Below is an overview of the current trends in surety and bonding that middle-market construction companies should consider when formulating their strategic plans.
In an industry as dynamic and risk-prone as construction, staying abreast of these trends is essential for ensuring the company's financial stability and continued growth.
1. Digital Transformation in Bonding Processes
One of the most prominent trends in recent years is the digital transformation of bonding processes. Traditional paper-based systems are being replaced with digital platforms that streamline the application, approval and issuance of bonds. Middle-market construction companies should explore adopting these digital tools to reduce paperwork, improve efficiency and reduce turnaround times when obtaining bonds.
2. Increased Focus on ESG Factors
Environmental, Social, and Governance (ESG) factors are gaining traction in the construction industry. Surety providers are placing more emphasis on companies' commitment to sustainability, safety practices and ethical conduct. As part of your strategic planning, consider how your company can align with ESG principles, as this can enhance your bonding capacity and reputation.
3. Cybersecurity and Data Protection
With the increasing reliance on digital platforms, the risk of cyberattacks and data breaches has grown significantly. Construction companies are becoming prime targets for cybercriminals. Investing in robust cybersecurity measures and insurance coverage is crucial for protecting sensitive data and maintaining trust with clients and surety providers.
4. Rising Surety Bond Costs
The cost of obtaining surety bonds has been steadily increasing due to factors like rising construction costs, more stringent underwriting standards, and increased risk awareness. As part of your strategic planning, you should anticipate these rising costs and incorporate them into your project budgets to maintain profitability.
5. Collaboration with Surety Providers
Building strong relationships with surety providers has become increasingly important. Collaborative partnerships can help construction companies access larger bonding capacities and more favorable terms. Consider engaging in regular discussions with your surety provider to understand their requirements and expectations, which can inform your strategic planning.
6. Supply Chain Disruptions
The global supply chain disruptions witnessed in recent times have significantly impacted construction projects, causing delays and cost overruns. As part of your strategic planning, assess supply chain risks and develop contingency plans to mitigate disruptions that could affect your bonding capacity and project timelines.
7. Talent Acquisition and Retention
Securing skilled talent is a growing challenge in the construction industry. Surety providers may inquire about your workforce's expertise and qualifications when evaluating bonding applications. Your strategic plan should include initiatives for talent acquisition, training and retention to demonstrate your company's ability to complete projects successfully.
8. Compliance and Regulatory Changes
Construction companies must remain vigilant about evolving regulations and compliance standards. Failing to adhere to these requirements can lead to bond claims and project delays. Stay informed about regulatory changes and ensure that your strategic plan includes measures to address compliance challenges.
In conclusion, the construction industry is evolving rapidly, and middle-market construction companies must adapt to these changes in their strategic planning. Embracing digital transformation, addressing ESG considerations and enhancing cybersecurity are all vital steps to secure bonding capacity and thrive in a competitive market. Collaborative partnerships with surety providers, proactive supply chain management and a focus on talent acquisition and compliance will further strengthen your company's position.
Led by a diverse group of shareholders and managers, Schneider Downs provides strategic and practical solutions for our construction clients in all facets of their business. Our dedicated team of more than 350 professionals have a wide background of tax, accounting, technological and business experience in the region, specifically in Pittsburgh and Columbus.
To learn more, visit our Construction Industry Group page.
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