UNINTENDED CONSEQUENCES OF FLORIDA’S HYPER POPULATION GROWTH

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As we look at the Macro Consequences of Florida’s growth in the next two to three decades, it is easy to get lost in the very comfortable idea that there will be sufficient profitable work for every construction company domiciled in Florida. As true as that may be, the unintended consequences of the hyper growth we are facing will be the extreme changes that will have to take place in the construction entities that now play a leading role in Florida infrastructure projects.

Looking at the potential growth (Florida’s population could double in the next 25 years), there is no way that the current construction infrastructure that is available for Florida’s growth could even marginally undertake the multi-billions of roads, water, sewers, electric grid upgrades, public and private institutional structures, etc. that will have to be built to accommodate the ‘hoards’ that are looking to make Florida home. The additional available work will bring into our market National, International, and Regional competitors which will create additional competition on all levels and eventually make our great local contractors who have been “big fish in a relatively small pond” – “little fish in a huge pond”. Not all bad, but certainly not all positive.

FLORIDA – CENTER OF THE CONSTRUCTION UNIVERSE

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Those of us that are associated with the construction or real estate market should be very grateful. It has been projected that Florida will grow more in raw population (number of new bodies calling Florida home) than any other State in the Union in the next 20-25 years. Florida is the third most populated state with approximately 23 million people behind California’s approximately 38 million and Texas with approximately 27 million. In the next 25 years, our population will not likely catch either California or Texas, but the gap will definitely be narrowed.

Right now, Florida has an average of more than 800 people moving to the state on a daily basis. The pace is expected to accelerate in the next two decades. Demographic projections have suggested that somewhere between 15-30% of all “Baby Boomers” will end up retiring in Florida. There are 74.6 million “Baby Boomers”, so if 30% move to Florida, that alone will almost double our population. For the next two to three decades, Florida will be the best construction market in the country, possibly the world.

What are Surety Bonds and How Do They Work?

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2021 promises to be banner year for Florida’s transportation and infrastructure industry with the State Transportation Work Program. This program includes vital funding to increase infrastructure capacity, new highway construction, bridge repairs, and seaport, aviation, and transit program improvements. As a result, the need for obtaining Surety Bonds will  be greater than ever.

Surety Bonds perform an essential role in the construction industry. A Surety Bond is a three-way contract between the surety (the company providing the bond), the principal (the contractor) and the obligee (the project owner). The principal usually applies for the Surety Bond with the surety and it is to protect the obligee’s interest.

A Surety Bond is simply a three-party agreement or contract where the first party, the surety, guarantees the performance of the second party, the principal (contractor), if they default on their obligation to the third party, the obligee (project owner).

The reason Surety Bonds work so well is simple. They help to take the risk out of a risky business. Surety Bonds are designed to protect your interest from the actions of a third party.

Types of Surety Bonds.

There are variety of Surety Bond types designed to meet your needs. In fact, almost any contract or obligation can be bonded. The four most common types of Surety Bonds include Contract Surety Bonds, Commercial Surety Bonds, Court Surety Bonds, and Fidelity Surety Bonds. But, for this article, we will focus on the most common bonds used for road and highway work – Contract Surety Bonds.

Contract Surety Bonds

In the construction industry, the most common bond types are Contract Surety Bonds. They include Bid Bonds, Performance Bonds, and Payment Bonds. All are needed for different purposes to ensure that the interests of the obligee are protected, especially if the principal fails to meet the terms of their contract.

Bid Bonds financially protect an obligee if the bidder awarded the contract fails to sign the contract and fails to provide the essential Performance and Payment Bonds.

Performance Bonds, on the other hand, are put in place to protect the obligee from monetary loss if the contractor fails to deliver the job according to their agreement.

Payment Bonds are there to guarantee that the contractor is going to pay the workers, subcontractors, and material suppliers involved in the project.

A Contract Surety Bond protects the project owner by guaranteeing that the contractor will follow the specifications and perform the work laid out in the construction contract. It also ensures that certain labor, materials suppliers, and subcontractors will be paid.

What Do You Need for a Surety Bond?

Before you apply for a Surety Bond in Florida, make sure that all your documents are in order so that you can expedite the whole process. Essential documents include:

Financial Records: Surety companies will ask for both personal and business records. For businesses with less than $20 million in sales, you will need to provide financial statements for the last year and for the interim period in this year, most recent personal and corporate tax returns, financial records of majority shareholders, and a bank reference letter. Companies with more than $20 million in sales need to show their audited financial records.

