jean says. One of those is the impact of job slowdowns on profit potential.

“As some private work dries up, that means more contractors chasing public work,” he says. “And with more people bidding on public work, margins are tighter. What this is going to look like next year nobody knows, but contractors need to start preparing.”

Cost increases for materials, along with safety and risk mitigation costs and even costs for remote work, are also impacting the bottom line, both for backlogged jobs and new bids, Jean says. Issues syncing up the sequence of subcontractors, all of whom are involved in a project and are all facing the same challenges, introduce even more inefficiency.

“In general, our clients are finding they’re not as productive as they have been,” Jean says.

At least during the initial phase of the pandemic, PPP funds were able to mask some of the worst financial impacts for many construction businesses that would otherwise have been struggling, especially those in jurisdictions for which construction was temporarily locked down. Depending on how the government elects to dispense any additional economic support, however, PPP might have simply delayed any eventual downturn.

Managing the Legal Ramifications of Change

In an unpredictable business environment, maintaining communication integration with accounting, project management and estimating system backbones protects against loss of documentation for items of negotiation that should be part of an electronic job file.

“That’s more important today than ever, because things are in flux and plans that have previously been made are changing,” Jean says.

Ruesch adds that COVID-19’s potential disruption of formerly stable personal relationships puts even more emphasis on the importance of good documentation.

“People change positions, especially now, and that highlights the need for written documentation and communication,” Ruesch says. “These days, I’ll call somebody up on the phone or we’ll have a Zoom and establish that direct line; but the importance of discipline and adhering to notice provisions cannot be overstated. The reason is that, in the context of a dispute, there’s an inclination among people in a courtroom or arbitration setting to not believe something happened if there’s not a contemporaneous piece of paper or an email that documents it,” he says.

That still holds true for parties in negotiating relationships even when they’ve been working together for years, according to Ruesch. “There’s often a reluctance to send an email or take a position because you don’t want to upset the person who’s going to receive it,” he says. “It’s important to appreciate that there’s a way to communicate a position without necessarily being adversarial.”

In these areas and others, professionals like Ruesch and Jean contribute their expertise in uncovering and assessing the impact of change on contracts—and vice versa.

“There’s no better advice I could give to a client in any of my roles within the construction industry than to identify problems early and be proactive in communicating about them,” Ruesch says.

The Team Imperative

That’s exactly why the most successful contractors surround themselves with carefully selected business professional advisors: bond professionals like Shaw, financial professionals like Jean and construction lawyers like Ruesch, along with insurance professionals, systems IT professionals and others.

“For the privately held company, this team may serve as a quasi-advisory board,” Ralph Pulver says. “These advisors not only know their own professions really well, but also become intimately knowledgeable about the construction companies they serve.”

“No good question can be out of bounds,” Pulver adds. “When COVID-19 hit, one of our clients said to me, fire away with any and all questions about how we’re dealing with this because we’re in uncharted waters.”

For the contractor advisory group, then, collaborative work becomes a requirement.

“COVID-19 found us all quickly placed in that territory, with topics like force majeure clauses, PPP loans, new ways of looking at project safety and the necessity of assessing the financial impact of work delays and cancellations; the list goes on,” Pulver says. “It’s critical to keep the communication ongoing, and I think those advisers are doing an incredible job of boiling down all the available information and telling them what’s most important.”

Getting Contractors Their Share of Work

In the heat of this past summer near Lewiston, Shaw held a get together with a few of his construction clients. The goal was to get everybody up to speed about some of the changes that had recently been made in the PPP program.

“I have a friend who has a field and a barn,” Shaw says. “I invited about 10 or 12 of my contractors, and we’re all out in the field because it seemed like the right thing to do, with the proper hand sanitizers and face masks and a couple of beers. And we just kind of stood around for an hour or so and chatted.”

“The interesting thing about our business as surety bond producers is that the end products we provide all look the same; my bond looks like my competitors’ bonds,” Shaw says. “What sets everybody apart is the knowledge and resources we bring to the table that enable our clients to maximize their bonding capacity.”

And the band plays on. “If somebody who has a weakness needs some help and I can get one of these guys involved, they make me look good,” Shaw says. “My job is to make sure the right team is in place—that we have the band ready to make the kind of music we want to make. When we do that, our contractor clients achieve their goals and objectives.”