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Bonding Education Program
BONDING EDUCATION PROGRAM WORKSHOPS
A partnership between the US Department of Transportation
Office of Small and Disadvantaged Business Utilization
The Surety and Fidelity Association of America (SFAA)
The Bonding Education Program (BEP) is composed of two interrelated components:
- The Educational Workshops Component offers a set of ten workshops: 1) an introductory workshop on intake and logistics; 2) eight comprehensive workshops, each of which is designed to provide information to the contractors related to improving their company’s operations and thereby making it easier to be bonded or to increase their bonding capacity; and 3) a closing workshop focused on networking and next steps.
- Kick-Off: Program Description and Initial Intake
This workshop includes an overview of the Bonding Education Program and its implementation; a presentation of current procurement opportunities; and the scheduling of initial intake interviews with a local surety bond professionals.
- Business Planning and Management for Construction
This workshop focuses on such areas as assessing or reassessing the legal form of the company, developing a succession/business continuation plan, managing and controlling growth, and assembling a business team. Subjects covered include legal and corporate structures, certifications, licenses, permits, establishment of goals and objectives for a business plan, and issues related to company management, policies and procedures, and staffing. The team-building portion of the workshop describes: 1) the importance of choosing the right construction lawyer, accountant, banker, insurance agent, and producer; 2) how to identify them; 3) why they are important; 4) what role these individuals will play and how they interrelate, 5) what they will expect from the small business; and 6) how their involvement contributes to the small business’ overall success.
- Construction Accounting and Financial Management
This workshop focuses on basic construction accounting concepts and will provide an overview, from job costing to financial reporting, as well as construction-specific practices that introduce the small businesses to construction accounting fundamentals. These fundamentals include: 1) debits and credits and how they work; 2) accounting for job cost; 3) work-in-progress (WIP) schedules; 4) percentage-of-completion revenue recognition; and 5) development of financial statements.
- Banking and Financing for Transportation-Related Small Businesses
This workshop addresses the need for capital equipment financing, how to determine working capital requirements, the use of lines of credit, and the need to establish a banking relationship.
- Bonding and Insurance for New and Emerging Transportation-Related Small Businesses
This workshop focuses on: 1) the definition of surety bonds and the various types of surety bonds; 2) how to begin the process of obtaining a bond; 3) the role of the agent/producer and the underwriter; 4) the prequalification process; 5) the 3 “C’s”, capital, capacity and character; 6) the costs of bonding; and 7) how to develop a surety bond relationship. The workshop also covers the various types of insurances required (commercial general liability, Workers Compensation, etc.) and what to look for in an insurance agent relationship. In addition, the workshop covers other bonding assistance programs, such as the SBA Bond Guarantee and Loan Programs, relevant state bond guarantee and loan programs, and any local bonding or financial support programs that might be available for emerging transportation-related small businesses.
- Marketing, Estimating and Bidding
The marketing portion of this workshop focuses on: 1) identifying core company capabilities and determining company capacity; 2) developing a marketing plan; 3) identifying targets of opportunity; and 4) making sales calls and visits. The estimating and bidding portion of the workshop covers: 1) methods of computing measurements, including off-the-shelf estimating software, metric conversions, and essential mathematical formulas for estimating; 2) planning construction projects; and 3) preparation of bid documents.
- Project Management and Field Operations
This workshop focuses on project-specific activities, including hands-on advice at the job site. The project management portion of this workshop covers: 1) plan reading; 2) types of contracts (lump sum, cost plus fee, etc.); 3) common contract forms; 4) project planning methods; 5) job costing and scheduling; 6) management of subcontractors; 7) the proper expedition of change orders; and 8) measuring project performance. The field operations portion of this workshop covers setting up the job site and on-going job site operations.
- Claims and Dispute Resolution
This module focuses on: 1) mechanic’s liens; 2) the claims process under Miller Act payment bonds; 3) the various mediation services and approaches available to a contractor in a dispute; 4) the arbitration provision in standard form construction contracts and what it means; and 5) when and under what circumstances is litigation considered.
- Managing Growth: - Why Some Contractors Succeed and Others Fail
This workshop identifies the most common reasons why contractors, especially small contractors, fail. The workshop also provides suggestions and approaches as to how to avoid these situations and various management approaches and techniques that will help to ensure the small business’s success. In conducting this workshop, the instructor will present “real world” examples of contractors who have succeeded, what pitfalls they were able to avoid and how.
- Conclusion of Workshop Component and Opportunity Networking
This workshop is the conclusion of the educational component of the program and focuses on solidifying the bondability of the contractor and exploiting contracting opportunities through contacts and networking.
- The Bond Readiness Component consists of one-on-one interactions with surety bond producers, underwriters and other professionals. The surety bond professionals will work with the small businesses on a case-by-case basis to assemble the materials necessary for a complete bond application and address any omissions and/or deficiencies that might impede the successful underwriting of a bond. To deliver this component, SFAA will join with the designated Small Business Transportation Resource Centers (SBTRCs) and use the network of local surety associations (LSAs) to identify surety professionals in each local area who will volunteer to assist the small businesses to become bondable or increase their bonding capacity. In addition, the SBTRC is encouraged to assign a full-time staff person with surety experience or contract with a surety consultant to coordinate the program at the local level.
Under this component, the local surety association member(s) will work with the SBTRC to establish a bond readiness team ideally comprised of a surety agent, an underwriter, and other professionals as needed. Other professionals may be an accountant, banker, attorney, or technical assistance provider. The team will first develop procedures for the review of the small businesses bonding applications and establish protocols to ensure the confidentiality of their business information. Next, the team or a team member will meet with each small business on an individual basis to assemble a profile of the company, including financials and job performance history. In the event this information is incomplete, the team or the team member will assist the small business to assemble a more thorough package for assessment. The team or the team member will then review the small business’s financials and/or performance history to identify issues that may lead to the denial of bonding. After this step, the team or the team member will identify those factors that would potentially make the small business bondable and develop a strategy to address each of these factors, including referring the small business to specialized project management, accounting, or financing assistance. Lastly, the team or the team member will help the small business to identify and secure bonding for subsequent projects. A similar approach will be taken for those small businesses that need an increase in bonding capacity in order to bid as prime contractors or to take advantage of larger subcontracting opportunities.
To recap of the specific steps of this bond readiness component:
- Initial Intake Interview
- Assembling the Company Profile and Bonding Package
- Assessing Company Bondability
- Prescribing Remedies for Bondability
- Referrals and Technical Assistance
- Support in the Bond Application Process