Resumes: Some surety companies may ask for resumes of key personnel. Make sure to highlight any relevant experience.

WIP Form: WIP stands for “Work in Progress” form. Ask your surety company for the relevant form. This details all the projects you have completed recently, ongoing work, and any outstanding surety.

Insurance: Some surety companies may insist on work insurance to see that there are no uninsured liabilities.

References: Companies issuing Surety Bonds in Florida will ask for references from associated parties, such as past clients, suppliers and so on. The references are an indication of other’s trust in your ability.

Apply for a Surety Bond Online:

Surety Bonds are usually required for contractors to work on projects. Without it, a contractor might not be able to work with project owners, workers, and material suppliers. These are the people who play a significant role in the successful completion of contracted jobs. Surety Bonds protect project owners if the principal does not fulfill their obligations per the terms of their agreement.

With a new administration also proposing to make “historic investments in infrastructure”, there should be plenty of new projects in 2021 and numerous contractors bidding on these projects. With Surety Bonds usually required to even start the bidding process, you must find a reputable Surety Bond company to apply with – one that has a strong reputation and is an industry leader. Before choosing a surety company, make sure they have the available resources to support the project you are bidding on.

But obtaining a Surety Bond can be a grueling, time intensive process. That’s why more companies turn to America’s number one provider of Surety Bonds, Nielson, Hoover & Company. To learn more, call 305.722.2673.

Understanding How Maintenance Bonds Work in a Real Estate Project

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Every real estate transaction carries high value and a lot of risk with it. Surety bonds protect the investment of a project owner and ensures he gets value for his money. Contractors working on real estate projects have to furnish surety bonds before they are awarded the contract. They have to furnish maintenance bond in particular, which ensures that the building they build will stay in the optimum condition for at least a specified time. After that period, any defect or fault will not be covered under the scope of the bond.

Different Parties to Maintenance Bonds

• Contractors, purchase these bonds to showcase the quality of their work and durability. They have to get these bonds as a mandatory document to win the project.
• Project owners, who keep these bonds as a surety that their real estate project will be delivered as per contracted terms. If there is a default, they will be compensated for it and won’t have to cover for the default from their pocket.
• The surety company, which issues the bond runs a full check on the contractor’s background. They have to run these checks to make sure that they are putting their money on the right person. Before they issue the bond they create necessary channels required to later recover the money from the contractor in case he defaults.

More about Maintenance Bonds

Under maintenance bonds, contractors have to pay the entire money of the bond value in full, as compared to an insurance bond where the premium is just a fraction of the insurance value.

In case of a default, the contractors at times try to pay in cash for losses directly to the project owner. A maintenance bond restricts them from doing such a thing outside the scope of the bond.

Decoding How Performance Bonds Work and Why You Need Them

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Everyone expects that the person they hire should complete the assigned job. But there can be instances when that job is not completed as intended, or not completed at all. A surety bond binds the contractor taking up the project to deliver what he committed to do. In case he doesn’t, the surety bond compensates the loss incurred by the project owner, charging the contractor for the same later.

Understanding Performance Bonds
Performance Bonds ensure optimum performance by the contractors throughout the project duration. These bonds are the most commonly used surety bonds for public work contracts that have an estimated value of $100,000 or more. However, that is only one of the conditions for issuing them. These bonds can also be used for managing company operations that may not be bound by this cap. Bidding could be done initially, post which the winning contractor has to furnish a performance bond as a guarantee for successfully completing the project.

These bonds create a win-win situation for all, bringing lucrative contracts for contractors and ensuring highly satisfying results for the project owners.

How Performance Bonds Work
Performance bonds safeguard the interests of the project owner if a work is not done satisfactorily or if the contractor has defaulted deliberately or even unwillingly. Since this risk of default is always there, surety bond institutions (banks/insurance companies/private lenders) run an extensive check on the contractor’s history before issuing the bond. They take into account his past experience, risk capital, financial statements, and more. Under the circumstance where the contractor’s history doesn’t seem credible enough, he is not issued the bond, thereby denying him the chance to win a contract too.

This way, there is a very little scope for a miss to ever happen. And if it happens, the surety bonds take care of the losses. There are rarely any government or private projects involving large investments that happen now without performance bonds.